PRINCIPLES OF MANAGEMENT

BEM 327

INTRODUCTION

With increasing complexities managing the business has become a difficult task. The
need of existence of management has increased immensely. Management is
essential not only for business concerns but also for banks, schools, colleges,
hospitals, hotels, religious bodies, helpful trusts etc.. Every business unit has some
objectives of its own. These objectives can be achieved with the coordinated efforts
of several personnel. The works of number of persons are properly coordinated to
achieve the objectives through the process of management

DEFINITION OF MANAGEMENT

Management as a discipline is as old as man, there is no common agreement among

it's specialists and practitioners about its exact definition. In fact, this is so in case of
all social sciences alike psychology, sociology, anthropology, economics, political
science etc.

Many management professionals have tried to define management. But, no

definition of management has been universally accepted. Some of the leading
definitions of management

Peter F. Drucker defines, "management is an organ; organs can be described and

defined only through their functions".

According to Terry, "Management is not people; it is an activity like walking, reading,

swimming or running . People who perform

Ralph C. Davis has defined Management As, "Management is the function of

executive leadership anywhere."
Henry Fayol, "To manage is to forecast and plan, to organize, to compound, to
coordinate and to control."

Harold Koontz says, "Management is the art of getting things done through and with
informally organized group."

Koontz and O'Donnel, "Management is the creation and maintenance of an internal

environment in an enterprise where individuals, working in groups, can perform
efficiently and effectively toward the attainment of group goals. Itis the art of getting
the work done through and with people in formally organized groups."

Mary Parker Follett defines management as the "art of getting things done through
people".

More elaborate definition of management is given by George R. Terry. He defines

management as a process "consisting of planning, organizing, actuating and
controlling, performed to determine and accomplish the objectives by the use of
people and other resources".

MANAGEMENT LEVELS

An organization may have different levels of management. Levels of management

refer to a line of demarcation between various managerial positions in an
organization. The levels of management depend upon its size, technical facilities and
the range of production. We Generally come across two broad levels of
management, viz.

i. Administrative management (the upper level of management)

ii. Supportive management (the middle management)
iii. Operating management (the lower level of management).

Administrative management.is concerned with "thinking" functions such as laying

down policy, planning and setting up of standards. Operative management is
concerned with the "doing" function such as execution of policies, and directing the
operations to attain the objectives of the enterprise.

But in actual practice, it is difficult to draw any clear cut demarcation between
thinking function and doing function. Because the basic/fundamental managerial
functions are performed by all managers irrespective of their levels or, ranks. For
instance, wage and salary director of a company may assist in fixing wages and salary
structure as a member of The Board of Directors, but as head of wages and salary
department, his job is to see that the decisions are implemented.

FUNCTIONS OF MANAGEMENT LEVELS

i. Top Management of a company consists of owners/shareholders, Board of

Directors, It's Chairman, Managing Director, or the Chief Executive, or the
General Manager or Executive Committee having key officers.
ii. Middle Management of a company consists of heads of functional
departments viz. Purchase Manager, Production Manager, Marketing
Manager, Financial controller, etc. and Divisional and Sectional Officers
working under these Functional Heads.
iii. Lower Level or Operative Management of a company consists of
Superintendents, Foremen, Supervisors, etc.
1. Top Management: Top management is the ultimate source of authority and it
lays down goals, policies and plans for the enterprise. It bestows more time on
planning and coordinating functions. It is responsible to the owners of the
business of the overall management. It is also described as the policy making
group responsible for the overall direction and success of all company activities.
The important functions of top management include:
a) To establish the objectives or goals of the enterprise.
b) To make policies and frame plans to attain the objectives laid.
c) To set up an organizational frame work to conduct the operations as per
plans.
 d) To assemble the resources of money, men, materials, machines and methods
to put the plans into action.
e) To exercise effective control of the operations.
f) To provide overall leadership to the enterprise.
2. Middle Management: The job of middle management is to implement the
policies and plans outlined by the top management. It serves as an essential link
between the top management and the lower level or operative management.
They are responsible to the top management for the functioning of their
departments. They devote more time on the organization and motivation
functions of management. They provide the guidance and the structure for a
purposeful enterprise. Without them the top management's plans and ambitious
expectations will not be effectively realized. The functions of middle management
includes:
a) To understand the policies chalked out by top management.
b) To prepare the organizational set up in their own departments for fulfilling the
objectives implied in various business policies.
c) To recruit and select suitable operative and supervisory staff.
d) To assign activities, duties and responsibilities for timely implementation of
the plans.
e) To compile all the instructions and issue them to supervisor under their
control.
f) To motivate personnel to attain higher productivity and to reward them
properly.
g) To cooperate with the other departments for ensuring a smooth functioning
of the entire organization.
h) To collect reports and information on performance in their departments.
i) To report to top management
j) To make suitable recommendations to the top management for the better
execution of plans and policies.
3. Lower or Operative Management: It is placed at the bottom of the hierarchy of
management, and actual operations are the responsibility of this level of
management. It Consists of foreman, supervisors, sales officers, accounts officers
and so on. They are in direct touch with the rank and file or workers. Their
authority and responsibility is limited. They pass on the instructions of the middle
management to workers. They understand and divide the plans of the
management into short-range operating plans. They are also involved in' the
process of decisions-making. They have to get the work done through the
workers. They allot various jobs to the workers, evaluate their performance and
report to the middle level management. They are more concerned with direction
and control functions of management. They devote more time in the supervision
of the workers.

