CHAPTER 1

MANAGEMENT
Learning Objectives:
❒ To introduce the concept and definitions of management.
❒ Present the characteristics of management.
❒ Understand the functions of management.
❒ Understand the functional areas of management.
❒ Distinguish administration and management.
❒ Introduce the role of management.
❒ Present the levels of management.
❒ Trace the development of management thought.

1.1 MEANING
Giving precise definition of management is not so simple because the term management
is used in a variety of ways. Being a new discipline it has drawn concepts and principles
from a number of disciplines such as Sociology, Economics, Psychology, Statistics,
Anthropology and so on. The contributors from each of these groups have viewed
management differently. For example economists have treated management as ‘a factor
of production’; Sociologists treated it as ‘a group of persons’. Hence, taking all these
view points, it becomes difficult to define management in a comprehensive way and
no definition of management has been universally accepted. Many definitions were given
by various contributors; one popular definition is given by Mary Parker Follet. According
to Follet management is ‘the art of getting things done through people’. This
definition clearly distinguishes between manager and other personnel of the organization.
A manager is a person who contributes to the organization’s goal indirectly by directing
the efforts of others, not by performing the task by him. A person who is not a manager
makes his contribution to the organization’s goal directly by performing the tasks by
himself. Some times a person may play both roles simultaneously. For example, a sales
2 // Management and Entrepreneurship

manager plays managerial role by directing the sales force to meet the organization’s
goal and plays non-managerial role by contacting an important customer and negotiating
deal with him. The principal of an institution plays the role of manager by directing
the heads of the departments and plays non-managerial role by teaching a subject. There
are two weaknesses of this definition. The first weakness is that the definition states
that management is an art. Art deals with application of knowledge. But management
is not merely application of knowledge. It also involves acquisition of knowledge i.e.,
Science. Managing using intuition or thumb rule is not correct management. The second
weakness of this definition is that it does not explain the various functions of
management.
A better definition is given by George R Terry who 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 resources”. According to him,
management is a process-a systematic way of doing thing using four managerial functions
namely planning, organizing, actuating and controlling. ‘Planning’ means thinking of
the manager’s action in advance. The actions of the managers are based on logic, plan
or some method rather than hunch. ‘Organizing’ means coordinating machines, materials
and human resources of the organization. ‘Actuating’ means motivating, directing the
subordinates. ‘Controlling’ means that manager must ensure that there is no deviations
from plans. This definition also indicates that managers use people, materials and other
resources to accomplish the organizations objectives. The objectives may vary with each
organization. For example the objective of a technical or management institute might
be to provide quality education according to the needs of the industry. The objective
of a hospital might be to provide medical care to the community at reasonable price.
Whatever may be the objectives of the organization management is a process by which
the objectives are achieved.
From the view point of economics, sociology, psychology, statistics and anthropology
management has different meanings. There are four views of management:
(1) Management is a process.
(2) Management is a discipline.
(3) Management is a human activity.
(4) Management is a career.
Management is a process : A process is defined as systematic method of handling
activities. Often we hear the statements “that company is well managed” or “the
company is miss-managed”. These statements imply that management is some type of
work or set of activities, these activities sometimes performed quite well and some times
not so well. These statements imply that management is a process involving certain
functions and activities that managers perform.
 Management // 3

Management is a discipline: Discipline refers to the field of study having well

defined concepts and principles. Classifying management as discipline implies that it is
an accumulated body of knowledge that can be learnt. Thus, management is a subject
with principles and concepts. The purpose of studying management is to learn how to
apply these principles and concepts at right circumstances at the right time to produce
desired result.
Management is a human activity: If you say that “the restaurant has an entirely
new management” or “He is the best manager I have worked for”, you are referring to
the people who guide, direct and thus manage organizations. The word ‘management’
used here refers to the people who engage in the process of management. Managers
are responsible for seeing that work gets done in organization.
Management is a career: Today management is developed as a career focused on
specialization. Marketing management, finance management, personal management,
Industrial management, production management, quality management are some of the
specializations in management. Specialists are appointed at various positions of the
organizational hierarchy. Hence, management is career.
According to Ralph C Devis, “Management is the executive leadership anywhere”.
According to William Spriegal, “Management is that function of an enterprise which
concerns itself with the direction and control of various activities to attain business
activities”.
Ross Moore states “Management means decision-making”.
According to Donald J Clough, “Management is the art and science of decision-
making and leadership”.
Joseph L Massie defines as “Management is the process by which a cooperative group
directs actions towards common goals”.
According to F.W. 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”.
John F Mee states “Management is the art of securing maximum results with
minimum efforts so as to secure maximum prosperity for employer and employee and
give the public the best possible service”.
According to Koontz and O’Donnel, “Management is the direction and main-
tenance of an internal environment in an enterprise where individuals working
in groups can perform efficiently and effectively towards the attainment of group
goals”. It is the art of getting the work done through and with people in formally
organized groups.

