Unit Unit: Principles Rrnctions
Uploaded by
Abhinay AlleUnit Unit: Principles Rrnctions
Uploaded by
Abhinay AlleContents ecruitment: Meaning
Meaning and Importance 13. R
and Sources 14. Selection: Meaning and Process 15.
Ti"aining and Development
PART:A: Principles and Rrnctions of Management Unit - I 1. Unit - 7 16. Directing:
Management : An Introduction 2. M Importance and Principles 1 7. Supervision: Meaning an
anagement As Science, Art and Profession
Importance 1 8. Motivation: Meaning and Importance 1
3. Levels and Functions of Management 4. Coordination:
Leadership: Nature
Meaning and Importance 20. Communicati
and
Importance and Barriers
Importance
315
9'
Unit - 2 5. Principles of Management: Nature and Significance 6.
3239566889
Scientific Management: Principles and Techniques
Unit - 3 7. Business Environment : Importance and Dimensions 25
105. tt7 1
Unit - 4 8. P lanning
and Types of Plans t37 t46 156 r62
Unit - 5 9. Organising: Importance
and Process 10. Organisation Structure: Meaning and fyp"t I l. 172 178
Delegation of Authority a nd Decentralisa[ion 182 195 202
Unit - 6 12. Staffing:
lg
Unit - 8 21. Controlling: Importance and Process Z
PARTIB: Business Finance and M
arketing
Unit - 9 1. 2. 3. Planning Financial
Management, Financial Decisions and
Financial Capital Structure: Meaning and
Determinants Fixed and Working Capital
Zg zbl 2 62
: Meaning and Determinants Z
Model CBSE Sample T
est Papers Question Paper-2009 (
Unit - l0 4. 5. Stock Concept
Question Papers
Financial Meaning Market
Exchange: of and Functions
270 281
Unit - tl 6. 7. 8. 9. Marketing
and Markering Mix Advertising
295 328 336 342
: Role, Limitations and Objections P
ersonal Selling : Meaning and
Importance Sales Promotion and Publicity
349 367 381
Unit - 12 10. Consumer Protection: Importance and Ways . * x
+
ll I llIR 0 II U GII 011
MAI|AG Etll E lll: A
Learning Obiectives After studying this
chapter, you will be acquainted with: o M
anagement: Concept
o Det'initions of Management o Charocteristics of
bjectiues of Management c l mportance
Management o O
of Management
I Management: Concept
Detailed description about the Management concept has been given in the following Analysis Box:
+
4 Business Studies
il
Managemenl An Introduction
+
Business Sfudies
Management: An Introduction
o Definitions of Management
Following are the main definitions of management.
(1) A ccording to Harold Koontz, "Monagement is the art ot' getting things
organised groups."
done through others ond with Jormally (2) According to George R. Terry, "Management is a distinct process
consisfing oJ planning, orgonising actuating ond controlling; ufi/ising i n e och both science and art, ond followed in
order to occomplish
pr e- determined obj ectiu es. "
(3) A ccordingto F.W. Taylor, "Manogementisthe artof o k nowing whot you want to do ond then seeing thot
they do it in the best and the cheapest way." (4)
ccording to Peterson and Plowman , "Manogement may be det'ined osthe process by means oJ
A
which the purpose and objectiues of a porticular human group are determined, clarified and et'Jectuated."
o Characteristics of
Management
On the analysis of various definitions, the following characteristics of management emerge: (1) Management is Goal Oriented
Process: No goal in the hand-no need of management. In other words, we need management when we have some goals to be achieved.
A manager on the basis of h is knowledge and experience ties to a chieve the goals which are already decided. Hence, nothing is
wrong to say that management is a goal oriented process.
(2) Management is all P ervasive: Anything minus management is nothing or zero. Here by anything we mean all
types of activities-business and non-business. If w e deduct management out of these activities, the result will be failure or zero. It means
management is necessary to conduct any type of a ctivities. Hence, it is pervasive or universal.
8 Business Studies
(3) Management is Multidimensional: The management i s a three dimensional activity: (i) Management of Work: Every
organisation is established for doing some work, like a school provides education, a hospital heats patients, a factory produces, etc. Of
anagement. (ii)
these no work can be completed satisfactorily without m anagement of People: Each organization is established for
M
doingsome workand the same is conducted b y people. Hence, i t is necessary to manage the people s o that the work c an be accomplished
in a better way. (iii)
Management of O
perations: To achieve the goals of an organisation many operations or activities are need
to be conducted, such as, production, sale, p urchase, finance, accounting, R&D, etc. Again, management is needed to make sure that
operations a re accomplished efficienfly and effectively.
(4) Management is a Continuous Process: The various managerial
activities cannot be p erformed once for all, but it is a continuous process. A
manager is busy sometimes in d oing one managerial activity and at other time
some other activity.
(5) Management is a Group Activity: It means that it is not a
single person who consummates all the activities of an organization but it i s
always a group of persons (Managers). Hence, management is a group effort.
(6) Management is a Dynamic Function: Management is a
dynamic activity as it hasto adjust itself to the regularly changing environment. In
this context, it can be rightly said that nothing is etemal in management.
(7) Management is an Intangible Force: Management is that power which cannot be seen. It can only be felt."If any
organization is heading toward higher levels of achievement, it signifies a existence of good management and vice-versa. !
Objectives of Management
objectives of management can be broadly divided into the following three ( 1 ) Organisational Objectives (2)
SocialObjectives (3)
Personal or Individual Objectives. (1) Organisational Objectives: It refers to ascertain
objectives for the whole
organisation. While fixing t hese objectives, m
anagement keeps into consideration
benefit of all related parties (like owner,
employee, customer, government, etc.). This also fulfil organisational economic objective which are survival, profit and groMh. (i)
Survival: Every business wanh to survive for long. So, management by taking positive decisions with regard to different business
activities should ensure that business survives for long.
Management: An Introduction
(ii) Profit: Profit plays an important role in facing business hazards and successful running of business activities. So, it
must be ensured that adequate profit is earned by the business.
(iii) Growth: Every business w
ants to grow. Management must ensure growth of business. Growth can be measured by
sales, number of employees, products, capital investment, etc. If all these show increasing trend then it can be concluded that
business is heading towards growth.
(2)SocialObjectives: Itreferstotheconsiderationoftheinterestofthesociet5rduringmanagerial activities. An
organisation is established in a society. It runs through the resources made available by the society. That is why it becomes the
responsib;ility of every organisation t o account f or social benefits. Thus, social objectives are defined as the fulfillment o f
responsibility o f an organisation towards society. Under t his objective manager promises to a ssure health, s afety and price c ontol.
Main social objectives of management are included in the following list: (i) T
o make available employment opporhrnities. (ii) T o save
o contibute in improving living s tandard. For
environment from getting polluted. (iii) T example: fuian Paints has provided funds under
its community development programme, which made possible the effective utilisation of local resources by the farmers. In the same
manner, Steel Authority o f India r egularly provides services related to agriculture, industry, education, h ealth, etc. to the people living
nearby to its steel plant.
(3) Personal or Individual Objectives: It refers to ascertainment of the objectives in reference to the employees.
Employee class is an initiative and e mpathetic resource of a company. Thus, special attention needs to be given towards its feelings.
If the c ompany is able to satisfu its employees it will be able to pro$ess in 'leaps and bounds'.
Main objectives of management towards employees are as follows: (i) To give deserving remuneration, (ii) To provide good working
environment, (iii) To provide a share in profit.
! l mpoitance of Management
The above mentioned mathematical equation highlights the importance of significance of managemenl very
well. Here by anything we mean all types of activities whether business or non-business. If we are not going to manage these
activities the result will be Zero or Failure or Nothing. In short, the importance of management is explained through the following facts:
(1) Management helps in achieving Group Goals: In is the most important characteristic of manag€ment that it i s
goal-oriented activity. A manager achieves these goals by giving the proper direction to the efforts of all individuals.
(2) Management Increases Efficiency: A manager increases efficiency through the optimum utilization of all the
resources, such as, Man, Machine, Material and Money.
(3) Management Creates a Dgmamic Organisation: Every organisation work in an ever changing environment.
To face the c hanging environment, many changes need to be made in the organisation as well. But people resist changes. Manager
creates a favourable environment through introducing employees to the benefits arising by adapting changes.
10 Business Shrdies
(4) Management helps in achieving Personal Objectives: Every employee wants to get suitable remuneration,
personal objectives. a share in profit, participation in management, promotion, etc. in the form of his This objective can only
be achieved, if they work while using their full abilities. Managers
make employees able through motivation, result, they
attain their individual objectives. good
s a (5) Management helps in the
leadership and open communication. A
Development of Society: Management has some responsibility towards society. Managers by fulfilling their social
responsibilities helps in the development of society. These responsibilities are to provide employment opportunities, to
prevent environment from getting pollution, to make available good quality products at a reasonable price, etc.
I . Meaning of Management: Management is the process of conducting a set of functions, such as, planning, organizing,
staffing, directing and controlling to get the work done in an aefficient and effective manner. 2.
Characteristics of
Management:(i) Management is a goal oriented process, (ii) Management i s allpervasive, (iii) Management i s
multidimensional, (iv) Management i s Vfunction, a 3' c ontinuous Objectives (vii)Management process, of
Management: (v) Management is an Intangible (i) is Organisational a force. group activity, (vi) Objectives:
ascertainment or Individual consideration
Management It r efers is a the of Objectives: objectives
of the interest for It the
whole the to society
refers of the organisation.
ascertainment during
managerial (ii) of Social
the objectives activities.
Objectives: (iii) in r eference Personal It dynamic to the refers
to
employees. V
to the
4. (ii) lmportance
Management orgnisation, (iv) of
Management: (i) increases efficiency, Management helps
in Management in achieving creates achieving personal objectives, (v) group dynamic
anagement helps
(iii) M a
goals, Management hblps
in the development o f societ5r.
I Management: Concept
1. What is meant by Management? Explain any four characteristics. 2.'Management i s Multidimensional.' Explain.
3. 4. 5. Clarify
the meaning of 'Group Efforb' in management. Explain
any four characteristics of Management. Explain any five feahrres
of management.
6. 8. 7. Define
management. Clarifu the f ollowing equation : 'Anything - Management
: Zero, Explain in brief, 'management' as an
.
activity.
6 Marks
4/5 Ma*s
(c.B.s,E.2005) (c.B.s.E.2006)
-$
(c.B.s.E. 2004,06)
Management An Intoduction
g. 'Explain,inbrief,'Management'asaprocess. (C.B.S.E.20U,06) 10. 11. 12. 13. 74. 15. H ow
Management is a 'Goal Oriented Process'? Management i s not visible, it can only be felt. Explain. How is management a Continuous
Process? 'Explain, in brief, management as a 'Dynamic Function.' Explain 'Management of people' as a dimension of management. Explain
in brief, 'management' as a group of people having managerial responsibility for an enterprise.
76. State any two characteristics of management.
11
23.
24.
25.
2627
(c.B.s.E.2004) (c.B.s.E.2004) 1'[{ark 77. What is meant by the term Management?
Ans. Management is the process of conducting a set o f functions (planning, organizing, staffing, directing and controlling) to get the
hat does a manager aspire while doing work?
work done in an efficient and effective manner. 18. W
Ans. A manager wanh to make optimum utilisation of resources (manpower, money, material, machlnes, etc.) in order to accomplish
the work efficiently and effectively. 79. Clarify t he terms efficiency and effectiveness in m
anagement.
Ans. Efficiency refers to do the job in a cost effective manner. Effectiveness refers to complete the job on time, no matter whatever is the cost.
20. What is meant by 'Doing things Right' in management?
hat is the meaning of 'Doing the Right Things' in
Ans. 'Doing things Right' refers to do the job in a cost effective manner. 27. W
management?
hy is it said that management is all
Ans. 'Doing the Right Things' refers to complete the job, no matter whatever is the cost. 22. W
penrasive? (c.8.s,E.2009)
Ans. Because it is needed in all spheres say - business and non-business organisations. 'Management is uniformty n eeded at all places.'
Explain. Ans. It is needed throughout the world whether it is India, America or Japan. 'Management is multi-dimensional.'
Enumerate any tow dimensions of management. Ans. (i) Management of work. (ii) Management of people. ' Nothing is
permanent i n management.'Give an example. A ns. For e xample, principles of management are changing according to the
changing business environment. 'Management cannot be seen.' Explain. Ans. Management cannot be seen, it can only be 'In a n
organisation employees are happy an management is noticeable.' Which characteristic of management is highlighted by
this statement? (qB.s.E.2oo8) 28. Ans.
Name Management
the process is working intangible
of an
with force.
and through
by efficiently using its limited resources in the changing
others to effectively achieve organisational / - objectives
environment.
(c.8.s.E.2008)
Ans. Management.
72 Business Studies
the statement? 'ln
/ 2/ order environment.' to
be successful Which an
organization characteristic must
of change
management its ighlighted to thl needs in t he of
goals according is h 30. Ans.
Give Management
any two
dynamic. of management. (C.B.S.E.
characteristics is Somple Paper)
3Ja Ans.
(i) Management is goal-oriented process. (C. B. S.E. Sampl e Paper ) (ii) Management is all pervasive. The management
management is highlighted by this statement?
principles can b e applied to all types of activities.'Which characteristic of
(c.B.s.E. 2008) 32. A
ns. Management is all pervasle. Name the process of designing and maintaining an environment
working together in groups, efficiently accomplish selected aims. Why is
in which individuals (c.8.5.E.2008) 33. Ans.
Management. it said that management is a goal-oriented process? (c.B.s.E.2009)
34. Ans.
Management various individuals. said
to
goal oriented process as it helps in getting goals by coordinating the efforts of Why is Ans. It "management meains that it is called not
a a single group.activity"? p erson (manager) who c onsummates the whole (C.B.S.E. process 2009) of 35. management but it is
conducted by a group of persons (managers). Ans. 'Management Management creates creates a dlmamic such type organisation." of
organisation How? which is able to face the
regularly (Foreign changing 2009)
environment easily. f Obiectives of Management
6 SIarks 36. Explain the objectives of management.
'4lE ftrarks 37.
38. Explain
Discuss tlre inbrieftheobjectivesofmanagement. social objectives of management.
(c.8.s.E.2007)
What List the are
N. 39. three the
three examples categories
objectives Objectives of
of Social of management? of management.
47. What are the organisational obJectives of m anagement?
$ [Iarks
f Mark
42. Ans.
It includes survival, profit and groMh. "Management helps in development of society." How? (c.8.s.E.2009)
Ans. Management enables the organisatlon to make available employment
opporfunities, hence 43. W
hat helping
do in
you the
development mean by personal of
society. obiectives of management?
Ans. It refers to the consideration of the interest of employees d uring managerial activities. I physically achieve. meet
J To the
challenged obiectives of petsons. the f irm Identifu the management the organization's of Angora Ltd. obiective
offers employment it is trying to to
(C.B.S.E. Somplepaper) Ans. I t is social objective.
Management An Intoduction
13
45. Management of any organization sMves to attain different obiectives. Enumerate any twosuch objectlves?
Ans. (i) Organisational objectives, (ii) Social objectives. I lmportance of Management
ample Paper)
(C. B. S.E. S
46. 'Anything minus management is zero.' Explain the importance of management in the light of this 47. 48. statement.
Explainthesignificance 'Management of managementinrunningof modementerprise. ( C.B.S. is the art of getting things done
through others.' Explain the importance of
E.2001) management
ow is management essential for the s uccessful running of an enterprise? 50.
in the light of this statement. 49. H
Explain 'Lack of any proper Give five reasons reasons management why in support management results of your in wastage
51. statement?
answer. is essential of
time, in any money
efforts.' Do you (C.B.S.E. (C.B.S.E. agree
organisation? and with 2006) 2003)
this
52. Explain by giving any four poinJs why management is important in any organisation?53. 'ln the absence of management' the
productive resources will remain resources and shall (c.B.s.E. never become 2005) production.'
Explain the importance of management in the
light of the above statement.(c.B.s.E.2006) statement. of an organization largely depends upon its management."
54. "success above
(C-B-S-E. Sample Paper)
Explain any five reasons to justify the
55. How does management help in the development of society?
56. ,'Anlrthlng minus
management is nothing.'rWhat does this statement tell?
'Anything It tells minus about
57. Ans. the
management importance
of is management.
nothing.' Hete what is the meaning of 'anything'?
'Anything It refers
58. Ans.
all types management of
minus to activities, is nothing'. such
as, business Here what and
non-busiriess is the meaning activities.
of
Name It the refers
'nothing'? 59. Ans. failure points or
two to of loss.
the importance of management.
Ans. (i) It helps in achieving group goals.
"Management It increases efficienry. increases efficiency." How?
60. (ii)
(c.8.s.E.2009) Ans. A manager increases efficiency through the optimum utilisation of all the resources, such as, mdn, machine, material
and money.
light of this
Solution, who
t\ Mr. as been
is an M.B.A., h appointed at the post of General Manager in Sa-re-ga-ma Ltd.
Company. Just after his
appointment, he took a decision to set up a chemical plant near a residential colony. (The chosen location to set up the plant was favourable for
many reasons to the company). After s ome time, an another important d ecision to the amount o f charity been given annually to educational
t4 Business Shrdies
instifutions and religious institutions was withdrawn giving the justification that it was an unnecessary burden on the company. More
emphasis was given to the share of company in the market and in search of modern procedures. Apart from this, a long time labour-dispute was
resolved by taking a balanced decision. (i) Tell whether Mr. Solution is at fault? (ii) If yes, the fault is in which context? (iti${ow can the mistake be
amended? Ans. Yes, Mr. Solution is at fault. He is avoiding the social objective of management. There is need of rethinking on two issues: (i)
Establishing Chemical Plant and (ii) Giving Charity. l2l, Mr. PROBLEM is working at the post of Sales Manager in Surabhi Tel. Ltd. Last year,
the targeted sales increased to 20,000 units from earlier target of :18,000 units. This he achieved very easily. To achieve
/
this, he increased the expendifure on advertisement to almost double. (i) Did sales manager perform his duty efficiently and effectively? (ii) If not,
Is there any difference in
then how? Ans. Mr. Problem is effective as he gets his job done but not efficient as the job is done at a very high cost. W
planning, organising, staffing, directing and contolling of vaiious organisations
as a school, a club, a restaurant and a steel plant. ' This case is
V such
o, t here is no difference as far as the functlons of management are performed by various
related to which characteristic of management? Ans. N
organisations. In other words, all the functions of management are performed in a similar manner in all tlrpes of organisations, i.e., business or
ncn-business. This case is related with the characteristics of management, namely, 'management i s all pervasive'.
Mr. Question : Sir, a manager while performing his duty efficiently and effectively tries to best utilise the
resources. This is absolutely correct. However, while doing this what is his focus of thinking? Mr.
Answer :
Right, a very nice question raised. The central focus of thinking of a manager is 'establishment of coordination'. I n all
ants to e stablish
ways, he/she w
coordination. Mr. Question; Sir, coordination among whom....? Mr. Answer : *
Coordination among objectives * Coordination among activities * Coordination among people * Coordination among divisions
Mr. Question : O.K. sir, thus a manager can achieve his obiectives by establishing coordination.
Sir, Thank U.
OIIAPTTR 2t[AlrAG tt[
S SG r tl{ G
r]il A
[, ANIAilII
PRIITTSSIOI{
Different Management experts have d escribed the nature of
management differently in their own time.
Learning Objectives After Studying
this Chapter, you will be Acquainted with: o Nlanqgement: As
a Science * Meaning of Science * Testing of Management as a Science
a Nlanagement: As qn Art * Meaning of Art * Testing of
Management as qn Art o lanqgement: As a Profession * Meaning
N
of P rot'ession * Testing of Manogement a s Prolession
! Management: A Science or An Art
There is a conflict about the nafure of management whether management is a science or an art. Some management
experts consider it as a science, while s ome place it in the category of Art. It is a very old and misleading conflict.
Before understanding the issue about the nature o f management, it is important
to u nderstand the meaning o f
eanings of science and a rt and i ts presence in management will become clear in the
science and art. The f eahrres and m
following description. ! Management as a Science
It is important to understand the meaning of science before accepting management as a science.
eaning
oM
of Science
Science refers to that systematic body of knowledge which is acquired on the basis of observation and experiments
and verification of this knowledge is possible. For example, a person completes his sfudy of engineering. During the
course of his shrdy, he gets a complete theoretical knowledge of the subject. His acquiring of knowledge in this
manner is a science.
76 Business Studies
Science seems to have the following three characteristics: (1) Systematised Body of Knowledge. (2) Principles Based on
Experimentation and (3) Universarl Validitv.
o Testing of Management as a Science
It is important to apply these characteristics of science to management in order to find out whether management is a science or
not.
(1) Systematised Body of Knowledge: It is necessary for science to be a systematised b ody of knowledge. Management is
also a systematised body of knowledge because it has its own theory and principles which are developed by the management
experts after years of research.
(2) Principles Based on Experimentation: After applying this characteristic of science to management, analysis and
anagement management came took into -trears existence
experiments. we find that In development other words, of m for the
because collection of the of continuous fach, their
and encouraging labour of the theorists and various people concerned.
