PRINCIPLES AND PRACTICES OF MANAGEMENT

UNIT-1
Concept of Management
Management is a universal phenomenon. It is a very popular and widely used term.

All organizations - business, political, cultural or social are involved in management because it is
the management which helps and directs the various efforts towards a definite purpose.

According to Harold Koontz, ―Management is an art of getting things done through and with
the people in formally organized groups. It is an art of creating an environment in which
people can perform and individuals and can co-operate towards attainment of group goals‖.

According to F.W. Taylor, ―Management is an art of knowing what to do, when to do and see
that it is done in the best and cheapest way‖.

Management is a purposive activity. It is something that directs group efforts towards the
attainment of certain pre - determined goals. It is the process of working with and through others
to effectively achieve the goals of the organization, by efficiently using limited resources in the
changing world. Of course, these goals may vary from one enterprise to another.

E.g.: For one enterprise it may be launching of new products by conducting market surveys
and for other it may be profit maximization by minimizing cost.

We can say that good management includes both being effective and efficient.

Being effective means doing the appropriate task or doing the right things i.e. fitting the
square pegs in square holes and round pegs in round holes.

Being efficient means doing the task correctly or doing the things right, at least possible cost
with minimum wastage of resources.

Management can be defined in detail in following categories:

1. Management as a Process
2. Management as an Activity
3. Management as a Discipline
4. Management as a Group
5. Management as a Science
6. Management as an Art
7. Management as a Profession

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Management as a Process:

As a process, management refers to a series of inter-related functions. It is the process by

which management creates, operates and directs purposive organization through systematic,
coordinated and co-operated human efforts.

Management performs 5 core functions of PLANNING, ORGANIZING, DIRECTING OR

LEADING, STAFFING AND CONTROLLING.

It is by the performance of these functions that the management is able to effectively utilize the
resources such as MEN, MONEY, MACHINE, MATERIAL, METHOD, MARKETS
effectively.

As a process, management consists of three aspects:

1. Management is a social process - Since human factor is most important among the other
factors, therefore management is concerned with developing relationship among people.
It is the duty of management to make interaction between people - productive and useful
for obtaining organizational goals.
2. Management is an integrating process - Management undertakes the job of bringing
together human physical and financial resources so as to achieve organizational purpose.
Therefore, is an important function to bring harmony between various factors.
3. Management is a continuous process - It is a never ending process. It is concerned with
constantly identifying the problem and solving them by taking adequate steps. It is an on-
going process.

Management as an Activity:

Management is also an activity because a manager is one who accomplishes the objectives by
directing the efforts of others. According to Koontz, ―Management is what a manager does‖.
Management as an activity includes -

1. Informational activities - In the functioning of business enterprise, the manager

constantly has to receive and give information orally or in written. A communication link
has to be maintained with subordinates as well as superiors for effective functioning of an
enterprise.
2. Decisional activities - Practically all types of managerial activities are based on one or
the other types of decisions. Therefore, managers are continuously involved in decisions
of different kinds since the decision made by one manager becomes the basis of action to
be taken by other managers. (E.g. Sales Manager is deciding the media & content of
advertising).
3. Inter-personal activities - Management involves achieving goals through people.
Therefore, managers have to interact with superiors as well as the sub-ordinates. They
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 must maintain good relations with them. The inter-personal activities include with the
sub-ordinates and taking care of the problem. (E.g. Bonuses to be given to the sub-
ordinates).

Management as a Discipline:

Management as a discipline refers to that branch of knowledge which is connected to study of

principles & practices of basic administration. It specifies certain code of conduct to be
followed by the manager & also various methods for managing resources efficiently.

Management as a discipline specifies certain code of conduct for managers & indicates various
methods of managing an enterprise. Management is a course of study which is now formally
being taught in the institutes and universities after completing a prescribed course or by
obtaining degree or diploma in management, a person can get employment as a manager.

Any branch of knowledge that fulfils following two requirements is known as discipline:

1. There must be scholars & thinkers who communicate relevant knowledge through
research and publications.
2. The knowledge should be formally imparted by education and training programmes.

Since management satisfies both these problems, therefore it qualifies to be a discipline. Though
it is comparatively a new discipline but it is growing at a faster pace.

Management: Art and Science

As a science: - Science is a body of knowledge pertaining to a particular field of enquiry. It
contains concepts, hypotheses, theories and principles to a explain cause and effect relationship
between two or more factors. Any subject which is scientifically developed and consists of
universally accepted principles is a science. In order to be organized as a science, a discipline
should have the following characteristics:

1) Systematized body of knowledge- It should have a systematic body of knowledge

including concepts, principles and theories.
2) Scientific observation- It should have scientific methods of observation and enquiry.
There should be no scope of personal likes and dislikes of the scientist.
3) Experimentation- Scientific principles are evolved through observation and tested by
repeated experimentation to check their validity. They should produce the same cause
and effect relationship every time.
4) Verifiable principles- Once an observation is confirmed by repeated experimentation and
testing, it takes the form of a scientific principle. Anybody can verify the principle by
repeating the experiment. The results are the same every time. Thus, it can be said that
application of a principle ensures predictable results.

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 5) Universal application- The scientific principles have universal validity and application.
They give the same results everywhere if the prescribed conditions are satisfied.

Management has been given the shape of an organized body of knowledge. Its study helps in
gaining a rational approach to the development of means for accomplishing certain goals. That is
why management is called a science. However, management is not a perfect science like other
physical sciences such as physics, chemistry, biology etc. The theories and principles of
management are situation bound. It may produce different results in different situations. That is
why Ernest Dale has called management a ‘Soft Science’.

As an art: Art signifies the application of knowledge and personal skills to bring about desired
results. If a science is learnt then art is practiced. Science is to seek knowledge and art is to apply
knowledge.

Art has following features:

1) Body of knowledge- Art is based on theoretical knowledge of concepts principles and

application about a particular field such as music, painting, etc.
2) Personalized application of knowledge and skills- Art implies personalized application
of knowledge and skills about a particular field, say, music or painting. Every artist or
practitioner develops his personal skills and style of producing concrete results.
3) Practice- Art is learnt and refined through continuous practice.
4) Creativity- Art is creative in nature. An artist uses his skills and style to create better
results.

Art may be defined as ―the technique of applying the principles to actual practice so as to
achieve the desired results with efficiency‖. It is concerned with the application of knowledge and
skills. The principles and techniques when applied in the organization to achieve its objectives
become ‗Art‘. In this manner, management is also an art on account of the following reasons:

1. It uses know-how and skills.

2. Its direction is towards the accomplishment of concrete results.
3. It creates new situations needed for further improvement.
4. It is personalized because the success of management task is related to the personality of
the manager.
Thus, management is considered as a science because it has an organized body of knowledge and
as an art because managing requires certain skills.

Science teaches one ‘to know’ and an art ‘to do’.

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Management as both Science and Art:

Management is both an art and a science. The above mentioned points clearly reveal that
management combines features of both science as well as art. It is considered as a science
because it has an organized body of knowledge which contains certain universal truth. It is called
an art because managing requires certain skills which are personal possessions of managers.
Science provides the knowledge & art deals with the application of knowledge and skills.

A manager to be successful in his profession must acquire the knowledge of science & the art of
applying it. Therefore management is a judicious blend of science as well as an art because it
proves the principles and the way these principles are applied is a matter of art. Science teaches
to ‘know‘ and art teaches to ‘do‘. E.g. a person cannot become a good singer unless he has
knowledge about various ragas & he also applies his personal skill in the art of singing. Same
way it is not sufficient for manager to first know the principles but he must also apply them in
solving various managerial problems that is why, science and art are not mutually exclusive but
they are complementary to each other (like tea and biscuit, bread and butter etc.).

The old saying that ―Manager are Born‖ has been rejected in favor of ―Managers are Made‖. It has
been aptly remarked that management is the oldest of art and youngest of science. To conclude,
we can say that science is the root and art is the fruit.

Management as a profession
The term profession may be defined as an occupation backed by specialized body of knowledge
and training and to which entry is regulated by a representative body. The essential requirements
of a profession are:

1) Specialized field of knowledge: Management is widely taught in the universities and

management institutes as a discipline
2) Restricted entry based on formal training: Entry to a profession is based on formal
training. E.g.: To be a doctor, one requires prescribed qualification i.e. MBBS degree.
But entry to management profession is not restricted as there is no prescribed
qualification or formal training. MBA‘s are preferred for managerial jobs but it is not a
necessary condition.
3) Representative association: For the development and regulation of any profession, the
existence of a representative body is a must. For e.g.: the Institute of Chartered
Accountants of India lays down the standards of education and training for those who
want to be a CA. But it is not so in the case of management. In India, we have AIMA but
it is not essential to hold its membership to be a manager.
4) Ethical code: Every profession has a code of conduct which prescribes norms and
professional code of ethics for its members. Managers are not bound by any common

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 code of conduct or ethics. There is no universally accepted code of ethics for practising
managers.
5) Social responsibilities: There is a growing concern for social responsibilities of
management. Managers of today recognize their social responsibilities towards
customers, workers and other groups. They take various resources from the society such
as men, materials, machinery etc and this is why it becomes imperative to serve the
society in return. Their actions are influence by social norms and values.
6) Charging of fee: The managers who act as consultants charge professional fees for the
services provided to their clients as in the case of doctors.

There are two views of management:

a. Traditional View

Traditionally, management is defined as an art of getting things done through others.

According to Mary Parker Follett, Management is the art of getting things done through
people. The traditional viewpoint of management is considered inappropriate in the
present day scenario where workers are educated and have higher levels of aspiration.

The various drawbacks in traditional concept are:

• It does not give the functions which a manager has to perform to get results from
others.
• It gives the impression of the manipulative character of the practice of
management.
• The employees are merely treated as means for getting results. In others words,
their position is like a cog in a wheel.
• The needs of the workers are ignored. The workers are supposed to work like
machines.

b. Modern View

The modern concept of management considers management as the process of utilization

of human resources and physical resources (i.e. capital, machines, materials etc.) in such
a manner that organizational objectives are achieved effectively and efficiently.
According to Harold koontz, ―Management is the art of getting things done through and
with people in formally organized groups‖.
George R. Terry stated, ―Management is a distinct process consisting of planning,
organizing, actuating (directing) and controlling, performed to determine and accomplish
the stated objectives with the use of human beings and other resources‖.
Koontz and O‘Donnel gave the most widely accepted functions of management i.e.
Planning, Organizing, Staffing, Directing and Controlling.

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 The modern concept of management has the following features:
• Management is goal-oriented. Its purpose is to accomplish the objectives of the
organization.
• It involves effective and efficient utilization of human and other resources like
capital, machines, materials etc.
• It performs the functions of planning, organizing, staffing, directing and
controlling. Thus, management could be viewed as a process consisting of these
functions.