Learning Activity 1.1: List the Managerial and Non-managerial activities of your Principal and Head
of the department.
4 // Management and Entrepreneurship

1.2 CHARACTERISTICS OF MANAGEMENT

The critical analysis of the above definitions, the following characteristics of management
evolve.
(1) Management is a continuous process: The process of management consists of
planning, organizing, directing and controlling the resources to ensure that resources
are used to the best advantages of the organization. A single function alone cannot
produce the desired results. Management involves continuous planning, organizing,
directing and controlling.
(2) Management is an art as well as science: Management is an art in the sense
of possessing managing skill by a person. Management is science because certain
principles, laws are developed which are applicable in place where group activities are
coordinated. This will be discussed in detail later in this chapter.
(3) Management aims at achieving predetermined objectives: All organizations
have objectives that are laid down. Every managerial activity results in achievement of
these predetermined objectives.
(4) Management is a factor of production: An enterprise produce goods or services
using resources like land, labour, capital, machines etc. These resources themselves
cannot realize the organizations goals. The goals are achieved when these are effectively
coordinated by the entrepreneur. In case of small enterprises an individual can do such
type of job where as in large enterprises the coordination job is done by management.
Therefore, management is a factor of production.
(5) Management is decision-making: Decision-making is selecting the best among
alternative courses. Decision-making is an important function of a manager. Whatever
a manager does, he does it by making decisions. The success or failure of an organization
depends upon the quality of decision. A manager must make a right decision at right
time.
(6) Universal application: The principles and concepts of management are
applicable to every type of industry. The practice of management is different from one
organization to another according to their nature.
(7) Management is needed at all levels: The functions of management are common
to all levels of organization. The functions of planning, organizing, directing, controlling,
decision-making are performed by top level as well as lower level supervisors.
(8) Management aims at maximum profit: The resources are properly utilized
to maximize profit. Maximizing the profit is the economic function of a manager.
(9) Dynamic: Management is not static. Over a period of time new principles,
concepts and techniques are developed and adopted by management. Management is
changed accordingly to the social change.
(10) Management as a career: Today management is developed as a career focused
on specialization. Marketing management, finance management, personal management,
 Management // 5

industrial management, production management, quality management are some of the

specializations in management. Specialists are appointed at various positions of the
organizational hierarchy. Hence management is career.
(11) Management is a profession: Management is a profession because it possesses
the qualities of a profession. The knowledge is imported and transferred. The established
principles of management are applied in practice. This is discussed in detail later in this
chapter.
(12) Management is a discipline: Discipline refers to the field of study having well
defined concepts and principles. Classifying management as disciplines implies that it is
an accumulated body of knowledge that can be learnt. Thus, management is a subject
with principles and concepts. The purpose of studying management is to learn how to
apply these principles and concepts at right circumstances, at the right time to produce
desired result.

1.3 NATURE OF MANAGEMENT

The principles, concepts and techniques of management have changed over the period
of time. Various contributions to the field of management have changed its nature. The
nature of management can be described as follows:
(1) Multidisciplinary: Management is multidisciplinary. It draws freely ideas and
concepts from the disciplines like economics, sociology, psychology, statistics, operations
research etc. Management integrates the ideas taken from various disciplines and presents
newer concepts which can be put into practice. The integration of these ideas is the
major contribution of management.
(2) Dynamic nature of principles: A principle is truth which establishes cause
and effect relationships of a function. Principles are developed by integration of ideas
from various disciplines supported by practical evidence. These principles are flexible
and change with the environment in which organization works. Continuous researches
are being carried on to establish new principles; many older principles are changed by
new principles. There is nothing permanent in management.
(3) Relative not absolute principles: Management principles are relative and not
absolute. They must be applied according to the need of the organization. Each
organization is different from other. The principles of management should be applied
in the light of prevailing conditions.
(4) Management – science or art: There is controversy whether management is
science or art. Earlier management was regarded as art but now it is both science and
art. This aspect has been discussed in detail in this chapter.
(5) Universality of management: Management is universal phenomena. Though
universal yet management principles are not universally applicable but are to be modified
according to the needs of the situation.
6 // Management and Entrepreneurship

1.4 MANAGEMENT FUNCTIONS OR THE PROCESS OF MANAGEMENT

A function is a group of similar activities. There is divergence of view on “What
functions are undertaken by managers in organizations?” Some management experts
classify these functions into four types and others classify into five types and some
others classify them as seven items. The Table 1.1 presents the management functions
identified by various writers. The Table 1.2 gives the combined list of management
functions.
Table 1.1: Management functions

Writers Management Functions

1 Henry Fayol Planning, organizing, commending, coordinating, controlling
2 Luther Gulick Planning, organizing, staffing, directing, coordinating, reporting
and budgeting (POSDCORB)
3 Lyndall Urwick Planning, organizing, commanding, coordinating, communi-
cating, forecasting, and investigating.
4 E.F.L. Brech Planning, organizing, motivating, coordinating, controlling
5 Koontz and O’Donnell Planning, organizing, staffing, directing (leading), controlling.