(3) Universal Validity: Scientific principles are based on truth and they can be applied al every time and in every
situation. Thus, its universal application is possible. In the field of management too, managerial knowledge and principles of
management are considered to be based on truth and they, too, can be applied anywhere and in every situation But the principles
of management are not as exact as the principles of s cience as their application may not yield t he desired results always.
Conclusion: The management cannot be treated as a perfect science, but as its principles are subject to change with time,
situations and human nafure, it is better to call it Applied Science or Inexact Science Ernest Dale has called management a soft
science because its principles are not very rigid.
! Management as an Art o Meaning of A
rt
Art refers to the practical application of knowledge. For example, when a person after completing the course of engineering
working as a n engineer in a company, his this work is known an art.
Science and Art In simple words it can be soid thot to get inJormotion about o subject is science and
o Following (iii) (ii)
(i)
Testing E xistence PersonalisedApplication. Based are of o n the Practice of Management T heoretical important and Creativity.
Knowledge. characteristics as an Art
of Art: For science
putting example, thot
ond information a
fter studying study
to engineering proctice
working is on os is afi.
on
a
engineer is an aft.
Whether management is an art or not will be known b y the application of the characteristics of art in management, description
of which is as under:
(1) Existence of Theoretical Knowledge: Art is always b ased on certain theoretical knowledge. O n the basis of this
knowledge one can understand how a particular work can be accomplished. In this context management is an ar1 as a lot of
literature i s available in various areas of management
(2) Personalised Application: The use of available theoretical knowledge is found in varying degree among different
persons. For example, two teachers, two players, or two g oldsmith will a lways differ in performing their jobs. Management
here are various principles
possesses this feature of art too T
Management as Science, Art and Profession
of management as developed by management experts. Managers apply these principles differently depending on their
level of knowledge. Sometimes they may get exacfly opposite results while applying the same principles.
(3) Based on Practice and Creativity: Just as art can be embellished with the help of practice, ih the same way managerial
skill also improves with practice.Every manager has a desire to become a complete expert in his field. They can fulfil his
desire by continuous practice. A fully developed manager not only moulds the organisation according to the changing
circumstances but also has the capacity to change the outer circumstances according to his will. Thus, management .nossesses this
feature of art too.
The a bove analysis clearly establishes that management possesses all the characteristics of art and on this very basis it has been
accepted as an art.
o C onclusion
science as well as an art. As a science, m
Therefore, we can say that management is both a anagement with the help of
its principles provides the necessary guidance to the managers to achieve practical efficiency. With reference to art,
management, in the form of best work t echnique, helps the managers to face every lype of sifuation successfully. It is, therefore,
reasonable to treat management both as a science and an art. ! Management: As a Profession or
Professionalisation of Management a M
eaning of Profession
The nafure of management gives rise to an important question - whether management is a profession. One has to
learn the meaning of profession and understand its characteristics before answering this question.
Profession refers to t hat economic activity which i s conducted by a person having some special knowledge and skill which
is used impartially to serve various sections of the society. Following are the main characteristics of profession:
(1) Well Defined Body of Knowledge (2) Restricted Entry
(3 )
Ethical Code of Conduct (5) Service Motive
Professional Association (4) o Testing of Management as a
Profession
After having understood the meanings of profession it now remains to be decided whether management should be
heated as a profession. In order to find an answer to this question it shall have to be ascertained whether all the characteristics of a
profession are found in management. To find out an answer to this euerV, the
following analysis is important:
Defined Body of Knowledge : The foremost quality of a professional is the possession of specialised
(1 ) Well knowledge.
Management has ih own principles based on experiments and which requires special competence to bringthem into use. On
the basis of this speciality, management can be accepted as a profession.
(2) Restricted Entry: The entry to a profession is restricted through acquiring an educational degree. For example, a
17
degree in [ -aw is essential for joining the Law profession. But as for as the
Profession? Profession refers b t hat economic odiuity which is conducted by aperson hauingsome speciol knowledge and skill which is
ured impofiiolly to serue uorious seclions of the
18management is concemed there is no such condition for b
eing
Business Studies
a manager. Hence, on this basis management cannot be accepted as a professiorr. profession (3) Professional is that it
must Association: have a r epresentative The third characteristic professional of
association which performs the following important functions:
(i) To regulate ent4r, (ii) To grant certificate of practice, and (iii) To create a code of conduct for guiding the activities of the
profession.
In India, Representative Professional fusociations with regard to other professions have already been established. There are
.awyers. Medical Cor-rncil of I ndia for D
representative professional associations like the Bar Council o1 India for L octors:
Institute of Charteled Accountants for Chariered Accountarrts. etc. For managers All Irrdia Mariargenrcrrt Assc.rciation (AIMA)
has been established. But it is not essential to be a member of the AIMA in order to be a manager. Therefore, ort this b.tsis
ilatrargenrent cannot be acccpied as a llofe-ssictrr
(4) Ethical Code of Conduct: Membersof aprofessionareboundtofollowacodeof conduct. By Code of Conduct, we mean
the rules and regulations framed to guide the behaviour of professionals. The code of conduct of already recognised professions
like Law. Medical and C hartered Accountant. e tc., have already been prescribed b ut no such code o
f conduct h as been
laid down in connection with management. On t his basis it can be asserted that marrragenrent is not at all a profession
otive: The main motive of a profession isto serve the society. For example, no doubt a doctor follows his
(5) Service M
profession for his living but to ensure that his patients get justice happens to be his chief motive. Though there is no code of conduct
iew, the,re
regarding management but its social responsibilities are being stressed upon increasingly. From this point of v
should not l:e any hesitation to accel:t managemenl
o as a profcssion Conclusion
On the basis of the above study it can be said that management does fulfill some of the characteristics of the
profession and some of the characteristics have yet to blossom or develop. In this way, management as a profession in India is still in
its infanry and ib development is moving at a slow speed.
g 1. Management: A Science or An Art: are:
(l) Management (i)
Systematised as Body
Iftowledge.
a Science: of
Management (ii)
Principles has all the Based
characteristics on Experimentation, of science. These (iii) niversal Validity.
U
Therefore, management can be called a science but it cannot be classified as a science like Physics and Chemistry. It will be more
appropriate to describe it as an applied science Existence (ll) M of inexact Theoretical science as an Knowledge
anagernent or or
Art: soft Management science. (ii) P ersenalised has all the Application characteristics (iii) of Based art. These on Practice
are: (i)
and Creativity.
Six Main Management
Institutes of l ndia 7.IIM Ahmedabad 2. IIM Bangalore 3.lIM Kolkata 4. IIM Indore 5.IIM Kozhikode 6. IIM Lucknow
79 Management as Science, Art and Profession
g 2. IVlanagement as a Profession: Under profession a man after haining and long experience
acquires proficiency
with which he impartially serves different sections of socie$. profession Is Management (like
Well a Profession?
defined body Management of knowledge satisfies and some Service of the Motive) conditions but for the being other a
characteristics (like Restricted entry, Professional association, Ethical code of conduct) have still not developed adequately. In
India, the development of management as a profession is still at its infancy and is moving ahead gradually. Its recognition as a
profession w ill increase i n accordance with the pace of its development.
! Management: As a Science
6 Marks 1. "Management is a science like physics or chemishy." Do you agree with this statement? Give reasons in 2. support
of your
answer. Is management a 'Science'? Explain.
3. 4. Explain.
"Management is neither as precise nor as comprehensive as the natural and pure
rc,8,5.E.2004)
,.,iJ.U"5fif;
'Management is a science.' Do you agree? Give any three reasons in support of your answer.
3 Marks 5. 6. State Explain why through management an example, is not a Pure how Science2
'Universal Validity' one of the feafures of Science exist in Management? 7. E
xplain 'Management as a Science'. ark 8.
lM
'Management is a Soft Science'. How?
tate two features of science.
Ans. Management is a soft science as its principles are not very rigid' 9. S
ame the type of science to which management is related.
Ans. (o) Systematic body of knowledge. (b) Universal validity' 10. N
Applied science.
11. Why management is not called a s perfect science? Ans.
Because it is related w
ith human being.
12. "The
(C.8. S.E. Somple Poper
Principle(s) of Management are different from those used in pure science." Write any one
difference. )
"The The
13. Ans. PrinciplesofManagementaredifferentfromthoseusedinpurescience."Writeanyonedifference. management
principles are not as rigid as principles of pure science. (C.B.S.E. Somple Poper ) ! Management: As an Art
6 Marks 14. Test the fact that 'management is an art'. t A5. 16. How is management a social science as well as an art?
Management is considered to be both an art and science. Explain
(c.8.s.E.2002) (N.C.E.R.T./
20
I
Business Studies
'7' 18' 'Management
is an art.' Do you agree? Give any three reasons in support of your answer.4/5 Marks (c.B.s.E.2006) What is the
meaning of management as an Art? Briefly describe any three of its feafures.
27. 20. 1 9. Clarifi7, Explain'Managementasanart'. " Management how management is both Science possesses and
Marks 22. W
Art." the feature Explain of this Art statement namely the in brief. 'Personalised Application'? rc.8.5.E,2007) 3 hat is
ark 23. Ans.
meant by art? l M Give It refers to achieve the desired result t hrough any two points of the features of Art.
application of skill.
ns. ls management (o) Existence contains of rheoretical all the Knowredge, features of (b) the
24. A
profession
personarised art? Application. Ans. Yes, the management contains a ll the feafures of the art. Management:
As a
25' reasons "Management in support is a profession of y our answer. like medical or legal profession." Do you agree with this statement? 6
Marks Give 26.
Explain critically if management is a profession. 27.
How is management not a full- fledged profession? 28.
anagement has the characteristics of a fun-fledged profession?
Do you think m
29. 30.
31.
32.
35. 33. 34. I s Is Write management 'Management' shortnote on'managementas a aprofession'. a profession? profession on the basis of
'Ethical code of conduct,?
36. Name two feafures of profession which are not a vailable in management. 37. Ans.
Name (i)
any Resticted
two main
Entry. management (i,)
Ethical Code institutes of
conduct. of India. what (i)llM,
38. Ans. Ahmedabad. (ii)ilM, Bengaluru.
function does a representative professional association perform?
Ans. It regulates the behaviour of its members.
(c.8.s.E.2002) (N.C.E.R.T.)
Discuss the basic feafures of management as a profession. "Management is regarded as fully-developed profession." Do you agree? Give
reasons. 4/5
Marks (N.C.E.R.T.) (c.8.s.E.2005)
"Management is a profession." Do you agree? Give reasons in support of your answer.
"Management is profession." Give one argument in favour and against of this statement.
(c.8.s.E.2006) 3 Marks (c.B.s.E.2007)
l Mark
Management as Science, Art and Profession
cAsE STUDY/APPLTCATTON ORTENTED QUESTTONS
Ms. Bharti passed her M.B.B.S. examination in the first division in 2006. Later on in the year 2009 she passed her M.S. examination as an
eye specialist. She was awarded a gold medal in this examination. After completing her sfudies she joined a big hospital as an eye surgeon. She is
ow tell, what aspect of Ms. Bharti's above experience is a science and what aspect is an
performing ten operations successfully every day. Q. N
tr,rdying for M.B.B.S. and M.S. is science and working as an eye-surgeon is an art.
art? Ans. S
Mr. Amol Khan passed his B.Sc. (Non-medical) examination in the year 2006. After this he successfully ran the business of his father.
Suddenly, he thought of seeking employment. He got the job o f a finance manager in a company on the basis of his k nowledge, experience
r. do Khan
as not tell, it is necessary the appointment for him of to M
and proficiency. He is doing his job successfully. Q.1: Q.2: Now W
M.B.A. as or a some manager other valid?
course for t his job? Ans. (1)Yes, (2) No.
27
t1l
t2l
0rrry, Session
For this query session, questions from readers' side are invited.
GIIf,PTER $
lrurlsffi0 r ultGrloils 0r
MAIIIGTMETT
All the functions of management are performed at allthe levels of management but there
is only a difference of d egree.
Learning Objectives After studying
this chapter, you will be acuainted with: a
L
euels of
Management * Top Leuel Monagement * Middle Leuel Manogement
* Lower Leuel or Superuisory Monagement o unctions of
F
Management * Planning * rgonising x Staffing * Directing
O
Communication o
o Superuision o
Leadership o
Motiuation *
Controlling
After clarifuing meaning and nafure of management, now the question arises what different functions a re
pertormed by management? Apart from this, in order to successfully accomplish pre- determined targets of an
organisation, how does an idea pass through various managerial levels to become a reality? Answer to both these
questions are duly replied in this chapter. I Levels of Management It will be beneficial to first
understand the levels of organisation and then the levels of management. All
the employees working in an
organisation/instifution can be divided into two categories. (1) Managerial Members (2) Non-Managerial Members
23 Levels and Functions of Management
On the basis of this division of employees, an organisation can be divided into two broad levels: (a) Managerial (I)
anagement In this category, and (b) Chief Non-Managerial Executive
Managerial Levels or Members: Levels of M
Officer levels.
(CEO), Departmental Managers, Supervisors, etc. are included. They are called managers because they manage some or the
rnanages someboclv).
other CEO, person. ranks highest il,,1,ri;rgei in t he is hierarchy. tirarf i;ersc:rli,lro Departmental manager is
Thus they all have subordinates. The
subordinate to the CEO. Supervisors work
subordinate under the departmental to s upervisors. managers Except and workers, so they are all subordinate others are to
called them. In managers the same irrespective manner, workers of t heir are
designation. He is the manager only who builds managerial levels. Their link among themselves is clarified in t he
following d iagram.
.
,, .t \i \1, ,%_ Chief Departmental Executive Suoervisors o..-^Y-^-- *.Lo
ti t
Officer-CEO Managers .)r ,,.f,'
'' It
is uite evident from the above diagram that all the employees working in an organisation builds a
chain of hierarchy. This is known as c hain of authority. Chain of authority explains the link between superior - subordinate.
In this chain one manager is linked to the other in a vertical form. I n this manner, this chain from top to bottom b uilds many
managerial posts, which a re termed as managerial levels. The term ' Level of Management' r efers to a line of demarcation between
various management positions in an organisation. Levels of management decides the authority of managers. As we move from top
to bottom, the degree of a uthorities goes o
n decreasing.
(2) Non-urtrrragerial Members: In this category, workers a re included. They a re those employees who w
ork directly on t he job.
The place at which such employees work is known a s platfolrn area. As they are cannot at the be lowest called managers. level of
chain For i n this an reason, o rganisation, they are t hey not do counted not have a mong any subordinates, ' Level of
Management'. that is why They they
form the non-managerial level. t Number of Levels of Management
Levels of management do not have a definite number. Its number is fixed according to the nahtre, size, etc. of the business.
Brech has d ivided levels of management into the f ollowing three categories:
op Level Management (2) M
(1) T iddle Level Management (3) L ower Level o r Supervisory Management
24 Business Studies
Levels of organisation along with
its various components are shown in the following diagram: t
Board of Chief Execr Chairman, Director, Man
Directors ttive Officer Managins ager General / / / Management
/ - ,/
toq \ \
l-evet
Depa(mental Manager
Manage Deputy Departmental rtmental Manager
/ *,oo,"L"r"r v"nrg"r"n\
Operations/Functional
:tional Mgr Supervisors
Foremen
or Operation"t trrtrnrg"r"n\
/ ro*.rlevet
Non-managerial
f Non-managerial members
Level L I Workers
I platfor
Levels of Organisation r __l
(l) Top Level Management: In top level management, Board of Directors, Chief Executive Officer, etc. are
included. Chief Executive Officer can be a single person or a committee of officers. Chief Executive officer can be called
by many names, like Managing Director, General
Manager, President, etc. Top Management has all
Levels in The Form of Pyramid-A Pyromid. Leuels
of By Manogement
this we get the are
the form that of os
information in the we
go to on bottom
number moue of down employees from top increosing. leuel, the owners management
or shareholders authorities,
of
the and
company. because
of these authorities officers of these levels are accountable to example' Following
(i) Determining
an objective functions
can Objectives: are
be set included
that in Top in
the the
level following list
for management Top
year Level
the sales sets Management:
of objectives the company for the has crore.organisation. For to cross Rs 1,000 are
formed. fixed, (iii) (ii) F
or Determining Determining such example, as sales, it purchase, Policies: can Activities: be
a sales advertisement, Only Different policy at this of activities levelpolicies a production, company to be to performed related
research, just make to for the etc. cash the realisation fulfillment sales. of objectives are of an objective (iv)
Assembling
Resources: Needed resources objective, like capital, raw-material, fixed assets, etc. are
assembled (ananged) for the realisation
of an (v) Controlling to get desired results. the Work Performance: The work in progress is closely monitored in a company
(vi) Approving Budgets: approval is given to the budgets. Budgets prepared by different managers are given final shape,
M
i.e., superintendents, management. (2) iddle Under and Level
operations this, Management:
divisional managers heads,
Middle (Functional departmental level
management Managers) heads, lies
are deputy between
included. departmental top
level and heads, lower
plant level
Levels and Functions of Management 25
Following are the main functions of Middle Level Managers: (i) Interpreting Policies: At this level, policies
framed by top level managers are interpreted. Like t he marketing m
anager introduces his salesman to the sales policy
of the company t hat at no c ost credit s ales will be made.
(ii) Preparing Organisational set-up: Every middle level manager prepares outline of his respective
department in accordance with the objectives of the organisation.
(iii) Appointing Employees: Every departmental manager appoints employees to fulfill the activities of his
department.
(iv) Issuing Instructions: Departmental managers direct their subordinates about what to do and how they have to
do. Needful resources are made available to subordinates so that they can do the assigned j obs intermittently.
(v) Motivating Employees: Middle level managers motivate their employees by various means so that they work most
efficiently to achieve organisational objectives.
(vi) Creating Cooperation: Cooperation among different divisions is reuired to successfully achieve company's
objectives and this done by middle level managers.
(3) Lower Level or Operational Management: It is also known as Supervisory Management. Under t his, various
formen and supervisors are included. They are called First Line Managers.
Following are various functions of lower level managers: (i) Submitting Workers' Grievances: Lower level
managers are in direct contact with the workmen employees. They themselves sort out the ordinary problems of
workmen and submit serious workers' grievances to middle level managers.
(ii) E nsuring Proper working
Environment: Lower level managers ensure that proper arrangement
of water, elechicity, ventilation,
cleanliness, etc. is made at the work place. This increases efficiency.
(iii) Ensuring Safety of Workers: Probability to accidents can be annuled by building fences around machines.
(iv) Helping Middle Level Management: They help middle level managers in recruiting, training and promoting
employees.
(v) Inviting Suggestions: They invite suggestions from their subordinates, as to how the uality of work can by
improved.
(vi) Creating better Human Relations: They create better human relations so that altercations can be avoided at
the workplace. ! Functions of Management
Management has been defined in the form of a process. Under the management process (planning, organising, staffing,
directing and controlling), many activities inter-related to each other are included. These activities are known as
functions or elements o f management.
26 Business Studies
Functions of management are pictorially presented in seriatim in the following diagrams:
Functions of Management
:tdj.l
5. controllins j
(1) Planning: It refers to thinking before hand. In other words, planning is the determination of a future course of action to
achieve a desired result. Under planning it is ascertained that what should be done,
how it should be done and who should do
it. If before the commencement of a job all these points are not contemplated than the objective of a business cannot be
achieved.
Planning (vii) (iii) (i) (v) is a long process, for the consummation Setting Identifuing objectives altemative courses of
which Developing following premises steps are taken: (iv) E
action (ii) of valuating altemative courses Selecting an altemative (vi)
Implementing the plan Follow up action (2)
Organising: I t refers to harmonious adjustment of various parts to achieve common
objectives. In order to make the first function of management (i.e., planning) functional, 'a stmcture of roles' needs to be famed
and sustained. The process of creating this sktrcture of roles is known as organising. Planning is j ust to put some idea in writing,
but to convert that idea into r eality, a group o f people i s needed. F
urther to s teamline the activities of this g
roup of p
eople,
organising is reuired. Under this, the whole project i s job divided
will be into
performed various
small at which jobs,
to post),
assign to unite these
various jobs
to designated jobs into one posb
departnent, (which
will to clarifu
clarifu that
the a rights
particular and duties
of employees to be appointed at various posts, and to define relationship among various posts
(employees).
Following
(iii) (i) Assignment Identification steps
are of and taken
Duties
organising (iv) (ii) Deparhnentalization Establishing function of management: Reporting
culminate of Work the
Division to
Relations (3) Staffing: I t refers to filling and keeping filled the p ost with people. I n planning, i deas are given a written
shape, on
the other hand organising, with the objective of converting these ideas into reality, prepares a stucfure of various posts. After
organising comes staffing which deploys people on these posts so that jobs can b e performed. I n view of the fact that the s uccess
of an organisation is commensurate to howadroiflyeveryemployeeperformshisjob, the importance of staffingfunction
increases even more.