EVOLUTION OF MANAGEMENT THOUGHT

The practice of management is as old as human civilization. The ancient civilizations.

of Egypt (the great pyramids), Greece (leadership and war tactics of Alexander the
great) and Rome displayed the marvelous results of good management practices.

The origin of management as a discipline was developed in the late 19th century.
Overtime, management thinkers have sought ways to organize and classify the
voluminous information about management that has been collected and
disseminated. These attempts at classification have resulted in the identification of
management approaches. The approaches of management are theoretical
frameworks for the study of management. Each of the approaches of management
are based on somewhat different assumptions about human beings and the
organizations for which they work.

The different approaches of management are:-

a) Classical approach,
b) Behavioral approach,
 c) Quantitative approach,
d) Systems approach,
e) Contingency approach.

The formal study of management is largely a twentieth-century phenomenon, and to

some degree the relatively large number of management approaches reflects a lack
of consensus among management scholars about basic questions of theory and
practice.

a) THE CLASSICAL APPROACH:

The classical approach is the oldest formal approach of management thought. Its
roots pre-date the twentieth century. The classical approach of thought generally
concerns ways to manage work and organizations more efficiently. Three areas of
study that can be grouped under the classical approach are scientific management,
administrative management, and bureaucratic management.

i. Scientific Management.

Frederick Winslow Taylor is known as the father of scientific management. Scientific

Management (also called Taylorism or the Taylor system) is a theory of management
that analyzes and synthesizes workflows, with the objective of improving labor
productivity. In Other words, Old-style rules of thumb are replaced by precise
procedures developed after careful study of an individual at work.

ii. Administrative Management.

Administrative management focuses on the management process and principles of

management. In contrast to scientific management, which deals largely with jobs and
work at the individual level of analysis, administrative management provides a more
general theory of management. Henri Fayol is the major contributor to this approach
of management thought.

iii. Bureaucratic Management.

Bureaucratic management focuses on the ideal form of organization. Max Weber
was the major contributor to bureaucratic management. Based on observation,
Weber concluded that many early organizations were inefficiently managed, with
decisions based on personal relationships and loyalty. He advised that a form of
organization, called a bureaucracy, characterized by division of labor, hierarchy,
formalized rules, impersonality, and the selection and promotion of employees
based on ability, would lead to more efficient. management. Weber also contended
that managers' authority in an organization should be based not on tradition or
charisma but on the position held by managers in the organizational hierarchy.

b) THE BEHAVIORAL APPROACH:

The behavioral approach of management thought developed, in part, because of

perceived. softness in the assumptions of the classical approach. The classical
approach emphasized efficiency, process,and principles. Some felt that this emphasis
disregarded important aspects of organizational life, particularly as it related to
human behavior. Thus, the behavioral, approach focused on trying to understand the
factors that affect human behavior at work.

(i) Human Relations.

The Hawthorne Experiments began in 1924 and continued through the early
1930s.Avarietyof researchers participated in the studies, including Elton Mayo. One
of the major. Conclusions of the Hawthorne studies was that workers' attitudes are
associated with productivity. Another was that the workplace is a social system and
informal group influence could exert a powerful effect on individual behavior. A third
was that the style of supervision is an important factor in increasing workers job
satisfaction.

(ii) Behavioral Science.

Behavioral science and the study of organizational behavior emerged in the 1950s
and1960s.The behavioral science approach was a natural progression of the human
relations movement.It focused on applying conceptual and analytical tools to the
problem of understanding and predicting behavior in the workplace. The behavioral
science approach has contributed to the study of management through its focus on
personality, attitudes, values, motivation, group. behavior, leadership,
communication, and conflict, among other issues.

c) THE QUANTITATIVE APPROACH:

The quantitative approach focuses on improving decision making via the application
of quantitative techniques. Its roots can be traced back to scientific management.

(i) Management Science (Operations Research)

Management science (also called operations research) uses mathematical and

statistical approaches to solve management problems. It developed during World
War II as strategists tried to apply scientific knowledge and methods to the complex
problems of war. Industry Began to apply management science after the war. The
advent of the computer made many management science tools and concepts more
practical for industry

(ii) Production and Operations Management.