Table 1.2: Combined list of management functions

Planning Directing Controlling

Formulating purpose Leading Investigating
Decision making Motivating Evaluating
Innovating Commanding Coordinating
Organizing Activating Representing
Staffing Securing Efforts Administration
Appraising Communicating

The list of management functions is too long. However it can be shortened by

combining some functions into one. For example, leading, motivating, communicating
and commanding may be combined into a single function namely directing.
For our purpose we shall designate the following five as the functions of the manager.
In addition we briefly refer to “Innovation and representation as two additional
managerial functions considered important by Earnest Dale.
(1) Planning: Planning is the primary function of management. It is looking ahead
and preparing for the future. It determines in advance what should be done. It is
conscious determination of future course of action. This involves determining why to
take action? What action? How to take action? When to take action? Planning involves
 Management // 7

determination of specific objectives, programs, setting policies, strategies, rules and

procedures and preparing budgets. Planning is a function which is performed by
managers at all levels – top, middle and supervisory. Plans made by top management
for the organization as a whole may cover periods as long as five to ten years, whereas
plans made by low level managers cover much shorter periods. This “Planning” is
discussed in detailed in Chapter–2.
(2) Organizing: Organizing is the distribution of work in group-wise or section-
wise for effective performance. Once the managers have established objectives and
developed plans to achieve them, they must design and develop a human organization
that will be able to carry out those plans successfully. Organizing involves dividing work
into convenient tasks or duties, grouping of such duties in the form of positions,
grouping of various positions into departments and sections, assigning duties to
individual positions and delegating authority to each position so that the work is carried
out as planned.
According to Koonz O’Donnel, “Organization consists of conscious coordination
of people towards a desired goal”. One has to note that different objectives require
different kinds of organization to achieve them. For example, an organization for
scientific research will have to be very different from one manufacturing automobiles.
(3) Staffing: Staffing involves managing various positions of the organizational
structure. It involves selecting and placing the right person at the right position. Staffing
includes identifying the gap between manpower required and available, identifying the
sources from where people will be selected, selecting people, training them, fixing the
financial compensation and appraising them periodically. The success of the organization
depends upon the successful performance of staffing function.
(4) Directing: Planning, organizing and staffing functions are concerned with the
preliminary work for the achievement of organizational objectives. The actual
performance of the task starts with the function of direction. This function can be called
by various names namely “leading”, “directing”, “motivating”, “activating” and so on.
Directing involves these sub functions:
(a) Communicating: It is the process of passing information from one person to
another.
(b) Leading: It is a process by which a manager guides and influences the work
of his subordinates.
(c) Motivating: It is arousing desire in the minds of workers to give their best to
the enterprise.
(5) Controlling: Planning, organizing, staffing and directing are required to realize
organizational objectives. To ensure that the achieved objectives confirm to the pre-
planned objectives control function is necessary. Control is the process of checking to
determine whether or not proper progress is being made towards the objectives and
goals and acting if necessary to correct any deviations. Control involves three elements:
8 // Management and Entrepreneurship

(a) Establishing standards of performance.

(b) Measuring current performance and comparing it against the established standard.
(c) Taking action to correct any performance that does not meet those standards.
(6) Innovation: Innovation means creating new ideas which may be either results
in the development of new products or finding new uses for the old ones. A manager
who invents new products is an innovator. A salesman who persuades Eskimos to
purchase refrigerator is an innovator. One has to note that innovation is not a separate
function but a part of planning.
(7) Representation: A manager has to spend a part of his time in representing his
organization before various groups which have some stake in the organization. A
manager has to be act as representative of a company. He has dealings with customers,
suppliers, government officials, banks, trade unions and the like. It is the duty of every
manager to have good relationship with others.

Learning Activity 1.2: Visit your bank and identify various functions performed by the bank manager.

1.5 FUNCTIONAL AREAS OF MANAGEMENT

Management process involves several functions. A distinction should be maintained
between management functions (planning, organizing, staffing, directing and controlling)
and the organizational functions (productions, finance etc.) Organizational functions
differ from organization to organization depending upon their nature while management
functions are common to all. A manager may be put either in production or finance or
marketing, he performs all the managerial functions. These organization functions are
called functional areas of management. There are four functional areas of management
namely production, finance, marketing and finance and personnel. Each functional area
may have a number of sub-activities.
Production: This is generally put under production manager and he is responsible
for all production related activities.
This area has a number of activities, few of them are given below:
(1) Purchasing: Which is related with the purchase of various materials required
by the organization. Purchasing involves procuring right quantity of materials
at the right quality, at the right time and at the right price from the right
supplier.
(2) Materials management: This involves storing of materials, issue of materials
to various departments.
(3) Research and Development: It deals with improving the existing products and
process and developing new products and process.
 Management // 9

