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Principles of Management
class 12 Notes Business
Studies
March 16, 2018 by myCBSEguide

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Chapter 2 Principles of
Management
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CHAPTER – 2
Principles of Management class 12
Notes Business Studies

Principle

A principle is a fundamental statement of

truth that provides guidance to thought
and action.

Principles of Management

Principles of management are broad and

general guidelines for managerial
decision making and behavior (i.e. they
guide the practice of management).

Nature of Principles of Management

The nature of principles of management

can be described in the following points:

1. Universal applicability i.e. they can

be applied in all types of organizations,
business as well as non-business, small
as well as large enterprises.

2. General Guidelines: They are general

guidelines to action and decision making
however they do not provide readymade
solutions as the business environment is
ever changing or dynamic.

3. Formed by practice and

experimentation: They are developed
after thorough research work on the
basis of experiences of managers.

4. Flexible: Which can be adapted and

modified by the practicing managers as
per the demands of the situations as they
are man-made principles.

5. Mainly Behavioural: Since the

principles aim at influencing complex
human behaviour they are behavioural in
nature.

6. Cause and Effect relationship: They

intend to establish relationship between
cause & effect so that they can be used
in similar situations.

7. Contingent: Their applicability

depends upon the prevailing situation at
a particular point of time. According to
Terry, “Management principles are
‘capsules’ of selected management
wisdom to be used carefully and
discretely”.

Significance of the Principles of

Management

The significance of principles of

management can be derived from their
utility which can be understood from the
following points:

1. Providing managers with useful

insights into reality: Management
principles guide managers to take right
decision at right time by improving their
knowledge, ability and understanding of
various managerial situations and
circumstances.

2. Optimum utilization of resources

and effective administration:
Management principles facilitate
optimum use of resources by
coordinating

the physical, financial and human

resources. They also help in better
administration by discouraging personal
prejudices and adopting an objective
approach.

3. Scientific decisions: Decisions

based on management principles tend to
be more realistic, balanced and free from
personal bias.

4. Meeting the changing

environmental requirements:
Management principles provide an
effective and dynamic leadership and
help the organization to implement the
changes.

5. Fulfilling social responsibility:

Principles of management not only help
in achieving organizational goals but also
guide managers in performing social
responsibilities. Example : “Equity” and
“Fair” remuneration.

6. Management training, education

and research: Management principles
are helpful in identifying the areas in
which existing and future managers
should be trained. They also provide the
basis for future research.

Fayol’s Principles of Management

About Henry Fayol: Henry Fayol (1841-

1925) got degree in Mining Engineering
and joined French Mining Company in
1860 as an Engineer. He rose to the
position of Managing Director in 1988.
When the company was on the verge of
bankruptcy. He accepted the challenge
and by using rich and broad
administrative experience, he turned the
fortune of the company. For his
contributions, he is well known as the
“Father of General Management”.

Principles of Management developed

by Fayol

1. Division of work: Work is divided in

small tasks/job and each work is done by
a trained specialist which leads to greater
efficiency, specialization, increased
productivity and reduction of
unnecessary wastage and movements.

2. Authority and Responsibility:

Authority means power to take decisions
and responsibility means obligation to
complete the job assigned on time.
Authority and responsibility should go
hand in hand. Mere responsibility without
authority, makes an executive less
interested in discharging his duties.
Similarly giving authority without
assigning responsibility makes him
arrogant and there is fear of misuse of
power.

3. Discipline: t is the obedience to

organizational rules by the subordinates.
Discipline requires good supervisors at
all levels, clear and fair agreements and
judicious application of penalties.

4. Unity of Command: t implies that

every worker should receive orders and
instructions from one superior only,
otherwise it will create confusion,
conflict, disturbance and overlapping of
activities.

5. Unity of Direction: Each group of

activities having the same objective must
have one head and one plan. This ensures
unity of action and coordination.

Difference between Unity of

Command and Unity of Direction

Unity of Unity of
Basis
Command Direction

It advocates
‘one head,
and one
plan‘ for a
It means that
group of
a
activities
subordinate
having the
should
same
1.Meaning receive
objectives.
orders and
The
instructions
activities
from one
should be
boss only.
directed
towards the
common
goals.

This
principle is
related to
This principle
the
is related to
functioning
2.Scope the
of a
functioning
department
of personnel
or the
organization
as a whole

The
purpose of
The main
unity of
purpose of
direction is
unity of
to direct the
command is
efforts of
to avoid
employees
3.Purpose confusion
of one
and fix up
department
the
in achieving
responsibility
the main
of the
objective of
employee.
that
department.

