JAI MAHAVIR COMMERCE CLASSES

SYBCOM
SUBJECT – COMMERCE III

Q.1 Henri Fayol’s 14 Principles of Management:

Ans: A Principles refers to a fundamental truth. It establishes cause & effect
relationship between two or more variables under given situation. They serve as a
guide to thought & actions. Therefore, management principles are the statements of
fundamental truth based on logic which provides guidelines for management
decisions making & actions.
There are 14 Principles of Management described by Henri Fayol:
1. Division of Labour: Henri Fayol has stressed on the specialization of jobs.
He recommended that work of all kinds must be divided & subdivided &
allotted to various persons according to their expertise in a particular area.
2. Party of Authority & Responsibility: Authority & responsibility are co-
existing. If authority is given to a person, he should also be made
responsible. Ina same way, if anyone is made responsible for any job, he
should also have concerned authority.
3. Principle of One Boss: A sub-ordinate should receive orders 7 be
accountable to one & only one boss at a time. In other words, a sub-ordinate
should not receive instructions from more than one person because-
- It undermines authority
- Weakens discipline
- Divides loyalty
- Creates confusion
- Delays & chaos
- Escaping responsibilities
- Duplication of work
- Overlapping of efforts
4. Unity of Direction: Fayol advocates one head one plan which means that
there should be one plan for a group of activities having similar objectives.
Related activities should be grouped together. There should be one plan of
action for them & they should be under the charge of a particular manager.
5. Equity: Equity means combination of fairness, kindness & justice. The
employees should be treated with kindness & equity if devotion is expected
 of them. Equity is essential to create & maintain cordial relations between
the managers & sub-ordinate.
6. Order: This principle is connected with proper & systematic arrangement of
things & people. Arrangement of things is called material order & placement
of people is called social order
7. Discipline: According to Fayol, “Discipline means sincerity, obedience,
respect of authority & observance of rules & regulations of the enterprise.” It
is an important requisite for smooth running of the enterprise. Discipline is
not only required on path of subordinates but also on the part of
management.
8. Initiative: Workers should be encouraged to take initiative in the work
assigned to them. It means eagerness to initiate actions without being asked
to do so. People then enjoy working in the organization because it adds to
their zeal & energy.
9. Fair Remuneration: The quantum & method of remuneration to be paid to
the workers should be fair, reasonable, satisfactory & rewarding of the
efforts. As far as possible it should accord satisfaction to both employer &
the employees. Fayol also recommended provision of other benefits such as
free education, medical & residential facilities to workers.
10. Stability of Tenure: 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. Stability of job creates team spirit & a sense of
belongings among workers which ultimately increases the quality as well as
quantity of work.
11. Scalar Chain: Fayol defines scalar chain as ‘The chain of superiors ranging
from the ultimate authority to the lowest.” Every orders, instructions,
messages, requests, explanation etc. has to pass through Scalar chain.
12. Sub-Ordination of Individual Interest to General Interest: An
organization is much bigger than the individual it constitutes therefore
interest of the undertaking should prevail in all circumstances. As far as
possible, reconciliation should be achieved between individual & group
interests.
13. Espirit De’ Corps: It refers to team spirit i.e. harmony in the work groups
& mutual understanding among the members. Spirit De’ Corps inspire
workers to work harder. Fayol cautioned the managers against dividing the
employees into competing groups because it might damage the moral of the
workers & interest of the undertaking in the long run.
 14. Centralization & Decentralization: Centralization means concentration of
authority at the top level. In other words, centralization is a situation in
which top management retains most of the decision making authority.
Decentralization means disposal of decision making authority to all the
levels of the organization. In other words, sharing authority downward is
decentralization.

Q.2 Functions of Management:

Ans: Management has been described as a social process involving responsibility
for economical & effective planning & regulation of operation of an enterprise in
the fulfillment of given purposes. It is a dynamic process consisting of various
elements & activities.
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 achievements 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.
2. Organizing: It is the process of bringing together physical, financial &
human resources & developing productive relationship amongst them for
achievement of organizational goals. According to Henry Fayol, “To
organize a business is ti provide it with everything useful or its functioning
i.e. raw material, tools, capital & personnel’s”.
3. Staffing: It is the function of manning the organization structure & 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.
4. Directing: It is that part of managerial function which actuates the
organizational methods to work efficiency for achievements of
organizational purposes. Direction is that inter-personnel aspects of
management which deals directly with influencing, guiding, supervising,
motivating.
5. Controlling: It implies measurement of accomplishment against the
standards & correction of deviation if any to ensure achievements of
 organizational goals. According to Theo Haimann, “Controlling is the
process of checking whether or not proper progress of checking whether or
not proper progress is being made towards the objectives & goals & acting if
necessary, to correct any deviation”.