Marketing: This area involves the distribution of organizations’ products to the

buyers. The sub-activities are:
(1) Advertising: Involves giving information about products to buyers.
(2) Marketing research: It is related with the systematic collection, analysis of
data relating to the marketing of goods and services.
(3) Sales management: It involves management efforts directed towards movement
of products and services from producers to consumers.
Finance and accounting: It deals with intelligent investment of financial resources
and record-keeping of various transactions. The various sub-functions are
(1) Financial Accounting: Deals with record keeping of various transactions.
(2) Management Accounting: Deals with analysis and interpretation of financial
records so that management can take certain decision.
(3) Costing: It deals with recording of costs, their classification and analysis for
cost control.
(4) Investment Management: Takes care of how financial resources can be invested
in various alternatives to maximize returns.
(5) Taxation: Deals with various direct and indirect taxes to be paid by the
organization.
Personnel: It deals with the management of human resources with the following
sub-activities:
(1) Recruitment and Selection: It deals with recruitment and selection of employees.
(2) Training and Development: It deals with training of employees and making them
more efficient.
(3) Wage and Salary Administration: Deals with fixing of salaries, job evaluation,
promotion, incentives etc.
(4) Industrial Relations: Deals with maintenance of good employee relations.

1.6 MANAGEMENT: A SCIENCE OR ART ?

There is great controversy whether management is science or art. It is an art in the
sense of possessing of managing skill by a person. It is a science also because of
developing principles or laws which are applicable in a place where a group of activities
are coordinated. In fact management is both science and art as it clear from the following
discussion.
Management as science: Science is a systematized body of knowledge. We call a
discipline scientific if its
(1) Methods of inquiry are systematic and empirical.
(2) Information can be ordered and analyzed; and
(3) Results are cumulative and communicable.
10 // Management and Entrepreneurship

‘Systematic’ means, being orderly and unbiased. Moreover, enquiry must be empirical
and not merely an armchair speculation. Scientific information collected in the raw form
is finally ordered and analyzed with statistical tools. It is communicable which permits
repetition of study. When study is replicated then the second try produces the results
similar to the original. Science is also cumulative in that what is discovered is added to
that which has been found before. We build upon the base that has been left by others.
Science denotes two types of systematic knowledge; natural or exact and behavioural
or inexact. In exact or natural science (such as physics and chemistry) we can study the
effect of any one of many factors affecting a phenomenon. For example, we can study in
the laboratory, the effect of heat on density by holding other factors (like humidity,
pressure etc.) constant, whereas in behavioural or in exact science it is not possible. In
management we have to study man and number of factors affecting him. For example,
we cannot study the effect of monetary incentives on workers productivity, because in
addition to monetary incentives other inseparable factors like leadership styles, workers
need hierarchy and leadership styles will also have simultaneous effect on productivity.
At the most we may get only rough idea of the relationship between monetary incentives
and productivity. Therefore, management is in the category of behavioural science.
Management is an art: Management is the art of getting things done through
others in dynamic situations. A manager has to coordinate various resources against
several constraints to achieve predetermined objectives in the most efficient manner.
Manager has to constantly analyze the existing situation, determine objectives, seek
alternatives, implement, and control and make decision. The theoretical lessons on
principles, concepts and techniques learnt by a manager in classroom is not enough
to get the aimed results unless he possess the skill (or art) of applying such principles
to the problems. The knowledge has to be applied and practised. It is like the art of
musician or painter who achieves the desired results with his own skill which comes
by practice. A comparison between science and art is given in table 1.3.
Table 1.3: Comparison between science and art

Science Art
Advances by knowledge Advances by policies
Process Feels
Predicts Guesses
Defines Describes
Measures Opines
Impresses Expresses
 Management // 11

Management uses both scientific knowledge and art in managing an organization.

As the science of management increases so should the art of management. A balance
between the two is needed.

1.7 MANAGEMENT: A PROFESSION

According to McFarland, “Profession” possesses the following characteristics:
(1) Existence of an organized knowledge.
(2) Formalized method of acquiring training and expertise.
(3) Existence of professional association.
(4) Existence of an ethical code to regulate the behaviour.
(5) Charging of fees based on service with due regard to social interest.
Management does not possess all the above characteristics of profession.
Management has no fixed norms for managerial behaviour. There is no uniform code
of conduct or licensing of managers. There are no restrictions to individuals to possess
an academic degree. Unlike medical or legal professionals, a manager need not possess
an academic degree. In the light of absence of these characteristics, management cannot
be called as profession. However, ‘professionalization’ of management started and it is
essential nowadays to acquire some professional knowledge or training. In this regard
government of India has started six national institutes of management and a number
of universities and institutions are offering MBA programmes.