Effectiveness vs. Efficiency

Effectiveness Efficiency
It refers to accomplishment of organizational It refers to efficient utilization of resources to
goals. accomplish organizational goals.
Its focus is on end results Its focus is on getting maximum output using
minimum of resources.
It is a multi-dimensional concept. It is It is uni-dimensional in nature. It is concerned
concerned with satisfaction of customers, with the efficient use of resources only.
employees, investors and other stakeholders of
the business.

Functions of Management
It was Henri Fayol who gave for the first time a functional definition of management. According
to him, ―To manage is to forecast and plan, to organize, to command, to coordinate and to
control‖.

Ralph Davis classified managerial functions into three categories, i.e. planning, organizing and
control. He was of the view that command and coordination facilitate control and therefore
should be considered as parts of it.

Luther Gullick coined the word ‗PODSCORB‘ to describe the functions of management. It
stands for Planning, Organizing, Directing, Staffing, coordinating, Reporting and Budgeting.

The basic reason for so many classifications of functions of management is that different authors
discussed them by studying different organizations. However for the purpose of analysis of
management process, we can divide the management functions into:-

1. Planning: Planning is a mental process requiring the use of intellectual faculties foresight
and sound judgment. It is the determination of course of action to achieve the desired
results. It is selecting and relating to facts and the making and using assumptions

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 regarding the future in the in the visualization and formation of proposal activities
believed necessary to achieve desired results. Thus, planning denotes the systematic
thinking about the ways and means for the accomplishment of pre-determined objectives.
The process of planning involves the following steps:-

a) Determination of goals or objectives of the enterprise.

b) Forecasting of future environment.
c) Search of alternative course of action.
d) Evaluation of various alternatives and formulation of a plan.
e) Formulation of strategies, policies, procedures and methods.
f) Preparation of schedules programmes and budgets.

2. Organizing: In the words of Louis A Allen, ―organizing involves identification and

grouping the activities to be performed and dividing them among the individuals and
creating authority and responsibility relationships among them for the accomplishment of
organizational objectives‖.
Thus, organizing is an important activity by which management brings together the
human and material process for the achievement of pre-determined objectives.
Organizing involves the following steps:-

a) Identification of activities required for the achievement of objectives and

implementation of plans.
b) Grouping of activities so as to create well-defined jobs.
c) Grouping of jobs into sections, departments and divisions.
d) Assignment of jobs to employees.
e) Delegation of authority to subordinates.
f) Establishment of authority-responsibility relationships throughout the
organization.

3. Staffing: The staffing function of management pertains to recruitment, selection,

training, development and appraisal of personnel. There is a controversy whether staffing
is a function of every manager in the organization as there is a specialized personnel
department in every organization. In fact, every manager is associated with the
employment and training of human resources and also their performance appraisal. The
personnel department is set up to provide the necessary help to mangers in performing
their staffing or personnel function efficiently. Staffing has been taken as a district
function in view of the need to employ right type of people and to train and develop them
for the well-being of the organization.

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 4. Directing/ Leading: The term ‗directing‘ or ‗direction‘ is generally used in every walk
of life. In the words of Marshall, ―Directing involves determining the course, giving
orders and instructions and providing dynamic leadership‖. It relates directly to those
activities which deal directly with influencing, guiding, supervising and motivating
subordinates in their jobs.
According to G R Terry, ―Directing means moving to action and supplying stimulative
power to group of persons‖. Thus, directing involves issuing instructions to sub-
ordinates, guiding, motivating and supervising them.

a) Communication: It the process of passing information and understanding from

one person to another. This process is necessary for making the subordinates
understand what the management expects from them. A manager has always to
tell the subordinates what to do, how to do it and when to do it. Communication is
a two-way process. A manager, to be successful must develop an effective system
of communication so that he may issue instructions, receive the reactions of the
subordinates and guide and motivate them.
b) Leadership: A manager must perform the function of leadership if he has to
guide the people effectively for the achievement of organizational objectives.
Leadership may be defined as the process by which a manager guides and
influences the behavior of his subordinates. A manager must possess the
leadership qualities if he has to get others to follow him and accept his directions.
He should also build up confidence and zeal to work among the subordinates.
c) Motivation: A manager can get the desired results from the people working in the
organization through proper motivation. Motivation means inspiring the
subordinates with zeal to do work for the accomplishment of organizational
objectives. Manager should study the behavior of individuals working under him
to provide them proper inducements. To some, financial incentives are important
while others are motivated by non-pecuniary incentives like job security, job
enlargement, freedom at work, recognition by peers and management.
d) Supervision: It means overseeing the functions of subordinates. Every executive
has to supervise his subordinates. Supervision is necessary to ensure that the
subordinates are following the instructions given to them and using raw material,
machines etc, in proper manner.

5. Controlling: The function of controlling deals with the measurement and correction of
the performance of subordinates against the pre-determined standards. E F L Brech
defined as the process of checking actual performance against the agreed standards with a
view to ensure satisfactory performance.

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 Henri Fayol viewed control as verifying whether everything occurs in conformity with
the plan adopted, the instructions issued and the principles established. Controlling leads
to taking corrective action if the results do not confirm to plans.

The process of control involves the following steps:

a) Establishment of Standards: The management must establish standards with which

the actual performance of the subordinates will be compared with the standards of
performance should be laid down in proper manner and should be understood by
everyone in establishment.
b) Measurement of Performance: The actual performance of each unit and employee
has to be measured in terms of quality, quantity, cost and time.
c) Appraisal of Performance: The establishment of standards has no meaning unless
they are used in actual practice. The Management must provide for comparing the
actual performance with the pre-established standards. The deviations from the
standards should be recorded and brought to the knowledge of the management.
d) Taking corrective Actions: When the deviations occur, the management must take
corrective actions so that such deviations do not occur again. Moreover, while taking
corrective steps, management should also consider the improvement of plans and
standards.

Nature/Features of Management
The basic features or characteristics of management are as follows:

1. Management is Goal-oriented: The purpose of management is to achieve the goals of

the organization. Management of a business aims at satisfaction of customers, earning of
profits and increasing the goodwill and image of the business. There is no need of
management if there are no pre-determined goals or objectives. The success of
management is judged by the extent to which organizational goals are achieved.
2. Continuous process: Management is a continuous process i.e. its functions are repeated
time and again. Management does not stop anywhere. It is an ongoing process of
planning the activities and execution of plans through organizing, staffing, directing and
controlling.
3. Coordinative force: The essence of management is the coordination or integration of
human and other resources for effective performance. It brings together physical and
financial resources and leads the human resources for the efficient use of non-human
resources. All these resources are properly organized and divided into various work-units
for the purpose of achieving greater coordination.

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 4. Intangible force: management has been called the unseen force. Its presence is evident
by the results of its efforts-orderliness, informed employees, buoyant spirit and higher
output.
5. Group effort: Management is an integral part of any group activity. It involves the use of
group efforts in the pursuit of well defined goals or objectives. It cannot exist
independent of the group or organization it manages.
6. Management accomplishes results through the cooperation of others: The managers
cannot do everything themselves. They must have the necessary ability and skills to get
work accomplished through the efforts of others. They must motivate the subordinates for
the accomplishment of the tasks assigned to them. It is through motivation that managers
can influence the behaviour of their subordinates.
7. Management balances effectiveness and efficiency: Sound management requires that
all organizational activities are preformed effectively and efficiently. An organization is
said to be effective if it is able to accomplish its objectives. It will be termed as efficient
if it is able to accomplish its objectives by making optimum use of resources.
8. Dynamic Discipline or Multi-Disciplinary: Management is a field of study which is
taught in universities and management institutes. Management is multi-disciplinary in
nature as it contains principles drawn from many social sciences like anthropology,
psychology, Sociology etc.
9. Science as well as an Art: Management has an organized body of knowledge consisting
of distinct concepts, principles and techniques which have wide application. So, it is
treated as a science. The application of these concepts, principles and techniques require
specialized knowledge and skills on the part of the manager. Since the skills acquired by
a manager are his personal possession, management is viewed as an art.
10. Pervasive or Universal: Management is essential for effective performance of any
organized activity. Thus, it is universal in nature. They can be applied to all types of
organizations-business, social, educational and religious. The principles and techniques
should be modified to suit the given situation and the type of organization.

Objectives of Management
Objectives are the goals or ends towards which the activities of a business are directed.
Organizational objectives serve as the benchmarks or standards against which the performance is
measured or assessed.

From the point of view of the management, objectives may be grouped under three categories:

1. Organizational objectives

These objectives serve as a common purpose or direction towards which the whole
organization moves. These include:

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 a) Survival: The basic objective of any business is survival. Management must strive to
ensure the survival of the business. The management must earn enough revenues to
cover costs of operations.
b) Profit: Mere survival is not enough for the business. Management has to ensure that the
business makes reasonable profits. Profits provide the incentive for the continued
successful operation of the enterprise. To remain in the market, it is essential for an
organization to earn sufficient profits to meet the various costs of business expansion.
Growth of a business may be measured in terms of increase in annual production, sales
turnover, capital investment etc.

2. Social Objectives

Management is an organ of the society and so it must have social objectives. Since the
management takes various resources from the society such as men, material etc, it becomes their
primary duty to serve them in return. Social objectives include the following:

a) Supply of quality goods at reasonable prices.

b) Generation of employment opportunities.
c) Providing financial support to community projects.
d) Protection of environment by using environmental friendly methods of production.
e) Providing employment to physically challenged people.

There are various reputed organizations who are actively involved in fulfilling their social
responsibilities such as TATA Steel, ITC, Asian Paints etc. have been working for rural
development by financing schemes for the health, education and training of rural masses.

3. Personal Objectives

These objectives pertain to individual employees and managers. Each individual has some
personal goals or objectives along with those organizational objectives which is required from
them to achieve. Personal objectives are equally important for a person to achieve as it helps to
boost the morale of an employee and motivates him/her to give their best in the organization.
Personal objectives can be like:

a) Good salary and other benefits.

b) Opportunities for training, promotion etc.
c) Recognition of meritorious work.
d) Good and healthy working conditions.

Management must facilitate the accomplishment of the personal objectives of the employees. It
must also integrate the personal goals of the individuals with those of the organization.

