Amrita completed her Master’s Degree in Fashion Technology from Paris. After coming back to India, she observed a shift towards formal wear in the fashion industry. To grab this opportunity, she opened a boutique in a posh area of Delhi.
She used environmental friendly method of production. To make the store run efficiently, she divided the work into small tasks so that her employees are well trained and the wastage can be reduced. Similar activities were grouped together and departments were formed.
She assigned responsibility to her sales staff in the form of clear cut targets and gave them authority to close the deal by offering a discount of 5% but the decision to give any further discount rests with her. The departments were headed by the specialists who were appointed through placement agencies and management consultants. Levels were created in the organization and helped in establishing reporting relationship.
In the earlier period of her venture, she asked her employees to put in extra hours of work. In return, she promised to give them special incentive within one year. Her business was doing well and she honours her commitment by giving them bonus.
Amrita was a good leader. She develops plans and makes decisions in consultation with her subordinates. However, she was biased with her female employees when it comes to solving conflicts among her staff.
Amrita allows her sales staff to give 5% discount to close the deal and retains with herself the power to give any further discount. Which principle of Fayol is highlighted here?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Centralization and decentralization
Option (1) Order — Incorrect. Order is about keeping people and materials in suitable places at the right time. It is not about who takes the decision.
Option (2) Division of work — Incorrect. Division of work is about dividing work into small jobs. It is not about who takes decisions.
Option (3) Scalar chain — Incorrect. Scalar chain is the formal line of authority from the highest to the lowest rank. It is not about how much decision-making power is shared.
Option (4) Centralization and decentralization — Correct. Sales staff can decide on a 5% discount. That is decentralisation, because decision-making is passed down. Any further discount rests with Amrita. That is centralisation, because final authority is kept with her. She is balancing both.
NCERT (2026-27 Edition): “(viii)Centralisation and Decentralisation: The concentration of decision-making authority is called centralisation whereas its dispersal among more than one person is known as decentralisation. …” |