Chapter 1

Nature & Significance of Management

Introduction
In narrow sense, getting work done from other persons, while doing
work himself for achieving the common objectives is management. In broader sense, management is an
art & science, relating to planning, organising, directing, co-ordinating, motivating & controlling
individual & collective efforts of various persons for achieving common objectives of an organisation.
Management is a very popular term and has been used extensively for all types of activities – business
and non-business. It is essential for all organisations big or small, profit or non-profit, services or
manufacturing.
Management is an activity which is necessary wherever there is a group of people working in an
organisation. People in organisations are performing diverse tasks to achieve the common goal.
Management aims at guiding their efforts towards achieving a common objective — a goal. Thus,
management focuses that tasks are completed and goals are achieved (i.e. effectiveness) with the least
amount of resources at a minimum cost (i.e. efficiency).
Management has been defined as a process of getting things done with the aim of achieving goals
effectively and efficiently.
Process means the primary functions or activities that management performs to get things done. These
functions are planning, organising, staffing, directing and controlling.
Being effective or doing work effectively basically means finishing the given task. Effectiveness in
management is concerned with doing the right task, completing activities and achieving goals. In other
words, it is concerned with the end result.
Efficiency means doing the task correctly and with minimum cost. There is a kind of cost-benefit analysis
involved and the relationship between inputs and outputs. Efficiency is also increased when for the same
benefit or outputs, fewer resources are used and less cost are incurred.
Therefore, it is important for management to achieve goals (effectiveness) with minimum resources i.e.,
as efficiently as possible while maintaining a balance between effectiveness and efficiency. Usually high
efficiency is associated with high effectiveness which is the aim of all managers. But undue emphasis on
high efficiency without being effective is also not desirable. Poor management is due to both inefficiency
and ineffectiveness.
“Management is effective utilisation of human & material (physical) resources to achieve the enterprise
objectives.” - Glueck
“Management is the art of knowing what you want to do and then seeing that it is done in the best &
cheapest way.” – F.W. Taylor
“Management is the development of people & not the direction of the things.” - Lawrence Appley
“Management is the art of getting things done through & with the people informally organised groups.”
– Harold Koontz
“Management is the art of getting work done through others.” – Mary Parker Follett
“Management is the art and science of decision making & leadership.” – Prof. Clough
“Management is the process of decision making and control over the actions of human beings for the
express purpose of attaining pre-determined goals.” – Stanley Vance
“Management is a group of systematic ability, which is based on some general principles with reference
to business profession.” – Louis A. Allen
Thus, management is an art & science of getting work done from others, minimization of costs, achieving
goals of enterprise with the help of human efforts which include overall activities from planning to
controlling.
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Characteristics of Management
1) Management is goal- oriented process - An organisation has a set of basic goals which are the
basic reason for its existence. Different organisations have different goals. Management unites the
efforts of different individuals in the organisation towards achieving these goals.
2) Management is all pervasive - The activities involved in managing an enterprise are common to
all organisations whether economic, social or political. In other words, principles, techniques and
functions of management are applicable to all types of organisations.
3) Management is multi-dimensional - Management is a complex activity that has three main
dimensions. These are:
(a) Management of work: All organisations exist for the performance of some work.
Management translates the work in terms of goals to be achieved and assigns the means to
achieve it. This is done in terms of problems to be solved, decisions to be made, plans to be
established, budgets to be prepared, responsibilities to be assigned and authority to be
delegated.
(b) Management of people: Human resources or people are an organisation’s greatest asset.
Managing people implies dealing with employees as individuals with diverse needs and
behaviour. It also means dealing with individuals as a group of people. The task of
management is to make people work towards achieving the organisation’s goals, by making
their strengths effective and their weaknesses irrelevant.
(c) Management of operations: Every management requires a production process which entails
the flow of input material and technology for transforming this input into the desired output
for consumption. This is interlinked with both the management of work and the management
of people.
4) Management is a continuous process - The process of management is a series of continuous,
composite, but separate functions (planning, organising, directing, staffing and controlling). These
functions are simultaneously performed by all managers all the time.
5) Management is a group activity - An organisation is a collection of diverse individuals with
different needs. Every member of the group has a different purpose for joining the organisation
but as members of the organisation they work towards fulfilling the common organisational goal.
This requires team work and coordination of individual effort in a common direction.
6) Management is a dynamic function - Management is a dynamic function and has to adapt itself
to the changing environment. In order to be successful, an organisation must change itself and its
goals according to the needs of the environment.
7) Management is an intangible force - Management is an intangible force that cannot be seen but
its presence can be felt in the way the organisation functions. The effect of management is
noticeable in an organisation where targets are met according to plans, employees are happy and
satisfied, and there is orderliness in the organisation.
Objectives of Management
Objectives can be classified into organisational objectives, social objectives and personal or individual
objectives -
1) Organisational Objectives - Management is responsible for setting and achieving objectives for
the organisation. It has to achieve a variety of objectives in all areas considering the interest of
all stakeholders including, shareholders,
employees, customers and the government.
The main objective of any organisation
should be to utilise human and material
resources to the maximum possible
advantage, i.e., to fulfill the economic
objectives of a business. These are survival, profit and growth.
Survival - The basic objectives of any business is survival. Management must strive to ensure
the survival of the organisation. In order to survive, an organisation must earn enough revenues
to cover costs.

