The Five Functions of Management was first described by Henri Fayol in his 1916 book Administration Industrielle et Generale. The Five Functions of Management is a general theory of business administration. It argues that management is comprised of five general functions: planning, organizing, staffing, leading, and controlling.
Understanding the difference between leadership and management
Indeed, leadership is much more about the long-term direction of the business, which tends to motivate employees through inspiration, and a clear mission, usually instilled by the company’s leadership team.
Management, on the other hand, is more about the operational side and the day-to-day planning needed to achieve these goals.
Management and leadership are highly tied, as one without the other don’t go far.
In fact, effective management might lead to short-term success, yet it might derail the company in the longer run.
While strong leadership might work as an incredible motivator yet, it might also result in organizational chaos.
Thus, balancing out management and leadership is critical to enable a company to move toward its long-term vision while being effective in the short term.
That is why, rather than looking at it as management vs. leadership, a company should look at how management and leadership come together to reach the company’s goal.
For that respective, management and leadership bring different perspectives to the table based on five main aspects:
How those two different perspectives shape the organization is critical to building a valuable company that stands the test of time.
Understanding the Five Functions of Management
The Five Functions of Management was first described by Henri Fayol in his 1916 book Administration Industrielle et Generale.
Fayol, a French mining engineer, theorized that five functions were universal to management across various organizations.
Each function describes a set of principles advising managers on how they can successfully lead their subordinates. What’s more, the theory helps managers see their role as more than just supervisory in nature.
Today, the five functions are still in use and are often collectively referred to as Fayolism. Let’s take a look at each of these functions in the next section.
The Five Functions of Management
The Five Functions of Management consist of:
Planning
According to Fayol, planning is the hardest of the five functions.
Managers must plan for the future and develop appropriate strategies to meet organizational goals.
Furthermore, risks must be identified with plans in place to mitigate them. Planning must also be coordinated across different levels and consider the available human and non-human resources.
Fayol also stressed the importance of forecasting at daily, weekly, monthly, yearly, five-yearly, and ten-yearly intervals.
Organizing
Or the process of assembling physical, financial, and human resources.
This involves the identification of necessary activities, assignment of roles and responsibilities, and the delegation of authority.
Commanding (Directing)
Successful managers communicate clearly and honestly and act in a way that reflects company values.
Their decisions are based on regular audits and they are capable of motivating and encouraging employees to use initiative.
Coordinating
The fourth function aims to create harmony between the various activities within an organization.
For example, spending should be proportional to available resources, production requirements, market demand, or stock levels.
Fayol argued that regular meetings were also a good way to solidify relationships between different departments or activities.
Harmony is also created by hiring employees who are suitably qualified to carry out their roles.
Controlling
Is progress being made toward the goals and objectives stated in the planning phase?
If not, management needs to take corrective action.
Limitations of the Five Functions of Management
Despite its obvious advantages, Fayol’s theory has some drawbacks:
Based on anecdotal evidence
The Five Functions of Management is based on Fayol’s own experiences during his time as director of a mining company.
The theory does not incorporate empirical research and its application may be limited as a result.
Inward-focused
With no credence given to the customer, each organization is structured to meet its own needs and not the needs of the much more important end-user.
A lack of nuance
Fayol’s theory is rather broad and rigid. Its scope does not extend to the informal, micro-interactions or relationships between managers and subordinates.
In more dynamic and modern organizations, the theory may not be able to facilitate effective management.
Five functions of management examples
Now let’s conclude by taking a more expansive look at some examples for each of the five functions of management.
This section is loosely based on the case of a department manager in an order fulfillment center with 10 team leaders and 120 staff.
Planning
As we noted earlier, the planning function is one of the most important but also the hardest to implement well.
To be effective, Fayol believed four components would enable the organization to unite toward a common purpose: unity, continuity, flexibility, and precision
At the departmental or team level, organizations must plan to create an ideal environment for employees.
Since people are the most important asset, it is vital to plan activities conducive to teamwork, cooperation, and positive company culture.
These activities may include:
The initial meet and greet where staff are acquainted with one another and work to understand their current needs.
Periodic discussions with supervisors to address problematic issues.
The establishment of positive, achievable objectives with reward systems in place.
Organizing
While similar companies like Amazon are characterized by fast cooperation between various departments to better meet client needs, the manager understands that changes can be made in their department without affecting the rest of the organization.
This so-called “departmentalization” advocates that employees and activities in the fulfillment center be further broken down into small, specialized groups.
For example, the manager may establish a more experienced team to process fragile or bulky items, while another team can be set up to handle orders with next-day delivery.
The latter team may also be allocated extra resources to ensure orders are dispatched in the appropriate timeframes.
Commanding (Directing)
The manager decides to adopt a transformational leadership style when dealing with subordinates.
This style is exemplified by leaders who inspire, motivate, and encourage employees to be the drivers of innovation and positive change.
To carry out the second component of commanding, which Fayol described as putting the organization into motion, the manager must also:
Understand the organization’s obligations to employees.
Work with other managers to ensure unity of direction, and
Avoid involving themselves in trivial matters.
