Concept, Nature and Significance of Management

Definition of Management

A. Traditional Definition of Management

✓ Henri Fayol: “To manage is to forecast and to plan, to organize, to command, to co-ordinate
and to control.” Fayol emphasized the administrative functions of management.
✓ Frederick Winslow Taylor (FW Taylor): “Management is the art of knowing what you want to
do and then seeing that it is done in the best and cheapest way.” Taylor focused on scientific
management and efficiency.
✓ Mary Parker Follett: “Management is the art of getting things done through people.” Follett
highlighted the human aspect of management.
B. Modern Definition of Management
✓ Peter Drucker: “Management is a multipurpose organ that manages a business and manages
managers and manages workers and work.” Drucker emphasized the multifaceted role of
management in modern organizations.
✓ James A.F. Stoner: “Management is the process of planning, organizing, leading, and
controlling the efforts of organization members and of using all other organizational resources
to achieve stated organizational goals.” Stoner’s definition reflects the dynamic and integrative
nature of modern management.
✓ Kathryn M. Bartol and David C. Martin: “Management is the process of achieving the
organizational goal by engaging in the major functions of planning, organizing, leading, and
controlling.” This definition underscores the functional approach to modern management

In the words of William Spreigel “Management is that function of an enterprise which concern itself
with the direction and control of the various activities to attain the business objective. Management
is essentially an executive function it deals particularly with the active direction of the human efforts”

Nature of Management

1. Multidisciplinary: Management integrates knowledge from various fields such as economics,

sociology, psychology, and engineering.
2. Dynamic: Management practices evolve with changes in the business environment.
3. Goal-Oriented: The primary focus of management is to achieve organizational goals.
4. Universal: Management principles apply to all types of organizations, whether business,
government, or non-profit.
5. Continuous Process: Management is an ongoing process that involves continuous planning,
monitoring, and adjusting.

Significance of Management

1. Achieving Goals: Effective management helps organizations achieve their objectives efficiently.
2. Optimal Resource Utilization: Management ensures the best use of resources, reducing waste
and increasing productivity.
3. Adaptability: Good management helps organizations adapt to changes in the environment.
4. Innovation: Management fosters innovation by encouraging creative problem-solving and new
ideas.
5. Stability: Effective management provides stability and helps in maintaining a balance between
different organizational activities.

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 Difference Between Management and Administration

Sno. Basis Management Administration

Formulation of policies and setting
1 Definition Execution of policies and plans
objectives
Implementing strategies to achieve Establishing overall direction and
2 Focus
goals policies
3 Level Middle and lower levels Top level
Managers execute plans and oversee Administrators make high-level
4 Role
daily operations decisions
Planning, organizing, leading, Planning, policy formulation,
5 Function
controlling strategic decisions
6 Scope Operational activities Strategic activities

7 Authority Operates under administration Ultimate authority

8 Decision-Making Operational decisions Strategic decisions

Government, military, educational,
9 Applicability Business organizations
non-profits

Functions of Management

Controling
Directing
Staffing
Organising
Planning

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 pre-determined goals.

Planning is necessary to ensure proper utilization of human & non-human 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.

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According to Henry Fayol, “To organize a business is to provide it with everything useful or it’s
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.

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 behaviour etc. The main purpose of staffing is to put right man/woman
on right job i.e. square pegs in square holes and round pegs in round holes.

According to Koontz & 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 un 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 and action of people, because planning, organizing and staffing are the mere
preparations for doing the work.

Direction is that inter-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- implies overseeing the work of subordinates by their superiors. It is the act of
watching & directing work & workers.
✓ 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.
✓ Leadership- may be defined as a process by which manager guides and influences the work of
subordinates in desired direction.
✓ 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:
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 a. Establishment of standard performance.

b. Measurement of actual performance.

c. Comparison of actual performance with the standards and finding out deviation if any.

d. Corrective action.

Conclusion

Management functions encompass planning, organizing, staffing, directing, and controlling. Planning
involves deciding in advance the actions needed to achieve goals, ensuring efficient resource use and
minimizing uncertainties. Organizing assembles resources and establishes relationships to achieve
objectives. Staffing focuses on filling roles with the right personnel through recruitment, training, and
development. Directing influences and motivates employees to work towards organizational goals,
involving supervision, motivation, leadership, and communication. Controlling measures performance
against standards, correcting deviations to ensure goals are met. Together, these functions ensure
effective and efficient management of organizational resources and activities

Principles of Management

14 Principles of Henry Fayol (Principles of General Management)

Henry Fayol is known as the father of modern management theory. He was an engineer at the
Compagnie de Commentry-Fourchambault-Decazeville mining company and worked his way up to
become a manager during the peak of the Industrial Revolution in France. Under his watch, the
struggling company prospered.

