THE PROFESSIONALS’ ACADEMY OF COMMERCE

Revision Notes BY ATTIQUE UR REHMAN (M.Phil, PhD Scholar)

Chapter No. 1 – MANAGEMENT CONCEPTS

Management Concepts

Basic Concepts: Classical / Early Modern / Other Management Skills:

Theories of Theories of
1. Leadership Management: Management: 1. Time Management
2. Management 2. Stress
3. Supervision 1. Fredwrick Taylor’s 1. Peter Drucker’s Management
Scientific Categories of 3. Innovation and
Management Management Creativity
2. Henri Fayol’s 2. Rosabeth Moss 4. Communication
Principles of Kanter’s Modern 5. Information
Management and Bureaucracy gathering
Functions of 3. Henri Mintzberg’s 6. Negotiation
Management Roles of Manager 7. Coaching and
3. Lyndall Urwick’s and Building Blocks Mentoring
Principles of of Management 8. Leadership
Organization 4. William Ouchi’s
4. Max Weber’s Theory Z
Bureaucracy 5. Mc Gregor Theory
5. Rosemary X and Y
Stewart’s 6. Management
Bureaucracy Science Approach:
a. Network
Analysis
Linking Classical
b. Game Theory
Theories with Modern
c. Queuing
Theories:
Theory
Elton Mayo Human d. Simulation
Relations View: e. Mathematical
Hawthorne Studies Logic
f. Mathematical
Optimization
g. Mathematical
Modeling
 MANAGEMENT CONCEPTS

1. Leadership: Leadership means “Giving lead to others. A leader is responsible for giving
guidance, direction and motivation to others (followers). Leadership has the broadest spectrum in
the domain of business management. Leaders inspire and motivate their followers towards
organizational goals and objectives.

2. Management: Management is a formal process of planning, organizing, commanding,

coordinating and controlling organizational activities so that tasks can be performed efficiently
and effectively. Management involves following activities (ECTODERMS):
i. Setting goals and objectives
ii. Establishing plans on how to achieve the set goals
iii. Organizing resources
iv. Coordinating activities
v. Defining control parameters
vi. Establishing effective communication systems both inside and outside
organization
vii. Monitoring performance
viii. Reviewing results
ix. Taking corrective actions

3. Supervision: Supervision means “looking over” someone else. Supervision involves monitoring
the activities of others to see whether the desired targets have been achieved. Supervision is
performed at front line management. it is the lowest managerial level in organization hierarchy.
Supervisors are expected to do following tasks:
i. Develop staff by empowering them and encouraging them to take
responsibility
ii. Train lower level employees (on-job training)

Leadership
Top level
Management
Management
Middle level
Management
Supervision
Front Line Management

Non-Managerial Employees
 CLASSICAL THEORIES OF MANAGEMENT

Classical theories are concerned with:

 Roles of managers
 How managers perform their tasks efficiently and effectively
 Classical theories focus on “management of tasks” rather than “management of people at work”.

1. FW Taylor (1856 – 1915) and Scientific Management:

Points to remember:
 US engineer Father of Scientific Management
 Studies relationship between people and the tasks they perform
 Known for time and motion study
 Focused on dividing tasks into smaller management units and work specialization
 Carried out experiments at shoveling coal a steel work industry in US
 Introduced work specialization with shoveling operations
 Four principles of scientific management by Taylor:
1. There should be science of work for every task based on analysis of work
methods (one best way of doing a task)
2. Careful selection of workers (right person on the right job)
3. Scientifically train and develop workers to achieve best results and efficiency
4. Equal division of work between management and workers and management
should work closely with workers. Reward the workers on the basis of work
they perform
Criticism on Scientific Management:
 Scientific Management results in dull, repetitive and monotonous work
 Workers get de-motivated and demoralized
 Low work efficiency of workers
 Workers might lose interest in their jobs