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Importance of Management
Management is the thinking organ that provides vision to the business. The importance of
management for a modern business can be explained as follows:

1. Accomplishment of Goals: It is the management which determines the goals of the

organization and of various departments and functional groups. The goals are
communicated to the employees to seek their cooperation. All organization activities are
directed towards the organizational objectives. Clear-cut definition of goals is essential
for the success of any organization.
2. Effective/Optimum utilization of resources: Management ensures optimum utilization
of resources. Through planning and organization, management eliminates all types of
wastages and achieves efficiency in all business operations.
3. Sound Organization: Management establishes sound organization for the
accomplishment of the desired objectives. It clarifies authority responsibility
relationships among various positions in the organization. It fills various positions with
persons having the right qualification & training. Management also provides workers
with proper environment & encourages the spirit of cooperation.
4. Providing vision & foresight: Management keeps itself in touch with the external
environment so that it can meet the demands of the changing environment and supplies
vision and foresight to the enterprise. It helps in predicting what is going to happen in
future which will influence the working of the enterprise.
5. Harmony in work: In an organization, employees come from different backgrounds,
they have different attitudes, style of working, and if everyone starts following his own
style, it can lead to chaos and confusion at the workplace. By giving directions,
managers bring uniformity & harmony in the action of employees.
6. Help the employees in achieving personal objectives: Every manager motivates and
leads his team in such a manner that individual members are able to achieve personal
goals while contributing to the organizational objectives.
7. Development of society and nation: Management plays a pivotal and crucial role in
economic and social development of a country. The development of a country lies on the
quality of management and available resources. Management can help increase the
national income and standard of living of the people.
8. Reduces Costs: It gets maximum results through minimum input by proper planning and
by using minimum input & getting maximum output. Management uses physical, human
and financial resources in such a manner which results in best combination. This helps in
cost reduction.
9. Establishes Equilibrium: It enables the organization to survive in changing
environment. It keeps in touch with the changing environment. With the change is
external environment, the initial co-ordination of organization must be changed. So it

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 adapts organization to changing demand of market / changing needs of societies. It is
responsible for growth and survival of organization.
10. Essentials for Prosperity of Society - Efficient management leads to better economical
production which helps in turn to increase the welfare of people. Good management
makes a difficult task easier by avoiding wastage of scarce resource. It improves
standard of living. It increases the profit which is beneficial to business and society will
get maximum output at minimum cost by creating employment opportunities which
generate income in hands. Organization comes with new products and researches
beneficial for society.

Coordination as essence of Management

Coordination has been viewed by different management experts in different ways. Henri Fayol
considers coordination as a function of manager. Louis A. Allen also regards coordination as one
of the separate managerial functions etc.

In the words of Mooney and Railey, ―Coordination is the orderly arrangement of group efforts to
provide unity of action in the pursuit of a common purpose. It is the effort to ensure a smooth
interplay of the functions and forces of the different components of the organization to the end
that its purpose will be realized with a minimum of friction and a maximum of collaborative
effectiveness.

The features of coordination are as follows:

a) It is an essential managerial activity. It is needed at all levels of management.

b) It involves an orderly arrangement of group efforts.
c) It is a continuous process carried on by the managers.
d) Its purpose is to secure unity of action towards common objectives.

Importance of Coordination:

As a coordinator, the manager performs the function of securing and maintaining unified action
throughout the organization. In an organization, coordination will lead to the following
advantages:

1. Better results: Coordination helps to avoid duplication of efforts. The time and energy
thus saved are better utilized in creative tasks. This results in total accomplishment which
will be far in excess of the sum of the individual parts.
2. Economy and efficiency: Coordination leads to economy and efficiency in the
organization by avoiding wastage of resources and duplication of efforts. Due to
coordination, there will be no delays, red-tapism and breakdown which will further
increase productivity and efficiency.

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 3. Better utilization of human resources: Modern organizations employ specialists in
diverse fields for achieving better results. Their efforts need to be integrated if the
services of such experts are to be utilized fully. Coordination can help in integration of
the activities of the experts or specialists.
4. Meeting environmental challenges: The modern business environment (Technological,
social, legal, political) is very complex. Proper coordination of the operations of different
departments can help in these challenges effectively.
5. High morale: Coordination in organization and staffing leads to job satisfaction of
employees. This improves the morale of different groups. As a result, their loyalty to the
organization is increased. They work whole heartedly for the attainment of the objectives
of the organization.

As Essence of Managing:

Coordination is all-inclusive function of management and not just one of its functions.
Management seeks to achieve coordination by performing various functions like planning,
organizing, directing and controlling. When all these functions are related to each other
harmoniously, coordination is achieved. As the matter of fact, coordination is the essence of
managing.

Coordination is required in every function of management as discussed below:

1) Coordination through Planning: Planning leads to formulation of objectives, policies

and procedures which are essential to bring coordination in the organization. Plans of
different departments must be coordinated otherwise the objectives of the organization
will not be achieved.
2) Coordination through Organizing: All the different activities which are required to
achieve objectives of the organization must be properly grouped and assigned to the right
people.
3) Coordination through Staffing: A balance must be attained between manpower
requirements and the qualities of the personnel. Manpower planning is the most
important tool of coordination.
4) Coordination through Direction: The direction function in management is an attempt in
achieving coordination through supervision, leadership, communication and motivation.
This helps to secure unity in action in a group or organization.
5) Coordination through Controlling: The purpose of comparing actual performance with
standards and taking corrective action in case of any deviation is to achieve coordination.
Corrective actions must match the types of deviation in the performance of various
individuals.

That is why, management is called the essence of management.

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Management vs. Administration
At initial stages of the development of management thought, there was no fundamental
difference between management and administration. But these terms were used interchangeably.
Later, Oliver Sheldon emphasized administrations as a decision-making function and
management as an executive function, which gave rise to several controversies. Theses
controversies have given three view points:

1. Administration is a higher level function, but management is lower level function.

2. Management is generic term and includes administration.
3. Both the terms can be used interchangeably.

Practically, there is no difference between management & administration. Every manager is

concerned with both - administrative management function and operative management function
as shown in the figure. However, the managers who are higher up in the hierarchy denote more
time on administrative function & the lower level denote more time on directing and controlling
worker‘s performance i.e. management.

Basis Management Administration

Definition Management means getting the work Administration is concerned with
done through and with others by the formulation of objectives, plans
leading and motivating them. and policies of the organization.
Nature of functions Management refers to execution of Administration relates to decision-
decisions. It is a doing function. making. It is a thinking function.
Stage of performance It is concerned with implementation of It is concerned with determination
policies laid down by administration. of major objectives and policies.
Leading of human It is actively concerned with direction It is not directly concerned with
efforts of human efforts at the operative level. direction of operative personnel.
Type of authority Management has operational authority Administration has authority to
to execute administrative decisions. take strategic and policy decisions.
Levels in the Management is relevant at lower levels Administration refers to higher
organization of management. levels of management.
Decision-making Management decides who shall Administration determines what is
implement the administrative to be done and when it is to be
decisions. done.
Usage The term management is widely used The term ‗administration‘ is
in business organizations in the private associated with non-business
sector. organizations such as government
departments, public enterprises,
military organizations, socio-
cultural organizations, etc.

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Designations in General manager, managing director, Minister, secretary, commissioner,
organizations Plant supervisor, branch manager, director, vice-chancellor, registrar,
controller, etc. etc.
Influencing factors Managerial decisions are influenced Administrative decisions are
mainly by organizational mission, influenced by economic
objectives, policies values and beliefs environment, social forces,
of managers. government policies, etc.

Levels of Management
The term ‗level‘ means arrangement of persons in series. Thus, the term ‗levels of management‘
refers to the arrangement of managerial positions in an organization. There is no fixed number of
management levels for a particular organization. It all depends on the size, technology and range
of production of the organization.

Management levels determine the authority relationship in an organization. There are three levels
of management in view of authority and responsibility relationship. They are:

1. Top Management: Top management is the head of an organization. It consists of the

Board of Directors and Chief Executives or the Managing Directors. In the operation of
an organization, top management is the final source of authority. It establishes policies,
plans and objectives. The functions include:
a) Determining objectives of the enterprise.
b) Preparing policies and plans for the enterprise.
c) Issuing instructions for the preparation of departmental budgets, schedules,
procedures etc.
d) Appointing executives for the middle level.
e) Building and maintaining relations with the outside public.

2. Middle Management: It generally consists of heads of functional departments. It is

concerned with the task of implementing the policies and plans laid down by top
management. It is also a link between the top management and the lower level
management. The functions include:
a) Executing plans in accordance with the policies and directives of top
management.
b) Selecting suitable operative and supervisory personnel.
c) Assigning duties and responsibilities for timely execution of plans.
d) Evaluating the performance of the junior managers.
e) Motivating personnel.
f) Collecting information on performance.
g) Reporting to top management.
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 h) Making recommendations to top management.

3. Lower Management (Supervisory Level): It consists of supervisors, foremen, account

officers, sales officers etc. They are directly concerned with the control of the
performance of the operative employees. They assign specific jobs to the workers,
evaluate their performance and report to the middle level management. The functions
include:
a) To plan activities of their sections.
b) To issue orders and instructions to the workers.
c) To provide training.
d) To solve problems.
e) To maintain good human relations.
f) To maintain discipline among the workers.
g) To act as liaison between the middle management and the rank and file workers.
h) To send performance reports to the middle management.

Who is a Manager?
A manager is a person who performs the functions of planning, organizing, staffing, directing
and controlling for the accomplishment of the objectives of an undertaking.

Characteristics of a manager are as follows:

1. Managers spend major portion of their time in achieving coordination between human
and non-human resources.
2. Managers do much work at an unrelenting pace.
3. Managerial tasks are characterized by brevity, variety and fragmentation.
4. Managers prefer live action i.e. brief, specific, well-defined activities that are current,
non-routine and non-reflective.
5. Managers prefer oral to written communication.
6. Managers maintain a vast number of contacts, spending most time with subordinates with
subordinates, linking them with superiors and others in a complex network.

Role of a Manager
Management involves various functions. While performing these functions, a manager has to
play multiple roles. A role consists of the behaviour patterns displayed by a manager within an
organization or a functional unit.

Henry Mintzberg identified ten basic roles performed by managers at all levels from foremen to
chief executives and classified them under three heads: (1) Interpersonal, (2) Informational and
(3) Decisional.

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The roles describe what managers actually do, whereas functions of managers describe what
managers should do.

A. Interpersonal Roles
The first set roles include:
1) Figurehead: executive managers perform a number of ceremonial duties such as
representing their firm at public affairs, official functions and events etc. Lower
level managers have ceremonial duties as well, perhaps on a lesser scale such as
attending employees‘ weddings, greeting visitors and hosting customers.
2) Leader: This consists of a range of duties including motivating workers, guiding
work-related behaviour, and encouraging activities that help achieve
organizational objectives.
3) Liaison: Managers act as liaison between groups and individuals which are a part
of or come in contact with an organization. The liaison role is important for
establishing contact with suppliers, coordinating activities among work groups,
and encouraging harmony needed to assure effective performance.