In 1916, he wrote the book, "Administration Industrially et Générale," where he shared his experiences
of managing a workforce. This laid the foundation for administrative theory and the 14 Principles of
Management. By focusing on administrative over technical skills, these principles became one of the
earliest examples of treating management as a true profession.

Henry Fayol’s 14 Principles of Management

Henry Fayol’s 14 principles of management look at an organization from a top-down approach to

help managers get the best from employees and run the business with ease. Let’s take a look at them
and understand them in detail.

1. Division of Work

The first Henry Fayol principle of management is based on the theory that if an employee is given a
specific task to do, they will become more efficient and skilled in it. This is opposed to a multi-tasking
culture where an employee is given so many tasks to do at once. In order to implement this principle
effectively, look at the current skill sets of each employee and assign them a task that they can become
proficient at. This will help them to become more productive, skilled, and efficient in the long run.

Example: At a school, every department has a different responsibility, like academics, sports,
administration, sanitation, food, beverages, etc. These responsibilities are taken care of by employees
specializing in that particular department, increasing efficiency and productivity and making them
specialists in their field.

2. Authority

This Henry Fayol principle of management states that a manager needs to have the necessary authority
in order to ensure that his instructions are carried out by the employees. If managers did not have any
authority, then they would lack the ability to get any work done. However, this authority should come
along with responsibility. According to Henri Fayol, there should be a balance between authority and
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responsibility. If there is more authority than responsibility, the employees will get frustrated. If there
is more responsibility than authority, the manager will feel frustrated.

Example: If an employee has been responsible for managing the decor department while planning an
event but has no authority to make design decisions or contact the vendors to get the work done, no
efficiency or productivity will be achieved.

3. Discipline

This principle states that discipline is required for any organization to run effectively. In order to have
disciplined employees, managers need to build a culture of mutual respect. There should be a set of
organizational rules, philosophies, and structures in place that should be met by everyone. Bending
rules or slacking should not be allowed in any organization. In order to achieve this, there is a need for
good supervision and impartial judgment.

Example: Every employee must follow certain rules and regulations and keep a disciplined attitude in
the workplace for smooth working and efficient results.

4. Unity of Command

This principle states that that should be a clear chain of command in the organization. The employees
should be clear on whose instructions to follow. According to Fayol, an employee should receive orders
from only one manager. If an employee works under two or more managers, then authority, discipline,
and stability are threatened. Moreover, this will cause a breakdown in management structure and
cause employees to burn out.

Example: If in a company, an employee has been given a task to finish within 3 to 4 hours as ordered
by their immediate superior. But the head of the department asks them to deliver the task within 1
hour. In this case, no unity of command can create confusion and pressure in the workplace.

5. Unity of Direction

This Henry Fayol principle of management states that the work to be done should be organized in
such a way that employees work in harmony towards the same objective, using one plan, under the
direction of one manager. For example, if you have a range of marketing activities such as
advertising, budgeting, sales promotion, etc., there should be one manager using one plan for all the
marketing activities. The different activities can be broken down for different sub-managers, but they
should all work towards a common goal under the direction of one main person in charge of the
whole thing.

Example: Different sets of activities within a department should be managed by different managers
to avoid confusion and lesser efficiency within the workflow.

6. Collective Interest Over Individual Interest

This principle states that the overall interest of the team should take precedence over personal ones.
The interest of the organization should not be sabotaged by the interest of an individual. If anyone
goes rogue, the organization will collapse.

Example: While planning a team outing, the employee making the travel and stay decisions must make
arrangements according to comfort and affordability, not just as per their liking.

7. Remuneration

This Henry Fayol principle of management states that employees should be paid fair wages for the
work that they carry out. Any organization that underpays its workers will struggle to motivate and
keep quality workers. This remuneration should include both financial and non-financial incentives.
Also, there should be a structure in place to reward good performance to motivate employees.
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Example: Any organization must be fair regarding their remuneration policies where all the
employees must receive a salary worth their efforts irrespective of their gender, tenure, and other
factors.