2. Henri Fayol (1841 – 1945) Principles of Management and Tasks of Management:

Points to remember:
 Tasks of Management:
1. Planning
2. Organizing
3. Command (now replaced with leadership)
4. Coordinating
5. Controlling (monitoring performance)
Points to remember:
 14 Principles of Management (ADDRESS, CUUES, ISO):
1. Division of Work – focusing on work specialization
2. Authority – manager must have authority to give orders
3. Discipline – Some rules and regulations must be defined
4. Unity of command – there should be one immediate supervisor
5. Unity of direction – goals must be common and there should be one plan to
be followed
6. Subordination of individual interest – organizational interest is more
important than an individual’s interest
7. Remunerations – employees should be given fair remunerations and rewards
based on performance
8. Centralization – decision making should be at one point in organization
9. Scalar chain – employees should know there position in organizational
hierarchy
10. Order – workplace should be clean, tidy and safe
11. Equity – fair treatment should be practiced by the managers towards all staff
12. Stability of tenure – managers should strive for low turnover rate
13. Initiative – employees should be given necessary level of freedom at work
14. Esprit De Corps – organization should promote team spirit and motivate
people
3. Lyndall Urwick – Principles of Organizations:

Points to remember:
 10 Principles of Organizations (BA-ACCORDSS):
1. Objective – clear purpose of existence must be undertaken
2. Specialization – breaking tasks into smaller doable parts focusing on a single
function
3. Coordination – facilitation, unity of effort
4. Authority – supreme authority must rest somewhere. A clear line of hierarchy
must be established
5. Responsibility – subordinates must be responsible to superiors
6. Definition – job descriptions, duties and roles must be clearly defined
7. Correspondence – responsibility and authority must correspond
8. Span of control – no person should supervise more than 5 individuals
9. Balance – various units of organization must be kept in balance
10. Continuity – re-organization is a continuous process. Doing it again all over
4. Max Weber (1864 – 1920) and Bureaucracy:

Points to remember:
 German sociologist
 Studied growth in the number, size and power of large bureaucracies
 Suggested that bureaucracy provides with a structure in which human activity is
rationalized and coordinated
 Government organizations are largely bureaucratic in nature
 Operates with clear and impartial rules
 Six characteristics of ideal bureaucracy (WHIPED):
1. Hierarchy of authority: from top management down to workers at the
bottom. Offices (management positions) should be ranked in hierarchical
order, with information flowing up the chain of command and instructions
and directions passing down the chain.
2. Impersonality and Impartiality: There should be a clear statement of duties,
responsibilities, standardized procedures and expected behavior.
3. Written rules of conduct
4. Promotion based on achievement
5. Division of work and work specialization
6. Efficiency in operations
 Three types of legitimate Authority:
1. Traditional – based on heredity of power in royal families with leadership
passing in a family
2. Rational legal – form of authority associated with bureaucracy. Based on rules
and regulations and derived from formal management position in the
organization
3. Charismatic – special personal qualities that inspire others to do what the
individuals asks. Short-lived and unstable type of power
 Criticism to bureaucracy:
1. Red tape
2. Pen pushing
3. Soul destroying work
5. Rosemary Stewart on Bureaucracy:

Points to remember:
 Modern UK writer on Management Theory
 Four main features of Bureaucracy:
o Specialization
o Hierarchy of Authority
o A system of rules
o Impersonal

Points to remember:
 Reasons for growth of bureaucracy:
o Growing size of organizations – Large organizations need bureaucratic
structure to work effectively
o Greater complexity of work – complexity makes it necessary to have
specialization of tasks in organizations
o Scientific Management – rational way of organization of work and formal
procedures of getting work done
o Demand for equality of treatment – bureaucracy provides impersonality and
impartiality