1.8 MANAGEMENT AND ADMINISTRATION

The term administration and management are used synonymously. Some writers urge
that running of a business requires skills, which is known as management and
functioning of government departments and non-profit institutions requiring skill is
known as administration. Various views expressed by thinkers of management led to
the emergence of there approaches:
(1) Administration is above management.
(2) Administration is a part of management.
(3) Management and administration are same.
According to classical thinkers, Administration is above management so far as different
in the organization are concerned. According to Spreigal, “Administration is that phase
of business enterprise that concerns itself with the overall determination of institutional
objectives and the policies necessary to be followed in achieving those objectives.
Management on the other hand is an executive function which is primarily concerned
with carrying of broad policies laid down by the administration”. This implies that
administration deals with establishing objectives and policies and is done by the top
level whereas management is the execution of these policies by the middle and lower
organizational level. Table 1.4 shows the distinction between administration and
management.
12 // Management and Entrepreneurship

Table: 1.4: Differences between administration and management

Basis of difference Administration Management

1. Level of organization Top Level Middle and Lower Level

2. Major focus Policies formulation and objective Policies execution for

determination objectives achievements

3. Nature of function Determinative Executive

4. Scope of functions Broad & Conceptual Narrow & Operational

5. Factors affecting decision Mostly external Mostly internal

6. Employer – Employee relation Entrepreneurs & Owners Employee

7. Qualities required Administrative Technical

E. El. Brech urges that administration is a part of management. According to Brech,

“Management is a generic name for the total process of executive control in industry
or commerce. It is a social process entailing responsibility for the effective and
economical planning and regulation of the operation of an enterprise in the fulfilment
of a given purpose or risk. Administration is that part of management which is
concerned with the installation and carrying out of procedures by which it is laid
down and communicated, and the process of activities regulated and checked against
plans. According to this view, administration become a subordinate function to overall
management function. According to the third approach which is the most popular
and practical one, management and administration are same. Both involve the same
functions, principles and objectives. The term administrator found its origin in
bureaucratic structure of government or in regulation of some laws. The government
often uses the terms administrator who is supposed to execute broad policies laid down
by government.
The basic point of controversy between management and administration lies in forms
of coverage of activities. The content of policy formulation is higher at higher levels; it
is lower at lower levels, while executive is more at lower levels and lower at higher
levels. Hence, it becomes unimportant whether policy formulation function is known
as administration or management.

1.9 ROLE OF MANAGEMENT

A manager performs planning, organizing, directing and controlling to achieve the
organizational objectives. It has been questioned whether these functions provide an
adequate description of the management process. As against these management functions
Henry Mintzberg has defined the role of managers to identify what managers do in
the organizations. Mintzberg has identified ten roles of manager which are classified
into three broad categories as shown in fig. 1.1.
 Management // 13

Roles of Manager

Interpersonal Roles Information Roles Decisional Roles

Figurehead Monitor Entrepreneur

Leader Disseminator Disturbance handler
Liaison Spokesperson Resource Allocator
Negotiator

Fig. 1.1: Roles of manager

Interpersonal role: This role is concerned with his interacting with people both
organizational members and outsiders. There are three types of interpersonal roles:
(1) Figure head role: In this role manager has to perform duties of ceremonial
nature such as attending social functions of employees, taking an important
customer to lunch and so on.
(2) Leader role: Manager’s leader role involves leading the subordinates motivating
and encouraging them.
(3) Liaison: In liaison role manager serves as a connecting link between his
organization and outsiders. Managers must cultivate contacts outside his vertical
chain to collect information useful for his organization.
Information roles: It involves communication. There are three types of infor-
mational roles:
(1) Monitor: In his monitoring role, manager continuously collects information
about all the factors which affects his activities. Such factors may be within
or outside organization.
(2) Disseminator: In the disseminator role, manager possesses some of his
privileged information to his subordinates who otherwise not be in a position
to collect it.
(3) Spokesperson: As a spokesperson manager represents his organization while
interacting with outsiders like customers, suppliers, financers, government and
other agencies of the society.
Decisional roles: Decisional role involves choosing most appropriate alternative
among all so that organizational objectives are achieved in an efficient manner. In his
decisional role manager perform four roles:
1. Entrepreneur: As an entrepreneur, a manager assumes certain risks in terms
of outcome of an action. A manager constantly looks out for new ideas and
seeks to improve his unit by adopting it to dynamic environment.
14 // Management and Entrepreneurship

2. Disturbance handler: In this role manager works like a fire-fighter manager

contains forces and events which disturb normal functioning of his organization.
The forces and events may be employee complaints and grievances, strikes,
shortage of raw materials etc.
3. Negotiator: In his role of negotiator, manager negotiates with various groups
in the organization. Such groups are employees, shareholders and other outside
agencies.
Readers are advised to note that management functions and roles do not exist
opposite to each other but these are two ways of interpreting what managers do. All
these roles can be integrated with earlier classification of management which is presented
in fig. 1.2.