This approach focuses on the operation and control of the production process that
transforms resources into finished goods and services. It has its roots in scientific
management but became an identifiable area of management study after World War
II. It uses many of the tools of management science.

Operations management emphasizes productivity and quality of both manufacturing

and service organizations. W. Edwards Deming exerted a tremendous influence in
shaping modern ideas about improving productivity and quality. Major areas of study
within operations Management include capacity planning, facilities location, facilities
layout, materials requirement planning, scheduling, purchasing and inventory
control, quality control, computer integrated manufacturing, just-in-time inventory
systems, and flexible manufacturing systems.

d) SYSTEMS APPROACH:

The simplified block diagram of the systems approach is given below.

The systems approach focuses on understanding the organization as an open system

that transforms inputs into outputs. The systems approach began to have a strong
impact on management thought in the 1960s as a way of thinking about managing
techniques that would allow managers to relate different specialties and parts of the
company to one another, as well as to external environmental factors. The systems
approach focuses on the organization as a whole, its interaction with the
environment, and its need to achieve equilibrium.

e) CONTINGENCY APPROACH:

The contingency approach focuses on applying management principles and

processes as dictated by the unique characteristics of each situation. It emphasizes
that there is no one best way to manage and that it depends on various situational
factors, such as the external environment, technology, organizational characteristics,
characteristics of the manager, and characteristics of the subordinates. Contingency
theorists often implicitly or explicitly criticize the classical approach for its emphasis
on the universality of management principles; however, most classical writers
recognized the need to consider aspects of the situation when applying management
principles..

MANAGEMENT FUNCTIONS/PROCESS OF MANAGEMENT

Henri Fayol identifies five functions of management, viz. planning, organizing,

commanding, coordinating and controlling. Luther Gulick states seven such functions
under the catch word "POSDCORB' which stands for planning, organizing, staffing,
directing, coordinating, reporting and budgeting. Warren Haynes and Joseph Massie
classify management functions into decision-making, organizing, staffing, planning,
controlling, communicating and directing. Koontz and O'Donnell divide these
functions

Into planning organizing, staffing, directing and controlling. For our purpose, we
shall: designate the following six as the functions of a manager: planning, organizing,
staffing, directing, coordinating and controlling.

1. Planning

It is the basic function of management. It deals with chalking out a future course of
action & deciding in advance the most appropriate course of actions for achievement
of pre-determined goals. According to KOONTZ, “Planning is deciding in advance-
what to do, when to do & how to do. It bridges the gap from where we are & where
we want to be".

A plan is a future course of actions. It is an exercise in problem solving & decision

making. Planning is determination of courses of action to achieve desired goals. Thus,
planning is a systematic thinking about ways & means for accomplishment of
predetermined goals. Planning is necessary to ensure proper utilization of human &
nonhuman resources. It is all pervasive, it is an intellectual activity and it also helps in
avoiding confusion, uncertainties, risks, wastages etc.

2. Organizing

It is the process of bringing together physical, financial and human resources and
developing productive relationship amongst them for achievement of organizational
goals. According to Henry Fayol, “To organize a business is to provide it with
everything useful or its functioning i.e. raw material, tools, capital and personnel's".
To organize a business involves determining& providing human and non-human
resources to the organizational structure. Organizing as process involves:

 Identification of activities.
  Classification of grouping of activities.
 Assignment of duties.
 Delegation of authority and creation of responsibility.
 Coordinating authority and responsibility relationships.
3. Staffing

It is the function of manning the organization structure and keeping it manned.

Staffing has assumed greater importance in the recent years due to advancement of
technology, increase in size of business, complexity of human behavior etc. The main
purpose of staffing is to put right man on right job i.e. square pegs in square holes
and round pegs in round holes. According to Kootz & O'Donell,“Managerial function
of staffing involves manning the organization structure through proper and effective
selection, appraisal &development of personnel to fill the roles designed in the
structure". Staffing involves:

 Manpower Planning (estimating man power in terms of searching, choose the

 person and giving the right place).
 Recruitment, selection & placement.
 Training & development.
 Remuneration.
 Performance appraisal.
 Promotions & transfer.
4. Directing

It is that part of managerial function which actuates the organizational methods to

work efficiently for achievement of organizational purposes. It is considered life-
spark of the enterprise which sets it in motion the action of people because planning,
organizing and staffing are the mere preparations for doing the work. Direction is
that inert-personnel aspect of management which deals directly with influencing,
guiding, supervising, motivating sub-ordinate for the achievement of organizational
goals. Direction has following elements:
  Supervision
 Motivation
 Leadership
 Communication
(i) Supervision- implies overseeing the work of subordinates by their
superiors. It is the act of watching & directing work & workers.
(ii) Motivation- means inspiring, stimulating or encouraging the sub-ordinates
with zeal to work. Positive, negative, monetary, non-monetary incentives
may be used for this purpose.
(iii) Leadership-may be defined as a process by which manager guides and
influences the work of subordinates in desired direction.
(iv) Communications- is the process of passing information, experience,
opinion etc. from one person to another. It is a bridge of understanding.
5. Controlling

It implies measurement of accomplishment against the standards and correction of

deviation if any to ensure achievement of organizational goals. The purpose of
controlling is to ensure. That everything occurs in conformities with the standards.
An efficient system of control helps to predict deviations before they actually occur.