B. Informational Roles
1) Monitor: Managers monitor activity, solicit information, gather data, and observe
behaviour. Well-informed managers are prepared for decision-making and can
redirect behaviour to improve organizational performance.
2) Disseminator: Here communications are reversed. Rather than receive
information, managers transmit information. This is a crucial aspect of
management. Subordinates, superiors and managers of similar work groups rely
on timely information disseminated with clarity.
3) Spokesperson: Top executives find themselves more involved as spokespersons
than lower-level managers. Some common topics in executive speeches are firm‘s
policy on competition, its philosophy of customer care, and its commitment to
safety etc. However, managers at all levels are spokespersons who may be called
upon to represent their groups. For e.g. when department heads meet to discuss
operating budgets, they must be prepared to present information and support
budget requests of their respective departments.

C. Decisional Roles
1) Entrepreneur: Managers in complex organizations act in entrepreneurial way by
constantly trying to improve their operations. They seek new ways of using
resources, new technologies for enhanced performance. And new systems of
organizing human resources. They focus on bringing innovation and creativity in
the organization.
2) Disturbance Handler: This may be the best understood role of managers because
they have always had the primary responsibility for resolving problems. It may

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 also be the most stressful role as managers seem to find themselves constantly
dealing with disturbances that threaten the harmony and effectiveness of their
organizations.
3) Resource Allocator: This role links planning and organizing functions. Managers
must plan to meet their objectives and distribute resources accordingly. There will
never be sufficient time, money, materials or manpower to accomplish all that is
expected, so effective resource allocation and optimum utilizations of resources is
important to be done as resources are scarce.
4) Negotiator: The allocation process bears on the role of negotiator. When scarce
resources must be shared among many operating units, managers with superior
negotiating skills will have advantage over others. However, negotiating extends
to many managerial activities both inside and outside the firm. Purchase manager,
for example, negotiates material prices and terms. Personnel manager negotiates
union contracts. Negotiation, of course, does not mean conflict to resolve
problems or formulate performance expectations.

The above description of the managerial roles shows that managers must ‗change hats‘
frequently and must be alert to the particular role needed at a given time. The ability to recognize
the appropriate role to be played and to change roles readily is a mark of an effective manager.

Management Skills
The term managerial skills means the personal ability put to use by a manager for the
accomplishment of organizational goals. The job of a modern manager has become very
complex. He requires different skills to manage a large organization in the fast changing
environment.

Robert. L. Katz has given three types of managerial skills as follows:

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 1. Technical skills: Technical skill implies proficiency in a specific kind of activity
particularly the one involving methods, processes, procedures or techniques. For e.g.:
technical skill of a surgeon, the musician, the accountant or the engineer. These
professions involve specialized knowledge, analytical ability within the specialized field.
Technical skill is very important in managing. In a small manufacturing organization,
even the top boss who owns the company needs to have a lot of technical skills.
However, in big organizations, technical skills are more important at the lower levels.

2. Human skills: Human skill is the manager‘s ability to work effectively as a group
member and to build cooperative effort within the team he leads. Human skills are
essential to work with others and achieve their cooperation. Such skills require a sense of
feeling for others and capacity to look at things from others‘ point of view. Every
manager should be able to communicate effectively and also understand the thoughts of
others. With human skills, managers can resolve intra and inter-group conflicts.

3. Conceptual skills: Conceptual skill is the ability to see the organization as a whole, to
recognize inter-relationships among different functions of the business and external
forces and guide effectively the organizational efforts. Conceptual skills are used for the
abstract thinking and for the concept development involved in planning & strategy
formulation. These skills involve the ability to understand how various parts of an
organization depend on each other and make the individual aware about how changes in
one part of the organization affect the others. A manager needs conceptual skills to
recognize the interrelationships of various situational factors and therefore, make
decisions that will be in the best interests of the organization.

There are two other managerial skills which are also required at various levels of the
organization:

1. Analytical skills: These refer to abilities to proceed in a logical, step-by-step manner, to

examine the various aspects of specific issues to understand complex characteristics of a
phenomenon. It is also the ability to breakdown a problem into its components and to
‗clinically‘ examine its dimensions. Analytical skills are needed for problem solving and
decision making, to evaluate performance and to manage complex situations.

2. Administrative skills: These centre around ability to act in a pragmatic manner, get
things done by implementing decisions and plans, to mobilize and organize resources and
efforts, to coordinate diverse activities and to regulate organizational events in an orderly
manner.

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Characteristics of quality managers

A manager has to direct, inspire and motivate his team. He has to clearly set forth the objectives
for them and inject in them enthusiasms to achieve the objectives. He must be a man of open
mind, high moral, and emotional integrity and capable to understand and solve problems. An
excellent manager taps into talents and resources in order to support and bring out the best in
others. An outstanding manager evokes possibility in others.

Following are some important traits of a successful manager:

a) Ability to think: He must be a rational thinker.

b) Broad vision: a manager must be able to take into consideration the overall effect of his
functioning on the company as a whole.
c) Technical ability: Thought a manager need not to be a technician, it is necessary that he
possesses the necessary degree of technical competence relating to his filed. Technical
skills are important at the supervisory level.
d) Human relation skills: A manager must possess adequate knowledge of the factors and
forces which go to ensure good relations motivate people for best of their performance
and generate cooperative and competent human behavior.
e) Dynamic personality/Flexibility: A manager must possess the desire to move ahead, to
introduce change for better, to do something new. He must always look for doing
something bigger and better.
f) Integrity: A manager must enjoy the confidence of both his superiors and subordinates.
Both as a person and in his actions, he must be known as a person of high moral integrity.
g) Discipline/Focus: Discipline is the ability to choose and live from what one pays
attention to. Discipline as self-mastery can be exhilarating! Role model the ability to live
from your intention consistently and you'll role model an important leadership quality.
h) Creativity: Creativity is what separates competence from excellence. Creativity is the
spark that propels projects forward and that captures peoples' attention. Creativity is the
ingredient that pulls the different pieces together into a cohesive whole, adding zest and
appeal in the process.
i) Structure: The context and structure we work within always have a set of parameters,
limitations and guidelines. A stellar manager knows how to work within the structure and
not let the structure impinge upon the process or the project. Know the structure
intimately, so as to guide others to effectively work within the given parameters. Do this
to expand beyond the boundaries.
j) Intuition: Intuition is the capacity of knowing without the use of rational processes; it's
the cornerstone of emotional intelligence. People with keen insight are often able to sense
what others are feeling and thinking; consequently, they're able to respond perfectly to
another through their deeper understanding. The stronger one's intuition, the stronger
manager one will be.

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 k) Knowledge: A thorough knowledge base is essential. The knowledge base must be so
ingrained and integrated into their being that they become transparent, focusing on the
employee and what s/he needs to learn, versus focusing on the knowledge base. The
excellent manager lives from a knowledge base, without having to draw attention to it.
l) Commitment: A manager is committed to the success of the project and of all team
members. S/he holds the vision for the collective team and moves the team closer to the
end result. It's the manager's commitment that pulls the team forward during trying times.
m) Being Human: Employees value leaders who are human and who don't hide behind their
authority. The best leaders are those who aren't afraid to be themselves. Managers who
respect and connect with others on a human level inspire great loyalty.

School of thoughts/Evolution of management

A. CLASSICAL THEORY:
The Classical Theory is the traditional theory, wherein more emphasis is on the organization
rather than the employees working therein. According to the classical theory, the organization is
considered as a machine and the human beings as different components/parts of that machine.

The classical theory has the following characteristics:

1. It is built on an accounting model.

2. It lays emphasis on detecting errors and correcting them once they have been committed.
3. It is more concerned with the amount of output than the human beings.
4. The human beings are considered to be relatively homogeneous and un- modifiable. Thus, labor
is not divided on the basis of different kinds of jobs to be performed in an organization.
5. It is assumed that employees are relatively stable in terms of the change, in an organization.
6. It is assumed that the authority and control should be vested with the central authority only, in
order to have a centralized and integrated system.

Classical theories are:

1. Scientific Management
2. Administrative Management
3. Bureaucratic theory of management

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 I. Scientific Management Theory:

Fredrick Winslow Taylor ( March 20, 1856 - March 21, 1915) commonly known as ‘Father of
Scientific Management‘ started his career as an operator and rose to the position of chief
engineer. He conducted various experiments during this process which forms the basis of
scientific management. It implies application of scientific principles for studying & identifying
management problems.
According to Taylor, ―Scientific Management is an art of knowing exactly what you want your
men to do and seeing that they do it in the best and cheapest way‖. In Taylors view, if a work is
analyzed scientifically it will be possible to find one best way to do it.
Hence scientific management is a thoughtful, organized, dual approach towards the job of
management against hit or miss or Rule of Thumb.

a) Development of Science for each part of men’s job (replacement of rule of thumb)
• This means replacement of odd rule of thumb by the use of method of enquiry,
investigation, data collection, analysis and framing of rules.
• Under scientific management, decisions are made on the basis of facts and by the
application of scientific decisions.

b) Scientific Selection, Training & Development of Workers

• There should be scientifically designed procedure for the selection of workers.
• Physical, mental & other requirement should be specified for each and every job.
• Workers should be selected & trained to make them fit for the job.

c) Co-operation between Management & workers or Harmony not discord

• Taylor believed in co-operation and not individualism.
• It is only through co-operation that the goals of the enterprise can be achieved
efficiently. There should be no conflict between managers & workers.
• Taylor believed that interest of employer & employees should be fully
harmonized so as to secure mutually understanding relations between them.

d) Division of Responsibility
• This principle determines the concrete nature of roles to be played by different level
of managers & workers.
• The management should assume the responsibility of planning the work whereas
workers should be concerned with execution of task.
• Thus planning is to be separated from execution.

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e) Mental Revolution
• The workers and managers should have a complete change of outlook towards their
mutual relation and work effort.
• It requires that management should create suitable working condition and solve all
problems scientifically.
• Similarly workers should attend their jobs with utmost attention, devotion and
carefulness. They should not waste the resources of enterprise.

f) Maximum Prosperity for Employer & Employees

• The aim of scientific management is to see maximum prosperity for employer and
employees.
• Maximum output & optimum utilization of resources will bring higher profits for the
employer & better wages for the workers.
• There should be maximum output in place of restricted output.

TECHNIQUES OF SCIENTIFIC MANAGEMENT

1. Time Study
• It is a technique which enables the manager to ascertain standard time taken for
performing a specified job.
• Every job or every part of it is studied in detail.
• This technique is based on the study of an average worker having reasonable skill and
ability.
• Average worker is selected and assigned the job and then with the help of a stop watch,
time is ascertained for performing that particular job.
• Taylor maintained that Fair day‘s work should be determined through observations,
experiment and analysis by keeping in view an average worker.
Standard Time × Working Hours = Fair Day‘s Work

2. Motion Study
• In this study, movement of body and limbs required to perform a job are closely
observed.
• In other words, it refers to the study of movement of an operator on machine involved
in a particular task.
• The purpose of motion study is to eliminate useless motions and determine the bet
way of doing the job.
• By undertaking motion study an attempt is made to know whether some elements of a
job can be eliminated combined or their sequence can be changed to achieve
necessary rhythm.