6. Elton Mayo (1880 – 1949) Human Relations View:

Points to remember:
 Founder of human relations movement in management theory
 Involved in set of experiments at Hawthorne works in Illinois (USA)
 Original aim of experiment was a scientific management study focused on studying
the impact the changes in work environment on individual’s productivity
 Study involved six workers with varying working conditions such as lighting, rest
periods, length of the working day and incentives
 Even in worse working conditions, the productivity continue to rise
 Mayo explained the reasons towards this are:
o Motivation and commitment of the individuals in the experiment
o Relationship between employees and management
 Workers develop social relationships at work
 Arguments related to the positive effect of motivation on productivity:
o Work has a social value. Worker’s attitude towards work is important
o Productivity is affected by self esteem
o Work satisfaction lies in recognitions, sense of belonging and security
o Motivation and productivity is affected by the relationship between
management and workers
o Lack of attention towards human is a major weakness of early theories of
management
 Other / Modern Theories of Management

1. Peter Drucker (1909 – 2005)

Points to remember:
 Five Areas or categories of Management:
o Setting Objectives - Managers set objectives for the organization, and decide
on targets for the achievement of those objectives, which they then
communicate to other people in the organization.
o Organizing work - Managers organize the work that is done, by dividing it into
activities and jobs. They integrate the jobs into a formal organization structure
and select and appoint people to do the jobs.
o Motivating and Communicating - Managers need to motivate their
employees. They must also communicate with their employees so that they
can do their work.
o Measuring - Managers measure performance, perhaps by comparing it
against a target or yardstick (benchmark). They analyze and assess
performance, and communicate their findings, both to their superiors and
their subordinates.
o Developing People: Managers need to develop their employees and also
themselves. Drucker wrote that the manager ‘brings out what is in their
employees or he stifles them. He strengthens their integrity or he corrupts
them.’
 Managing commercial business is different from managing an organization because
business managers are mainly responsible for economic performance of the business.
 Three aspects of responsibilities of managers in business:
o Managing the Business – innovation, creativity and marketing. Putting
customer first.
o Managing the managers – giving targets for achievements and monitoring
performance of the managers
o Managing workers and their work – motivate staff, communicate with teams,
set objectives for the team and dividing tasks into smaller measureable units.
2. Rosabeth Moss Kanter:

Points to remember:
 Inefficiencies of bureaucracy
 Traditional bureaucratic organizations have become unacceptably slow
 Hierarchal change of command means slow decision making
 Increased dynamics, growing competition, new technology have made bureaucracies
inefficient
 toInremember:
Points her book Teaching elephants to dance (1989) she argued that bureaucratic
 organizations need to
Rebirth and success ofchange according
business to ever
organization changing
depend on: environment.
o Innovation – developing new products, services and operating methods
o Entrepreneurship – taking business risks
o Participative management - encouraging all employees to participate in
making decisions about work
3. Henri Mintzberg:

Points to remember:
 Roles of managers
o Interpersonal roles
 Figurehead
 Leader
 Liaison
o Informational roles
 Monitor
 Spokesperson
 Disseminator
o Decisional roles
 Disturbance handler
 Resource allocator
 Negotiator
 Initiator
 Henri Mintzberg also contributed towards organizational structure, that will be
discussed in 3rd chapter.

4. William Ouchi – Theory Z:

Points to remember:

 Compared Japanese companies with American companies

 Presented his thoughts in his book “How American management can meet Japanese
challenge (1981)”
 Key points of theory Z:
o Long term employment
o Collective decision making (consensus)
o Individual responsibility
o Slow
5. Mc Gregor evaluation
Theory of performance
X and Theory Y: and slow progression
o Informal control systems
o Moderately specialized career paths
o Wide concern for employees
 Points to remember:

 In his book “Human side of enterprise (1960)” he discussed two approaches of

managing people (X and Y)
 Theory X
o Average person dislike work
o Authoritarian style to manage
o Individuals should be forced to work
o Individuals do not like responsibility, have no ambitions and wants security
 Theory Y
o Participative style of management
o People like work and take responsibility
o Putting effort in work is a natural play
o Strength of motivation is determined by rewards associated
o People are multi-taskers
 Theory Y doesn’t work in factory environment
 For theory Y to be applicable, people must be self motivated and self driven.