8. Centralization

Centralization refers to the concentration of power in the hands of the authority and following a top-
bottom approach to management. In decentralization, this authority is distributed to all levels of
management. In a modern context, no organization can be completely centralized or decentralized.
Complete centralization means that people at the bottom have no authority over their responsibilities.
Similarly, complete decentralization means that there will be no superior authority to control the
organization. To use this effectively today, there should be a balance of centralization and
decentralization. The degree to which this balance is achieved will differ from organization to
organization.

Example: Centralization is mostly common in small and medium-sized firms where the delegation of
work is minimal, and the owners make most of the decisions.

9. Scalar Chain

A scalar chain refers to a clear chain of communication between employees and their superiors.
Employees should know where they stand in the hierarchy of the organization and who to go to in a
chain of command. To implement this in the workplace, Fayol suggests that there should be an
organizational chart drawn out for employees to see this structure clearly.

Example: Every organization has a specific chain of authority from the highest level of superiors, like
the founder or CEO, to the lowest level of subordinates following a hierarchy for maximum
productivity.

10. Order

This principle states that there should be an orderly placement of resources (manpower, money,
materials, etc.) in the right place at the right time. This ensures the proper use of resources in a
structured fashion. Misplacement of any of these resources will lead to misuse and disorder in the
organization.

Example: Employees should be given a designated space and the right tools or equipment to complete
their work efficiently.

11. Equity

Equity is a combination of kindness and justice. This principle states that managers should use
kindliness and justice towards everyone they manage. This creates loyalty and devotion among the
employees towards the organization they work for.

Example: All employees, irrespective of gender, religion, race, and sexuality, must feel safe, seen, and
heard and be given equal opportunities to grow and flourish in their careers within the organization.

12. Stability of Tenure of Personnel

This principle states that an organization should work to minimize staff turnover and maximize
efficiency. Any new employee cannot be expected to get used to the culture of an organization right
away. They need to be given enough time to settle into their jobs to become efficient. Both old and
new employees should also be ensured job security because instability can lead to inefficiency. There
should also be a clear and effective method to handle vacancies when they arise because it takes time
and expense to train new ones.

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Example: Every new employee must be given a proper induction of both the technical aspect of the
company as well as the work culture and office environment for them to mingle well. Old employees
should be given alum awards for completing certain tenures to boost morale.

13. Initiative

This principle states that all employees should be encouraged to show initiative. When employees
have a say as to how best they can do their job, they feel motivated and respected. Organizations
should listen to the concerns of their employees and encourage them to develop and carry out plans
for improvement.

Example: Taking suggestions from employees regarding their specific department can make them feel
seen in an authoritative position and can give them a sense of achieving something for the team.

14. Esprit de Corps

Esprit de Corps means “Team Spirit”. This henry fayol principle of management states that the
management should strive to create unity, morale, and co-operation among the employees. Team
spirit is a great source of strength in the organization. Happy and motivated employees are more likely
to be productive and efficient.

Example: While discussing the new plan of action for achieving the next month's targets, using the
word 'We' instead of 'I' brings a teamwork spirit to the group.

Conclusion

Henri Fayol, known as the father of modern management theory, introduced 14 principles of
management in his 1916 book “Administration Industrielle et Générale,” which laid the foundation for
administrative theory. These principles, which include division of work, authority, discipline, unity of
command, and others, emphasize a top-down approach to management, focusing on administrative
skills over technical ones. Fayol’s principles aim to enhance efficiency, productivity, and harmony within
organizations by clearly defining roles, responsibilities, and the balance between authority and
responsibility, thus treating management as a true profession.

5 Principles of F.W Taylor (Principles of Scientific Management)

Frederick Winslow Taylor, known as the father of Scientific Management, introduced his principles in
the early 20th century to improve industrial efficiency. His seminal work, “The Principles of Scientific
Management” (1911), emphasized using scientific methods to optimize work processes, replacing
traditional “rule of thumb” approaches. Taylor’s principles included systematic task analysis,
standardized procedures, and cooperation between management and workers to enhance
productivity. His ideas revolutionized management practices, laying the groundwork for modern
efficiency and productivity techniques

Frederick Winslow Taylor, known as the father of Scientific Management, introduced several principles
aimed at improving industrial efficiency. Here are the key principles of management according to F.W.
Taylor:

1) Science, Not Rule of Thumb

Taylor emphasized the use of scientific methods to determine the best way to perform a job, rather
than relying on traditional methods or personal judgment. This involves:

✓ Analyzing tasks: Breaking down each task into its components.