Levels and Functions of Management
Following (4)
irecting: Selection Training Estimating Recruitment P lacement steps
(iii) (iv) (ii) (v) (i) D and are
evelopment taken
the and It D to culminate
refers manpower Orientation to instructing. reuirements the
guiding. staffing
function communicating of management: and inspiring people in t he organisation Under directing following four
activities are included:
27
Supervision Leadership
(iii) (i)
(ii) Communication (iv) Motivation Brief description of these four activities is as follows: (i) Superuision: It refers to
monitor the progress of routine work of one's subordinates and gr-riding them properly Supervision is an important element of the
directing function o f management. Supervision h as an important f eature that face to f ace contact between supervisor and h is
subordinate is a must.
(ii) Communication: It refers to an art of transferring facts. ideas, feelir-rg, etc. from one person to another and making him
understand them. A m anager has to continuously tell his subordinates about what to do, how to do, and when to do various
things. Also, it is very essential to know their reactions. To do all t his it b ecomes essential to develop e tfective
telecommunication facilities. Communication by developing mufual u nderstanding inculcates a sense of c ooperation
which b uilds an e nvironment of c oordination in the organisation.
(iii) Leadership: I t refers to influence others in such a manner to do work what the leader wants them to do. L eadership
plays an i mportant role in d irecting. Only through this uality, a manager can inculcate tust a nd zeal among his subordinates.
(iv) M otivation: [t refers to t hat process which excites people to work for a ttainment of d esired objective. Among the
various factors of production, it i s only the human factor which is dynamic and provides mobility t o other p hysical
resources. If human r esource goes static then other r esources automatically fum immobile. Thus, it b ecomes essential to
motivate human r esource to k eep them dynamic, aware and eager to perform their duty. B oth monetary and non-monetary
incentives are given to employees for motivation.
(5) Controlling: It refers to bring the actual results closer to the desired results. Under this, the manager check whether
monitors the whether uality the and jobs uantity are b eing of job performed performed in accordance is in alignment to
the set to p lans the o r pre-determined not. S/he also
standards/parameters or not. Deviations are then checked for by matching actual performance with pre-determined
standards. After this corrective action is taken for negative deviations so that the difference between actual result and
desired results can be minimised. Thus, with the enforcement of conkolling process all the bottlenecks coming in the way of
work-progress are removed and efforts of all the people start approaching in the desired direction. In the form of conclusion,
controlling process has five main (iv) (iii) (v) (ii) (i)
steps: Setting Measurement Analysingdeviations Taking Comparison
performance corrective of of actual actual action
standards performance performance with standards
28 Business Sfudies
g1. Levels of Management: (i) (ii) Top
Middle Level
Level Management:
i ncludes It includes board
Management: It
directors and manager, chief
departmental of executive deputy departmental officer.
gmanager (iii) Lower and Level
operations Management: or functional It includes managers. Supervisors and foremen. 2. Functions at different Levels:
Top Level (iv) To Management:
activities, (a) arrange for resources, (i)
To fix objectives, (v) controlling (ii)
To the frame
work policies,
performance, (iii)
To determine set-up, (vi) (vi) (b) Approving Creating Middle ( iii) Appointing Level
cooperation. budgeh. Management: employees, (iv) (i) Issuing Interpreting instructions, policies, (v) (ii) Motivating
Preparing employees, organisational gg
working management, (c) Lower environment, Level (v) Inviting Management: (iii) suggestions, Ensuring (i)
orkers' w
Submitting (vi) safety creating of w orkers, better grievances, human (iv) r elations. Helping (ii) Ensuring
Non-Managerial not managers they Level:
middle proper level are 3. are not In
the this
part level
of of
any management,
managerial workers
levels. are included. As workers 4. Functions of Management: (ii) ( i) Planning: Organising: It r efers
It refers to thinking to harmonious before hand. adjustment of various parts to achieve common objectives. (iii) s taffing:
(iv) Directing: It refers to filling and keeping filled the posts with people. It refers to instucting, guiding, communicating
and inspiring people in the organisation. (v) Controlling: I t refers to bringing the actual results closer to the desired results.
I Levels of Management
1. 2. 3. 4. Describe,
in brief, the functions of top level management in an organisation. Describe, in brief, the functions of middle level
management in an organisation. Describe, in brief, the functions of lower level management in an organisation. What are the functions of
different levels of management?
6 Marks
hat are the three levels of management? State any three functions of the middle level management. 4/5
5. W Marks 6. 7.
(c.B.s.E.2007) Write the meaning of 'Level of Management' . What are the main functions of top level management? What are the three levels
of management? State any three functions of top level management. (c.B.s.E.2007)
8. Enumerate any three functions of a General Manager.
3 Marks
Levels and Functions of Management
9. 10. 11. 72. 13. 74. Enumerate
any three functions of a Departmental Manager. State any three functions of lower level
management. Enumerate any three functions of middle levelmanagement. ( C.B.S.E.2006) Enumerate any three functions of top level
management. (C.B.S.E.2006) What do you mean by 'Levels of Management'? Write names and two functions each of the levels or
tenets of management engaged in: (a) Overseeing 15. activities of the workers, (b) T aking key decisions. Name any two
76. 77. the
hat does the pyramid form of levels of management indicate? Name (i)
designations and two functions given to the First Line Managers. W
Determining the Levels Policies
of management (ii)
Assembling engaged in:
Resources (iii) Interpreting Policies. I Mark 18.
Name the two categories in which all the employees of an organisation
can be divided. 19. Ans.
Which (o)
are Managerial
the two members.
main categories (b)
Non-managerial of levels of
members. organisation.
20. Ans.
Workers (o)
Managerial are included level.
at (b)Non-managerial
which level of management?
level.
27. Ans.
they are are
Workers fu n on-managerial at which level members,
included the they can't be the
of organisation? so
part of any managerial level.
22. Ans.
What At
is non-managerial
meant by levels level.
of management?
23. Ans.
It refers to a
line of demarcation between various managerial positions in an organisation. To determine the policies is the function of which
level of management? Ans. 24. Ans.
Departmental A
t middle Top level Level management. Management. managers are
included at which level of management? I Functions of Management
25. 26. Discuss the functions of management in brief. 'Management is a series of continuous intenelated functions.' Comment. 6
Marks 27. E xplain Planning and Organising as functions of management. 4/5 Marks 31. hat Explain Explain
29. 30. 28. W
Explain are briefly the 'direction' the meaning elements any as three of a of function staffing functions direction? function of of
management. management. of management. 3
Marks 32. W ark 33. Ans.
hat is meant by planning? l M What It is refers
meant
to thinking by organising before
hand. as a f unction of management?
34. Ans.
It refers to harmonious adjustment of various
elements to achieve common objectives. What is m
eant by staffing?
Ans. It refers to filling and keeping filted the posts with people.
29
30 Business Studies
35. What is meant by directing? 36. What Ans.
It is refers
instructing, by superuision? guiding,
meant to communicating and
inspiring people in the organisation.
It refers to monitoring the progress of work of one's subordinates and guiding them properly.
37 Ans.
What It is refers
What is meant by communication? 39. Ans. the by process
meant to passing information from
leadership? of
one person to another.
What L-eadership
39. Ans. is meant by means
motivation? that
uality which influences people for the
attainment of a goal.
40. Ans.
What Motivation
is meant means
by controlling?
a process which excites people to work for the attainment of a desired object. Ans. It refers to bring the acfual results closer to the desired
results. CASE STUDY/APPLICATION ORIENTED UESTIONS [1} / Your
uncle is working
as 'Marketing Manager' in a company. At what level of management is he working? What functions do you think he is performing? State any
four. Hint: My uncle is working at the middle l evel management. Explain any four functions of middle level management. t2)
Your working? father
what has
retired functions as
t he do director
he a manufacfuring was performing company.
you think of that level?
at
At what State level
any of
management two. was
he Ans. (i) Determining He was working objectives. at the (ii) top Determining level
mnagement. policies. He was performing the following functions: t3l
Your friend is working as a 'worker' in a company. At what level of organisation is he working? What is the name of the place/area where he
is working? Ans. Non-managerial Level. Platform Area. t4l
Rifu is the manager of the northern division of a large corporate house. Atwhat level does she work in the organisation? What are her basic
functions? Ans. (i) Interpreting Ritu
is working policies
middle (ii) Preparing level
at and the of organisational management
strucfure. in
the organisation. Her basic functions are: tsl You h ave three brothers. They are working in three different MNCs as General Manager,
Supervisor and Deputy Personnel Manager. What functions of management do you think they are performing in their companies?
Are they
performing the same functions of management? If yes, how? Ans. All the three brothers of mine are working on three different levels of
management, such as, top planning, performed example,
level, lower planning
organising, at level all the and is
considered three staffing,
levels They most of and imporant are management. controlling. performing function
middle these level. directing the It But the means at
top all functions is the while
same there the only functions at management, lower
a of difference the of management level
of degree
all important. t6l
directing such For are as, is
Raman is working as 'Plant Superintendent' in Tifco Ltd. Name the managerial level at which he is working? State any four functions he
will perform as 'Plant Superintendent' in this company.
(c.B.s.E.2008) Hint: He is working at Middte Level Management. Refer to any four functions of Middte Level
. try
Management. Dheeraj is working as 'Operations Manager' in Tifco Ltd. Name the managerial level at which he is working. State any four
functions he will perform as 'Operations Manager' in this company. Hint: He is working at Middle Level Management. Refer to any
four functions (c.8.s.E.2008) of Middle tevel Management.
Levels and Functions of Management 31
(lrrn, Session,
Mr. Question: Sir, at one place, you are calling organisation as the second function of management but at
ean organisation is
oes this m
another place you have used the word 'company organisation'? Sir, d a
function of management and even a company can be called an organisation? How is this possible? Mr.
very good uestion. Listen carefully.The word organisation can be used
Answer : A
synonymously for two meanings: (i) In the form of Function of Management: Organising means to decide about the
stnrcture of roles. Thus to decide about how many posts are needed to culminate the different activities.and what will be the
authorities and responsibilities of these posts, etc. (ii) In the form of Company/Institution/Enterprise: Organisation
means 'Group
of people.' In this context, a company, a school and a club, etc., all are organisations. To conclude, we can say
that organising is a function of management and even a company or a 'group of people' can be called an organisation as well. Mr.
Question : Ok, thank you sir.
GO|INDIilAIIll]I: ]IAIU RE AlI II I M
PllBIIlI GE
Coordination makes 2 + 2 = 5 possible
Learning Objectives After o Meoning studying
of Coordination this
chapter, you will be acquainted with: o
oture of Coordination a C oordination is the Essence of Manogement a C oordinotion is
Definitions of Coordination a N
needed at all Leuels ol Monagement o I mportance of Coordination
! Meaning of Coordination
The dictionary meaning of coordination is rapport. T
hus, coordination is to synchronize the various activities of an
organisation. In t he context of a business unit, the meaning
of coordination is to balance its various activities (purchase,
sales, production, finance, personnel, etc.) so that objectives of business can be easily achieved. I Definitions of
Coordination
Different management experts have defined coordination from different points of view. A few of such definitions (1) (2)
'Donnell, below in order 'Coordinotion
According have to been Koontz reproduced and O to make clear is the the e ssence
meaning of r tonagement of coordination: ochieuement of h ormony of indiuidual et'lorts lowords the or:cornplishn'tenl of group
"Coordinotion
According to
goo1s. ' t'or the Mcfarland, the process and
pottern of group ef.forts omong his purposes ' subordinotes is
secures uhereby unitgt on ol execttiue octior-t irt deuelops prrrsuit of an
comrnon orderly Coordination ? hormony Coordination
actiuities is of e stablished is an a organisation, process
omong through
different so which
that orgonisotional
objecliues can be
successfully achieued.
Coordination: Nature and Importance
In conclusion, coordination can be a ppropriately defined as fhe process which establishes harmony among the
rganisotion in order to achieue the objectiues of the organisation in on effectiue
uarious actiuities being performed in an o
manner. I Nature of Coordination
Coordination is a process to establish harmony among the different activities of an organisation, so that the desired objectives can
be achieved. Definitions of coordination present the following facts about its nafure:
(1) Coordination lntegrates Group Effort: The need for coordination is f elt when group effort is needed for the
accomplishment of an objective. In short, it can be said that coordination is related to group effortand not individual effort.
The question of coordination does not arise, i f the job is done b
y one person
only.
(2) Coordination Ensures Unity of Action: The nature of coordination is of creating unity in action. It means during
coordinating process an effort is made to create unity among the various activities of an organisation. For example, the purchase
and sale departments have to coordinate their effort so that supply of goods takes place according to purchase orders.
(3) Coordination is a Continuous Process: It is not a job which can be performed once and for all, but its need is felt at
every step. Many activities are performed in a business. Sometimes or the other, if any one of the activity goes on flucfuating
either for more or less than required, the whole organisational balance is disrupted. Thus, a close watch has to be kept on all the
activities to maintain the balance. (4) Coordination is an All-Pervasive Function: Pervasiveness refers to that truth
which is applicable
to all spheres (business and non-business organisations) and places uniformly. The nafure of coordination is
pervasive. Like making of time-table in a n educational instifution is an apt example of e stablishing coordination. In the
game of cricket, the placement of players at pre-determined positions i s nothing but coordination. In the same manner, to
synchronize the activities of different departments, like - purchase, sales, production, finance, etc. in a business organisation is
coordination.
(5) Coordination is the Responsibility of All Managers: Coordination is needed at all the three, i.e., top, middle
and lower managerial levels. Different activities performed at all the levels are equally important. T hus it i s the
hy, it could not be s aid that
anagers that t hey make efforts to e stablish coordination. That i s w
responsibility of a ll the m
coordination is of more importance to any one particular managerial level or a manager. Coordination (6)
Coordination is never established is a Deliberate by itself but Function: it is a coordination 9tbsrut"
effort. Only cooperation is not suffice but
is also needed. For example, a teacher aspires
to teach effectively (this is cooperation) but the time-table i s not prepared in the school (this is lack of coordiation). In this
situation, classes cannot be arranged for. Here, the effort made by the teacher is meaningless, i n the a bsence of c oordination.
On the o ther hand, in the a bsence of c ooperation, coordinatlon dissatisfies the employees. Thus, b oth are r equired at a g
iven
point of t ime.
33
Cooperation ? collectiuely. Cooperation It originotes meons the effoftlessly.
ork
desire to w
34
I Coordination is the Essence of Management
An important question that arises in r elation to coordination is whether or not it is to be recognised as the sixth function in the
chain of management functions (e.g. planning, organising, staffing, directing and to controlling).
be a separate Some
managementexperts function of m
anagement. (e.g.
Fayol, However, L.A.
Allen, Tead) consider coordination modern
management experts are of. the view that coordination
is not a s eparate function of management, rather it f orms a
major part of all the other functions of management. In other words, management cannot be establishment
accomplished management without has of c oordination. to c oncentrate proper coordination Modern its
efforts management and on hence the
"Coordination
experts relation Koontz t hat they and h ave stated, O'Donnell are also the is the supporters essence of of
this management". line of thinking, It means and when it is only a manager in this
diligently performs all the management functions, he or she remains busy in establishing coordination. This fact is highlighted
through t he following discussron.
(1) Coordination and Planning: While performing the function of planning, coordination forms the centre or focus of the
thinking of a manager. Planning is undertaken keeping in mind the various activities being performed by the different
departments in an organisation. For example, when a sales manager is making a plan to increase his sales target, he also
consults the production manager, the purchase manager, the finance manager, etc. in order to avoid any problem that may
arise in the fufure. This clearly shows that coordination is very essential while performing the function of planning.
(2) Coordination and Organising: While performing the function of organising, the main work of the organisation is
divided into various sub-functions, and the r elationships between the various people performing those sub-functions are
defined, with the aim of accomplishing all the activities of the business in a systematic manner. While performing the function
of organising, the manager has to make efforts to establish coordination among the various departments as well as the various
people working in the same department. For example, work is divided among the p eople working in the production
department in such a manner that where the work of one person ends, the work of the next person begins. Since any
deficiency in the work of one person also affects the work of others, everybody makes efforts to complete his work on time,
and the workers do not create hurdle in each other's work.
(3) Coordination and Staffing: Organising results in the establishment of various positions in the organisation while staffing
eople. Even while
breathes life into s uch positions, i.e., the various positions established during organising are filled with p
perforining the function of staffing, the manager is also concerned about coordination. It is his effort to fill all the positions
witi cala-bElnd experienced people so that the various activities of the business may proceed without any hinderance.
Business Sfudies
Coordination and Functions of Management to con There
coordination estoblish be is
occomplished no
coordination.
which oJ does management in the not
function or obsence make
which ellofi oJ
Coordination: Nature and Importance 35
(4) Coordination and Directing: While performing the function of directing, a manager gives due priority
to coordination. While issuing orders and instructions to a subordinate, he has to keep in mind the effect they will
have on other people, and he should make all efforts to avoid any such adverse effect. Such a line of thinking is
nothing else but an effort to establish coordination. For example, two people performing the same work are treated
equally in order to avoid any animosity among them.
(5) Coordination and Controlling: Controlling is the constant evaluation of progress of work, so that adverse
results can be avoided and conective action c an be taken in time. In the c ontext of coordination, controlling
results in the harmonisation of the objectives of the organisation, the resources available to achieve those objectives
and the human efforts required.
From the above discussion, it can be seen that coordination is concerned with all the functions of management.
Therefore, it can be stated without any doubt that coordination is not a separate function of management, rather it is the
essence of management. I Coordination is Needed at all Levels of Management
Level. There If the are various three levels different of management levels of management are e valuated Top Level,
-
Middle Level and Supervisory or Low from the point of view of coordination, it can be seen that it is not concerned
anagement level, rather i ts need and importance i s the same a t all managerial l evels. If any
with a particular m
work is being done solely by one person, then the problem of coordination does not arise at all since everything
nly. Therefore, it can be s aid that coordination is mainly c oncerned with
is being done by that one person o
ork at every level of m
group e fforts. The w anagement is performed by a group of people and h ence, coordination is
required in order to complele the work successfully. Therefore, it can be said that coordination is required at all levels of
management.
Not only this, if all the levels of management are looked at together, they become a group in themselves, and as in the
case of. every group, they also require coordination among themselves. Thus, coordination is required at each level of
management indMdually and also by all of them collectively as a group. ! lmportance of Coordination
The following reasons bring out the need and importance of coordination:
(1) Size of the Organisation: These days, the scale of doing business is increasing day by day. Any increase in
the scale of the b usiness also results in an increase in the number of people employed in the o rganisation, with e ach
person having different interests, way of working, m utual understanding, objective of working, t olerance, etc.
However, all these people have to worktogether a s a group despite these differences, which is not a very easy task.
Therefore, it is very necessary that through coordination a proper e nvironment is created so that everybody gives in his
full contibution t owards the attainment of organisational goals.
36 Business Studies
(2) Functional Differentiation: There may be a clash of interests a mong the various departments in an
organisation. Such a sifuation becomes avery big hindrance in the achievement of organisational goals. There is only one
way to avoid clashes, and that is by establishing proper coordination between the departments.
(3) Specialisation: ln every organisation, in order to avail the benefits of specialisation, one main activity is divided into
various s ub activities, and each of these are a lloted to different persons who are experts in their particular sub-activity. Every
person wants to do his work in his own way, without h aving any regard for the ' total work' t o be performed. In such a
sifuation, in o rder to c omplete the activities being performed by v arious people successfully, it i s very n ecessary to e stablish
coordination among them. It is only upon the establishment of coordination that everyone completes his or her own work on
time k eeping in view the 'total work' to be performed.
(4) Inter-dependence of Different Processes: The next major point which delineates the importance of coordination
reater is the
is that the various units in an organisation are inter-dependent.The h igher the inter-dependence among the units, the g
need for coordination.
V1. Meaning of Coordination: It refers to establish harmony among various parts of a gsystem.
2. Nature of Coordinaiion: (i) Coordination integrates group effort, (ii) Coordination gensures unity of action, (iii)
Coordination is a continuous process, (iv) Coordination all-pervasive (vi) Coordination function,
is a deliberate (v)
Coordination function.
is the responsibility of All managers, is an
3. Coordination is the Essence of Management: As per modern management experts, gcoordination i s not a separate
Coordination is needed at all Levels oI Management: The
function of management, but it is the essence of management. 4.
work atevery level of management i s performed by a group of people, that i s why, coordination i s required at
every to complete work successfully. (i) Size of the organisation, (ii)
5. Importance level
of Coordination: the
Functional Differentiation, (iii) Specialisation, (iv) Inter-dependence of different processes.
! Meaning and Nature of Coordination
1. Discuss the meaning and nature of coordination.
6 Marks
4/5 Marks 2. commonpurpose." "Coordination is the Inthelightof orderly arrangement thisstatement, of group explainthenafureof
efforts to provide coordination. u nit5r of action in (C.8.5.E.2009)
the pursuit of a
Coordination: Nafure and Importance 37
3 Marks 3. 4. 5. 6. DefineCoordination.
How i s coordination a 'Continuous Process'? Clarifu that coordination does not get
established spontaneously. Coordination is more than cooperation. How? Give an example.
l Mark 7. To make t'he time-table in an educational institution is the
example of coordination. Comment.
Through it harmony is established among various classes. The coordination is
8. Ans.
required at which level of management?