According to Theo Haimann, “Controlling is the process of checking whether or not

proper progress is being made towards the objectives and goals and acting if
necessary, to correct any deviation". According to Koontz & O' Donell “Controlling is
the measurement &correction of performance activities of subordinates in order to
make sure that the enterprise objectives and plans desired to obtain them as being
accomplished". Therefore controlling has following steps:

(i) Establishment of standard performance.

(ii) Measurement of actual performance.
(iii) Comparison of actual performance with the standards and finding out
deviation if any.
 (iv) Corrective action.

PRINCIPLES OF MANAGEMENT

These principles are often referred to as the 14 principle of Henry fayol who is
considered to be the father of these principles.

1. Division of work: Division of work or specialization alone can give maximum

productivity and efficiency. Both technical and managerial activities can be
performed in the best manner only through division of labour and specialization.
2. Authority and Responsibility: The right to give order is called authority. The
obligation to. accomplish is called responsibility. Authority and Responsibility are
the two sides of the management coin. They exist together. They are
complementary and mutually interdependent.
3. Discipline: The objectives, rules and regulations, the policies and procedures
must be honoured by each member of an organization. There must be clear and
fair agreement on the rules and objectives, on the policies and procedures. There
must be penalties(punishment)for non-obedience or indiscipline. No organization
can work smoothly without discipline-preferably voluntary discipline.
4. Unity of Command: In order to avoid any possible confusion and conflict, each
member of an organization must receive orders and instructions only from one
superior (boss).
5. Unity of Direction: All members of an organization must work together to
accomplish common objectives.
6. Emphasis on Subordination of Personal Interest to General or Common Interest:
This is also called principle of co-operation. Each shall work for all and all for
each. General or common interest must be supreme in any joint enterprise.
7. Remuneration: Fair pay with non-financial rewards can act as the best incentive
or motivator for good performance. Exploitation of employees in any manner
must be eliminated. Sound scheme of remuneration includes adequate financial
and nonfinancial incentives.
8. Centralization: There must be a good balance between centralization and
decentralization of authority and power. Extreme centralization and
decentralization must be avoided.
9. Scalar Chain: The unity of command brings about a chain or hierarchy of
command linking all members of the organization from the top to the bottom.
Scalar denotes steps.
10. Order: Fayol suggested that there is a place for everything. Order or system alone
can create a sound organization and efficient management.
11. Equity: An organization consists of a group of people involved in joint effort.
Hence, equity (i.e., justice) must be there. Without equity, we cannot have
sustained and adequate joint collaboration.
12. Stability of Tenure: A person needs time to adjust himself with the new work and
demonstrate efficiency in due course. Hence, employees and managers must
have. job security. Security of income and employment is a pre-requisite of sound
organization and management.
13. Esprit of Co-operation: Esprit de corps is the foundation of a sound organization.
Union Is strength. But unity demands co-operation. Pride,loyalty and sense of
belonging are responsible for good performance.
14. Initiative:Creative thinking and capacity to take initiative.can give us sound
managerial planning and execution of predetermined plan.

SCIENTIFIC MANAGEMENT

Frederick Winslow Taylor well-known as the founder of scientific management was

the first to recognize and emphasis the need for adopting a scientific approach to the
task of managing an enterprise. He tried to identify the causes of low efficiency in
industry and came to the conclusion that much of waste and inefficiency is due to
the lack of order and system in the methods of management. He found that the
management was usually ignorant of the amount of work that could be done by a
worker in a day as also the best method of doing the job. Asa result, it remained
largely at the mercy of the workers who deliberately shirked
work.Hetherefore,suggested that those responsible for management should adopt a
scientific approach in their work, and make use of "scientific method" for achieving
higher efficiency.He advocated a thorough planning of the job by the management
and emphasized the necessity of perfect understanding and co-operation between
the management and the.workers both for the enlargement of profits, and the use of
scientific investigation and knowledge in industrial work. He summed up his
approach in these words:

·Science,not rule of thumb

·Harmony,not discord

·Co-operation,not individualism

·Maximum output,in place of restricted output

·The development of each man to his greatest efficiency and prosperity.