Q.3 Planning:
Ans: Planning & decision-making are two primary functions of management. The
first function of management is to take decisions on problems & situations.
In short, planning is deciding in advance:
a. What to do?
b. How to do?
c. When to do?
d. Who is to do it?
e. What is the cost?

1. Planning is the primary function of management: Planning is the primary

function of management. It is the very essence of management & the starting
point of the whole management process.
2. Pervades all other managerial activities: Planning is all pervasive. It
touches all aspects of a business activity. Planning is the function of every
managerial personnel. All managers & all departments have to participate in
the planning process.
3. Intellectual & realistic process: Planning is an intellectual process of
decision-making. It is a mental activity & involves thinking & the exercising
of foresight & vision. A business plan is not a fantasy but a proposition
based on intelligent study.
4. Continuous activity/function/process: Planning is a regular & continuous
function of management. This is because the socio-economic environment
under which business units have to operate is flexible. Planning is a
continuous process in the case of business organization.
5. Objectives-oriented: Planning is closely associated with the objectives of a
business unit. Planning process begins with clearly lying down the
objectives. It is based on the objectives the general policies of the business
organization. Planning is directed towards efficiency.
 6. Flexibility: Planning is always flexible. It changes along with the changes in
the business environment. In planning alternative plans are kept ready & one
among them is selected for execution.
7. Raises accuracy, economy & operational efficiency: Planning enables an
organization to achieve its objectives economically & with high degree of
accuracy. It raises efficiency & eliminates wastages of all kinds.
8. Link between past, present & future: Planning is for the future period but
is based on the past experience. Management has to consider the present
business environment & problems before the business enterprise while
preparing future plans.
9. Brings unity of purpose & action: Planning brings unity of purpose &
action among the executives, departments & staff. Departmental plans are
integrated in the master plan of the business unit.
10. Integrated activity/process: Business planning covers all aspects of
business activity. All departments & activities are brought closer due to
planning which provides common objectives 7 one common direction to the
whole organization.
Steps in Planning Process:
1. Classifying the problems
2. Determining the objectives
3. Collecting complete information & data
4. Analyzing & classifying the information collected
5. Establishing planning premises
6. Determining alternative plans
7. Selecting operating plan & preparing derivative plans
8. Arranging timing & sequence of operations
9. Securing participation of employees
10.Follow-up of the proposed plan
Advantages/Importance of Planning:
1. Quick achievement of objectives
2. Brings unity of purpose & direction
3. Ensures full utilization of resources
4. Avoids inconsistency in efforts
5. Raises competitive potentialities
6. Raises managerial efficiency
 7. Avoids hasty decisions
8. Ensures effective control
9. Insurance against uncertainties
10. Facilitates other managerial functions

Q.4 Decision Making:

Ans: Decision-making is an indispensable component of modern management
process. A manager’s major job is sound & rational decision-making.
Features of Decision-Making:
1. Implies Choice: Decision-making implies choice out of many alternatives
available. It is a process of selection. It is choosing from among two or more
alternative courses of action.
2. Continuous activity/process: Decision-making is a mental as well as
intellectual activity/process & requires knowledge, skills, experience &
maturity on the part of decision-maker. It is essential a human activity.
3. Mental/intellectual activity: Decision-making is a mental as well as
intellectual activity/process & requires knowledge, skills, experience &
maturity on the part of decision-maker. It is essential a human activity.
4. Systematic Process: Decision-making is a lengthy activity. Many steps are
involved in the decision-making process & they need to be completed in an
orderly/systematic manner.
5. Based on reliable information/feedback: Good decisions are always based
on reliable & updated information. The quality of decision-making at all
levels can be improved with the support of an efficient business information
system/marketing information system (MIS).
6. Goal oriented process: Decision-making aims at providing a solution to a
given problem/difficulty before a business enterprise. It is a goal-oriented
process & provides solutions to problems faced by a business unit.
7. Means & not the end: Decision-making is a means for solving a
problem/achieving a target & not the end in itself. It acts as a powerful tool
for achieving targets/goals.
8. Relates to specific problem: Decision-making is not identical with problem
solving but it has its roots in a problem itself.
9. Time-consuming activity: Decision-making is a time consuming
activity/process as various aspects need careful consideration before taking
 final decision. For decision makers, it is a lengthy/time consuming &
responsibilities activity.
10. Needs effective communication: Decision-taken needs to be
communicated to all concerned parties for suitable follow-up actions.
Decisions taken will remain on paper if they are not communicated to
concerned persons.
Techniques of Decision Making:
1. Programmed Decision
 Linear Programming
 Probability Decision Theory
 Payoff Matrix
 Decision Tree
 Game Theory
 Queuing Theory
 Simulation
 Network Techniques