Ans. At all the three levels. I Coordination is the Essence of Management and lmportance of
Coordination
6 Marks 9. "Coordination is the essence of management." Do you agree? Give reasons. 10. "Coordination is the essence of
management." Explain this statement with the help of examples.
4/5 Marks 11. 72. the
"Coordination "Coordination help
of a suitable is is not
needed example.
a separate at all function
levels
the is the essence function of management." of all managers." (C.8.S.E.2009) Explain Explain.
management management. and lt is it
of of
with
(c.B.s.E.2ooe) 13. rite Explain a note the term on the 'Coordination' importance and of coordination. its importance in
74. W
management. ( C.B.S.E. SomplePaper) 3 Marks 15. 'Coordination is the essence of management.' C tarifiy this point of view of
ark 16. W
modern managementexperts. l M hy coordination is known as the essence of management?
Ans. Because it is not a separate function of management, rather it forms a major part of all the other 'Inter-dependence
77. functions
of management. of different processes' is one point of the importance of coordination.
Clarifu. Ans. The higher the inter-dependence among the activities, the greater is the need for coordination.
38 Business Studies
Mr' Question: Sir, there is still confusion between the meaning of words, coordination and
K,
cooperation. PIease clarify it with the help of an example from daily routine. Mr. Answer : O
Listen carefully......... The
difference has already been clarified in the given chapter, but for m ore
clarification, let u s take up an example. Suppose Mr. X gets a houser stitched. On trying i t, he finds it is 4 inches
longer in length. N ext morning, while all the four members o f the family are sitting o n the breakfast table Mr. X
says, get this houser 4 inches short by the t ime I retum from the office. E verybody carefully l istens to the
instmction. After this M aughter for college, respectively. After
r. X leaves for office, son f or school a nd the d
some t ime, when Mrs. X remembered about the w ork, she t ook the trouser t o the tailor a nd got it short by 4
inches and kept it in the almirah. When the son returned from his school, he recalled the job assigned by his father.
Without communicating with any other member of the family, he took the trouser to the tailor, got it short
by 4 inches and kept it at its previous place (assuming
that everybody had different tailors). Then daughter
came. As soon as she refurned, she a lso recalled of the work, assigned by her father. She repeated the same action,
as had already been performed by her mother and brother. In the evening, when Mr. X refurned from the office
and tied the trouser, he found that it was now half the length. Just contemplate, why did this happened? All
-
Mr. X's wife, son and daughter loves him dearly, have full attachment with him and also want to keep him
-
happy. That is why all three hied t o fulfil the task assigned. Their this feeling is called cooperation. Thus, they
want t o cooperate with Mr. X. This feeling does not arises because of any pressure but comes on its own. On the
other hand, this error, shows the lack of coordination among all. If at the time o f breakfast, decision had b een
,
taken as to who will perform this job, then this
error could have been avoided. Thus, coordination does not
originate by itself but for this effort has to be made. Mr. Question: Sir, quite right, thank you.
GIIIPIEB 5
PRI]IGIPITS O] MAIIAGHNEilI: ]IATU Rt
AII II SIG T I TIGA]IGT
"Principles of management every type are of universal nature and apply:to
of organisatiotl," - Henry Fayol
Learning Obiectives After o studying
this c hapter, you will be acquainted Principles ol Monagement :
Meaning and Definitions with:
ow are Principles of Monagement deriued? o N ature ot' Principles oJ Monagement o
o H
undomentol Principles o f Monagement
lmportonce ot' Principles of Manogement o F
! Principles of Management
These days business has assumed wider dimensions as a result of which numerous problems arise in day guidelines to day to
activities grapple and with t he manager the p
roblems of the and e nterprise run the has organisation to solve these
efficiently. problems. The A manager prirrciples needs of management, management guide it i s necessary the manager.
'Principle'. Different scholars have
to know Before the entering meaning into of a detailed discussion about the
defined
principles of
'principle' Terry, "Principle
According the
(1) in
t'undomental (2) Accordingto guide
following to G
.R. manner:
stotement or t ruth prouiding a
to the thought or oction'' Edwin B'
.
lippo, is a
F
ccording is in a the t'undomentol t'orm of
"A principle (3) A to couse
Koontz truth
and ond et'fect and it
is generolly
relotionship." O'Donnell, stated
"manogement principles are t'undomental truth oJ generol ualidity which haue ualue in predicting the result ol monogement
action"
Principles and Techniques of '-----'
the'techniques oi *onog"^"ntlJhe
Management from The principles of monogement ore dfferent
odem use of o technique the help ol a pnnciple is taken.
hile help making of m
while machines produchon is a technique. with the W
40 Business Studies
explains The
the definitions
between these
relationship of scholars cause and show
effect that
and principles
experts are
play in
an the
important form
of role that
in basic
their preparation. truth
which I How are Principles of Management
Derived?
certain Like
definite all
other principles. social
sciences These management
principles have too,
developed are
has been its
the outcome by the management of
the varjous experts. problems
These faced
principles by-
the managers. First the problems
were born, then efforts were made to solve them and these efforts resulted in a lot of know r esearch these and solutions
finally, the in s olutions the form were of found principles out. We of management. leads principle that assigned
particular following as The possible stated the w
(l) t o far better was work on t wo event as principles
ays: performance.
according which basis when of he management whole faces to of i t was his observation: i n work ability observed
the
actual should are
and practice. by derived
managers this example, the
taste. be Under some divided For If we in do into
method, so, different that it the will dividing a principle l ead p arts manager to and the increase of e ach observes work
'division individual in the a of and proper efficiency. work analyses should manner tells This be us a may groups
Command'was conducted be (2)
of compared. On
people, by a the
researcher(s) derived. in When basis
which it of
is one
found to Experimental
derive is headed that a the principle by performance a Studies:
single of management. boss Under
of
whereas the first this
group For the method,
is the headed experimental
example, second is higher, an principleof performance
by two 'Unity study
bosses of two of is
to learn After
about having
the understood
nafure and the
need meanings
for the
'Principle' of management. and
principles of 'Principles of management', it is necessary ! Nature of Principles of
Management
their spheres offices, business The
(1) objectives playgrounds, (both Universal (industrial following
business has points
to
units, Applicability: a gricultural a nd apply etc.) bring
non-business). more and out
farms, or the
non-business
Universalit5r less army, nafure
The the clubs principles same of
refers principles organisations and principles. to other of that
management of social management: huth (education organisations), which are is also equally institutions, universal in
applicable order in government to nature. achieve in All all general physics outcomes (2) guidelines, and General can
chemishy. be predicted. Guidelines: and The they principles c annot The The principles be principles of applied physics
of management, strictly. of and management chemistry on arc the are very hot other definite clear hand, and are like
definite, of the the principles nafure and their of of Principles
of Management and Values of of The
basictruth on
management ualues common a rethe are
principles indiuiduol's while of conduct. generol in
the form rules For
manager.
Principles of Management: Nafure and Significance 47
(3) Formed by Practice and Experimentation: Principles of management are the results of various problems
faced by t he professional people. First of all problems appeared and then through careful research work solutions
were found. Thus, w e recognise the solutions, found with t he help of p ractice and experience as principles, of
management.
Similarly, researchers undertake experimental study to find out the principles of management. For example, the
principle of 'Unity of Comrnand' must have emerged when two groups of people must have been compared wherein
osses. Undoubtedly the first group o f
the first group of people had one boss while the second group of people had two b
heprinciplesof
people must have performed better. (4) Flexiirility: T
managementastheyexisttodayarenotintheformoffinaltruths. fu a nd when political, economic and social
changes take p lace, new kinds of problems arise. Old prilrciples
at'e alter-,,ci ,r!ril n.r',{ 1;r-ir-rlrpir:s ale
propr.)Llndc,d Therefore,theprinciplesof management are dynamic in nature and cannot be called stagna:rt or
fixed.
i5) Mainly Bclrar'iorrral. The principles of management are directly concerned with human behaviour. The
management activity is mainly concerned with management of man, who is a social animal having his own
nature, desires and expectations which cannot be repressed or eliminated. This is the main reason why the piincilries ol
ehaviour is the main hindrance in t he successful
uman behaviour. a nd often human b
maitzi.Ir.'n-rr,!ri aLe affected by h
application of management principles. For example, the principle of division of work is usually adopted for increasing
efficiency, but after doing the same work repeatedly a person gets bored (this is human behaviour), thereby resulting in
a decrease in efficiency.
(6) Relationship betureen Carrse and Effect: The principles o f management establish a relationship
between cause and effect. They specifu what the ultimate outcome will be if in a particular situation, work is done in
a particular manner. For example, if a ccording to the principle of division of work, the work is divided into
different parts, e ach part being assigned to a particular person according to his interests and capabilitgr, then it will result
in an increase i n overall efficiency. In this ca,se, the division ofworkisthecquseandtheincreaseinefficiency
istheet'fect.lnthesamemanner, theotherprinciplesof management also establish r elationship between c ause and
effect.
(7) Contingent: The principles of management are not fixed or permanent. They are affected by situations or
circumstances. Therefore, the decision to implement them or not is taken according to the sifuations or circumstances.
For example, according to the principle of division of labour a worker should be assigned a definite part of a job time
and again so that his efficiency is increased. But on the contrary, if a worker is fed up with doing a job repeatedly, the
application of this principle will not be b eneficial. Therefore, it will have to be changed. f Signilicance of
Principles of Management
The principles of management are in the form of pre-determined solutions for repeatedly accuring The problems.
importance They
guide of the the
principles manager.
is very important becomes for
of management It abundantly
from know
every manager clear to the them
following thoroughly.
rovides Useful Insight to
facts: (1) P
Managers: The principles of management were developed on the basis of the experience of various professional
people. The principles inform the manager about t he manner managers. in which In this h e way, should timely act
ot resources repeat the and mistakes the
in guidance various situations reduces the so that wastage he does of n
objectives of the previous can be achieved in a less expensive manner.
42 Business Studies
For example, according to one principle of management, i.e., division of work, a job is divided into many small units.
Every unit or part is assigned to different individuals. Each individual does the same work repeatedly that has been
assigned. He gets used to i t which helps him t o perform his job efficiently and quickly. Consequently, the entire job is
completed in an economical manner. (2) O ptimum Utilisation of R esources and Effective Administration:
In every organisation physical (material, machines, money, etc.) and human (man-power) resources are used. T he
function o f management is nothing b ut to put them to optimum u se or avoid w
astage of resources. And i t is possible
onlywhena manager makesuseoftheprinciplesof management. Accordingtotheprincipleof 'unityof command'
there should only be one boss for an employee at a time. In case there is more than one boss, the employee will not be in
a position to work p roperly. Consequently, human r esource will be wasted. Therefore, if we desire to use the human
resource favourably, t his principle has t o be adopted. Similarly, many other p rinciples ensure favourable utilisation
of various other resources.
The primary need of every organisation is that its administrative system should be effective. Only that
administrative system is called effective where the managers can take balanced and quick decisions. In order to take
ade possible with the help o f the
such decisions, sufficient information and authority should be available. This is m
anagement. For example, the principle of 'authority and responsibility' advocates granting of
principles of m
sufficient authority, while the principle of scalar chain advocates making adequate provision for providing
information. (3)
Scientific Decisions: A scientific decision means a balanced decision. T he principles o
f
management provide the n ecessary training to the managers so that they can take scientific /balanced decisions. In the
absence of these principles the managers have to adopt the method of trial and error. According to this principle, o ne
is expected to do a job i n a particular manner and if there is some error, some
e adopted. In this
other method has to b
way, the work is done in different ways till the error is eliminated. This method is not proper .Therefore,the
managers are trained with the help of the principles of management which makes them capable of t aking scientific
decisions. For example, the principle of 'authority and responsibility' tells us that if a subordinate is entrusted with
some respbnsibility, he should be allowed sufficient authority to accomplish it. Only in such a situation a
subordinate will be able to take a scientific decision whenever needed. (4)
Meeting Changing Environmental
Requirement: In modern times only s uch a business unit c an remain alive and develop which can keep pace with the
rapidly changing environment. In every fieldof businessactivity (production, marketing, etc.)
newtechniquesareemergingeveryday.Amanager who
can understand the changing sifuation well in time can
alone face competition successfully. The principles of management enable the managers to face this challenge. For
example, the principle of 'unity of direction' t ells us that all the activities connected with the attainment of the same
objective should be completed u nder the direction o f the same manager. In doing so a manager would be able to have
the detailed information c onnected with t he limited a ctivities being d one under his direction. I n case the activities
connected w ith different objectives are being done under the direction o f one manager, he will not be able to
understand the changes being affected in any activity.
(5) Fulfilling Social Responsibility: The principles of management increase the efficiency of the managers
and enable them to fulfil their social responsibility. More efficient managers can make good quality products at
reasonable prices available.all the times.
Principles of Management: Nature and Significance 43
For example, the principle of 'Fair Remuneration' advocates appropriate remuneration to the employees and helps
in fulfilling responsibility towards them.
(6) Management Training, Education and Research: The advantages of the principles of management
encourage the researchers to b ring in m
ore improvement in t hem. The attifude of the managers has moulded
itself in s uch a fashion t hat they are doing, consciously o r u nconsciously, something new. It means that the
managers have come to acquire an attifude titled towards research and development. This has helped the
managerialknowledge to be more solid and scientific. The principles of m anagement are actually providing
education a nd training to t he managers by e nriching their theoretical and practical knowledge.
For example, in order to take advantage of the change of attifude among the managers, various big companies have
established Research and Development Departments- HRD. Consequently, many new techniques have come to light
in the field of marketing, production, finance, etc. I Fundamental Principles of Managernent
towards its functions. Wlriic p resenting the principles of m arnaga
Different management experts have explained different principles on thebasis of
kepL rw-o thinEs in nrrnci. Firstly. the list o
f the principles of manageme
theirresearch. Henry Fayol, afamous industrialistof France, has described [ndustrial
long but should be suggestive and only t hose principles should b e e
" become applicable in most of the situations. Secondlv. the principles
'elements' N'lanagenteni makes principles
fourteen he Explaining clear of
it
should b e flexible and not rigid so that changes can be made in them in c
fourteen principles g
iven by Fay
that management
the the difference
between his of book
principles in Henry Fayol
'principles' "Generol (1847-7925)
management and and are fundamentally
true and establish a
'elements'
relationship between cause and effect, while the of management point
(1) Division ol Work: This principle of Fayol tells us that as far as possible the whole work should be divided into
different parts and each individual should be assigned only one part of the work according to h is ability and taste
rather fhon giving the whole work to o ne person. When a particular individual performs the same job repeatedly, he
will become an expert in doing that particular part of the whole job. Consequently, the benefits of specialisation will
become available.
For example, a furniture manufacfurer gets an order for manufacfuring 100 lecture stands. He has five workers who
will do t he job. There a re two w
ays to complete t his o rder. First, every worker should be asked to complete
20lectrxestands. The second m ethod c an be dishibuting different parts o f the lecture s tand-legs, top b oard, cenhe
support, assembling and p olishing - to a ll the five workers in a manner t hat only one worker d oes the same j ob for a ll
the 100 lecfure s tands. Here, Fayol's i ndication is to t he second w ay to do this j ob and not the former one. The
principle of division of labour applies not only to the workers but also equally to the managers. For example, if a
manager is attained to work on the same kind of activities for a long period of time, he will c ertainly be an expert in
his particular job. Consequently, more
and b eneficial decisions can be taken in a comparatively less time by him.
M Business Studies
*
Positive Effect
Violating Effect
Advantages *,*increase in the of obtained, decrease such
specialisation speed ofproduction, are the i.crease
in as, t h" quality of
wastage ir
work, ofresources.
The Increase
the mentioned work
above in efficiency positive of
the workers. effects of specialisation will not b e available. *
The work efficiency of the workers will be reduced.
(2) Authority go hand in hand. It and
Responsibility: According to this principle, means that when a particular individual
is given authority
and responsibility should a particular work and he is made responsible for the r esults, this can be possible
only when he is given sufficient authority to discharge his responsibility. It is not proper to make a person responsible words of
Fayol, "7'he
result ol ctuthority is responsibi/ity. lt for any work in the absence of authority. In the is the naturol result of
outhority ond essentially onother aspect of authoritg and wheneuer authority is used, responsibility is outomoticolly born." For
this CEO
example, year. To a chieve the target, of
a authority Co.
has doubled for a ppointing the
sales necessary target
of
the sales Sales
representatives, Manager
for the advertising coming
according cannot be to the need, etc. shall have to be
allowed. In case these things are not allowed the sales manager than is needed Positive
Violating held responsible Effect
- Effect
* * Wrong Difficulty Increase Helpful * * Cannot Decline for not achieving the target. (Note: Giving less
both are * *
authority or more authority undesirable.)
in achieving the target. in the confidence of the employees. use of authority in case more
authority is given than is needed. in achieving the target in case less authority is given than is needed. fix accountability of the subordinates in
case the desired results are not obtained. in the confidence of the employees.
(3) Discipline: Discipline is essential discipline t o mean obedience, respect for authority, be
established by providing good
supervision at system of reward-and punishment. A m
anager disciplining himself.
for any successful work performance. Fayol considers and observance of established rules. Discipline can all
levels, clearly
explaining the rules, and implementing a can present a good example to h
is subordinates by For
example, if the employees
break their promise of working upto their full capacity, to t he violation case he allows of obedience. Similarly a sales manager
eneral customers but only to his relatives and friends, it will amount
has the authority to do business on this facility not to the g
credit. But in then it will amount to ignoring his respect to his authority. (Note: Both these examples give a message of
indiscipline which is an undesirable situation). PositiveEffect*Adisciplinedorganisationha.abetter@
Violating Effect * * * An Decline Height Increase Better atmosphere labour of in in disorder. the the management reputition
**
efficienry of doubt and of of the employees. relations. the organisation and efficiency of the employees. suspicion.
* Decline in the confidence of the employees.
45 Principles of Management: Nature and Significance
(4) Unity of Command: According to the principle of unity of command, an individual employee should receive orders
from only o ne superior at a time a nd that e mployee should be answerable only to that superior. If there are many superiors
giving orders to the same employee, he will notbe a ble to decide as to which order is to be given priority. He thus finds himself
in a confused situation. S
uch a situation a dversely affects the efficiency of the subordinates. On t he other hand, when t here are
many s uperiors, every superior would l ike his orders to b e given priority. T his ego problem c reates a possibility o f clash.
Consequently, their own e fficiency is likely to b e affected.
The principle of unity of command has b een shown in the following diagram:
In the first d iagram, Sr, S, and S. all the three subordinates have one manager Mr. S, gets orders only from M, and the
same is the case with S, and 53. Here the principle of unityof command is being followed. Therefore, it is the right
approach.
In the second diagram, all the three subordinates S,, S, and S. get their orders from two managers M, and Mr. S, gets orders from
both M, and Mrsimultaneously. (Same is the position of S, and S. also.) He is unable to understand as to which order is to be
given priority. Both the managers would like their orders to be given priority. There is likely to be heart burning between the
two. Here the principle of unity of command is being vlolated. Therefore, this is a wrong approach.
*
Positive Effect * * * * There
is no confused situation for the subordinates. The efficiency of the subordinates increases. The
*
efficiency of the superiors increases. It is easy t o fix responsibility. An atmosphere of coordiality prevails. Violating
Effect It creates
a confused sihration for the subordinates.
* It reduces the efficiency of the subordinates. * It reduces the e fficiency of the superiors. * Conflicts due to the injured ego of the superiors.
* It is difficult to fix accountability. * Height of disorder.
(5) Unity of Direction: Unity of direction m eans that there should be one head for one plan for a group of activities
having the same objective. In other words, there should be one plan and o f there action should for a group be one o f activities
manager having to c ontrol the same them. o bjective For example, suppose an automobile company is manufacturing two
products, namely, scooters and cars, hence having two
R ght Approach
Wrong Approach
M1
t\,4
l M2
J1 J2 s2 v l
Mr, Mz ) Manage6 51, 52, 53:, SubordinalesUnity Direction ln efficient this connection running ol Foyol an orgonisation
of Command & Unity of
the unitg unity
feelsthatfor the of
ol direction
impoftant, is i mportont whilethe
command is to enhonce
the elficiency of the employees.