Difference between Classical and Modern theories:

Classical theories Modern Theories

Focus on improving efficiency Focus on improving work behavior
Focus on humans as machines Focus on humans as humans with feelings and
workplace behavior
Complex and difficult to apply in larger Easy to apply in larger structures and diversified
organizations where diversified people work work behavior
One size fits all – universality of management Different circumstances require different
management practices
Work well in labor intensive environment Work well in human intensive and behaviorally
diverse environment
One best way of doing a thing Something called “contingency approach” is
important – situation defines best course of action

6. Management Sciences Approach (Operations Research)

1. Network Analysis:

Points to remember:

 Used in project management

 Used to identify time it takes to complete activities in a project
 Helps in identifying critical path – longest possible time in a project
 Used in planning resources
  Help identifying delays in a project (bottlenecks and slacks)

2. Game Theory:

Points to remember:

 Helps in strategic decisions

 Situational analysis before a decision is made
 Prisoners’ dilemma example
 Types include:
o Zero sum games (Win-lose situation)
o Non-zero sum games (Win-Win situation)

3. Queuing Theory:

Points to remember:

 Used to understand delays and congestions in processes

 Helps in identifying the ways to remove congestions and bottlenecks
 Helps in improving traffic flows, call centre performance, process shipping orders, enhance
performance of service department.

4. Simulation:

Points to remember:

 Building models that relates to real time situation

 Help understanding the behaviors and environment in better manner
 Evolved from the simulation of atomic bomb in 1940s
 Used in:
o Computer system as database management systems
o Government – traffic flow improvement
o Business – cash flow analysis

5. Mathematical Logic, mathematical modeling and mathematical optimization:

Points to remember:

 Logic is used to develop relationships between different components or variables

  Optimization means to maximize the benefits or minimize the cost, generally done through the
use of Linear programming
 Mathematical modeling is the use of mathematical language in systems to make predictions of
behaviors and processes
 Leads towards problem solving

“OR” is majorly used in:

 Maximize profits
 Minimize cost
 Critical path analysis
 Supply chain management
 Scheduling
 Routing
 Project planning
 Transportation decision

Management Skills:

1. Time Management Skills:

Points to remember:

 Barriers of effective time management:

o Procrastination
o Ineffective delegation
o Mismanagement of paperwork
o Failing to set priorities
o Attending unnecessary meetings
 Effective time management skills:
o Prioritize tasks
o Delegate
o Set daily, medium term and long term objectives
o Use checklist
o Control interruptions (mobile phones, distortions etc)
2. Stress management: to be discussed in 6th chapter

3. Innovation and creativity:

Points to remember:

 Used to identify new situation and business opportunities

 Helps determine new products, idea, new markets
  Help in quick and effective negotiation
 Some techniques include:
o Experience of managers
o Brainstorming
o Mind-maps
o Effective delegation

4. Communication:

Points to remember:

 Used to:
o Coordinate
o Share plans
o Communication goals, objectives
o Generate ideas
o Managing relationships
o Gather information
o Directions are: horizontal, vertical (upward, downward) and diagonal

5. Information gathering:

Points to remember:

 Listening
o Seeking feedback
o Forecasting working relationships
 Observations
 Interviews
 Questionnaires

6. Negotiation: to be discussed in chapter 10

7. Coaching and mentoring:

Points to remember:

 Coaching:
o Short term relations
o Knowledge enhancement
 o Training the employees
o Plan and execute systematic learning and development program
o Feedback on performance
 Mentoring:
o Long term relationships
o Career sponsorships
o Personal relationship building
o Encouraging the people
o Nurturing the mentee
o Responding to personal needs

8. Leadership: to be discussed in detail in chapter 8