2. Non-Programmed Decisions
A. Creativity Techniques
 Attribute Listing Technique
 Brainstorming Technique
 Delphi Technique
 Nominal Group Technique
 Gordon Technique
B. Participative Techniques
C. Quality Cycles
D. Heuristic Techniques

Q.5 Organizing:
Ans: Organizing is next to planning (as management function). Once the plans are
formulated, the next step is establish organizational structure to execute the plan.
This is organizing.
Organizing Involves the Following Aspects:
1. Identifying the resources & activities which are required to achieve
organizational objectives.
2. Grouping of these activities into workable units (Departmentation).
3. Assignment duties & responsibilities to subordinates in order to achieve the
tasks assigned.
4. Delegating authority & responsibility necessary & useful for the
accomplishment of tasks assigned.
5. Establishment superior-subordinate relationship & authority relationships.

Steps of Organizing:
1. Determining of Objectives
2. Identification of activities
3. Enumeration of activities
4. Classification of activities
5. Allocation of duties
6. Establishing formal reporting system
7. Measurement of performance
8. Delegation of authority

Q.6 Formal & Informal Organization:

Points Formal Organization Informal Organization
Formation Formal organization is Informal organization
created by the top develops by social forces
management deliberately & existing within the formal
consciously. It is a organization. It is a natural &
prescribed structure. spontaneous formation.
Appearance Formal organization can be Informal organization cannot
shown through organization be shown through
charts. organization charts.
Relationship The superior-subordinate The superior-subordinate
relationship is clearly relationship is absent.
defined.
 Communication Communication is normally Communication is normally
through formal channels. through grapevine.
Suitability It is suitable to large business It is suitable to small business
enterprises. enterprises.
Behaviour Formal organization is a There is no stability to
Norms stable type of organization informal organization,
structure. structure.
Stability Formal organization is a There is no stability to
stable type of organization informal organization,
structure. structure.
Operation Formal organization exists & It exists & operates within a
operates independently. formal organization structure.
Reward & Rewards are monetary & Reward is continuation of
Punishment non-monetary whereas group membership whereas
punishment is for breaking punishment may be removal
rules. from the group.
Focus It is built around jobs. It is built around people &
their roles.

Q.7 Directing:
Ans:
Meaning: Directing is the active element which initiatives action to translate
decisions into productive activities. In the absence of direction, these decisions will
remain only as good intentions on paper.
1. A full understanding by each individual manager of the objectives, the
long & short-term plans & the master strategy of the organization.
2. A full understanding by the individual manager of the organization & its
elements, of his own area of authority & responsibility.
3. A full understanding of all policies, regulations & procedures under
which the group operates.
4. A full understanding of the major problems which the organization is
facing & specifically, what each manager can contribute to the solution of
these problems.
Features of Directing:
1. Directing is pervasive
 2. Continuing managerial function
3. Linking/connecting approach
4. Directing is a creative concept
5. Directing is difficult & challenging
6. Chain of command
7. Actual management performance

Q.8 Leadership:
Ans:
Meaning: The terms leading & directing are closely related. In fact, in the current
literature on management science, the term leading is used in place of directing.
Functions:
1. To lay down specific objectives & policies & thereby to inspire
subordinates to work with devotion to achieve the objectives already
decided.
2. To offer guidance & to issue instructions to subordinates & thereby to
stimulate proper actions on their part in order to get the work done from
them.
3. To encourage innovative thinking & ideas from the subordinates to carry
out the work assigned in an efficient manner.
4. To show non-dependency on others while taking decisions on all vital
aspects of management.
5. To encourage initiative on the part of subordinates & to motivate them
to take more interest in the work. In addition, to raise morale of his
subordinates.
6. To win the support of all subordinates & thereby to raise their active
participation & involvement in the work.
7. To represent his department/organization while dealing with others i.e. to
act as a spokesman of his department/organization.