46 Business Studies
irection. an employee, over all Positive
divisions. targets. It d is Now the Unity necessary fu
Effect activities each
each
*
while of command product
division the must the of means its
to having Advantage unity distinguish has direction of
same plan
own specialis
between that its objective. markets
there m
eans t arget the should a s and that meaning per there problems
be its only
environmental should of one therefore
the be manager unity only each
conditions of one at command -unug". division
a
time to to must
get "*"rcising give and better command have
own results. unip o
the its f to control
Violating Effect * * *
dvantange activity. It Increase Easy helps t o in a chieve in coordination the of specialisation efficiency objectives. due of the to is
*A
Difference between Unity of Command and Unity of Direction
such should contrary, manager interest interest 'Priority a (6)
decision certainly of in to Subordination
takes if the order
helps is definitely over
General some organisation some should of give decision priority, Interest decision priority never of
above Individual
to which be Individual the t he taken. everything) interest harms manager the geneial lnterest
him I nterest.'
hccording is General
of personally the If personally interest one company to asked will but but be results and to results to
placed place Interest:
this take in in principle, individual a at the a great the g reat decision This
first l oss profit t he principle
interest place. to g eneral accordingly. to the the For and company, can
interest company, example, t he be general On named
or
example, from to but be the the a supplier firm a company purchase
then the the if he a personally, material happens For of
his along will manager
son with incur at a other of
heavy rate a company higher suppliers l oss. This than has
in situation to
the the purchase
market market. i s undesirable. rate. 100
The tonnes
This manager will of
raw profit purchases material.
the
raw son
manager the His organisation. the unity in a ctivities. not obtained. * Decrease in the efficiency of the organisation. *
Difficulty
Difficulty in achieving coordination in the a bsence of unity of activities.
in achieving the objectives. .*
Difference Basis
of Unity of Comnrand Unity of D
irection
l. Meaning According to this principle, every employee should get orders only from one manager at a time and he should be responsible for
that manager alone.
person action completed According
under there this
having f or a nd similar s uch to type objective t he should principle,
of
activities. supervision be one all
should activities
Aim It prevents dual subordination. Itprevents overlapping of
plan of one be of 2-
various activities. 3. Implications I t affects an individual employee. It affects the entire organisation.
47 Principles of Management: Nature and Significance
*
Positive Effect Observing humanity.
* E verybody profih in the profit of the company. * O
rganisational objectives are obtained. *
iolating Effect
Coordination between the individual and organisational objectives. V * Humanity violated. * Increase in jealousy.
* Hindrance in achieving organisational objectives. * [-ack of coordination between the individual and organisational objectives.
(7) Remuneration to Employees: Fayol is of the opinion that the employees should get a fair remuneration so that the
emplbyees and the owners find equal amount of satisfaction. It is the duty of the manager to ensure that everybody is being paid
remuneration according to their work. If however, they are not paid properly for their work, they will not do their work
with perfect dedication, honesty and capacity. As a result of this the organisation shall have to face failure. Proper
remuneration depends on some factors like the cost of living, demand of labour and their ability' Fayol feels that in order to
motivate the e mployees, apart from general remuneration, they should be g
iven some n)onetary and non-monetary
incentives.
For example, suppose that the things are getting dearer and dearer and the company is getting good profits. In such a situation,
the remuneration of the employees should be increased even without their asking. If t his is n ot done, the employees will leave
the company at the first opportunity. Expenses shall have to be incurred on new recruitment which shall bring loss to the
*
company. Positive Effect Increase in the encouragement and satisfaction of the employees.
* Development of t he spirit of
ecline in the labour furnover rate. Violatlng Effect
dedication among the employees. * D Decline in the encouragement and
*
satisfaction of the employees. * E ncouragement to dishonesty. " *' I ncrease in the labour turnover rate.
(8) Centralisation a nd Decentralisation: According to this principle, the superiors should adopt effective
cenhalisation instead of complete centralisation and complete decentralisation. By effective centralisation, Fayol does not
mean that authority should be completely centralised. He feels that the superiors should keep the authority of taking important
decisions in their own hands, while the authority to take daily decisions and decisions of less importance should be delegated to
the subordinates. The ratioof cenhalisation and decentralisation can differ in different situations. For example, it is
advantageous to have more centralisation in a small business unit and more decentralisation in a big business unit.
For example, the decisions in r espect of d etermining the o bjectives and p olicies, expansion of b usiness, etc. should remain
in the hands of the superiors. On the other hand, authority for the purchase of raw material, granting leave to the employees, etc.
should be delegated to the subordinates.
48 Business Studies
Violating Positive
Effect Effect
Unnecessary B etter Increase Decrease and in in quick the the increase encouragement
* * * *
ecline decisions in by the the encouragement
work-load decisions. in-the * Impatient the subordinates and wrong in case decisions of * D
subordinates of superiors. decentalisation. workJoad to the subordinates. of tht ilp;;iors in case of centralisation and of by the superiors in
nd weak
case of complete centalisation a in case of complete decentalisation. to subordinates in case of complete centralisation.
(9) Scalar Chain: here communication lowest (ii) (i)
is ranks that Meaning
Fayol's n
o in a must step straight of
Opinion: Scalar
move (post) line. from should Chain: This top be to Itrefers chain bottom overlooked must to a and
of authoritywhich in a in s traight a
formal be v ice-versa followed line strict line. manner. moves
The important from
It
highestto the means each condition during communication. (iii)
ayol's Ladder: Fayol has explained this principle
F
with the help of a ladder or double chain as shown in the diagram. For
example, wants to have According to the contact
,F, ,p,. ,F,
principle in a company with of scalar the the employee chain employee shall
have to reach 'A' through the medium of E,D,C,B and then having contact with L,M,N,O shall reach 'P'. Thus 'F'shall have
to take the help of all the nine steps (posts) to have business contact with 'p,. (iv) Utility: Due to more clear system of
Gang Plank: It is the exception of the principle of
authority and communication, problems can be solved faster. (u)
Gang Plank: A Special Note emergency scalar
direct contact chain.
to This
with avoid concept
the employee delay
was in developed
of communication. equal rank to establish in case For of a example, as shown in the diagram employee
the the onlg
'F, can have Gang Plonk employees plonk example, can in of con present equol be
or estoblished
example some leuel.
no with
gong For the
be established between F ond O. direct contact w
ith employee'P'. But for doing so employees permission
of their immediate bosses 'E' and 'O'. The details of them. 'F' and 'P' shall have to seek their talk also shall have to be the
*
prior given to Positive
Effect *Violating E
ffect 't :t *:t
Flow of orderly information. Better relations because of absolute respect for authority. Disorderly Quick solution flow of of problems.
information Bittemess in relations because of ignoring the close superiors. Increase in problems because of non-availability of information
ccording to the principle o f order, a right a right thing should be placed at the right place. Accordingly
in time. ( I O) Order: A
person should be placed at the right job and to Fayol every enterprise should h
ave two
Principles of Management: Nature and Significance
different orders- Moterial Order for Physical Resources a nd S ocictl Order lor Human Resources. Keeping the physical
resources in order means that 'a proper place for e verything and everything in its right place'.
Similarly, keeping the human
rders properly
resources in order means 'a place for everyone and everyone in his appointed places'. Maintaining these two o
will ensure that everybody knows his workplace, what he is to do and from where he would get his required material.
Consequently, all the available resources in the organisation will be utilised properly.
For example, an employee working i n a factory should know the place or source from where he can get his tools in case of need.
Similarly, h e should know t he place where his supervisor will b e available in case of anv n eed. It is, however, i mportant to
note that it is not sufficient to have an alloted place for a tool-box and for the supervisor but the availability of both at their
eavy loss as a result of damage to the machines.
decided place is absolutely important. If this is not t he case, it can lead to a h
*
Positive Effect {' ** Violating
Effect **
49
Complete utilisation of material and human resources. No loss of time in tacing the resources in need of time. Better discipline. Misuse of
resources. Increase in the possibility of accidenb. Height of disorder.
his principle tells that the managers should treat their subordinates in a just and kind manner
(1 1) Equity: T so that they
develop a feeling of dedication and attachrnent for their work. All the employees should be treated equally and impartially.
Fayol tells us in connection with this principle that there should not be any equality of treatment between a person whose work is
really good and a person who i s a shirker by nature. R
ather the latter should b e treated sternly. Doing s o would b e equitable. It i s
because of this point of view that Taylor h as presented his differential remuneration method.
For example, a labourer completes 10 units of goods in a day. Another l abourer who h appens to be a relative of the supervisor
completes 8 units but both get equal remuneration. This v iolates the principles of equality. T he second labourer should g et less
remuneration than the first one.
*
Positive Effdct {.
,k
* Violating
Effect *'t*:F
f to devotion improve to upon the organisation.
The employees remain satisfied. Skilled Increases employees the s ense ty o
their skill. Unskilled employees try to achieve some skill, Creates dissatisfaction for the skilled workers. Skilled workers lose confidence in the
organisation. Decline in the efficienry of the skilled workers. Increase in the carelessness of the unskilled workers.
(12) Stabilitgr of Personnel: From the point of view of management it is absolutely harmful to c hange the employees
frequently as it is a reflection of inefficient management. Therefore, according to this principle there should be stability of
tenure o f the employees so that the work continues efficienfly. Fayol thinks that instability in the tenure of employees is a cause
of poor m anagement and results. High r ate of labour turnover w ill result in increased expenses because of s electing them time
and again, and g iving them training afresh. It also lowers the prestige of the organisation and creates a feeling of insecurity among
the e mployees which k eeps them busy i n f inding o ut new a venues of work. C onsequenfly, the sense of dedication cannot b e
created among t hem.
50 Business Studies
Forexample,itistruethatiftheworkers inacompanyarenottreatedwell andtheatmosphereinthe company is also unhealthy,
the employees will not stay for a long time. In other words, they will leave the company at the first p,:,i1:1'e []r{r,, I'io!11lnir
r
* * * * * * opportunity
[:.fJ.,c! * * An Skilled Decline Company Heavy Less Increase lncrease atmosphere expenses
recruitment workers in in in is the the the available. left reputation on reputation confidence are of by training. disbelief and good inclined
This taining workers. of of of for the towards the situation
the the company. expenses.
harmful. i13)
employees. c ompany. employees. the is company. absolutely
i
lnitiativr::lnitiativemeansthecapacitSrtoworkwhileexpressingone'sthoughts.Accordingto Fayol it is the duty of the
manager to encourage the feeling of initiative among his employees for doing some work or taking some decision but within the
limits of authority and discipline. It will be possible only when the manager will welcome the thoughts of his/her subordinates.
By doing so the subordinates will present new and useful ideas time and again and gradually they will become an integral
part of the organisation.
In order to make this process a success a manager will have to abandon his false sense of prestige. The
sales For
example, manager a sends salesman
him suggests
his telling sales
away by to him manager
that it to
is implement
not
possible a new and advenisement
ignores the suggestion technique.
altogether. In such a situation the salesman, who has been
admonished and belittled, will nevervenfure to offer any suggestion in fufure because his desire of t aking initiative has been
Violating i.-sr+.'ile suggestion to offer Effect
suppressed. On the contrary, if c ourage his
*
l'i.r,.'ct had some been
* * * * * An Decline Increase Cooperation Increase Decline suggestion listened
atmosphere in in in in
the the
the the to in of carefully
thinking employees' future. sense thinking
the of non-cooperation. employees of Such power (even
power attachment attachment an though
of in of
the a ction implementing the
to employees. employees
not the to w
ould the
be company.
organisation. to
simply implemented)
decisions. have encouraged he
could have his initiative. taken
the (14) Esprit De Corps: As per this
principle, a manager should continuously make efforts to develop a team spirit among the subordinates. To do this, helshe
should use the word 'We' instead of 'l' during
the conversation with subordinates. For example, a manager should always say
that 'we will do this work' instead of 'l will do it'. This behaviour of a , P
osi{iue Effect I I i Violating Effect manager
* *
* * will keep alive the spirit of cooperation among the subordinates. M
otivation to work with team-spirit.
Easy to achieve objective. Sweet relationship. Kills
team spirit. i*i*
relationsh ip.
Difficulty in achieving objective. _p!ttg-rnep_i1
51 Principles of Management: Nah-re and Significance
Corrclusion
Clarifuing his principles of management, Fayol has pointed out that since management is related to human what situation beings
-
nothing and to c an what b e said degree with (or a sense exltent) of finalig. decision-making power of the manager. Thus, the
it all depends o n the experience, efficiency and
principles What principles are to be applied at what time, in advocated by Fayol
have an element of fleibility.
I . Meaning of Principle of Management: Management principles are those basic truths which have the ability to predict
the results of managerial activities. IZ2. How are Principles of Management Derived? (i) On the basis of Observation,
and g(ii) On the basis of Experimental Shrdies.
3. Nature of Principles oI Management: (i) UniversalApplicability, (ii) G eneral Guidelines, (iii) Formed by Practice
and Experimentation, (iv) Flexibility, (v) Mainly Behavioural, ( vi) Relationship between Cause and Effect, (vii)
Contingent. V4. Significance of Principles o
f Management: (i) Provides Useful Insight to Managers, (ii) Optimum
Utilisation of Resources and Effective Adminisbation, (iii) Scientific Decisions, (iv) Meeting Changing Environmenhl Requirement,
(v) Fulfilling Social Responsibility, (vi) Management Training, Education and Research.
Z
5- Fundamental Principles of Management: Principles advocated by Henry Fayol: (i) Division of work, (ii) Authority
emuneration to (vi) Subordination
and responsibility, (iii) Discipline, (iv) Unity of command, (v) Unity of direction, (vii) R
of Individual to General Interest,
employees, (viii) Cenhalisation and Decentralisation, (ix) Scalar Chain, (x) Order, (xi) Equity, (xii) Stability of personnel,
(xiii) Initiative, and (xiv) Espiit de corps.
! Principles of Management : Meaning and Nature
1. Explain the meaning and nahrre of management principles.
2. 3. How
are principles of management derived? C larifu in detail' Briefly discuss any four points of the nafure of the principles of
management'
4. 5. 6. 8. 9. 7. What
is meant by 'Principle of Management'. Whatdo you understand by the universality o f principle of
management? Explain in brief, the meaning of 'Universal Applicability of Management Principles'. What do you understand by the
'Flexibility' of principle of management? 'Principles of management are general guidelines.' Explain. 'Principles of management are
contingent.' Explain.
6 Marks
4/5 Marks
3 Marks
(c.8.s.E.2003)
52 Business Shrdies
10State and explain any three points which highlight the nafure of principles of management.
(c.8.s,E.2004\ 11
Explain the meaning of management principles and state how they are derived?
12. Principles of management are derived 'on the basis of Experimental sfudies'. Explain. (c.8.s.E.2004)
13. what is meant by
'Principles of Management'? l Mark (c.B.s.E. 200g) Ans. Management principles are thhose basic truth which have the
hy are the principles of management calted contingent?
ability to p redict the r esults of managerial activities. 14. W
ive any two points of the nature of principles of
Ans. Because principles of management are affected by sifuations. 15. G
management.
tate how the management principles are flexible?
Ans. (o) Universal Applicability. (b) General Guidelines. 16. S
ow have the management
(c.8.s.E,2008,2009) Ans. They are not in the f orm of final truth and can be changed any time. 17 . H
principles been derived?
(c.8.s.E,2008) Ans. On the basis of observation and experimental studies.
202L222324.
25. 26.
27
(Foreign2a09)
18' difference. "The
principles of management are different from those of pure sciences." (c,8.s.E.2008) State
any one
Ans. 19. W
hy The
is principles of management are not definite like the principles of pure science. said that management
it
principles are universal?Ans. (C.8. S.E. Sample Paper, 2008, 2009 ) Because these are applicable in both business and non-business
spheres in a similar manner. I Significance of Principles of Management
6 Marks Explain briefly the importance of management principles. State any five reasons as to why proper understanding of management
principles is necessary.
Explain any four points regarding significance of principles of management.
4/5 Marks (N.C.E.R.T.) Explain any two reasons why proper understanding of management principles is necessary.
(c.B.s E. 200e) 3 Marks State any three reasons as to why proper understanding of management principles (c,B.s.E.20ul is
necessary. 'Principles of management provide useful insight to managers.' Clarifu with the help of an example. How do principles of
management make possible 'effeclive administration,?
anagers in
anagement are helpful for m
responsibilitlr? How principles of m fulfilling l their Mark
social Ans.
their social The
principles responsibility. of
management increase the efficiency of the managers and enable them to fulfill
Principles of Management: Nature and Significance
28. How principles of management are helpful in developing 'management research'?
Ans. The various advantages of the principles of management encourage the researchers to bring in more improvement in them. !
Fundamental Principles of Management
6 Marks 29. E xplain the principles of management given by Fayol with example:
(i) Unitv of Direction (ii) E quity (iii) Esprit De Corps (iv) Order ( v) CenkalisationandDecentralisation (vi) Initiative
(N.C.E.R.T.) 30. W hat is the principle of 'scalar chain'? Explain briefly the utility of 'gang plank' with the help of a
diagram.
4/5 Marks (c.8.s.E.2001) (c.8.s.E.2001) (c.8.s.E.2001) 34. " Fayol's principles of Equity and Order can be applied in acfual work
sifuation." Do you agree? Explain
xplain the principle of 'Scalar Chain'. Explain your viewpoint by giving
your viewpoint by giving examples. (c.8.s.E.2003) 35. E
example. (C.B.S.E. 2003) 36. Which principle of management envisages that each group of activities having the same objectives must have
xplain the principles of 'Unity of Direction' and
one head and one plan? Explain the principle with a suitable example (c.8.s.E.2004) 37 . E
'Esprit De Corps'. ( C.B.S.E. 2006) 38. E
xplain briefly the principle of 'unity of command'. How does it differ from the principle o f
hat is 'Gang Plank'? Show i t through a diagram. ( C.8.5,E.2002) 40.
'unity o{ direction'? 39. W hich principle of management
W
suggests that employees should be treated with Justice and hy is this principle essential in management?
kipdness'? W
41. Which principle of
management suggests that employees should not leave the organisation frequenfly? Give tr,uo adverse effects if this principle is violated.
42.
Discipline (ii) Harmony, not discord 43. E
Explain the following principles in management: (i) xplain the following principles of
Scalar chain; (b)Science not Rule of Thumb. 4. N
management: (a) ame and explain that principle of Fayol which suggests that communication
from top to bottom should follow
the official lines of command. fC.B.S.E. Sample Paper ) 3
Marks 45. Explain the principle of
'Equity'. (C.8.5.E.2001) 46. G ive the meaning of the principle 'Unity of Direction' with the help of a suitable example.
(c.8.s.E.2001) 47.
ive the meaning of the principle of 'Unity of Command' with the help of a suitable example. (c.8.s.E.2002) 48.
G
Fayol points out the danger and costs of unnecessary labour hrrnover in one of his principles. Name and
n organisation follows the principles of management. What are the positive effects of each
explain the principle (c.8.s.E.2004) 49. A
of the
53
following principles of management on the organisation? ( i) Scalarchain, (ii) Equity, and (iii) Division of Work. (c.8.s.E.2005\ 31.
Explain the principles of 'Discipline' and 'Esprit D
e Corps'.
32. E xplain the principles of 'Remuneration' and 'lnitiative'. 33. E xplain the
principles of 'Stability of tenure of personnel' and 'Equity.'
(c.8.s.E.2008)
(c.B.s.E.2008)
54 Business Studies
50 An following organisation
principles follows
of management the
the management
principles on of organisation?
What are the adverse effects of each of the (i) Unity of command, (ii) Order, and (iii)Stability of Tenure of personnel (c.8.s.E.2005) 51
52
violated?Whataretheconsequencesof If How an organisation is principle of does 'Unity provide command'
not of the right
it? usefulfor
place management?
for physical and Explain
human briefly. resources, which (N.C (N. E.R. E.R.T.) T./
principle c is
53. 54. I Mark
State one violating effect of the principle of management Ans. Benefits of specialisation will not be available. - namely the
'Division o f Work, Responsibility'.
State one positive effect of the principle of management Ans.
Helpful in achieving the target.
- namely the 'Authority and
55. 56. 57
. 58' State
one violating effect of the principle Ans. Height of disorder. of
management - namely the
'Discipline,. State one positive effect of the principle of management Ans. The efficiency of the subordinates increases.