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 • Motion study increases the efficiency and productivity of workers by cutting down all
wasteful motions.

3. Functional Foremanship
• Taylor advocated functional foremanship for achieving ultimate specification.
• This technique was developed to improve the quality of work as single supervisor
may not be an expert in all the aspects of the work.
• Therefore workers are to be supervised by specialist foreman.
• Taylor advocated appointment of 8 foremen, 4 at the planning level & other 4 at
implementation level.

4. Standardization
• It implies the physical attitude of products should be such that it meets the
requirements & needs of customers.
• Taylor advocated that tools &equipments as well as working conditions should be
standardized to achieve standard output from workers.
• Standardization is a means of achieving economics of production.

5. Differential Piece Wage Plan

• This tech of wage payment is based on efficiency of worker.
• The efficient workers are paid more wages than inefficient one.
• On the other hand, those workers who produce less than standard no. of pieces are
paid wages at lower rate than prevailing rate i.e. worker is penalized for his
inefficiency.
• This system is a source of incentive to workers who improving their efficiency in
order to get more wages.

CRITICISM OF SCIENTIFIC MANAGEMENT

Although it is accepted that the scientific management enables the management to put resources
to its best possible use and manner, yet it has not been spared of severe criticism.

Critical Evaluation:-

• Mechanistic Approach
• Unrealistic Assumptions
• Narrow View
• Impracticable
• Exploitation of Labor

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 II. Administrative Theory:
The Administrative Theory is based on the concept of departmentalization, which means the
different activities to be performed for achieving the common purpose of the organization should
be identified and be classified into different groups or departments, such that the task can be
accomplished effectively.

Henri Fayol believed that more emphasis should be laid on organizational management. The
main focus is on how the management of the organization is structured and how well the
individuals therein are organized to accomplish the tasks given to them. It follows the top-down
approach for which Fayol has given 14 principles of management with the intent to improve the
functioning of the managers.

Henry Fayol’s 14 Principles of Management are:

1. Division of Work: The work should be divided among the individuals on the basis of their
specializations, so as to ensure their full focus on the effective completion of the task assigned to
them.
2. Authority and Responsibility: The authority and responsibility are related to each other.
Authority means the right to give orders while the responsibility means being accountable. Thus,
to whomsoever the authority is given to exact obedience must be held accountable for anything
that goes wrong. Authority & responsibility are co-existing. If authority is given to a person, he
should also be made responsible. In a same way, if anyone is made responsible for any job, he
should also have concerned authority. There should be a balance between the two i.e. they must
go hand in hand. Authority without responsibility leads to irresponsible behavior whereas
responsibility without authority makes the person ineffective.
3. Discipline: The individuals working in the organization must be well-disciplined. The discipline
refers to the obedience, behavior, respect shown by the employees towards others.
4. Unity of Command: According to this principle, an individual in the organization must receive
orders from only one supervisor. In case an individual has the reporting relationship with more
than one supervisor then there may be more conflicts with respect to whose instructions to be
followed.
5. Unity of Direction: Unity of direction means, all the individual or groups performing different
kinds of a task must be directed towards the common objective of the organization.
6. Subordination of Individual to General Interest: According to this principle, the individual
and organizational interest must coincide to get the task accomplished. The individual must not
place his personal interest over the common interest, in case there a conflict.
7. Remuneration of Personnel: The payment methods should be fair enough such that both the
employees and the employers are satisfied. The quantum and method of remuneration to be paid
to the workers should be fair, reasonable, satisfactory & rewarding of the efforts. Wages should
be determined on the basis of cost of living, work assigned, financial position of the

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 business, wage rate prevailing etc. Fayol also recommended provision of other benefits such
as free education, medical & residential facilities to workers.
8. Centralization: Fayol defines centralization as the means of reducing the importance of
subordinate‘s role in the organization, and the extent to which the authority is centralized or
decentralized depends on the organization type in which the manager is working.
9. Scalar Chain: This means there should be a proper hierarchy in the organization that facilitates
the proper flow of authority and communication. It suggests that each individual must know
from whom he shall get instructions and to whom he is accountable to. Also, the communication
either going up or down must pass through each level of authority. In certain circumstances
where the quick flow of communication is required, the rigidity of a scalar chain can pose
problems. Thus, Henry Fayol has suggested ―gang plank‖ which means anybody in the hierarchy
can interact with each other irrespective of their authority levels. Gang Plank clarifies that
management principles are not rigid rather they are very flexible. They can be moulded and
modified as per the requirements of situations.
10. Order: This principle is related to the systematic arrangement of things and people in the
organization. This means every material should be in its place, and there should be a place for
every material. Likewise, in the case of people, a right man should be in the right job.
Arrangement of things is called material order and placement of people is called social order.

• Material order- There should be safe, appropriate and specific place for every article and
every place to be effectively used for specific activity and commodity.
• Social order- Selection and appointment of most suitable person on the suitable job.
There should be a specific place for everyone and everyone should have a specific place
so that they can easily be contacted whenever need arises.

11. Equity: All the employees in the organization must be treated equally with respect to the justice
and kindliness. Equity means combination of fairness, kindness & justice. The employees should
be treated with kindness & equity if devotion is expected of them. It implies that managers
should be fair and impartial while dealing with the subordinates. They should give similar
treatment to people of similar position.
12. Stability of Tenure: The employees should be retained in the organization, as new appointments
may incur huge selection and training cost. Fayol emphasized that employees should not be
moved frequently from one job position to another i.e. the period of service in a job should be
fixed. Therefore employees should be appointed after keeping in view principles of recruitment
& selection but once they are appointed their services should be served.
13. Initiative: The manager must motivate his subordinates to think and take actions to execute the
plan. They must be encouraged to take initiatives as this increase the zeal and energy among the
individuals. Workers should be encouraged to take initiative in the work assigned to them.
Fayol advised that management should provide opportunity to its employees to suggest
ideas, experiences& new method of work. It helps in developing an atmosphere of trust and
understanding.

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14. Esprit de Corps: This means ―unity is strength‖. Thus, every individual must work together to
gain synergy and establish cordial relations with each other. It refers to team spirit i.e. harmony
in the work groups and mutual understanding among the members. Fayol cautioned the managers
against dividing the employees into competing groups because it might damage the moral of the
workers and interest of the undertaking in the long run.

Thus, Henry Fayol emphasized on the managerial activities and classified these further into five
sub-activities Viz. Planning, Organizing, Directing, coordinating and controlling and for the
better understanding of these he had proposed 14 principles of management.

Basis Taylor Fayol

Human aspect Taylor disregards human Fayol pays due regards on human
elements and there is more element. E.g. Principle of initiative,
stress on improving men, Espirit De‘ Corps and Equity recognizes
materials and methods a need for human relations

Status Father of scientific management Father of management principles

Efficiency & Stressed on efficiency Stressed on general administration
administration

Approach It has micro-approach because It has macro-approach and discuses

it is restricted to factory only general principles of management which
are applicable in every field of
management.
Scope of principles These principles are restricted These are applicable in all kinds of
to production activities. organization regarding their management
affairs.

Achievement Scientific management Administrative management

III. Bureaucratic Theory:

Max Weber a German Social scientist also known as father of bureaucracy approach
of management 1910, made a study of different types of business organization.
The Bureaucratic Theory is related to the structure and administrative process of the
organization and is given by Max Weber, who is regarded as the father of bureaucracy. What is
Bureaucracy? The term bureaucracy means the rules and regulations, processes,

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procedures, patterns, etc. that are formulated to reduce the complexity of organization’s
functioning.

According to Max Weber, the bureaucratic organization is the most rational means to exercise a
vital control over the individual workers. A bureaucratic organization is one that has a hierarchy
of authority, specialized work force, standardized principles, rules and regulations, trained
administrative personnel, etc.
it is impersonal, and the performance of an individual is judged through rule-based activity and
the promotions are decided on the basis of one‘s merits and performance.

Also, there is a hierarchy in the organization, which represents the clear lines of authority that
enable an individual to know his immediate supervisor to whom he is directly accountable. This
shows that bureaucracy has many implications in varied fields of organization theory.

Thus, Weber‘s bureaucratic theory contributes significantly to the classical organizational theory
which explains that precise organization structure along with the definite lines of authority is
required in an organization to have an effective workplace.

Max Weber Theory gave three types of authority

1. Rational Legal authority– People obey due to legally established position or rank.
2. Traditional authority– People obey a person because he belongs to a specific class.
3. Charismatic Authority– People obey them because they believe that the person has
some special power.
Features of theory:
1. Division of work: There is a high degree of specialization or division of labour in a
bureaucratic organization. Tasks are divided into very specialized jobs and each
member performs his specialized function in a predictable manner.
2. Rules and regulations: Detailed and rigorous rules and regulations are laid down to
specify and govern the work behavior, rights and duties of job holders to ensure
consistency and predictability in work performance.
3. Hierarchy of authority: Each level controls the level below and is controlled by the
level above. A formal hierarchy is the basis of central planning and centralized
decision making. Each superior exercises supervision and control on his
subordinates with provision for appeal to higher authorities in the prescribed manner.
4. Technical competence: Selection and promotion of job holders are based on their
technical competence. Qualifications are prescribed for each job/ position.
5. Record–keeping: Every decision and action is recorded in a wide array of written
documents and preserved in its original as well as draft form.

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6. Impersonal relations: The idea is to treat all employees equally and customers
equally, and not be influenced by individual differences. There is a rational personal
administration people are selected on their prudential and merits are paid according
to their position in the organization.

Merits:
• Proper delegation of authority in the organization.
• All actions are taken carefully because of rules and regulations.
• Behavior of the employees is rational.
• Behavior of employees is predictable.
• Leads to efficiency in the organization

Limitations of Bureaucratic approach

1. Rigidity: Rules and regulations in bureaucracy are often rigid and inflexible. Rigid
compliance with rules and regulations discourage initiative and creativity.
2. Goal displacement: Rules framed to achieve organizational objectives at each level
become an end in themselves.
3. Impersonality: A bureaucratic organization stresses mechanical way of doing things.
The office a person holds is more important than the person himself. Contractual
obligations are given primacy over human relations.
4. Compartmentalization of objectives: Jobs are divided into watertight categories which
restrict people from performing tasks that they are capable of performing.
5. Paperwork: Bureaucracy involves excessive paper work as every decision must be put in
writing. All documents have to be maintained in their draft and original forms. This leads
to great wastage of time, stationery and space.
6. Empire Building: People in a bureaucracy tend to use their positions and resources to
perpetuate self- interests or the interests of their sub-units. Every superior tries to increase
the number of his subordinates as if this number is considered a symbol of power and
prestige. It is hard to destroy bureaucracy even if it has outlived its utility.
7. Red Tape: Bureaucratic procedures involve inordinate delays and frustration in the
performance of tasks. The procedures are nevertheless valued, perpetuated and multiplied
for their own sake as also to pass the buck.