Co-
ordination
Systematic
within a
working and
particular
improved
department
4.Results efficiency by
and overall;
in removing
by
confusion
preventing
and chaotic
overlapping
conditions
of various
activities.

7. Remuneration of Employees: The

overall pay and compensation should be,
fair to both employees and the
organization. The wages should
encourage the workers to work more and
better.6. Subordination of Individual
Interest to General Interest: The
interest of an organization should take
priority over the interest of any one
individual employee.

8. Centralization and
Decentralization: Centralization means
concentration of decisions making
authority in few hands at top level.
Decentralization means evenly
distribution of power at every level of
management. Both should be balanced
as no organization can be completely
centralized or completely decentralized.

9. Scalar Chain: The formal lines of

authority between superiors and
subordinates from the highest to the
lowest ranks is known as scalar chain.
This chain should not be violated but in
emergency employees at same level can
contact through Gang Plank by informing
their immediate superiors.

10. Order: A place for everything and

everyone and everything and everyone
should be in its designated place. People
& material must be in suitable places at
appropriate time for maximum efficiency.

11. Equity: The working environment of

any organization should be free from all
forms of discrimination (religion,
language, caste, sex, belief or Basis Unity
of Command Unity of Direction
nationality) and principles of justice and
fair play should be followed. No worker
should be unduly favoured or punished.

12. Stability of Personnel: After being

selected and appointed by rigorous
procedure, the selected person should be
kept at the post for a minimum period
decided to show results.

13. Initiative: Workers should be

encouraged to develop and carry out
their plan for improvements. Initiative
means taking the first step with self-
motivation. It is thinking out and
executing the plan.

14. Espirit De Corps: Management

should promote team spirit, unity and
harmony among employees.
Management should promote a team
work.

Taylor’s Scientific Management

Fredrick Winslow Taylor (1856-1915) was

a person who within a very short duration
(1878-1884) rose from ranks of an
ordinary apprentice to chief engineer in
Midvale Steel Company, U.S.A. Taylor
conducted a number of experiments and
came to conclusion that workers were
producing much less than the targeted
standard task. Also, both the parties –
Management and workers are hostile
towards each other. He gave a number of
suggestions to solve this problem and
correctly propounded the theory of
scientific management to emphasize the
use of scientific approach in managing an
enterprise instead of hit and trial method.
For his contributions, he is well known as
the “Father of the Scientific
Management”. Scientific Management
attempts to eliminate wastes to ensure
maximum production at minimum cost.

Principles of Scientific Management

(1) Science, not rule of Thumb: There

should be scientific study and analysis of
each element of a job in order to replace
the old rule of thumb approach or hit and
miss method. We should be constantly
experimenting to develop new
techniques which make the work much
simpler, easier and quicker.

(2) Harmony, Not discord: It implies

that there should be mental revolution on
part of managers and workers in order to
respect each other’s role and eliminate
any class conflict to realize
organizational objectives.

(3) Cooperation not individualism: It is

an extension of the Principle of Harmony
not discord whereby constructive
suggestions of workers should be
adopted and they should not go on strike
as both management and workers share
responsibility and perform together.

(4) Development of each and every

person to his or her greatest
Efficiency and Prosperity: It implies
development of competencies of all
persons of an organization after their
scientific selection and assigning work
suited to their temperament and abilities.
This will increase the productivity by
utilizing the skills of the workers to the
fullest possible extent.

1. Functional Foreman-ship: Functional

foreman-ship is a technique in which
planning and execution are separated.
There are eight types of specialized,
professionals, four each under planning
and execution who keep a watch on all
workers to extract optimum
performance.

Planning Incharges:

1. Route Clerk to specify the exact

sequence and route of production.

2. Instruction card clerk is responsible

for drafting instructions for the workers.

3. Time and cost clerk to prepare time

and cost sheet for the job.

4. Shop Disciplinarian to ensure

discipline and enforcement of rules and
regulations among the workers.

Production Incharges:

1. Gang boss is responsible for keeping

tools and machines ready for operation.

2. Speed boss is responsible for timely

and accurate completion of job.

3. Repair boss to ensure proper working

conditions of tools and machines.

4. Inspector to check quality of work.

2. Standardization and Simplification

of work: Standardization refers to
developing standards for every business
activity whereas Simplification refers to
eliminating superfluous varieties of
product or service.
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