- namely the 'Unity o f Command'. State
one violating effect of the principle of management Ans. D
ecrease in the efficiency of the
organisahon. - namely the 'Unity of Direction,. State one positive e
ffect of the principle employees'. of management -
namely the 'Remuneration to 59
Ans. Why
Chain'? Decline the introduce labour
did F ayol in turnover
the Ans. This concept was developed to avoid delay in
communication. rate. concept of ' Gang plank' i n t he principle c ontact with the employees of equal rank in case of .Scalar-
rc.B.S.E 2009) of emergency to state
one positive effect of the principle Ans. Motivation to work with team-spirit. of
.Esprit
management - namely the De corps'. 61 employees According the does for to
62. S tate Ans. his What
principle the
principle doing this of p rinciple, 'Order'. s ome of 'lnitiative' work it is or the taking duty indicate? of some a manager decision to
encourage the feeling of @.B.S.E. initiative (Foreign2009) among 2009) Ans. organisation. The meaning of this principle is to provide the
right place for physical and human resources in an CASE STUDY/APPLICATION ORIENTED
QUESTIONS t1l
The production marketing violated in manager manager
ABC on Ltd.
is insisting of fast selling instructs
to reach a salesman the target. to
go
Which slow in selling the product, whereas the this case? State any truo consequences of the violation of this principte
principle. o f
management li.S.S.E. i s ZOOqi being Ans. The principle o f 'Unity of Comrnand' is violated in this case. The following are the violating effecb of it:
(i) It creates a confused situation for the subordinates. (ii) It reduces the efficiency of the subordinates. tzl
Hina and Harish are typists in a company having the same educational 3,000
of management per month i s and violated Harish in this Rs. 4,000
Hina is getting Rs. working hours. W
nd explain as salary t he for
case? Name per month a principle the same qualification.
hic[ prinliple
(c.B.s.E.2006) Hint:
The principle of 'Equity' is violating. Hence, explain this principle
rinciples of Management: Nature and Significance
55 P
Production Manager of Bharat Ltd. i nstmcts a salesman to go slow in selling the product, whereas the
t3l The
Marketing violatedinthecase?Stateanyoneof Manager is i nsisting on fast theconsequencesof selling to achieve the violation target. Which of
thisprinciple. principle of management (C.B.S.E.2006)
is being
Ans. should The receive principle oiders of from 'Unity only of one Command' superior is at violating. a time and As that per employee this
Mohan, a manager, does not distuibute
principle, should an be individual answerable employee only to t4] t hat superior. The violation of this
the work amongst his subordinates, either
principle reduces the efficiency of the subordinates.
according to capabili$ or
proportionately. Which principle of management is being overlooked and why? Give one violating effect. Ans. The
principle of 'Equity' is violated as the manager is not impartial as far as the distribution of work among the employees i s concerned. It creates
ohan, H e does the not manager give them of parameters a business or undertaking rules for
dissatisfaction for the skilled workers. tsl M
reporting is very lax to with work his and fellow completion employees of assignments' and subordinates' Which principle of management is
being overlooked and why? Give one violating effect. Ans. The principle of 'Discipline' is violated as the manager's b ehaviour is not
disciplined at all. It creates t6l a n Mohan, department atmosphere a m
anager, and of also doubt the very and other often suspicion.
rinciple all l evels, of passing management on i nstructions is being overlooked regarding and his
departments. speaks people Which at p
'scalar Chain' is violated as during communication the various steps of Scalar
why? Give one violating effect. Ans. The principle of 17)
Chain Mohan, organisation. are a overlooked. manager Which p rinciple expects It creates his of management subordinates disorderly flow is
to being of work information.
overlooked for t he happiness andwhy? and Give pleasure one violatingeffect.
of b eing in t he
t8l Ans. without Mohan, giving The them providing a principle manager time to fair of settle expects 'Remuneration remuneration down.
mployees' employees. to adapt of management is the violated l t n ew increases environs as is the being
his subordinates Which to to principle the E
the manager's labour and overlooked working turnover expectation and conditions rate.
why? has Give without no one use
violating effect. Ans. The principle being overlooked i s 'stability of Personnel' as the manager opportunity to the employees so that they get
settled. It increases the recruitment is not providing so'much
The subordinates in company receive orders regarding
and training expenses. t9l same task. Which principle a of management is being
their work from different operative heads
overlooked and why? Give one violating effect.
for the
Ans. The principle being overlooked is 'Unity of Command' as at the same time there are many t10l superiors In
ln degree-holder
particular company,
office, company. about a 2007 1500 he giving t he started In suggestions a company from very orders a sort Ll.M.
no importance had
short to of were appointed the Ahmedabad time, campaign same implemented there employee. Mr. a sking were with
been attached to the
Lohrs about an in for different It experience as s uggestions reduces 10,000 its Chief fields. the suggestions. of from
suggestions given
efficiency a Executive This decade. ig Officer. the assuming
every campaign After of On b studying or subordinates.
by the subordinates.
fetched small He the employee them the was charge company an i ntensirrely M.B.A' of of the his
an
additional (i) What principle profit of of 50 management crore rupees.
will have been working behind Mr. Lotus's thinking? (ii) What will be the effect of implementing these suggestions on the empioyees? Ans.
(i) PrinciPle of initiative. ( ii) Their attachment with t he company will i ncrease and they will offer new and u seful ideas.
[}urru Se*sinn
For this query session, questions from readers' side are invited'
GHIPITil 6$G I Tl{il TI G MA]IRG EM E I{T:
EGH]IIIIUES
PRI]IGIPTES AilII T
scientific management maximum production attempts
to at etiminate
minimum wastes
cost.
to ensure Learning Objectives After o M
eaning studying of Scientific this chapter, Management you will be
acquainted with: . D
efinitions ol Scientific Management o F eatures of Scientific Management o P rinciples of Scientific
echniques of Scientific Management a
Manogement o T . o Difference between Method Study and Motion Study
Dilference between Time Study and Motion Study Comparatiue Study of Contribution of Taylor ond Foyol
rdinary propounded Midvale Scientific
work the within o and a labourer dedication, very Steel by short Fredrick
reach chief as -1994)
of to a
management Company to duration the he was position winsrow in able (1878 USA is
Tayror. new
a labourer the Engrneer. thinking
r ose position Tayror from
and, In was on
of 1g7g, the
due chief
management a perstn ranks
hard who an
to he Engineer his joined of thereafter to management. to Taylor that in what the
solve the same conducted he amount this started was company problem Taylor supposed of providing a work number worked
within and, a to labourer in be a of services doing in short doing. experiments Bethlehem was span so, He as doing he of gave a
six management gave Steel and a years. was number came a works scientific far During to ress upto of t he consultant. as
suggestions this conclusion outrook compared 1901 plriod, a nd In
to Fredrick
Winslow Taylor
_1915)
( r 856
Scientific Management: Principles and Techniques 57
1903, he published a research paper titled ' Shop Monagement' and in 1911 his book 'Principles ol Scientific
Management' created ripples in the f ield of management. Taylor died in 1
915, but his contribution to
management will always remain immortal. ! Meaning of Scientific Management
The literary meaning of scientific management is performing the work of management in a scientific manner. In other
words, discarding the traditional approaches to management and adopting newer and more scientific approaches in
their place is called s cientific management. Taylor has said that before commencing any work, a manager s hould
first analyse it thoroughly, and only then take any decision. I Definitions of Scientific Management
Various experts have given many different definitions of scientific management. A few of the important
definitions are:
(1) A ccording to F.W. Taylor, " Monogement is the oct of knowing exoctly whot you want men to do and
then seeing to it that they do it in the b est and the cheopest way."
l2l According to Peter F. Drucker, ' The core of scientific
manogement is the orgonised study ol work. the onolysis of work into the s implest elements ond the s ystemotic
improuement of t he workers' performance of each elernent." Based
on the above discussion, it can be said that scientific
management involves studying each activip
in detail and in doing so ensure that all the activities of the organisation
are accomplished in an economic and effective manner. ! Features of Scientific Management
Based upon the definitions, the following are the main characteristics of scientific management: (l) S
ystematic
use ensures that all activities are
Approach: Scientific management is a systematic approach to management and its
completed in a systematic and scientific manner.
(2) Brings Complete Mental Change: Scientific management brings about a complete mental change both in the
owners as well as the employees of the organisation. Both the parties start aiming for more and better production
targets rather than merely chasing higher profits. They are able to comprehend
that increased and better
production will automatically result in higher profits which will benefit both the parties.
(3) Discards Traditional Management: The approach of scientific management completely discards
traditional management. It calls for the discarding of old techniques and adoption of new and modern techniques,
with the aim of improving the efficiency of employees. (4) R ules:
bservance of R
equires Strict O
Scientific management requires very shict observance
of rules, because the rules are formed only after due analysis
and there is very litfle chance of error among them.
(5) lmproves the Efficiency of Workers: The main aim of scientific management is to increase the efficiency of
workers. This is done through conducting various kinds of sfudies such as time sfudy, motion shrdy and fatigue
study.
58 Business Studies
(6) Gives due Weightage to Specialisation: S cientific management involves dividing each work into
various small parts, each part being allotted to the person who is an expert in it. This results in better and more work
ence, it c an be seen that scientific management gives due weightage
being performed in much less time. H
to specialisation. (7) Useful for Large O
rganisations: Since the scientific management system is quite expensive to
Attempts to Minimise Wastes:
implement, it is useful only for larger organisations. (8)
Scientlficmanagementaimsatminimisingthewasteof time, materials, machine, etc. I Principles of
Scientific Management
The scientific management approach propounded by F.W. I'aylor is based upon the following four principles:
cience, not Rule of Thumb: This principle says that we should not get sfuck in a set and continue with the
(I ) S
old techniques of doing work, rather we should be constantly experimenting to develop new techniques which make
the work much simpler.
(2) Harmony, not Discord: fu per this principle, such an atmosphere should be created in the organisation that
anagement consider each other indispensable. Taylor has rcf.ened
labour (the major factor of production) and m
to such a situation as a r ivif,rrrc/ R eooltiion' . Taylor firmly believed that the occurrence of a mental r evolution would
end all conflicts between the two parties and would be beneficial to both of them.
(3) Cooperatiotr, not Individualism: According to this principle, all the activities done by different
people must be carried on with a spirit of mutual cooperation. Taylor has suggested that the manager and the
workers should jointly determine standards. This increases involvement and thus, in furn, increases r esponsibility.
(4) Development of each and every- person t o hisAer greatest efficiency and prosperity: According to this
principle, the efficiency of each and every person should be taken care of right from his selection. A proper
arrangement of everybody's training should be made. It should also be taken care that e ach individual should be alloted
work according to his ability and interest. I Techniques of Scientific Management
The principles of scientific management only bring out the basic philosoplry behind the theory. The question
which now arises is how to implement these principles practically? Taylor has devised the following techniques
for actually implementing the principles of scientific management: 1. Functional Foremanship
.
F.W. Taylor has propounded the functional organisation. This form of organisation is totally based on the principle
of specialisation and makes full utilisation of expertise of various experts. In a functional organisation, work is
divided into many small parts and each part is assigned to an expert. In this manner, all the benefits of specialisation are
availed of.
"Functional
Taylor has defined functional organisation as follows: organisation consists of so clivicling tlte
ntanagement that each man from the assistant supelintendent shail have as few functions as
Scientific Management: Principles and Techniques 59
irr:1,-1i.rir' topelfoi'nr I lpr;rr:rrcabii:1lre'wotlrolrrcrcltrna.,nlirtlre :rianaqrrrit,nisiiouir.l tl,'cotittnr'ci i '.,r!-r. r
)(Jr-()lriLiirlcu c-,f a :;rnclie leaiinq tttnctii.rrr
Taylor has suggested the division of the work of factory manager into two sub-departments: (i) planning
department, and (ii) production department. Four experts are appointed in each department. The experts
in t he planning department do planning and the experts in the production department help in production.
Functional organisation has been clarified in the following diagram:
IFactory Manager I
Planning Officer Production Officer I
Gang Boss
Speed Boss
Repair Boss I
lnspector
Workers
(i) Specialists of Planninq l)epartment and their F'unctions (a) Rou ie Clerk: This clerk ensures the
sequence of completing a particular work, meaning thereby the stages it shall have to pass before being finalised. He
also decides the job to be done for the day and where i t is to be done.
lb) lnstrrrction (]ard Clerk; This clerk prepares the inshuction cards for the workers and hands them
over to the
gang boss. These cards contain information about the nafure of the work, procedure of doing it, materialto be used
and the details about machinery.
(rl Tirre and Cost Clerl,.: This clerk decides as to when a particular work is to be started and finished, meaning
thereby as to what time the whole work will take place. It is also decided at the same time at what cost the product
will be produced.
ldi lliscipline Officer: The discipline officer ensures that every work is being performed in a disciplined
manner.
1ii) Speciaiists o{ Production f)epartment and their Functions (a) Gang Boss: The workers are
divided into various groups from the point o f view of control. A group leader is selected w
ho is known as the
gang boss. He i s expected to e nsure that both t he workers and the machines are fit e nough for production a nd
that the material required for their u se has been made available to t hem.
60 Business Studies
(b) Speed Boss: The main function of the speed boss is to ensure that all the workers are performing their
job at the required or expected speed. If it is not so, the speed boss tries to find out the cause
of slow speed and hence
a solution for it.
(c) Repair Boss: The main function of the repair boss is to keep the machines and tools in working condition.
(d) Inspector: He inspects the things produced and compares their quality with the standard prescribed for
them and hies to find out the difference. In case of unfavourable result he initiates corrective action.
o 2.
Standardisation of work , <1" h ? r b enoa ,lV " / brfif^
amount of work to be done by a
(Standardisationmeanssettingstandardsion.F;[;;;pi;; the
worker in a day may be standardised{ln other words, the worker is expected to do the standard amount of work
everyday. In the same manner standards may also be set f or raw materials, machines and tools, techniques, conditions of
he following is a brief description of such standards: (i)
work, et) T Standardised Material: By standardisation
of material we mean that the raw material provided should be according to the quality of finished goods required.
For example, if for producing 'A' quality of finished goods 'X' quality of raw materials are required (and the same
has been determined after
uality of finished goods 'X' quality of raw
due deliberation), then we can say that for 'A' q
materials have been standardised. In the fufure whenever it is required to produce 'A' quality of finished goods, 'X'
quality of raw materials will be used without any hesitation. By doing so good quality of finished goods can
be
produced in the least possible time.
(ii)StandardisedMachines andTools: Standardisationofmachinesandtoolsensurethatthey are of the
required quantity and type to produce the desired finished goods. For example, if for producing 'A' q
uality of finished
achine and M, N and O tools are required. Once this is determined, whenever
goods 'X' m finished goods of 'A'
achine and M,Nand O
quality are to be produced, it can be done with the use of 'X' m tools.Standardisationof
machinesand tools will reduceerrorsonthepartofworkersasto which
machine or tools are to be used. and hence
work can proceed at a much faster pace.
(iii) Standardised Methods: By standardising the optimum techniques of doing work, the latter can proceed at
with much greater ease. The technique determined for doing a particular work is used uniformly
a faster pace and
whenever such work is performed.
(iv) Standardised Working Conditions: Working conditions have a very deep impact on the efficiency of
workers. In s tandardising working conditions, i t i s noted that how much t emperature, ventilation, lighting,
cleanliness and safety is necessary at the work place. After due studies, the working conditions are standardised and
.
efforts are made to maintain them at the work place. 3. Simplification
Simplification means putting an end to the u nnecessary types, qualities. sizes/weights. etc. For- examol bllt if it
)Y-"C. machines shall have to be installed, more stock shall have to be maintained and increased labour costs
Scientific Management: Principles and Techniques
shall have to be borne. Therefore, it is advisable to manufacfure shoes only of the proper sizg) In other words, simplification
roduct is the answer.
of the p
Objectives (ii) down economy simplification:
(i) Effecting Bringing of the labour in the u se cost of with machines.
be obtained by restricting specialization only to a few
the help of specialization. (The benefits of specialization (iii) can
products.) Affecting economy in the staff. According
to another example, a paper manufachrring company in the U.S.A.
started the work of simplification of the t ypes of papers it was manufacturing and succeeded in reducing their types from
2000
o to 4. 200
Scientific only.
Study of Work
It means to conduct the deep analysis of all the activities being performed in the organisation with the aim of producing
maximum possible quality output at minimum costs. Taylor has conducted the following studies:
Study:
(i) Method Study, ( ii) Motion Study, ( iii) Time Study, and ( iv) Fatigue Study. this study, lfUlethod p rocess
It refers to i dentify the most suitable way to do a particular
chart and operation research techniques are used. The main objective
activity. To conduct
of this shrdy is to minimise the cost of production and maximise the quality and level of consumer
satisfactircn.
(ii) Motion Study: It refers to conduct the study of motions being performed by workers and study machines is to while
eliminate doing the the unnecessary job. The movie motions. c amera is used to conduct this sfudy. The main (+
objective of this
For example, during an experiment it was found that while laying a brick, a mason wd-s conducting 18 different activities, but
after eliminating the unnecessary activities the number of activities could be reduced to 5, and in certain cases even down to 2
activities.
(iii)Time Study(llrefers to determine the standard time required to complete a particular activityJ The standard time is
determined on the basis of average tlme taken by the several experiences of the same work. This shrdy is conducted with the help of
a stop watch) The main objectives of t he study are (i) to get the estimated figure of labour costs, (ii) t o determine thelnumber of
required workers and (iii) to decide about the suitable incentive plan.
Fatigue Study: It refers to determine the duration and frequency of rest intervals to complete a
,rr(iv) particular job. The rest
refreshes the workers. They work again with their full capacity. The main objective of long this o working study 5.
t^.i
Differentaal is hours, to maintain poor wage the working efficiency System conditions, level of workers.
p h-Lt! p/gt,;'4
There may be so many relations ?,.^ causes wlth of fatigue, the |oss, such
gtc.
as,
Taylor has advised the adoption of diffe e r to motivate the employees. According to this system wages are paid on the basis
of work done and not on the basis of time spent ln doing the work. In this system two different wage rates are used : one is the high
wage rate and the other i s the l ow wage rate. Those workers w ho are able to p roduce the standard n umber of units w ithin a
fixed duration are paid as per the high wage rate, and those workers who are not able to produce the standard number of units
within the same time are paid as per the lower wage rate.
61
62 Business Studies
For example, let the standard output per day be 20 units and the two wage rates be Rs. 5 per unit and Rs. 4 per unit
respectively. Worker 'A' p roduces 20 units in a day and in doing so he earns Rs. 100 (20 unitsxRs.5
perunit).Another worker'B'producesonlyl8unitsinadayandhencehewillearnonly Rs.72
(18 units x Rs. 4
per unit). In this way, even though 'B' has produced only 2 units less than 'A' the difference in theirwages will be
Rs.28 (Rs. 100 -Rs.72). fu a result, less e fficientworkers will be motivated to work more and efficient
workers will be motivated to maintain their efficiency. o 6. Mental Revolution
Mental revolution calls for a change in the mind- set of both employers and workers. fu per Taylor, a revolution in
mind-set of both the employers and the workers is required because it will promote feelings of cooperation, and will
be beneficial to both the parties. Normally, it is seen that conflict between employers and workers results in
division of profits, with both the parties demanding a larger share of profits. This is the main reason why a
mental revolution is required. According to Taylor, insiy;:ri iri tightlrtg
r.rvet'dir;ision of lrroiits. bc;ilr tlie l.)(il'ri(.'s
should make i:ilorts iot inr:reasing tJ're profits, Such a situation will result in an increase in production, and as such a
high increase in profits that will make any talk of division of profits meaningless. ! Comparative Study of
the Contribution of Taylor and Fayol
Both Taylor and Fayol have been outstanding management experts. Their conhibution in the field of management has
indeed been invaluable. Taylor was such a personalityr who started his career as a labourer. That is why h e has seen the
workers very closely, understood their problems and recognised the level of their efficiency. Taylor conducted many
experiments regarding the efficiency of the workers and finally reached the conclusion that a worker works much less
than what he should actually do. He gave a number of suggestions in order to increase the work efficiency of the
workers. The focus of Taylor's study was
the work efficiency of the workers. That is why he is called ef.ficienct
sper-ic/rst
On the contrary, Fayol started his career as a high r anking manager. This is why he has observed and understood the
problems of the high ranking managers. Fayol brought into existence many invaluable principles i n order to solve
the problems of high ranking managers. His focus of study has been the problems of the high r anking managers
tr in lslr.oljr re st:r:cio/i.sl There are some similarities and
and for this simple reason he has come to be known as an orit
dissimilarities in the contribution of both these specialists in the field of management. They are a s follows:
o
Similarities
we find the following similarities in the thought process of raylor and Fayol: (1) Solution t o Managerial
Problems: Both the management experts have presented solutions to the managerial problems based o n their
rinciples. (2)
experience and experiments. The solutions presented by both these experts are present in the shape of p
Stress on Practical Aspect: Taylor and Fayol have both been directly connected with the reality of work. That is
why they both have laid stress upon the practical aspect of work. In other words, they
gave their suggestions about
improvement where such improvements were possible. They did not lay down any principle which cannot be
brought into the parameters of p racticality.
63 Scientific Management: Principles and Techniques
(3) Stress on Good Industrial Relations: Both the experts are of the opinion that if good relations between the
owner and the workers are established, the organisational aims can be easily achieved.
issimilarities
oD
Following are the dissimilarities in the ideas of Taylor and Fayol:
Difference between Taylor and Fayol
Basis of Difference Taylor Fayol
1. Perspective Related to production activities/related
to factory a rea.
In conclusion, it can be said that these days many changes have crept into the world of management. It is because of these changes
that the principles of Taylor appear to be a little old ones' On the other hand, principles advocated by Fayol get credence in the
modern context. Even then Taylor's contribution cannot be C
onsidered insignificant as his principles certainly guide the
managers in some way or the other'
cientific adopt newer Management: and more scientific To discard approaches
Vmanagement 1. Meaning and of S
the traditional in their ggg
approaches to place is called scientific management. 2. Features of Scientific Management: (i) Systematic approach,
mental rules, (v) change, Improves (iii) the D iscards efficiency the traditional o f workers, m
anagement, (vi) G ives due (iv)
weightage Requires (ii) strict to R
elated to higher level of management. 2. Unity o f Command w
orks Unity of under Command the
orker eight specialists simultaneously.
supervision is violated. A of w
Brings complete
observance of specialisation, (vii) Useful for large organisations, (viii) Attempts to minimise wastes. not 3. Principle
discord, (iii) of Scientific Cooperation, Management: not individualism, (i) Science, (iv) Development not rule of
thumb, of each (ii) and Harmony, every person to his/her greatest efficiency and prosperity. 4. Techniques of Scientific
Management:
(i) Functional Foremanship: (a) Experts of Planning Department: Route Clerk, Instruction Card Clerk, Time and Cost Clerk,
Discipline Officer; (b) Experts of Production Department:
The Principle is applied stricflY.