Planning
Interpersonal Role

Organizing

Informational Role
Staffing

Directing

Decisional Role
Controlling

Fig. 1.2: Functions and roles of manager

In planning a manager performs informational and decisional role as he has to collect
information on the basis in which he makes decisions. Similarly in performing other
functions some or the other roles are performed by manager.

Learning Activity 1.3: Visit an industry, identify and analyze various roles of the manager.

1.10 LEVELS OF MANAGEMENT

People in an organization are arranged in an hierarchy and they all have the relationship
of superior-subordinates. Every manager in an organization performs all five
management functions. The relative importance of these functions varies along the
managerial levels. There may be as many levels in the organization as the number of
superiors in a line of command. Some of these levels are merged into one on the basis
 Management // 15

of nature of functions performed and authority enjoyed. E.F.L. Brech has classified
management levels into three categories – Top Management, Middle Management and
Supervisory/Lower Level as shown in fig 1.3.

Board of Directors, Chairman, Chief Executive

Top

Middle Department Heads, Divisional Heads, Section Heads

Lower Senior Supervisor, Front Line Supervisors

Fig. 1.3: Levels of management

Top management of an organization consists board of directors, chairman and chief
executive officer. Top level management determines goals and objectives. It performs
overall planning, organizing, staffing, directing and controlling. It integrates organization
with environment, balances the interest groups and is responsible for overall results.
Middle management stands between top management and supervisory management level.
Middle level management establishes programs for department and carries out functions
for achieving specific goals. The other functions of middle level management are training
and development of employees, integrating various parts of the department. Supervisory
management is concerned with efficiency in using resources of the organization. A
supervisor is an executor of policies and procedures making a series of decisions with
well-defined and specified premises.

Learning Activity 1.4: Identify various levels of management of your institution.

1.11 EVOLUTION OF MANAGEMENT

Management in one or other form has existed in every hook and corner of the world
service the down of civilization. Although the 20th century is marked in history as an
‘Era of scientific management’, yet it does not mean that management was totally absent
in yester years. 1700 to 1800 highlights the industrial revolution and the factory system
highlights the industrial revolution and the factory system highlighted the importance
of direction as a managerial function. Several economists during this period explained
the concept of management. For example, Adam Smith explained the concept of division
of labour, Jacques Turgot explained the importance of direction and control, and Baptiste
explained the importance of planning. But management is emerged as a separate
discipline in the second half of 19 th century with the introduction of Joint Stock
16 // Management and Entrepreneurship

Company. This form of enterprises separated management of business from their

ownership and gave rise to labour inefficiency and inadequate systems of wage payments.
In search of solution to this problem, people began to recognize management as a
separate field of study. During 20th century, Management has become more scientific
discipline with standard principles and practices. The evaluation of management thought
during this period can be classified into two parts namely
(1) Early management approaches represented by Taylor’s scientific management,
Foyal’s administrative management and human relations movement.
(2) Modern management approaches, represented by behavioural approach,
quantitative/management science approach, systems approach and contingency
approach.

Early Management Approaches

Taylor’s Scientific Management
F.W. Taylor started his career as an apprentice in a steel company in USA and finally
became Chief Engineer. Taylor along with his associates made the first systematic study
in management. He launched a new movement in 1910 which is known as scientific
management. Taylor is known as father of scientific management and has laid down
the following principles of scientific management.
(1) Separation of planning and doing: In the pre-Taylor era, a worker himself
used to decide or plan how he had to do his work and what machines and
equipments would be required to perform the work. But Taylor separated the
two functions of planning and doing, he emphasized that planning should be
entrusted to specialists.
(2) Functional foremanship: Taylor introduced functional foremanship for
supervision and direction. Under eight-boss-scheme of functional foremanship,
four persons: (i) route clerk, (ii) instruction card clerk, (iii) time and cost clerk
and (iv) disciplinarian are related with planning function, and the remaining
four: (vi) speed boss, (vii) inspector, (viii) maintenance foreman, and (ix) gang-
boss are concerned with operating function.
(3) Elements of scientific management: The main elements of scientific manage-
ment are:
(a) Work study involving work important and work measurement using
method and time study.
(b) Standardization of tools and equipments for workmen and improving
working conditions.
(c) Scientific Selection, placement and training of workers by a centralized
personal department.
 Management // 17

(4) Bilateral mental revolution: Scientific management involves a complete mental

revolution of workmen towards their work, toward their fellow-men and toward
their employers. Mental revolution is also required on the part of management’s
side–the foreman, the superintendent, the owners and board of directions.
(5) Financial incentives: In order to motivate workers for greater and better work
Taylor introduced differential piece-rate system. According to Taylor, the wage
should be based on individual performance and on the position which a worker
occupies.
(6) Economy: Maximum output is achieved through division of labour and
specialization. Scientific Management not only focuses on technical aspects but
also on profit and economy. For this purpose, techniques of cost estimates and
control should be adopted.
Taylor summed up his approach in these words:
Science, not rule of thumb
Harmony, not discord
Cooperation and not individualism
Maximum output, in place of restricted output
The development of each man to his greatest efficiency and prosperity.

