A sales manager has to negotiate a deal with a buyer. She finds that if she can offer credit period of 60 days she is likely to clinch the deal which is supposed to fetch the company net margin of say ₹50 crores. Now the company gives power to the manager to offer a credit period of only 40 days.

Which principle of Henry Fayol is violated in the above statement?

Authority and Responsibility

The correct answer is option 2- Authority and Responsibility.

Authority and Responsibility is violated in the given statement.

According to Fayol, authority and responsibility should go hand in hand. In this case, the sales manager has the responsibility to negotiate a deal that will benefit the company (which in this case is a net margin of ₹50 crores). However, the authority to offer the necessary credit period (60 days) to secure the deal is restricted to only 40 days. This creates a disconnect between the responsibility given to the manager and the authority provided to her, thus violating the principle. If the manager has the responsibility to close the deal, she should also be granted the appropriate authority to offer the terms (in this case, the credit period) that are necessary to accomplish her goal.

According to Fayol, “Authority is the right to give orders and obtain obedience, and responsibility is the corollary of authority. The two types of authority are official authority, which is the authority to command, and personal authority which is the authority of the individual manager.” Authority is both formal and informal. Managers require authority commensurate with their responsibility. There should be a balance between authority and responsibility. An organisation should build safeguards against abuse of managerial power. At the same time a manager should have necessary authority to carry out his responsibility. For example, a sales manager has to negotiate a deal with a buyer. She finds that if she can offer credit period of 60 days she is likely to clinch the deal which is supposed to fetch the company net margin of say ₹50 crores. Now the company gives power to the manager to offer a credit period of only 40 days. This shows that there is an imbalance in authority and responsibility. In this case the manager should be granted authority of offering credit period of 60 days in the interest of the company. Similarly, in this example this manager should not be given a power to offer a credit period of say 100 days because it is not required. A manager should have the right to punish a subordinate for willfully not obeying a legitimate order but only after sufficient opportunity has been given to a subordinate for presenting her/his case.