3. Applicability It is applied in special situations. It is applied universally. 4. Basis of Formation Established management
principles by observations of scientific and experimentation.
Presented personal experiences in the form of universal tnrth.
5. Focus Increasing simplification, productivity the s tudy with of the time help and of
speed, etc.
Reforming the entire adminishation by following different principles.
Professional
6. Personality Scientific 7. Expression Scientific management. General thinking about adminishation.
64 Business Sfudies
tools, Gang
(iii) (ii) Standardisation Simplification (c) Boss,
standardised Speed
Boss, of methods, work: Repair
(a) Boss,
(d) Standardised standardised Inspector.
material, working (b) conditions. Standardised machines and
(iv)Scientificstudyof work:(a)Methodstudy, (v) Differential wage system. (b)MotionShrdy, (c)Timestudy, (d)Fatigue
sh-rdy. Z ( vi) Mental Revolution. Formation, (iii) (B) 5. (A) Comparative Stress Dissimilarities:
Similarities: on (v) good Focus, study (i) industrial Solution (i) (vi) Perspective, of Personality, the relations.
anagerial (ii) (vii) Unity E xpression. Problems, of of Command, Taylor (ii) and Stress
of Contribution M
(iii)Applicability, Fayol: on practical (iv) aspect Basis of I Meaning and Features of Scientific
Management
organisations. ! Principles of Scientific Management
1. Write any four feafures of Scientific Management.
2. 3. What does scientific management mean? Write 7 . Explain the principles of Scientific Management given by Taylor.
three feafures of ' scientific Management,. 8. Explain anytwoprinciplesofScientificManagement. 9.
Explain the principles of scientific management.
4. Name the petson who has propounded .Scientific
Management'. 5. Ans.
Fredrick
Winslow Taylor. State any two features of scientific management. 10. Describe Taylor's principle of 'Harmony, not discord' in about 50 wo
Ans. (a) It is a systematic approach. 6. (b) 11. State any two principles of 'scientific M
It brings c omplete mental change. scientific anagement,.
Ans. (i) Science, not rule of thumb. (ii) Harmony, not discord.
management is useful for which type of organisations? Ans. It is useful for larger 4/5 Marks
(N.C.E.R.T./ 4/5
3 Marks Marks (Foreign
2009)
(c.8.s.E.2009)
l Mark
l Mark
6 Marks
65 Scientific Management: Principles and Techniques
12. What is the meaning of the principle of scientific management namely the 'Cooperation not
Individualism'? Ans. According to this principle, all activities done by different people must be carried on w
ith a spirit of mufual
cooperation.
13. List any two organisation
principles scientifically of . 'Scientific Management'formulated by Taylor for
managing an
(C.B.S.E. SomplePaper)
!
Ans. (i) Science, not rule of thurnb. (ii) Harmony, not discord. Techniques of Scientific
Management
14. Explain in brief the techniques of scientific management. 15. Explain the technique of 'Functional Foremanship' and the 16.
Taylor. following techniques of scientific work sfudy:
enunciated Discuss the by
6 Marks
concept of ' Mental Revolution' as
(lJ.c.E.E.T.)
(a) Time Study (b) Motion Study
(c) Fatigue Shrdy (d) MethodStudy
1819
(N.C.E.R.T.) 4/5 Marks 17. Explain 'Differential Piece Rate' and 'Functional Foremanship'as techniques of scientific management
Explain any five techniques of scientific management.
(c.8.s.E.2009) (c.8.s.E.2009) shirts. Develop an imaginary plan of differential piece rates to be introduced for the workers, engaged
(c,8.s.E.2002)
in sewing
20. What Foremanship' contradiction and why? do you find in the principle of 'Unity of Command' and the iechnique (c.8.s.E.2002)
of
'Functional
Explain Explain 'Time-Study' and 'Fatigue Shrdy' as techniques of scientific management. 'Method Study' and 'Motion
22. 21,.
(C.8.5.E.2004) (C.8.5.E.2004)
Str-rdy' as techniques of scientific management. 23. H ow does the technique of 'Motion Sh-rdy' help to
two Marks
improve the efficiency of workers. Give any 3 points 24. in
How support
does the of
your technique answer.
of 'Time Shrdy'
help to improve the efficiency of workers? Give any two points support technique of
hich in
25. W your designation of any answer. of
Taylor suggests that each worker should be supervised by specialists? Give the two
types of specialists suggested by Taylor. (c.B.s.E.2005)
26. Name and explain the technique of Taylor which is the strongest motivator for a worker to reach standard 27. 29. 30. 31. 32.
28. performances. What What How What What Write do you mean by 'Differential Wage System'? does mental revolution i mply in
scientific management? does scientific management bring complete mental change? are the aims of 'time' and 'motion' s tudy? do you m
ean
by 'Simplification'? a note on 'functional foremanship'.
33. What is the job of 'Speed Boss' under functional foremanship?
Ans. He ensures that all the workers are performing their j ob at the required speed
(c.8.s.E.2006)
I Mark
66 Business Studies
34. 35. As
a technique of scientific management what is the meaning of 'standardisation Ans. It refers to s et the standards for
Work'? As a technique of scientific management what is the meaning of
different factors, after due deliberation. of
'simplification'? 36. Ans.
What It
is means
meant putting
end to Study'? unnecessary
by'Method an types, qualities, sizelweight
etc. 37 . Ans. It refers to identify the most suitable way to do a particular activity.
What is the main objective of 'Motion Study,?
What The
38. Ans. is meant main
objective by'Time of
Study'? this
study is to
eliminate the unnecessary motior.rs.
39. Ans. What It is refers meant to determine by'Fatigue the Study'? standard time required to
complete a particular activity. 40. Ans.
What lt is refers meant to determine by'Mental the Revolution'? duration
and frequency of
rest intervals to complete a particular job.
41. Ans.
Whatismainobjectiveof It
calls for a change i n the 'Method-Study'?
mind-set of both the employers and the workers. Ans. Its main objective is to minimise the cost of production and
42. consumer
satisfaction. What is main objective of 'Time-Study'?
(c.8.s.E.2008)
(c.8.s.E.2008) maximise the quality and level of
(c.8.s.E.2008) Ans. The main objective of time-study 43. D
ifferent number of required techniques workers were and
management. One of them is (c.8.s.E.2003)
(N.C.E.R.T.) 3 Marks
I Mark is to get the estimated figure of labour developed t o 'Fatigue d ecide about Study'. by t he Taylor What s uitable is to the
to determine the Somple Poper)
bjective plan. principles o f costs,
incentive facilitate o of s cientific this study ? (C.B.S.E.
M.
Ans. The main objective of this study is to maintain the efficiency level of workers. What is the main objective of fatigue study?
ns. ' k Refer to Q 43. What is the main objective of simplification in scientific management?
(c.8.s.E.2008) 45. A
(C.8.5.E,2008)
Ans. Effecting economy in the use of machines. I Comparative Study of Contribution of Taylor and Fayo!
46. complementary.' 'Taylor's principles Do of y ou scientific agree management with this view? and Fayol's Give any
principle four 6 Marks of management are mutually reasons in s upport of y our 47 . a nswer.
Discuss the difference between the contribution of Taylor and Fayol.
48. Write the similarities found in the views of Taylor and Fayol.
49. Distinguish between Taylor and Fayol on the basis of 'unity of command'. Ans.Basis of Difference Tavlor Favol
Unifu of Command A Unity worker of Command work under is violated.
the supervision of eight specialists simultaneously.
The Principle is applied shictly.
Scientific Management: Principles and Techniques
50. Distinguish between Taylor and Fayol on the basis of 'Personality'.
Ans.Basis of Difference Tavlor Fauol Personality
Scientific Professional
67
cAsE sTUDy/AppLrcATroN oRTENTED QUESTTONS t1l Ms. Libra is working a s
ari Patti, Lal Patti, Swad,
CEO in the Bagan Tea company. Her company manufactures tea with ten brand names (e.9. H
Mehak, Khushboo, Morning Tea, etc.). Every brand has f ive flavours. Tea of every taste is packed in the packing of 10
grams, 20 grams' 30 grams, 40 grams, 50 grams, 60 grams, 70 grams, 80 grams, 90 grams, 100 grams, 150 grams, 200
grams, 250 g rams, 300 grams,350 grams,400 g rams, 450 g rams, 500 g rams, 600 grams, 700 grams, 800 g rams, 900 g rams,
ackets and all the brands put
1 Kg, 2 Kg, 3 Kg, 4 Kg and 5 Kg. In this way the company sells tea of one brand in 135 (1x5x27) p
together are sold in 135 x 10 = 1 350 packets. Q. 1. What in your opinion is the mistake being committed by Ms Libra?
Q. 2. With what technique of scientific management can she improve upon her mistake? Q. 3. What benefit shall s he get
with the help of the technique suggested by you? Hint: Intensive study points out that there is no justification in selling tea
in s o many brands, so many tastes and huge number of packings. This variety of production can be decreased, e.g. let there
be only four brands with each brand having only one taste and each taste should be packed in 10 grams, 50 grams, 100
grams , 200
g packets. Thus the number of packets can be reduced to 32 (4x 1x8) packets.
grams, 500 grams, lKg,2Kg,S K
By doing so all the advantages of simplification can be obtained, e.g.,less number of machines, economy in stock, decrease i n
the cost of labour, etc.
0rrrr, Session
For this query session, questions from readers' side are invited.
GHAPIER T
BUSTITESS rlrurn0ilMHtr : I M
PORIAIIGI AlI II DI M E]ISI ll lIS
The study of the business environment is compulsory for the
survival and growth of the business.
Learning Objectives After studying this chapter, you
will be acquainted with: o Meaning o/Business Enuironment a Characterisfics o/ Busi ness
Enuironment a l mportance ol Busirress Enuironment o C
omponenh o/Business Enuironment
a Internal Enuironment a External Enuironment a Dimensions o/ Business Enuironrrtent o
Economic Enuironment in India c E conomic Reforms since 7997 or New Economic Policy or
Changing Scenario of
Indian'Ecortomic Enuironment a I mpact of chcnges in Gouernment Policy on
Business and Industry
AilAIYStS
BOII
COMMENCE:-
-: Mr. Answer : Genflemen, let us talk about business
ir, we have heard about environment. but what is this business
environment today. Mr. Question : S
environment? Mr. Answer : Well, first of all you tell us, what do you think about environment? Mr.
ir, in my opinion the forces present around us (e.g. air, sunlight. noise. weather,
Question : S
etc- ) form environment.
Contd...
69 Business Environment : Importance and Dimensions
uestion : Mr. Answer
Mr. Answer Mr. Q
Mr. Question Mr.
Answer
Mr. Question
Absolutely correct. Well, now teli us what is their importance? Sir. allthese forces (environment) affect us. They provide us both
joy
and distress. You Since example, a re we telling a re the influenced moment it r ight ..........
we by these get information forces, studying about them the winter regularly season, is important' we should For
arrange for the winter clothings otherwise physical distress is certain. Now t o listen........ Just as we do not live in a vacuum and
remain sunounded by various forces, in t he
Mr. Question
same way business cannot Sir. does it mean thzrt Air, be run in a vacuum, but .............. .
Sunlight. W<:ather. etc at'r lhe b r-rsirtess environment.
Mr. Answer
No. have In broad patience and listen carefully ....... .
terms. The sum total of alt the factors influencing business is called business environment. A come business in c ontact is
run not with in various a vacuum social but in factors. a society. These While factors doing are business - c ustomers' it has
to
suppliers, etc. All these competitors, factors are government outside the policies, business political and business structure, has
constifutional n o contol laws, o ver them. They are called external factors i nfluencing b usiness. NIr. Questior-t
Sir. hotv clo i.he customers inlluencr: b usit-rcss? M
r. Ansruer
e.g. if the customers i n large company, the sales will come numbers stop down and its b uying the products of a particular
profits will d ecline. The example of COKE and PEPSI is there for you to see. Mr. Question
O K. Sir. Sir. you have tolcl us that customers. sup,pliers. etc. are the external factors ilfluencing business Do yotr thir-rk.
ihere ale some internal factors also? Mr. Answer
Yes, objective, policies, organisation s tucture, production methods, production capacity, etc. management information
system, are the f actors which e xist within ihe b
usiness and i nfluence the decisions of the business. They a re called intemal
Mr. Question
ir. it means that the sun'i total of both the external and the control of
factors influencing business. These are generally within S
business.
internal factors constiiute the business environment. Mr. Answer
You are right ........... Now, This is listen the broad ahead
meaning of business environment. There is a limited meaning of business environment and, in reality, that is in prevalence- Sir,
kindly tell in detail. Listen .......... The external factors influencing b usiness are called e xtemal environment and the i nternal
factor influencing business are called intemal environment. Sorry tlte for the interruprion. Sir The factors of the internal
etrvironment are within control <,,i tl ie ltusinr-1,:, r-r:til lltt-: i,tclr;rs i.ri 11.v.ii.:,,lu1 etivirottment are beyond cor,trol Arn Iright
Sir'?
70
Mr. Answer
Mr. Question Mr.
Answer
Mr. Question
Mr. Answer Mr. Question
Mr. Answer
Mr. Question
Business Studies
ow listen further The extemal environment can further be divided into two parts:
Absolutely conect..... Well done N
which suppliers, and (i) Micro they a ffect can competing environment: be or t aken influence firms, under Micro the
etc. control firms environment These by of factors making a i ndushT means are efforts. closely separately, the sum related
total e.g., to of those the customers, business factors stmcture, almost (ii) Macro all constitutional the Environment: firms
of the laws, This industry etc. i s the The equally s um business total e.g. o f all has government t hese a distant factors
policies, relationship which influence political with these factors and conhol over them is almost impossible. Sir,
Sir No, not
yet, listen ahead ........ We (i) Intemal can
draw environment: the
following Complete conclusion
Control. from
the foregoing
analysis: (ii) Micro environment: Control is possible. Limited ( iii) Macro and e nvironment: generally C
ontrol
accepted almost meaning impossible. of b usiness environment: Sir. control business 'Business it mear.rs over ond
enuironment it ouer that is impossible
which only means rracro the business the ettvironurent sum hos total no of c ontrol., is those business factors environnrent
which influence because
the 101%
conect. I have understood of studying it. the
meaning of business e nvironnrent, but. sir. what
is the rreefl A very good question..... At continuous Sir.
it environment. means
from opporfunities the beginning scanning
and that
t his The the order
of threats in always live
discussion same opportunities are to thing you
and present. applies and
had develop can observed
In today's
An here. forestall organisation in that the the we
business possible competitive
get can
joy benefit environment threats. and age
itself distress the
by businessman shou]d continue studying business environmeni Sir,
any example regarding this ... ..... Mr. es, listen ...........
Answer : Y
business The
motorcycle environment. industry
in the did U.K.
It not declined
attack due importance not
any to
keeping a to watch
produce over
international-level product to match the Japanese motorcycle indusbry. Therefore, they
suffered. If the U.K. motorrycle Mr. Q
:
uestion would not have suffered O.K. Sir. Thank U.
he encl :--
like this. industry had adopted the right policy in time, it : T
7t Business Environment : Importance and Dimensions
! Meaning of Business Environment
Business environment means the sum total of those factors which influence the business and over which the business has no
control. ! Characteristics of Business Environment
Following are the chief characteristics of the business environment: (1) Totalality of External Forces: B usiness
environment is the sum total of all those factorVforces which are available outside the business and over which the business has
no control. I t is the group o f many s uch forces, that i s why, i ts nature i s of totality.
(2) Specific and General Forces: The forces present outside the business can be divided into two parts (i) specific and
-
general.
Specific: They are the forces which affect the firms of an industry separately, e.g., customers, suppliers, competitive firms,
investors, etc.
(ii) General: They are the forces which affect all the f irms of an industry equally, e.g.. social. political, legal and
technical situations.
(3) Inter-relatedness: The different factors of business environment are co-related. For example, let us suppose that there is a
change in the import-export policy with the coming of a new government. In this case the coming of new government to power
and change in the import-export policy are political and economic changes respectively. Thus, a change in one factor affects the
other factor.
(4) Dynamic Nature: As is clear t hat environment is a m ixfure of many factors a nd changes i n some or the other factors
continue to take place, therefore, it is said that business environment is dynamic. (5) Uncertainty: Nothing can be said with any
amount of certainty about the factors of the business business environment strategy because take they into consideration
continue to change the likely quickly. changes The before professional hand. people But this who is a determfne risky
job. For the
example, technical changes arevery rapid. Nobody can anticipate the possibility of these swift technical changes. Anything can
happen, anytime. The same i s the s ituation of fashion.
(6) Complexity: Environment comprises of many factors. All these factors are related to each o ther. Therefore, their
individual affect on the business cannot be recognised. This is perhaps the reason which makes it difficult for the business to face
them.
(7) Relativity: Business environment is related to the local conditions and this is the reason for b usiness environment
happens to be different in different countries and different even in the same countryr at different places. ! lmportance
of Business Environment
now as to why we want
It is not sufficient to know only the meaning of business environment. The more important aspect is to k
to study it. I n other words, what is its importance. The importance of business environment is highlighted by the following
facts:
over Advantage: The sfudy of business enVironment enables us to know about the opporhrnities available. A
(1) First M
company which is more conscious about the changes taking place in the business environment is the first mover. It takes
ecoming the first supplier. In other
advantage of it by b
72 Business Studies
words, a company which has the capacity to know the possibilities of the opportunities available can be the greatest
beneficiary. For example, the ASIAN PAINTS a leading company of the paint industryr, at one stage lagged behind
because of t echnology. This was smartly understood by another company, GOODLASS NEROIAC (GN). 1 n
order to exploit this situation, the latter company entered with a contract with a f oreign company named
KANSAI PAINTS (KP) with t he purpose of acquiring latest technology. The KP made available to the GN the
Cathodic Electro Depcsition (CED) technology. On this very basis,theGNwasabletoobtain thecontractfor
theentire paintrequirementsoftheMARUTI UDYOG. In this way, the GN earned huge profits by entering the market
Warning Signal: Along with the
with the latest technology. It was a first mover advantage of the company. (2)
availability of opportunities provided by the study of business environment, we also come to know about the threats
accompanying them. I f the knowledge about the threats i s available i n time, efforts c an easily be made to f ace or
surmount them. This is possible only by regularly studying the changes taking piace in the business environment. For
example, there was a time when the customers got dissatisfied at the slow supply of cars in the market. The Maruti
Udyog Ltd. was sharp enough to r ecognise the threat of new companies entering the market in time. Bef.orethe other
dyog Ltd. was able to increase the supply of its cars manifold and was thus
companies could do anything, the Maruti U
able to nullifu the effect of the possible threat. In this way, the Maruti forestalled the possible danger by the s tudy of
business environment. (3)
Taping Useful Resources: An organisation needs a member of resources to camT on
its business (e.g. material machine, man, money etc.). With the help of these resources goods and services are produced.
A business g ets resources from the environment and provides goods and s ervices to the s ame environment. A
study o f
business environment tells a business the requirements of the environment and what can it make available to get its needs
fulfilled. Therefore, it is possible to get useful resources from the business environment. (4) Coping with Rapid
Changes: These days business is being run in a rapidly changing environment. Various factors connected with
business, e.g. competition, fashion, number of customers, technology, etc. are changing quickly. Changes do not
affect business as much as the rapidity of the changes. It means that if the speed of the change is a little less it can be faced
with comparativl ease but to face the rapidity of change is a very difficult task. This can be possible only by constant
Assisting in Planning and Policy: The
vigil over the business environmeni and sfudying it simultaneously. (5)
knowledge of the business environment presents the basis for pianning and policy. For example, the ITC Hotels decided
to establish many new hotels abroad and irr India only after a c areful sfudy of the business environment. They felt that
tourism industry was the biggest indusky in the worid. Its future was particularly bright in India. The Government also
evelopment of this industry b ecause of many reasons (for example, the receipt of foreign
has a special interest in the d
exchange, increase of employment, etc.). The ITC Hotels formulated their future shategy onthe basis of this
information. In t his way, anyone can defeat their competitors by f ormulating their plans. (6) lmprovement in
Performanc e: ln every organisation the sfudy of business environment has an important role as far as its performance is
concerned. Those organisation which k eep a constant e ye on i t and a nalyse it correctly definitely win t he race and remain
alive for a long time. On the other hand, those organisations which do not care about it cannot remain steadfast in the
market, are likely to close down.
Business Environment : Importance and Dimensions
73
Therefore, it can safely be asserted that an organisation can improve its present as well as future with the help of the sfudy of
business environment. I Components of Business Environment
The different components of the business environment a re shown in the following diagram:
Components of Business Environment I
!nternal Environment I External Environment I
1. Objectives 2. Policies Micro Environment or 3.
Organisation Structure Operating Environment 4. Management
lnformation System 5. Production Method 6. Production Capacity
etc.
Competitors 4. Public 5. Marketing lntermediaries
Customers Suppliers 3.
2 1.
etc.
I A. lnternal Environment
Internal ehvironment includes all those factors which influence business and which are present within the business itself.