Henry Fayol’s Administrative Management (1841–1925)

Henry Fayol was a French Mining Engineer turned into a leading industrialist and
successful manager. Fayol provided a broad analytical framework of the process of
administration. He used the word Administration for what we call Management. Foyal
focused on general administrative and managerial functions and processes at the
organizational level. Foyal divided activities of business enterprise into six groups:
Technical, Financial, Accounting, Security, and Administrative or Managerial. He
focused on this last managerial activity and defined management in terms of five
functions: Planning, Organizing, Commanding, Coordinating and Controlling. He
emphasized repeatedly that these managerial functions are the same at every level of
an organization and is common to all types of organizations.
Foyal presented 14 principles of management as general guides to the management
process and management practice. His principles of management are as follows:
1. Division of work: This is the principle of specialization which is so well
expressed by economists as being necessary to efficiency in the utilization of
labour. Fayol goes beyond shop labour to apply the principle to all kinds of
work, managerial as well as technical.
2. Authority and responsibility: In this principle, Fayol finds authority and
responsibility to be related with the letter, the corollary of the former and arising
from the latter. The conceives of authority as a combination of official authority
18 // Management and Entrepreneurship

deriving from a manager’s official position and personal authority, “Compounded

of intelligence, experience, moral worth, past services etc”.
3. Discipline: Holding that discipline is “respect for agreements which are directed
at achieving obedience, application, energy and the outward marks of respect”.
Fayol declares that discipline requires good superiors at all levels, clear and fair
agreement, and judicious application of penalties.
4. Unity of command: This is the principle that an employee should receive
orders from one superior only.
5. Unity of direction: According to Fayol, unity of direction is the principle that
each group of activities having the same objective must have one head and
one plan. As distinguished from the principle of unity of command, Fayol
perceives unity of direction as related to the functioning of personnel.
6. Subordination of individual interest to general interest: In any group the
interest of the group should supersede that of the individual; when these are
found to differ, it is the function of management to reconcile them.
7. Remuneration of personnel: Fayol perceives that remuneration and methods
of payment should be fair and afford the maximum satisfaction to employee
and employer.
8. Centralization: Although Fayol does not use the term ‘Centralization of
Authority’, his principle definitely refers to the extent to which authority is
concentrated or dispersed in an enterprise. Individual circumstances will
determine the degree of centralization that will give the best overall yield.
9. Scalar chair: Fayol thinks of the scalar chair as a line of authority, a ‘Chain
of Superiors” from the highest to the lowest ranks and held that, while it is
an error of subordinate to depart ‘needlessly’ from lines of authority, the chain
should be short-circuited when scrupulous following of it would be detrimental.
10. Order: Breaking this principle into ‘Material order’ and ‘Social Order’, Fayol
thinks of it as the simple edge of “a place for everything (everyone), and
everything (everyone) in its (his) place”. This is essentially a principle of
organization in the arrangement of things and persons.
11. Equity: Fayol perceives this principle as one of eliciting loyalty and devotion
from personnel by a combination of kindliness and justice in managers dealing
with subordinates.
12. Stability of tenure of personnel: Finding that such instability is both the cause
and effect of bad management, Fayol points out the dangers and costs of
unnecessary turnover.
13. Initiative: Initiative is conceived as the thinking out and execution of a plan.
Since it is one of the “Keenest satisfactions for an intelligent man to experience”,
Fayol exhorts managers to “Sacrifice Personal Vanity” in order to permit
subordinates to exercise it.
 Management // 19

14. Esprit de corps: This is the principle that ‘union is strength’ an extension of
the principle of unity of command. Fayol here emphasizes the need for team-
work and the importance of communication in obtaining it.

Human Relations Approach

The human rationalists (also known as neo-classicists) focused as human aspect of
industry. They emphasize that organization is a social system and the human factor is
the most important element within it. Elton Mayo and others conducted experiments
(known as Hawthorne experiments) and investigated informal groupings, informal
relationships, patterns of communication, patterns of internal leadership etc. Elton Mayo
is generally recognized as father of Human Relations School.
The human relationists, proposed the following points as a result of Hawthorne
experiments.
(1) Social system: The organization in general is a social system composed of
numerous interacting parts. The social system defines individual roles and
establishes norms that may differ from those of formal organization.
(2) Social environment: The social environment of the job affects the workers
and is also affected.
(3) Informal organization: The informal organization does also exist within the
frame work of formal organization and it affects and is affected by the formal
organization.
(4) Group dynamics: At the workplace, the workers often do not act or react as
individuals but as members of group. The group plays an important role in
determining the attitudes and performance of individual workers.
(5) Informal leader: There is an emergence of informal leadership as against
formal leadership and the informal leader sets and enforces group norms.
(6) Non-economic reward: Money is only one of the motivators, but not the sole
motivator of human behaviour. Man is diversely motivated and socio-
psychological factors act as important motivators.