✓ Standardizing procedures: Developing standardized methods for performing tasks.
✓ Experimentation: Using time and motion studies to find the most efficient ways to complete
tasks.

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 2) Harmony, Not Discord

Taylor believed that there should be a harmonious relationship between management and workers.
He argued that conflicts between the two parties are detrimental to productivity. To achieve harmony:

✓ Mutual understanding: Both management and workers should understand and respect each
other’s roles.
✓ Mental revolution: A complete change in attitude towards work and cooperation is necessary.

3) Cooperation, Not Individualism

Taylor advocated for cooperation between workers and management rather than individualism. This
principle involves:

✓ Teamwork: Encouraging a collaborative environment.

✓ Shared goals: Aligning the objectives of workers and management to ensure everyone is
working towards the same goals.

4) Development of Each Person to their greatest efficiency and prosperity

Taylor stressed the importance of selecting the right person for the right job and providing them with
the necessary training. This principle includes:

✓ Scientific selection: Using scientific methods to select employees.

✓ Training and development: Providing continuous training to improve skills and efficiency.

5) Division of Work and Responsibility

Taylor proposed that work should be divided between managers and workers based on who is best
suited to perform each task. This principle involves:

✓ Managerial responsibilities: Managers should focus on planning and supervision.

✓ Worker responsibilities: Workers should focus on executing tasks as per the manager’s
instructions3.

Conclusion

Taylor’s principles of scientific management aimed to improve efficiency and productivity by applying
scientific methods to management practices. His approach has had a lasting impact on management
theory and practice, emphasizing the importance of systematic study and cooperation in achieving
organizational goals.

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 Levels of management

Management levels in an organization are typically divided into three main categories: Top-Level
Management, Middle-Level Management, and Lower-Level Management. Each level has distinct
roles and responsibilities:

1. Top-Level Management

This level includes positions such as the Board of Directors, Chief Executive Officer (CEO), and
Managing Director. They are responsible for the overall direction and success of the organization. Key
responsibilities include:

• Setting Objectives and Policies: Establishing the organization’s goals, policies, and strategic
plans.
• Decision Making: Making major corporate decisions and setting the overall direction.
• Resource Allocation: Allocating resources and overseeing the entire organization.

External Relations: Maintaining relationships with external stakeholders, such as shareholders,

government bodies, and the public1.

2. Middle-Level Management

This level consists of Departmental Managers and Branch Managers. They act as a bridge between
top-level and lower-level management. Key responsibilities include:

• Implementing Policies: Executing the plans and policies set by top management.
• Organizing and Directing: Organizing departmental activities and directing lower-level
managers.
• Coordination: Ensuring coordination between different departments.
• Performance Evaluation: Evaluating the performance of lower-level managers and
employees.

3. Lower-Level Management

Also known as Supervisory Management or First-Line Management, this level includes Supervisors,
Foremen, and Section Officers. They are directly responsible for managing the work of non-
managerial employees. Key responsibilities include:
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 • Supervision: Overseeing day-to-day operations and ensuring tasks are completed efficiently.
• Training and Development: Providing training and development opportunities for
employees.
• Motivation: Motivating employees to achieve their best performance.
• Reporting: Reporting performance and issues to middle management.

Each level of management plays a crucial role in ensuring the smooth operation and success of the
organization.

Functional areas of management and leadership

Functional Areas of Management

✓ Planning: Setting objectives and determining the best course of action to achieve them.
✓ Organizing: Arranging resources and tasks to implement the plan efficiently.
✓ Leading: Directing and motivating employees to achieve organizational goals.
✓ Controlling: Monitoring and evaluating progress to ensure goals are met.

Functional Areas of Leadership

✓ Vision Setting: Establishing a clear vision and direction for the organization.
✓ Inspiring: Motivating and encouraging employees to work towards the vision.
✓ Communicating: Ensuring effective communication within the organization.
✓ Decision-Making: Making strategic decisions that guide the organization.
✓ Empowering: Delegating authority and empowering employees to take initiative.

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