Coordinating
In essence, coordination means all employees understand their roles and responsibilities while also working with others harmoniously to achieve goals.
This is facilitated by proper resource allocation and the recruitment of individuals who are suitably qualified.
To ensure fulfillment center operations are not disrupted, the manager ensures that when experienced staff take leave or are promoted, there is suitable and available expertise to replace them.
Controlling
In the fifth and final function, the manager establishes benchmark KPIs that all employees must meet in their roles.
Performance is then measured periodically to identify and address problems that may relate to the employees themselves or with processes.
New instruction or additional training can be instituted in a collaborative way that is in keeping with the manager’s transformational leadership style.
Functions of management example: Apple
Now, let’s take a look at a functions of management example for tech giant Apple.
Planning
According to Apple’s product feedback page, the company “strives to bring the best personal computing experience to students, educators, creative professionals, and consumers around the world through its innovative hardware, software, and internet offerings.”
To achieve this mission, Apple employs a product development and differentiation strategy underpinned by:
Vertical integration and strengthening of the Apple ecosystem, and
Reduced dependence on iPhone sales.
Organizing
The way Apple organizes its resources has not changed since Steve Jobs re-joined the company in 1997. That year, he placed the company under one P&L and combined different business unit departments into one functional organization. Critically, this was done in such a way that expertise was aligned with decision-making power.
That Apple retains this structure is even more remarkable since the company is now 40 times larger and far more complex. SVPs remain the leaders of functions (not products) and CEO Tim Cook occupies the only area on the org chart where operations, marketing, engineering, design, and retail of Apple’s core products meet.
Commanding (Directing)
In terms of staff management, Apple assigns employees tasks and clarifies specific completion deadlines. Late work for any reason is unacceptable, with HR managers responsible for ensuring employees complete tasks on time.
Employees must also consistently embody the “think outside the box” mantra. In keeping with the company’s mission and values, they must be able to build and improve products with creative ideas.
The industry in which Apple operates also dictates how it directs staff. Since the company is present in markets where tech-driven disruption is frequent, it requires its leaders to possess three critical traits:
Intuition, judgment, and deep subject matter expertise. This enables them to meaningfully engage in every aspect of their respective functions.
Immersion in the details of those functions, and
Motivation to engage in collaborative debate over other functions during the collective decision-making process.
Lastly, it should be said that Apple does not have a hierarchy where managers oversee managers. It is instead one where experts lead experts. Why? Because the company believes it is easier to train an expert to be a manager than the reverse.
Coordinating
Within the company, there are hundreds of specialist teams, and dozens may be required for just one component of a new product. The dual-lens camera on the iPhone, for example, required collaboration between 40 specialist teams in areas such as camera software, reliability, motion sensor hardware, and silicon design.
So how are these teams coordinated? Since no one function is responsible for a product or service, cross-functional collaboration and debate are essential. When debates reach a stalemate – as all debates are liable to do – senior VPs and sometimes even Cook himself step in to break the deadlock.
The speed and attention to detail of the company’s coordination strategy can prove a challenge for even the most effective leaders. But Apple makes it work because its numerous senior staff understand the Apple way and are skilled collaborators.
Key takeaways
The Five Functions of Management is a general theory of business administration highlighting five key areas: planning, organizing, commanding, coordinating, and controlling.
The Five Functions of Management provide a framework for effective management. The theory argues that the role of a manager is far more complex than the supervision of subordinates.
The Five Functions of Management is broad, rigid, and may lack the nuance required for dynamic businesses. It also lacks any foundation in empirical research and does not focus on meeting the needs of the customer.
Project portfolio management (PPM) is a systematic approach to selecting and managing a collection of projects aligned with organizational objectives. That is a business process of managing multiple projects which can be identified, prioritized, and managed within the organization. PPM helps organizations optimize their investments by allocating resources efficiently across all initiatives.
Harvard Business School professor Dr. John Kotter has been a thought-leader on organizational change, and he developed Kotter’s 8-step change model, which helps business managers deal with organizational change. Kotter created the 8-step model to drive organizational transformation.
The Nadler-Tushman Congruence Model was created by David Nadler and Michael Tushman at Columbia University. The Nadler-Tushman Congruence Model is a diagnostic tool that identifies problem areas within a company. In the context of business, congruence occurs when the goals of different people or interest groups coincide.
McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.
Mintzberg’s 5Ps of Strategy is a strategy development model that examines five different perspectives (plan, ploy, pattern, position, perspective) to develop a successful business strategy. A sixth perspective has been developed over the years, called Practice, which was created to help businesses execute their strategies.
The COSO framework is a means of designing, implementing, and evaluating control within an organization. The COSO framework’s five components are control environment, risk assessment, control activities, information and communication, and monitoring activities. As a fraud risk management tool, businesses can design, implement, and evaluate internal control procedures.
The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.
Lewin’s change management model helps businesses manage the uncertainty and resistance associated with change. Kurt Lewin, one of the first academics to focus his research on group dynamics, developed a three-stage model. He proposed that the behavior of individuals happened as a function of group behavior.
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams based on the main corporate functions (like HR, product management, investor relations, and so on).
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