Modern Management Approaches

Behavioural Approach
This is an improved and more matured version of human relations approach. The
various contributors of this approach are Douglas Mc Gregor, Abraham Maslow, Curt
Levin, Mary Porker Follelt, Rensis Likert etc. Behavioural Scientists regard the classical
approach as highly mechanistic, which finds to degrade the human spirit. They prefer
more flexible organization structures and jobs built around the capabilities and aptitudes
of average employees. The behavioral approach has laid down the following conclusions.
(1) Decision-making is done in a sub-optimal manner, because of practical and
situational constraints on human rationality of decision-making. The behaviorists
attach great weight age on participative and group decision-making.
20 // Management and Entrepreneurship

(2) Behavioral Scientists encourage self direction and control instead of imposed
control.
(3) Behavioral Scientists consider the organization as a group of individuals with
certain goals.
(4) In view of behavioural scientists the democratic-participative styles of leadership
are desirable, the autocratic, task oriented styles may also be appropriate in
certain situation.
(5) They suggest that different people react differently to the same situation. No
two people are exactly alike and manager should tailor his attempts to influence
his people according to their needs.
(6) They recognize that organizational conflict and change are inevitable.

Quantitative Approach
Quantitative approach (also known as management approach) started during Second
World War during which each participant country of the war was trying to seek solutions
to a number of new and complex military problems. The interdisciplinary teams who were
engaged for this purpose were known as operation research teams. These operation
research teams developed quantitative basis for making military decisions. These
quantitative tools later are used to make business, industry and enterprise decisions.
The focus of quantitative approach is on decision making, and to provide tools and
techniques for making objectively rational decisions. Objective rationality means an ability
and willingness to follow reasonable, unemotional and scientific approach in relating
means with ends and in visualizing the totality of the decision environment. This
approach facilitates disciplined thinking while defining management problems and
establishing relationships among the variables involved. This approach is widely used
in planning and control activities where problems can be defined in quantitative terms.

Systems Approach
A system is a set of interdependent parts which form a unit as a whole that performs
some function. An organization is also a system composed of four independent parts
namely, task, structure, people and technology. The central to the system approach is
‘holism’ which means that each part of the system bears relation of interdependence
with other parts and hence no part of the system can be accurately analyzed and
understood apart from the whole system. A system can be open or closed system. In
open system, a system interacts with surrounding. An organization is open system
because it interacts with it.

Contingency Approach
According to this approach, management principles and concepts have no general and
universal application under all conditions. There is no best way of doing things under
 Management // 21

all conditions. Methods and techniques which are highly effective in one situation may
not give the same results in another situation. This approach suggests that the task of
managers is to identify which technique in a situation best contribute to the attainment
of goals. Managers therefore have to develop a sort of situational sensitivity and practical
selectivity. Contingency views are applicable in designing organizational structure, in
deciding degree of decentralization, in motivation and leadership approach, in establishing
communication and control systems, in managing conflicts and in employee development
and training.

Chapter Summary
Management is defined as the art and science of getting things done through others.
Management is the process of designing and maintaining the environment in which
individuals working together in groups, accomplish their aims effectively and efficiently.
Managers carry out the functions for Planning, Organizing, Staffing, Directing and
Controlling. Planning involves thinking ahead and preparing for future. It determines
in advance what should be done. Organizing involves dividing work into convenient
tasks or duties, grouping of such duties in the form of positions, grouping of various
positions into departments and sections, assigning duties to individual positions, and
delegating authority to each position so that work is carried out as planned. Staffing
consists of selecting and placing the right people at right position. Directing involves
various sub functions like Communicating, Leading and Motivating. Control is the
process of checking to determine whether or not proper progress is being made towards
the objectives and goals and acting if necessary to correct any deviations. All these
functions are performed to achieve predetermined goals. The nature of management
can be described by its multidisciplinary, dynamic nature, relative principles and
universality of Management. The functional areas of Management are Production,
Finance, Marketing and Personnel. A clear distinction can be made between
Administration and Management. Administration involves policy formulation, objective
determination and Management deals with policy execution and achieving objectives.
A manager plays inter-personal roles, information roles and decision roles. There are
many theories of Management and each theory contributes something to our knowledge
of what managers do. F W Taylor, Adam Smith, Henry Fayol, Elton Mayo and others
have contributed to the development of Management concept.

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