Criticism:
• Too much emphasis on rules and regulations.
• No importance is given to informal groups.
• Bureaucracy involves a lot of paper work.

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 • There will be unnecessary delay in decision-making due to formalities and rules.
• There is difficulty in coordination and communication.

B. NEO CLASSICAL THEORY:

Neo- classical theory is also referred to as behavioral science approach to modifying and
improving the classical theory. While classical theories focused more on structure and physical
aspects of the worker and Neo-classical theory gives importance to human and social aspects
of the worker and his relations in the organization.

Human relation approach argued that achievement of organizational objective is only possible by
the human beings. It is the human resources who covert the other resources into fruit of profits.

Features:

1. Business organization is a social system.

2. Individual is the part of informal group in the organization.
3. Only economic rewards cannot motivate the individual employees, their social and
psychological needs should be met.
4. It is cooperative attitude which can bring better results.
5. Management must aim at building social and leadership skills.
6. Productivity will be high only when the motivation is high.

I. Hawthorne experiments
George Elton Mayo (1880-1949) is considered the father of neo-classical approach. He was the
leader of the team which conducted the famous Hawthorne Experiments. These
experiments were conducted during 1924-32 at a plant of the Western Electric company. The
Hawthorne plant was manufacturing telephone system bell. The objective of the experiment was
to find out the behavior and attitude of workers at workplace under better working conditions. In
the company, when management provide the benefits of medical allowance and pension with
recreational facilities. Even thought workers get all facilities but the productivity was not up to
expectation.

So, in 1924, the professor Elton Mayo and his research team investigate the reasons
for dissatisfaction of employees and decrease in productivity.

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Four Phase of Hawthrone experiments:

Prof. Elton Mayo and his team conducted researches in four phases.

1. Illumination Experiment (1924 – 1927): The object of this experiment was to assess the
effect of illumination on employee output. Two groups were selected from among the
employees. One group was placed in the room where lighting remained constant. The
other group was placed in another room where lighting varied periodically. Surprisingly,
the output of both the groups increased steadily. It was concluded that lighting was a
minor factor and there were other more important factors influencing the output. At this
state, Mayo and his team was invited to conduct further studies.
2. Relay assembly Test Room Studies (1927–1928): These studies were conducted in
three different groups. The test group consisted of six female workers. Frequent changes
were made in working conditions such as shorter working hours, rest periods, hot lunch,
friendly and informal supervisors, free interaction among members of the group, etc.
Productivity of the group increased even when the improvements in working conditions
were withdrawn. It was concluded that socio-psychological factors, e.g., special attention,
recognition, sense of group pride and belonging exercise a greater influence on
productivity than working conditions.
3. Mass Interview Programme (1928-1930): A large number of workers were interviewed
to judge their attitudes and opinions on the factors influencing productivity. It was found
that the opportunity to talk freely about things that are important to workers has a positive
effect on their morale and productivity.
4. Bank Wiring Observation Room Study (1931–1932): In this experiment, a group
of fourteen workers was put under close observation. The pay of every member was
made dependent on the performance of the group as a whole. It was found that the group
had its own norms of performance and various forms of social pressure were exercised to
enforce these norms. As a result output could not increase despite group incentive
scheme.

The main findings of Hawthorne Experiments are as follows:

a) A work group is not merely a techno-economic unit. It is also a social system with a
culture of its own.
b) Workers are not merely rational economic beings motivated simply by money. They are
also socio-psychological beings and respond to the total work situation.
c) Social and psychological factors exercise a greater influence on employee behaviour and
performance than physical conditions of work.
d) Workers act or react not as individuals but as members of a group. The informal groups
have their own norms and beliefs. These groups and their leader exercise an overriding
influence on the attitudes, behavior and performance of individual employees.

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 e) Workers respond to the total work situation. Their behavior and performance are
conditioned by factors inside and outside the work place.

Hawthorne Experiments have been criticized on the following grounds:

• Pro-management bias: In Hawthorne studies, the ends of the company were assumed to
be correct. Mayo has in fact been criticized for implying that management is always
logical whereas workers are largely driven by emotions.
• Wider Social Context Overlooked: Mayo omitted detailed study both of the wider
social context and its relation to work behavior, and the total work situation by ignoring
the total social situation within an organization. Mayo reduced the value of his work.
• Unscientific: Even the scientific character of Hawthorne studies has been challenged.
There was no systematic basis in the choice of work, worker and the environment. The
investigations were not carried out in a scientific manner. The effects, therefore, could
not be scientifically related to the causes.
• No Mention of Trade Unions: In more than twenty thousand interviews upon which so
much of the findings were based there was an articulation on unions among the workers.
Mayo is also criticized for ignoring other relevant factors such as changes in the class and
occupational structure of America.

Conclusions of Hawthorne studies:

1. Social Unit:

A factory is not only a techno-economic unit, but also a social unit. Men are social beings. This
social characteristic at work plays an important role in motivating people. The output increased
in Relay Room due to effectively functioning of a social group with a warm relationship with its
supervisors.

2. Group Influence:
The workers in a group develop a common psychological bond uniting them as £ group in the
form of informal organization. Their behaviour is influenced by these groups. Pressure of a
group, rather than management demands, frequently has the strongest influence on how
productive workers would be.

3. Group Behaviour:
Management must understand that typical group behaviour can dominate or even supersede
individual propensities.

4. Motivation:
Human and social motivation can play even a greater role than mere monitory incentives in
moving or motivating and managing employee group.

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5. Supervision:
The style of supervision affects worker‘s attitude to work and his productivity. A supervisor who
is friendly with his workers and takes interest in their social problems can get co-operation and
better results from the subordinates.

6. Working Conditions:
Productivity increases as a result of improved working conditions in the organization.

7. Employee Morale:
Mayo pointed out that workers were not simply cogs, in the machinery, instead the employee
morale (both individual and in groups) can have profound effects on productivity.

8. Communication:
Experiments have shown that the output increases when workers are explained the logic behind
various decisions and their participation in decision making brings better results.

9. Balanced Approach:
The problems of workers could not be solved by taking one factor i.e. management could not
achieve the results by emphasizing one aspect. All the things should be discussed and decision be
taken for improving the whole situation. A balanced approach to the whole situation can show
better results.

II. HUMAN RELATIONS MOVEMENT

Hawthorne Experiments laid the foundations for human relations movement in management.
Subsequent research contributed several concepts and techniques of human relations. Human
relations school is a socio psychological approach to management. It suggests that a business
enterprise is a social system in which group norms exercise significant influence on the behavior
and performance of individuals. Workers cannot be motivated by economic rewards alone. They
required social satisfaction at workplace. Therefore, managers should create such a climate in
the organization that worker can feel happy. Employee counseling, participative decision-
making, cordial supervision, job enrichment and other techniques have been suggested for
keeping workers happy and satisfied. The human relations school is based on the following
ideas:

• The Individual: According to the human relations school, each person is unique. He
brings certain attitudes, beliefs, values, skills, etc. to the job situation. Therefore, an
individual is motivated by not only economic factors but by several social and
psychological factors.
• The work Group: Work is a social experience and most workers find satisfaction in
social or informal groups. The norms of such groups determine to a great extent the

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 attitudes and performance of workers. Therefore, managers should maintain good inter-
personal and inter-group relations to maximize productivity.
• The leader: As the leader of a work group, a supervisor/manager should provide a
pleasant work climate wherein employees are allowed to have a say in the decision
making process. He can gain respect and obedience by adjusting to various personalities
and situations.
• The work Environment: A positive work environment enables employees to satisfy
their needs as well as to achieve organizational goals. Positive work environment consists
of clearly defined goals, performance linked rewards, feed-back on performance,
participative decision making, interesting and growth oriented work, open
communications, etc.

Contributions of human relations Approach:

• Human relations school has a normal justification. Employees are human being and they
are entitled to be treated with respect and dignity.
• Human relations approach helps to satisfy the social and psychological needs of
employees. Such satisfaction is likely to improve productivity and reduce stress Sound
human relations can result in the optimum utilization of recourses.
• Human relations school highlights the people side of organized. It therefore, avoids the
imbalance caused by over emphasis on technical and administrative aspects under
scientific management and administrative theory.
• A true concern for workers (those vital machines would yield rich dividends).
• Human relations school focuses attention on inter personal relations and dynamics of
work groups.
• It revolutionized management training by stressing people management skills and
managerial styles.

The human relations movement quickly attracted wide attention in both academic and industrial
circles. Many firms significantly changed their approach to management. They started employee
welfare programmes to put greater attention on the human factor.

Human relations approach, has, however, been criticized on the follow points:

• Unscientific- critics have questioned the scientific validity of the human relations
approach. Hawthorne experiments on which the approach is based stamps from a clinical
bias as they discounted theory. A group of American workers is representative of the total
work force. Experimental groups cannot be equated the work groups
• Short-sighted- human relation approach is based on over liberal assume assumptions
about people. It soft paddles the requirements of organizations and management and
neglects the real issue of the work situation.

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 • Over concern with happiness- The assumption is that happy workers productive workers.
But research has revealed no direct co-relation between moral and productivity. Human
relations approach suggests that group decision making is superior to individual decision
but this may not necessarily be true in all cases.
• Negative view of conflict- human religionists believed that conflict is ways bad and must
be avoided. They failed to recognized conflict as the creative force.

C. MODERN APPROACH TO MANAGEMENT:

Relating to the present or recent times. Characterized by or using the most up-to-date techniques,
equipment, etc. Management: The process of managing: administer and regulate (resources
under one‘s control).

The theory includes:

1. System Approach
2. Contingency Approach
3. Total Quality Approach
4. Decision Theory

I. System Approach:

They viewed organization as an organic and open system, which is composed of interacting and
interdependent parts, called subsystems. The system approach is top took upon management as a
system or as ―an organized whole” made up of sub- systems integrated into a unity or orderly
totality

Systems approach is based on the generalization that everything is inter-related and inter-
dependent. A system is composed of related and dependent element which when in interaction,
forms a unitary whole. A system is simply an assemblage or combination of things or parts
forming a complex whole.

In the systems approach, attention is paid towards the overall effectiveness of the system rather
than the effectiveness of the sub-systems. The interdependence of the sub-systems is taken into
account. The idea of systems can be applied at an organizational level.

