Read the passage and answer the following questions.

After completing her Bachelor's in Fashion Designing from a well known college in London, Aahana opened a boutique in a posh market in Delhi. She divided the work into smaller units and each employee was well-trained to perform his/her work efficiently. The sales persons are allowed to close a deal with the buyers by giving a maximum of 5% discount. Whereas the decision to give any further discount rests with Aahana as the final authority.

In the earlier period of her business venture, employees were asked to put in extra hours of work. In return, she had promised to give them a special incentive within a year. Therefore, when the business was doing well, she honored her commitment by giving a bonus to her employees. She also instructed employees that communication from top to bottom should follow the official lines of command.

However, she tends to be more biased towards her female employees when it comes to resolving conflicts among employees.

"The sales persons are allowed to give a maximum of 5% discount, whereas the decision to give an extra discount rests with Aahana". Identify the Principle of Management highlighted here.

Authority and Responsibility

The correct answer is option 2- Authority and Responsibility.

In the passage "The sales persons are allowed to give a maximum of 5% discount, whereas the decision to give an extra discount rests with Aahana." This shows a clear line of authority- Salespersons have limited authority (up to 5% discount). Aahana holds higher authority to make decisions beyond that limit (extra discount). It reflects controlled delegation and balance of authority and responsibility at each level.

Authority and Responsibility: 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 the abuse of managerial power. At the same time, a manager should have necessary authority to carry out his responsibility.