These factors are usually under the conhol of business. The sfudy of internal factors (vii) (ix) (iii) (") (i) is really
Management Composition Organisational Objectives Production important of
Capacity, o f Business, I nformation
the of shrdy
Struchrre, Board for
Directors, internal environment. (viii) (iv) (x) (vi) (ii) Policies
System, of
Production Managerial Participation Features These of factors of Business, Methods, Attihrde, Human in Management, are:
Resource, etc.
Note: All the above factors do influence the decisions of business, but since all these factors are usually under the control of
business, they cannot be wholly included in the business environment. I B. Externa! Environment
External environment includes all those factors which influence business and exist outside the business. Business has no
conhol over these factors. The information about these factors is important for the sfudy of the external environment. Some of
these factors are those with which a particular company1. Economic Environment 2. Political Environment 3. Social Environment 4. Legal
Regulatory
Environment 5. Technological
Environment etc.
74 Business Studies
has very close r elationship. However, there are some other factors which influence the entire business c ommunity. On this
very basis, the external e nvironment can be d ivided into two parts:
(1) Micro Environment or Operating Environment: Micro environment means that environment which
includes those factors with which business is closely related. These factors influence every industrial unit differently. These
factors are as under:
(ii)Suppliers (iii) Competitors
(i) Customers (iv) Public
(v) Marketing Intermediaries. (i) Customers: Customers of an industrial unit can be of different types. They include
household, government, industry. commercial enterprises, etc. The number of different types of customers highly influence a
firm. For example, suppose a firm supplies goods only to the government. It means that firm has only one customer. If because
ill stop a nd in that case the closure of that f irm is certain. This
f goods w
of some reason their relations g et soured, the supply o
clearly indicates that the customers do influence business. Therefore, a firm should make efforts to have different kinds of
customers.
(ii) Suppliers: Like the customers, the suppliers also influence business. If a business has only one supplier and he gets annoyed
because of some reason, the supply of goods can be stopped and the very existence of the business can be threatened or
endangered. Hence, efforts should be made to h ave various suppliers.
(iii) Competitors: The competing firms can influence business in a number of ways. They can do so by bringing new and
cheap products in the market, by launching some sale promotion scheme or other similar methods.
(iv) Public: Public h as different constituents l ike the localpublic, press or media, e tc. The attitude or behaviour of these
constituents can affect b usiness units. For example, the local p opulation can oppose some established firm whose business is
excessively noisy. Similarly, if the media g ives some favourable report about a particular company the price of its share can
register an increase o n this count.
arketing Intermediaries: The marketing intermediaries play a significant role in d
(v) M eveloping any business u nit. They
are those persons w ho reduce the distance between the producers a nd agents. For example, a company s ells its goods with t he help
of agents and i f because of some reason all the agents get a nnoyed with the company and refuse t o sell i ts goods, there can be a
crisis for the company.
(2) Macro Environment or General Environment: Macro environment means that
environment which includes those factors which have a distant relation with business. A prominent feature of these factors
is that they influence all the business units almost in the same way.
NOTE: We haue alreody seen that the internal enuironment is under the control of business, and therefore, it c annot be wholly included in the
business enuironment. Similorly, the micro enuironment hos a uery close relahonship urith business and, therefore, if not immediotely ot l eost
it can be controlled to a large extent within o short s pan ol time. On the contrary, t here is remote r elotionship of macro enuironment
with business. In othei words, business hos n o control ouer it. ln foct, macro
enuironment is in reolity the business enuironment.'lts foctors ore
called Dimensions o/ Business Enuironment. We shall now study these dimensions.
Business Environment : Importance and Dimensions
I Dimensions of Business Envaronment
following Dimensions
factors: business
important of environment (or macro environment or general environment) have
the Environment, [Note:
eneral (ii) N
G on-economic environment
Environment can
be classified (Political into
Environment, two
major Socia[ categories: Environment,
(i)
E conomic Legal Regulatory Environment and
Technological Environment)l 75
TechnologicalEnvironment SocialEnvironment. EconomicEnvironment (2) Political Environment (4) Legal Regulatory
(3) (5) (1)
Environment o (1) Economic Environment A mong the various factors of m
acro environment, the economic
environment has a special significance. Economic environment c an be divided into three parts. We shall now sfudy their
effect on business. They are as under:
conomic system. (ii) Economic policies. (iii) Economic c onditions. (i) Economic System: It is necessary to know
(i) E
aboutthe economic s ystem prevailing i n a countryr in order to understand the economic environment. E
conomic system influences
penness of business. E
the freedom or o conomic system i s mainly of three kinds:
(a) Socialistic Economic System, (b) Capitalistic Economic System, (c) Mixed Economic System. (a) Socialistic Economic
System: Under this system, business is directed and conholled by the government. In other words, individuals h ave no freedom
to run business. The government owns all the means
of productions. No individual has the right to have private property. All
persons enjoy the benefits of c entrally planned economy. Russia, China, Hungary and All have equal rights. This system
of economy is mainly adopted by Poland. (b) Capitalistic Economic System: Under this system, private ownership of
business is given importance. Hence, business gets extended. It i s also known a s free market economy. Under this, all means
of production (such as labour, land, capital, etc.) are owned by private people. What to produce, how to produce and by whom it
will be produced- all such considerations a re determined b y the m
arket forces. Hence, it can b e said that there i s a complete
freedom of consumption, production, savings, investment, etc. Such type of economic system is prevailing in U.s.A.
Mixed Economic System: Under this system, business is owned both by the government and individuals.
and canada. (c)
Under this, several basic indushies are run under the control and ownership of the government. As far as the private
sector is concerned, it i s run b
y the private persons, but to s ave the interest of the country government regulates its activities.
India is a good example of countries following this concepts of economy. economic (ii) Economic p olicies are Policies:
laid down Economic to direct policies t he economic deeply i nfluence activities. the Economic business of activities
a country. include The
import-export, employment, tax struchrre, industry, public expenditure, public debt, foreign investment, etc. In order to
direct a ll these economic activities, the following economic policies are laid down:
(a) Export Import Policy, (b) Employment Poliry, (c) Taxation Policy, (d) IndustrialPolicy, ( e) (g)Agriculture
Policy, (h) Public Expenditure Foreign Investment Policy, Policy.
(f) Public Debt Policy.
76 Business Sh.rdies
All these policies influence business. For example, under the import-export policy, restrictions on imports will
benefit the indigenous industry.
(iii) Economic Conditions: Economic conditions are those conditions which are related with the possibilities of
economic development of a country. On the basis of the economic conditions the government starts various
programmes for t he welfare of t he people. These programmes influence business. Businessmen are influenced by
these programmes and they start their own programmes like the advertisement policy, discovery of new market,
bringing new products in the market, new methods of production, etc. Some of the examples of economic
conditions are as under:
(a) Foreign Capital, (b) Supply of Natural Resources, ( c) Level of Economic Development, (d) Rate of Interest, (e)
National Income, ( f) Industrial Development. (g) Foreign Trade, ( h) General Price Level. Impact of
Economic Environment on Business The following are the chief examples of the impact of economic
environment on business:
(i) After reforms were introduced in the banking sector. the bank loans were allowed on easy
terms. lt also led to better services. It helped really fast development of business. (ii) T hechange intheeconomic
environmentresulted inthe establishmentofLeasingCompanies.Mufual
Funds and Venture Capital Business. o (2)
Political Environment
Political environment is the outcome of a combination of various idealogies advocated by different political parties.
Factors connected w ith the activities o f the government a re included in i t, e.g.. the type o f government ( single party
government o r multi party government), t he attitude o f the governmenttowards different industries, p rogress in passing
different l aws, the platforms o f the political parties, the t endency o f the applicants f or different posts, efforts b y
various groups t o get effective s upport for themselves, e tc. Every p oliticalparty has a different a ttitude towards
business community. A l iving example of this c an b e s een during elections i n the shape o f fluctuations in the share
market. It is quite possible t hat the mere p ossibility of a particular political party c oming into p ower can make the
prices of s hare rise sky high. It is true conversely when t he possibility o f some other p olitical p arty coming into power
may bring t he price o f shares really n ose-diving. It clearly shows t hat the a ttitude of the first p olitical party towards
business is positive which gets reflected in the positive effect on the share market. On the other hand, the negative
attifude of the second p olitical party towards b usiness is reflected in the nose-diving of prices of shares in the share
market merely on the possibility of its coming to power. l mpact of Political Environment on Business
The following are some of the examples of the impact of the political environment on business: (i) I n the year 1977,
the Janata Government adopted a stringent attifude towards the multinational companies.
As a result of this attitude the
multinational companies tike the IBM and the Coca-Cola had t o ignore India.
(ii) T he new government encouraged the
multinational companies for investment i n India. This led to the opening
of the doors of the Indian marketforthe multinational
companies. Consequently, the Coca-Cola entered the Indian market once again.
(iii) l t was only because of the political interest
that Hyderabad came to be known as Cyberabad In other words,
it came to be recognised as the centre of Information
Technology (lT). fu a result of it many I.T. Companies came to be established there.
Business Environment : Importance and Dimensions
o (3) Social Environment
atr-tral. Social factors
Business is born and develops in society. Therefore, the effect of various social factors on business is but n
include customs, fashions, traditions, wishes, hopes, level of education, population, standard of living of the people,
religious values, distribution of income, corruption, family set-up, consumers' consciousness, etc.
lmpact of Social Environment on Business All social factors influence business in some way or the other. For
example, the production of things should be according to the fashion. Similarly religious values also influence business. For
example, some years ago the manufacfurers of Vanaspati Ghee used to import animal fat for manufach-rring ghee. On the basis of
ublic protests the g
the strong p overnment cancelled t he import licence o imilarly, with the news t hat
f these manufacfurers. S
some popular cold drinks contain pesticide elements, p eople protested against i t and minimised the c onsumption of these
cold drinks.
o (4) Legal Regulatory Environment
Many acts are passed from time to time in order to control and regulate business activities. The sum-total of all these Acts
creates legal regulatory environment. Acts are mostly passed to regulate such business activities as s ale-purchase, industrial
disputes, labour, regulating partnership business, regulating company business, foreign exchange, etc.
In India, the following Acts have been passed in c onnection with t he above business activities:
77
(i) Sale of Goods Act, (iii) Minimum Wages Act, (v) Companies Act,
(ii) Indushial Disputes Act. (iv) Indian Partnership Act, (vii) Trade Mark Act, (viii) EssentialCommodities Act, (ix)
Consumer Protection Act. eights and Measures Act. All these Acts influence business d ecisions. lmpact
(*) Standards of W
of Lega! Regulatory Environment on Business The (i) following
By removing are
control the
examples on the capital
of the market, impact
a of
huge the
legal amount regulatory
of capital environment
on business: was collected by issuing various
issues in the primary market. With i ntroduction of r elaxation in Foreign Direct I nvestment (FDI) and Foreign E xchange,
(ii) new
many multinational
companies entered the Indian market. Consequently, there has been a tremendous increase in the foreign exchange
reserves in the country. o (5) Technological Environment
I'echnology includes new methods of p roduction of goods, services and discovery of new implements. Technological
changes make available better methods of production and that makes the optimum use of the raw m
aterial possible. The
iechnological changes offer both the possibilities and threats for business. In case a company understands these things otherwise
the very existence of the company is threatened. For well example, in time it i t becomes can achieve a technological its
objective,
change for the a utomobile industry to produce vehicles which consume less petrol in view of the ever increasing prices of
petrol. Only that company will be able to survive which can move with the changes taking place in the environment.
Therefore, the companies should constantly watch the technological changes so that they are able to exploit the business
opportunities.
78 Business Studies
!mpact of Technological Environment on Business The following are the examples of impact of
technological environment on business:
iththe advent of televisioninthemarket,the
(i) W
ith the anival of the photostat machines in the market, the carbon
cinemaandtheradioindustryrwereadverselyaffected. (ii) W
paper industry suffered a setback. ith the entry of synthetic thread in the market, the cotton cloth industry was badly
(iii) W
affected. conomic
(iv) T he digital watches have almost eliminated the market of the taditional watches. ! E
Environment in lndia
Economic environment is an important constifuent of business environment. There are three main constifuents of
this environment as indicated in the following diagram:
We have already studied economic system, economic policies and economic conditions under the dimensions of
business environment. Now we shall study it in the Indian context.
o (1) Economic System of lndia
Economic system is one of the major parts of economic environment. Economic system is of three types:
-
ystem. Mixed Economic System.
Capitalistic Economic S
Socialistic Economic System. - - India has adopted the
mixed economic system. Features of Mixed Economic System: The chief characteristics of the mixed economic
system are as under:
(i) Different sectors of business - public,
private and mixed.
(ii) More attention to public interest.
( 2)
(iii) Encouragement to private sector. ( iv) Cenhal planning. (v) Freedom in the choice of employment. o
Economic Policies of tndia
In order to direct the economic activities in India, the following major economic policies have been framed.
(i)
mployment policy to make employment available to the
lmport-export policy to control import-export in the countryr. (ii) E
ax policy to form a stmcfure of direct and the indirect taxes.
people of the country. (iii) T
Business Environment : Importance and Dimensions
. ( viii) (vii) (ix) (iv)
(vi) (v) (3) Economic Agriculture Public Foreign Monetary Industrial
Public debt expenditure
investment policy policy policy policy in in encourage
Conditions to
in order policy policy order order to in to to to establish order
invite develop control industrial capital debt. public between in in
in lndia to foreign a control public agriculture balance development
country. the
expendifure. the the in country. the count4r.
demand and supply for money. The
major economic conditions and their
explanation is as under: (i) Foreign Capital: Foreign capital means investment made by foreigners in India. The foreign
capital in India is increasing at the rate of 4 billion dollars every year.lt is a good sign for the economic environment in India.
(ii) Supply of Natural Resources: In India, the supply of nafural resources (like the coal mines, iron mines, (iii) L
evel
forests, of etc.)
abundant Development: and
Economic is they are The fully
economic being
exploited. development in
India is also balanced. This
rate is about 5.5 per cent per year.
(iv) Rate of Interest: Sometime back the rate of interest in the system of banking was determined by the Reserve Bank. Now
all the banks in the counky have been given the freedom to determine their own rates of interest. That is why the rates of interest
in respect of various banks happen to be different.
(v) National lncome: In India, national income is increasing at a slow speed. (vi) Industrial Development: There is
instability in the industrial development of India. For the last one decade it has been observed that sometimes there is some
rogress at all.
progress and while sometimes there is no p
(vii) Foreign Trade: There is continuous progress in the foreign hade of India. (viii) General Price Level: In India, the
general price level is under complete conhol. This is a good indicator for the economic condition of the country. !
Economic Reforms since 1991 or New Economic Policy or Changing
Scenario of lndian Economic Environment
The process of economic reforms was started b y the government of India in 1991 for taking the country out of economic
difficulty and speeding up t he development of t he country. The centre of economic reforms has been liberalisation,
iberalisation means to unshackle the
prioatisation a nd globalisation. T hese three terms mean: (A) Liberalisation: L
economy from bureaucratic cobweb to make (viii) (vii) (iv) (vi) (iii) it (v) (ii) (i) more
To Freedom Simplifuing
Simplifuing Freedom Removing Freedom Reduction competitive.
do away to from in reshictions in the import-export determining f ix
with the unnecessary the process rate the Following
prices necessip of for of taxes. the the of procedure. athacting control goods scale are
movement of its having of and over foreign chief business services. of economy. a features: license goods capital activities. for and and most
services technology.
of the from industries. one place to another. 79
80 Business Studies
(B) Privatisation: In brief, privatisation means such an economic process through which some public sector
undertaking is brought either partially or completely under private ownership. Broadly
speaking, establishing a new
enterprise in private sector instead of a public sector is also privatisation. Not only this, depriving public sector of the
or transfering its production, without depriving it, to the private
job of production which was earlier reserved for it
sector also amounts to privatisation. Its chief features are given below:
(i) R educing the role of public sector and increasing
educing fiscal burden of the government. (iii) R educing the size of the government machinery.
the role of private sector. (ii) R
(iv) S peeding up economic development. (v) I mproving management of enterprises. (vi) I ncrease in govemment treasury.
(vii) Increasing competition by opening industries reserved for the public sector to the private sector. (C) Globalisation:
Globalisation means integrating the economy with the rest of the world. Following are its chief features:
(i) F ree
ree flow of capital in all the countries. (iii) F ree flow of information and
flow ofgoods and services in all the countries. (ii) F
ree movement of people in all the countries. (v) T he same conflict solving technique in
technology in all the countries. (iv) F
all the counhies. biectives of Economic Reforms
cO
Following are the objectives of economic reforms: (i) M
odernisation of the industrial system of the country. (ii)
ttracting foreign investment. (iv) E liminating unproductive controls. (v)
Encouraging private investment. (iii) A
ontrolling fiscal deficits. (Fiscal deficit comes into play when
Connecting Indian economy with the world economy. ( vi) C
the total expendih-rres of the countryr exceeds its total incomes)
(vii) I ncreasing foreign exchange reserves. (viii) C
ontolling
unprofitable industrial units in the public sector. the attainment of the
o Maior Steps of Economic Reforms For
above-mentioned objectives, the government of India has taken the following major steps:
(1) New IndustrialPolicy, ( 2) New Trade Policy (3)
FiscalReforms, (4) Monetary Reforms (5) Capital Market
Reforms, (6) Phasing out Subsidies (7) Dismantling Price Controls We shall
now sfudy these aspects of the economic reforms in detail. (l) N
ew
Industrial Policy
Under Indushial Policy, keeping in view the p riorities of the country and its economic development, the roles of the
public and private sectors are clearly decided.
You might also like
- Fundamental of Management BBA 1 To 4 UnitNo ratings yetFundamental of Management BBA 1 To 4 Unit139 pages
- Functions of Management Final 1674837371380No ratings yetFunctions of Management Final 1674837371380186 pages
- Official Notification For OAVS RecruitmentNo ratings yetOfficial Notification For OAVS Recruitment28 pages
- Pengaruh Lingkungan Kos-Kosan Terhadap Motivasi Belajar Mahasiswa Stakpn AmbonNo ratings yetPengaruh Lingkungan Kos-Kosan Terhadap Motivasi Belajar Mahasiswa Stakpn Ambon14 pages
- Chapter - 1 Nature and Significance of ManagementNo ratings yetChapter - 1 Nature and Significance of Management14 pages
- XII - Nature & Significance of ManagementNo ratings yetXII - Nature & Significance of Management10 pages
- JEEC11 - I Sem - Fundamentals of ManagementNo ratings yetJEEC11 - I Sem - Fundamentals of Management120 pages
- Introduction To Management - Doc SHIBE 2017 EditedNo ratings yetIntroduction To Management - Doc SHIBE 2017 Edited40 pages
- Principles of Management BBA 1st - Semester - 1704901820290 - 1714407201244No ratings yetPrinciples of Management BBA 1st - Semester - 1704901820290 - 171440720124467 pages
- of BST CHAPTER - 1 (Nature and Significance of - 240501 - 183452No ratings yetof BST CHAPTER - 1 (Nature and Significance of - 240501 - 18345228 pages
- Principles of Management and Organization Instructional Materials-2425a-Chapter-1No ratings yetPrinciples of Management and Organization Instructional Materials-2425a-Chapter-117 pages
- Notes-Nature and Significance of ManagementNo ratings yetNotes-Nature and Significance of Management19 pages
- Module 9: Social and Resources Mobilization: An Approach in The Implementation of Civic Welfare and Training ServicesNo ratings yetModule 9: Social and Resources Mobilization: An Approach in The Implementation of Civic Welfare and Training Services25 pages
- Concept, Nature and Significance of Management: By-Shubham KushwahaNo ratings yetConcept, Nature and Significance of Management: By-Shubham Kushwaha58 pages
- NZ Pa 36 New Zealand Numeracy Stages 1 To 8 Weekly Planning Template English Ver 2No ratings yetNZ Pa 36 New Zealand Numeracy Stages 1 To 8 Weekly Planning Template English Ver 212 pages
- Pressure Equipment - European Commission PDFNo ratings yetPressure Equipment - European Commission PDF22 pages
- SM Nature and Significance of ManagementNo ratings yetSM Nature and Significance of Management14 pages
- NCMA 219 RUBRICS - ADMINISTERING Magnesium SulfateNo ratings yetNCMA 219 RUBRICS - ADMINISTERING Magnesium Sulfate3 pages
- Chapter 1 Concept - Objectives - Importance by Pradeep GuptaNo ratings yetChapter 1 Concept - Objectives - Importance by Pradeep Gupta3 pages
- Tense Changes in Reported Speech Rules, Examples, and UsageNo ratings yetTense Changes in Reported Speech Rules, Examples, and Usage1 page
- The Nature Scope and Function of Management (Chapter 1)No ratings yetThe Nature Scope and Function of Management (Chapter 1)9 pages
- Activity 1 BRS NSC Mar 2017 Cheques Out)No ratings yetActivity 1 BRS NSC Mar 2017 Cheques Out)1 page
- The Trade - Offs of ChatGPT To Filipino Freelance Content Writers A Diffusion of Innovation Theory PerspectiveNo ratings yetThe Trade - Offs of ChatGPT To Filipino Freelance Content Writers A Diffusion of Innovation Theory Perspective7 pages