In Appling system concepts to the organization, organizations are taken into account and not
only the objectives and performances of different departments (sub-systems).

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One its most important characteristic is that it is composed of hierarchy of sub-systems. That is
the parts forming the major system and so on. For example, the world can be considered-to be a
system in which various national economies are sub-systems.

In turn, each national economy is composed of its various industries, each industry is composed
of firms‘ and of course a firm can be considered a system composed of sub-systems such as
production, marketing, finance, accounting and so on.

Contribution:

It has real significance to the practicing manager in the sense that managers operate in social
system and the organization is likely to succeed if the demands of the society in which it operates
are fully recognized.

Features of Systems Approach:

1. A system consists of interacting elements. It is set of inter-related and inter-dependent parts

arranged in a manner that produces a unified whole.
2. The various sub-systems should be studied in their inter-relationships rather, than in isolation
from each other.
3. An organizational system has a boundary that determines which parts are internal and which
are external.
4. A system does not exist in a vacuum. It receives information, material and energy from other
systems as inputs. These inputs undergo a transformation process within a system and leave
the system as output to other systems.
5. An organization is a dynamic system as it is responsive to its environment. It is vulnerable to
change in its environment.

Systems theory is useful to management because it aims at achieving the objectives and it views
organization as an open system. Chester Barnard was the first person to utilize the systems
approach in the field of management.

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Here we also have the concept of open system and closed system:

Open system: a system which has the active interface with the external environment by
receiving the inputs from the environment and giving the outputs to the market.

Closed system: it is a self dependent system which does not have any interaction with the
external environment. It focuses only on internal relationship and interaction between sub
systems only.

Merits:

• It aims at meaningful analysis of organizations and their management.

• It facilitates the interaction between organization and its environment.
• It guides manager to avoid analyzing problems in isolation and to develop an
integrated approach.
• It analyses the system at different levels and inter-relates and integrates it into a unified
set of direction.
• It synthesizes individual goals and organizational goals
• It provides a framework for effective interaction of parts of the organization

Demerits:

• The approach does not recognize the differences in systems.

• It is theoretical and every time it is difficult to define the systems and subsystem and
understand their difference
• It fails to study the organization from different perspectives
• It fail to specify the nature of interrelation and interdependence
• It does not offer any tools or techniques for analysis

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II. Contingency Approach of Management:

The contingency approach to management recognizes the situational nature of management.

According to this theory, management is absolutely situational. Manager practice depends upon
situation. Contingency theory is based upon situation. Contingency theory is based on the nature
and condition of situations. Every situation is unique, different situations demand different
managerial practice. Managerial practice appropriate in one situation cannot be generalized in
other situation.

Contingency approach to management is based upon the premise that there is no one best way
to handle any of the management problems. The application of management principles and
practices are dependent upon the circumstances and the situations.

The contingency approach to management is based on the idea that there is no one best way to
manage and that to be effective, planning, organizing, leading, and controlling must be tailored
to the particular circumstances faced by an organization.

The technique of problem solving appropriate in one situation may not be applicable in other
situation. There is no one best method of doing. There is no one best method of planning,
organizing, directing and controlling, before managing the organization and before handling the
problem. Manager must analyze, situation or conditions according to situation, he \she must
apply managerial practice. This theory does not agree with universal application of management
principles.

Different factors affect this theory or there are 6 major contingency variables. They are: -

1. Size of organization
2. Task technology
3. Environmental uncertainty
4. Geographical spread of organization
5. The type of work being done
6. Individual differences.

Features of Contingency

1. Management is situational in nature. The technique of management depends on complexity

of the situation.

2. Management principles are not universal in nature as there is no best style of management.

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3. It helps in understanding the complex organizations as it focuses on multivariate nature of
organizations. It helps an organization to operate under different environmental conditions.
Rather than having a specific solution to solve problems, it provides a framework where
every solution depends upon the environmental conditions.

4. It provides insight into organization‘s adaptability to both internal and external environment.
It is a matter of fitting the internal environment to its external environment.

Advantages:

1. It is an integration of different schools of thought; classical, behavioural and systems

approach. It integrates the principles of different schools of thought and applies them
contingent upon the needs of the situation.
2. It is pragmatic in nature as solution to every problem is found after analysing the situation.

3. It follows the technique of multivariate analysis. It thinks of all possible variables or

factors that affect the situation and adopts the best.
4. It is adaptive in nature. It does not presume a pre-designed structure of the organization
but adopts a structure that helps the organization adapt to the environment.

5. It helps to design the organization structure and plan the information decision systems. A
small-sized organization may be centralized and a large-sized organization may be
decentralized in structure.

Limitations:
1. It does not follow the concept of ‗universality of principles‘ which often apply to specific
management situations.
2. As there is no definite solution to a problem, managers think of alternatives to arrive at the
right choice. This is costly in terms of time and money.
3. It is not possible for managers to determine all the factors relevant to the decision making
situation.
4. It is not possible to establish perfect relationship amongst these factors. Application of this
theory may, therefore, be a complicated task as decisions are based on limited information.

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III. Total Quality Management Theory

TQM is a dynamic concept and so is its management. TQM has been accepted throughout the
world. It calls for continuous improvement of quality with the cooperation of workers through
innovation in product and technology so as to meet the changing requirements of the customer.

TQM is philosophy which believes in a company- wide responsibility towards quality. (TQM)
describes a management approach to long–term success through customer satisfaction. It refers
to meet the requirement of the customers consistently by continuously improvement.

In a TQM effort, all members of an organization participate in improving processes, products,

services, and the culture in which they work. Total Quality Management TQM, also known as
total productive maintenance, describes a management approach to long-term success through
customer satisfaction. In a TQM effort, all members of an organization participate in improving
processes, products, services, and the culture in which they work.

Total quality management can be summarized as a management system for a customer-focused

organization that involves all employees in continual improvement. It uses strategy, data, and
effective communications to integrate the quality discipline into the culture and activities of the
organization. Many of these concepts are present in modern quality system, the successor to
TQM.

Here are the 8 principles of total quality management:

1. Customer-focused The customer ultimately determines the level of quality. No matter what
an organization does to foster quality improvement—training employees, integrating quality into
the design process, upgrading computers or software, or buying new measuring tools—the
customer determines whether the efforts were worthwhile.
2. Total employee involvement
All employees participate in working toward common goals. Total employee commitment can
only be obtained after fear has been driven from the workplace, when empowerment has
occurred, and management has provided the proper environment. High-performance work
systems integrate continuous improvement efforts with normal business operations. Self-
managed work teams are one form of empowerment.
3. Process-centered
A fundamental part of TQM is a focus on process thinking. A process is a series of steps that
take inputs from suppliers (internal or external) and transforms them into outputs that are
delivered to customers (again, either internal or external). The steps required to carry out the
process are defined, and performance measures are continuously monitored in order to detect
unexpected variation.

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4. Integrated system
Although an organization may consist of many different functional specialties often organized
into vertically structured departments, it is the horizontal processes interconnecting these
functions that are the focus of TQM.
5. Strategic and systematic approach
A critical part of the management of quality is the strategic and systematic approach to achieving
an organization‘s vision, mission, and goals. This process, called strategic planning or strategic
management, includes the formulation of a strategic plan that integrates quality as a core
component.
6. Continual improvement
A major thrust of TQM is continual process improvement. Continual improvement drives an
organization to be both analytical and creative in finding ways to become more competitive and
more effective at meeting stakeholder expectations.
7. Fact-based decision making
In order to know how well an organization is performing, data on performance measures are
necessary. TQM requires that an organization continually collect and analyze data in order to
improve decision making accuracy, achieve consensus, and allow prediction based on past
history.
8. Communications
During times of organizational change, as well as part of day-to-day operation, effective
communications plays a large part in maintaining morale and in motivating employees at all
levels. Communications involve strategies, method, and timeliness.

Benefits of TQM
1. TQM brings quality consciousness in the enterprise which and encourages the production
of quality products.
2. TQM helps in providing greater satisfaction to customers by meeting their requirements.
If customers are satisfied, the sales are increased.
3. Create good image of the customers by providing them with better quality goods and
services.
4. Effective and efficient utilization of resources ( men, material, money, machine, method)
5. Reduce wastages to minimum. The cost of production will reduce and profitability will
be increased.
6. Competitive position of the company will be improved.
7. Employees are more committed to higher quality and thus they would be motivated and
be well connected with the system of the organization.

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Steps in implementing TQM:

W.E. Deming, is known as the father of Quality management.

The steps in PDCA cycle are:

1) Lay down policies and objectives of TQM. Determine what the customer is supposed to
receive and what they are actually receiving.
2) Chalk out the methods to achieve TQM objectives.
3) Educate and train workers and managers to understand and meet the requirements of
TQM.
4) Start the operation of TQM by introducing new products, machines, procedures etc.
5) Observe results of operation and find out the causes of non-conformance and place the
report before the top management.
6) Analyze the results and determine the consequences of non-conformance and place the
report before the top management.
7) Prevent undesired effects in quality improvement. Establish personal relationships with
employees so that they can voice their concerns and ideas.
8) Suggest measures for improvement of methods and design in future.

Requirements of Success in TQM:

For the successful implementation of TQM, the following guidelines should be followed:

1) The objectives and policies of the firm must reflect its commitment to quality as a
philosophy of customer satisfaction.
2) The TQM philosophy must be effectively communicated to each and every employee and
department, so that it is clearly understood throughout the organization.

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 3) The TQM program should be properly designed to meet the requirements of the
customers.
4) The participation of all the employees should be encouraged, so that innovative ideas are
put forward by the employees. TQM should not be imposed upon the employees. The
management should make TQM an employees‘ program through proper training of
workers.
5) Workers and managers should be given the necessary training for the effective
implementation of TQM.
6) TQM must involve product design and improvement, adoption of new technology,
systems and procedures.
7) TQM should be considered a continuous program as the requirements of customers keep
on changing. TQM should also try integrate the operations of various departments.

IV. Decision Theory Approach

This approach was contributed by Simon, Cyert, and Forrester. According to this approach:

• Management is essentially decision-making.

• Members of the organization are decision-makers and problems solvers.
• Organization can be treated as a combination of various decision centers. The level and
importance of organization members are determined on the basis of importance of
decisions, which they make. Quality of decision affects the organization effectiveness.
• All factors affecting decision-making are the subject matter of study of management.
Besides processes and techniques in decision making factors affecting decisions are
information systems, social and psychological aspects of decision-makers.

Contribution:

• It demonstrates how managers can discharge their functions effectively and for this
approach it provides various tools.
• Decision theorists have grappled with decisions pertaining to diagnosis and the resulting
prescriptions for improving communication, incentives, reactions of the individuals to
group and analysis of human values write stated objectives.

Limitations:

• This approach does not take the total view of management. Decision-making is vital in
every school of management. This vital aspect cannot be denied but management is more
than mere decision-making.

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Concept of Business ethics and social responsibility
The term ‗ethics‘ refers to value-oriented decisions and behavior. The word ethics comes from
Greek word, ‗Ethos‘, meaning character, guiding beliefs, and standards, ideals that pervade a
group or a community. Thus, ethics is study of moral behavior – the study of how the standards
of moral conduct among individuals are established and expressed behaviorally.

According to Dale S Beach. ―Ethics refer to a set of moral principles which should play very
significant role in guiding the conduct of managers and employees in the operation of any
enterprise‖. Examples:

• To charge fair prices for the customers.

• To use fair weights.
• To be honest with customers.
• To give fair treatment to workers.

Ethics refers to the rules and principles that define right and wrong conduct. There are ethical
dimensions to managerial decisions and actions.

Ethics are the critical examination of the standards of goods and evil, right and wrong, virtue and
vice. It is the study of whatever is right and good for humans. It is the entire body of moral
values that society attaches to the actions of human being.

Business ethics may be defined as moral principles or rules of behavior which should govern the
conducting business enterprises. Business ethics are answered with what is right and what is
wrong in the behavior of businessmen. It provides a code of conduct which can guide
businessmen in performing their jobs. It refers to the application of ethics to business. To be
more specific, business ethics is the study of good and evil, right and wrong and just and unjust
actions of businessmen.

So Business ethics further can be defined as a set of moral standards which people owning and
managing business is expected to follow. These standards are mean to govern the conduct of
business persons.

MANAGEMENT PROCESS AND ETHICS:

Management is defined as the process by which a co-operative group directs actions towards
common goals.

OR

The process of management is identified in asset of functions performed by managers to

accomplish the goals. It involves managerial steps such as planning, organizing, staffing,
directing and controlling.

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MANAGERIAL FUNCTIONS:

• Planning (in this step we determine the objectives of the organization. it also includes
deciding in advance as to what to do, how to do and when to do).
• Organizing (it refers to identification of activities to be carried out, grouping of similar
activities and creation of department, clearing and establishing line and staff authority,
hierarchy in organization).
• Staffing (it involves Human Resource Planning i.e. determining future manpower
demand of organization, employment, compensation , training & development,
performance appraisal of employees ).
• Directing (includes motivating employees, directing others, selecting the most effective
communication channels, and resolving conflicts).
• Controlling (Monitoring performance, comparing actual performance with previously set
goals, and correcting any deviation).

Social Responsibility:

Social responsibility refers to the overall way in which a business itself tries to balance its
commitments to relevant groups and individuals in its social environment. Most companies strive
to be responsible to five main groups:

• Customers: Critical factors include charging fair prices, honoring warranties, and
standing behind product quality.
• Employees: Treating workers fairly, making them a part of the team, and respecting their
dignity promote a company‘s reputation.
• Investors: Managers must follow proper accounting procedures, provide appropriate
information to shareholders, and manage the organization to protect shareholder
investments.
• Suppliers: Partnership arrangements with suppliers can enhance market image and firm
reputation.
• Local Communities/ environment: Contributing to local programs has a positive impact
on the community.

Areas of Social Responsibility:

1. Responsibility Toward the Environment

• Air Pollution: Under new laws, many companies must install special devices to limit
pollutants they expel into the air.

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 • Water Pollution. Increased awareness of chemical and waste dumping, and the resulting
dangers, has led to improved water quality in many areas of the country.
• Land Pollution. Proper toxic waste disposal and recycling programs are allowing
companies to help restore land quality and to prevent further contamination.

2. Responsibility Toward Customers

• Consumer Rights. Consumerism is the social activism dedicated to protecting the rights
of consumers in their dealings with businesses.
• Unfair Pricing. Collusion occurs when two or more firms agree to collaborate on such
wrongful acts as price fixing; price gouging occurs when firms respond to increased
demand with steep price increases.
• Ethics in Advertising. Consumers deserve to be given product information that is truthful
and can be proven, as well as information that is not morally objectionable.

3. Responsibility Toward Employees

• Recruiting, hiring, training, promoting, and compensating are the bases for social
responsibility toward employees; a whistleblower is an employee who discovers and tries
to end a company‘s unethical, illegal, or irresponsible actions by publicizing them.

4. Responsibility Toward Investors

• Some wrongful acts include: Improper financial management; check kiting, in which a
check has been written against money that has not yet arrived at the bank; and insider
trading, in which someone uses confidential information to benefit from the purchase or
sale of stocks.

Ethics and Social responsibility:

The term social responsibility conveys the moral conduct that relates to such broad issues as
environmental pollution, discrimination, poverty, unemployment, and inflation. Accordingly, an
organization whose practices contribute to inflation, unemployment, increased poverty is likely
to be viewed as socially irresponsible and not fulfilling its responsibility towards society. The
most meaningful way to distinguish business ethics from social responsibility is in terms of a
decision‘s implications for society as a whole.

Business Ethics: Business ethics is the application of moral principles to business problems.
However, ethics extends beyond the question of legality and involves the goodness or badness of
an act. Therefore, an action may be legally right but ethically wrong. The four important factors
that affect the manager‘s decision are:

1. Govt. legislations
2. Business codes
3. Pressure groups

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 4. Personal Values of manager himself.

Elements of Business Ethics:

Business managers must come to appreciate that comprise making ethical judgments. There are
six major elements that are essential in making ethical judgment:

1. Ethical Imagination: Developing ethical imagination means being sensitive to ethical

issues in business decision-making, ability to identify those situations where people are
likely to be detrimentally affected by decision-making.
2. Ethical Identification and Ordering: It refers to the ability to judge the relevance or
non-relevance of ethical factors in decision making situations.
3. Ethical Evaluation: To evaluate ethical factors business persons have to develop clear
principles, basis of weighing those factors and the ability to make out the likely ethical as
well as economic outcome of a decision.
4. Tolerance of Ethical Disagreement and Ambiguity: One of the principle objections to
ethics is the extent of disagreement and ambiguity that is tolerated in thinking ethically.
For Eg: a new product based upon limited test marketing , may be a critical decision, but
business persons have become accustomed to making them in spite of the disagreement
and ambiguity among those involved in the decision.
5. Integration of Managerial and Ethical Competence: Ethical competence is an integral
part of managerial competence. The ethical business person sees every evolving decision
as one in which an ethical perspective must be integrated.
6. Sense of Ethical Obligation: This refers to the intuitive or learned understanding that
ethical fibers- a concern for fairness justice and due process to people, groups and
communities should be woven into the fabric of managerial decision-making.

Four Views of Ethics:

1. The utilitarian view of ethics states that ethical decisions are made solely on the basis of their
outcomes or consequences.

2. The rights view of ethics says that ethical decisions are concerned with respecting and
protecting individual liberties and privileges such as the rights of privacy, freedom of
conscience, free speech, life and safety, and due process.

3. The theory of justice view of ethics states that decision makers seek to impose and enforce
rules fairly and impartially.

4. Finally, the integrative social contracts theory proposes that ethical decisions should be
based on empirical (what is) and normative (what should be) factors. This view is based on the
integration of two ―contracts‖—the general social contract and a more specific contract among
members of a specific community that might be affected by a decision.

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Shift to ethics
Many critics say that we live in the time of ―the ethics crisis‖. We see headlines that touch upon
it daily. Controversies about overcharging for rental cars; and unfair trade practices by retailers
have fueled a renewed concern about the role of ethics in business. As a part of society, business
and management is responsible to act credibly and ethically. Every action or decision taken by
the management or business has implications on society as a whole. That is why; there has been
a major shift to ethics.

The role of Ethics and values in the conduct of business can lead to the following benefits:

1) Ethical Decision-making: Ethics and values serve as guide to decision-making in

business. They help in differentiating between ethical and unethical alternatives to
solving any business problem.
2) Standards of Behaviour: Ethics are norms that guide individual and organizational
behaviour. The performance of an organization may be judged against the benchmarks
set by ethics. Ethics seek to answer the basic question as to what is good or bad in
business.
3) Creation of Corporate Culture: Organizations are distinguished by their corporate
cultures. The shared values and beliefs of organizational members constitute an integral
part of corporate culture. For building a strong corporate culture, organizational members
must base their conduct on business ethics and values.
4) Social Responsibility: Observance of ethics and values by a business helps it in
discharging its social responsibilities towards various stakeholders including owners and
investors, employees, customers, competitors, government, community and environment.
5) Credibility: Ethical and value based management of business enhances its credibility
among the stakeholders. Every stakeholder is assured of fair treatment by the business.
This increases market reputation of the business.
6) Stability and Growth: Today, most big companies are operating in the global market.
So, they have to attract foreign investors for capital and foreign customers to sell their
products. They also have to adhere to the rules and regulations operational in various
countries. Adoption of ethical governance practices provides stability and growth to the
enterprise.
7) Legal requirements: There are various laws that have been enacted which declare
certain business practices as illegal and prohibited. All business enterprises are obligated
to follow legal business practices. In other words, obedience to laws is considered ethical.

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Tools of Ethics
To improve ethical reasoning, managers imbibe certain tools of ethics. These tools are:

1) Values: Values are relatively permanent desires that seem to be good in themselves, like
peace or goodwill. Corporations also have values, such as size, profitability, or making a
quality product.
2) Rights and duties: A right is a claim that entitles a person the ―room‖ in which to take
action. In more formal terms, one might call this room a person‘s ―sphere of autonomy‖
or, his or her freedom. A duty is an obligation to take specific steps such as paying taxes,
obey the laws etc.
3) Moral rules: Moral rules guide us through situations where competing interests collide.
These are guidelines that can resolve disagreements. Moral rules, which are rules for
behaviour, often become internalized as values.
4) Human relationships: Every human being is connected to others in a web of
relationships. These relationships exist because we need one another for mutual supports
and to accomplish our goals. From a small child‘s relationship with parents to a
manager‘s relationship with an employee, relationships are a pervasive aspect of moral
life.
5) Common morality: Common morality is the body of moral rules governing ordinary
ethical problems. These are the rules we live by most of the time, and which we can use
to understand managerial problems in ethical terms.
6) Promise keeping: Most people want to have some assurance that other people will do
what they say. Every moral theory thus asserts, at the very least, that human beings
should most of their promises most of the time. Insider trading became such a scandal in
part because those who were caught had promised not to engage in such activities.
7) Mutual aid: Human communities are sustained by the recognition that people depend on
each other and help each other. According to the principle of mutual aid, individuals
should help one another if the cost of doing so is not great.
8) Respect for persons: Common morality also requires us to regard other people as ends
in themselves, not as mere means to our own ends. Treating people as ends involves
taking them seriously, accepting their interests as legitimate, and regarding their desires
as important.

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