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 Profit - Mere survival is not enough for business. Management has to ensure that the
organisation makes a profit. Profit is essential for covering costs and risks of the business.
Growth - Growth of a business can be measured in terms of sales volume increase in the number
of employees, the number of products or the increase in capital investment, etc. To remain in the
industry, management must exploit fully the growth potential of the organisation.
2) Social Objectives - As a part of society, every organisation whether it is business or non-
business, has a social obligation to fulfill. This involves the creation of benefit for the society
which may include use of environment friendly method of production, giving employment
opportunities to the under privileged sections of society and providing basic amenities like
schools and healthcare, etc., for community.
3) Personal Objectives – Organisations are made up of people who have different personalities,
backgrounds, experiences and objectives. They all become part of the organisation to satisfy
their diverse needs such as competitive salaries, personal growth, development etc. Management
has to reconcile personal goals with organisational objectives for harmony in the organisation.
Importance of Management
1) Management helps in achieving group goals – Management is required for achieving the goals of
the organisation. The task of a manager is to give a common direction to the individual effort in
achieving the overall goal of the organisation.
2) Management increases efficiency - The aim of a manager is to reduce costs and increase
productivity through better planning, organising, directing, staffing and controlling the activities
of the organisation.
3) Management creates a dynamic organisation - All organisations have to function in an
environment which is constantly changing. Generally individuals in an organisation these resist
changes. Management helps people adapt to these changes so that the organisation is able to
maintain its competitive edge.
4) Management helps in achieving personal objectives - A manager motivates and leads his team in
such a manner that individual members are able to achieve personal goals while contributing to
the overall organisational objective. Through motivation and leadership the management helps
individuals to develop team spirit, cooperation and commitment to group success.
5) Management helps in the development of society - An organisation has multiple objectives to
serve the purpose of the different groups that constitute it. In the process of fulfilling all these,
management helps in the development of the organisation and through that it helps in the
development of society. It helps to provide good quality products and services, creates
employment opportunities, adopts new technology etc.
Nature of Management
 Management as an Art
 Management as a Science
 Management as a Profession
Management as an Art
Art is the skilful and personal application of existing knowledge to achieve desired results. It can be
acquired through study, observation and experience.
Features of Art
1) Existence of theoretical knowledge - Art presupposes the existence of certain theoretical
knowledge. Experts in their respective areas have derived certain basic principles which are
applicable to a particular form of art for example literature on dancing, acting, music etc.
2) Personalised application – The use of this basic knowledge varies from individual to individual.
Art, therefore, is a personalised concept.
3) Based on practice and creativity – Art involves the creative practice of existing theoretical
knowledge. We know that all music is based on seven basic notes. However, what makes the
composition of a musician unique or different is his use of these notes in a creative manner.

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Management can be said to be an art since it satisfies the following criteria –
1) Management has existence of theoretical knowledge because lot of literature are available in
various areas of management like marketing, finance and human resources which the manager has
to specialise in.
2) There are various theories of management, as propounded by many management thinkers, which
prescribe certain universal principles. A manager applies these scientific methods and body of
knowledge to a given situation, an issue or a problem, in his own unique manner. A good manager
works through a combination of practice, creativity, imagination, initiative and innovation.
3) A manager applies this acquired knowledge in a personalised and skilful manner in the light of the
realities of a given situation. This gives rise to different styles of management.
Thus, we can say that all management practices are based on the same set of principles; what
distinguishes a successful manager from a less successful one is the ability to put these principles into
practice.
Management as a Science
Science is a systematised body of knowledge which establishes relationship between cause and effect & is
based on observations & experiments.
Features of Science
1) Systematic body of knowledge - Science is a systematic body of knowledge. Its principles are
based on a cause and effect relationship.
2) Principles based on experimentation - Scientific principles are first developed through
observation and then tested through repeated experimentation under controlled conditions.
3) Universal Validity – Scientific principles have universal validity and application.
Based on the above features, we can say that management has some characteristics of science –
1) Management has a systematised body of knowledge. It has its own theory and principles that have
developed over a period of time. Like all other organised activity, management has its own
vocabulary of terms and concepts which are used by managers during communication for better
understanding of their work situation.
2) The principles of management have evolved over a period of time based on repeated
experimentation and observation in different types of organisations. However, since management
deals with human beings and human behaviour, the outcomes of these experiments are not capable
of being accurately predicted or replicated. Therefore, management can be called an inexact
science.
3) Since the principles of management are not as exact as the principles of science, their application
and use is not universal. They have to be modified according to a given situation.
Based on the above facts, we can say that management is inexact (incomplete) science. It has features of
art and science both.
Management as a Profession
Profession refers to that economic activity which is conducted by a person having special knowledge and
skill, which is used to serve various sections of society.
Features of Profession
1) Well-defined body of knowledge - All professions are based on a well-defined body of knowledge
that can be acquired through instruction.
2) Restricted entry - The entry to a profession is restricted through an examination or through
acquiring an educational degree.
3) Professional Association – All professions are affiliated to a professional association which
regulates entry, grants certificate of practice and formulates and enforces a code of conduct.
4) Ethical code of conduct – All professions are bound by a code of conduct which guides the
behaviour of its members. All doctors, for example, take the oath of ethical practice at the time
they enter the profession.

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 5) Service Motive - The basic motive of a profession is to serve their client’s interests by rendering
dedicated and committed service. For example, the task of a lawyer is to ensure that his client gets
justice.
Management does not meet the exact criteria of a profession. However, it does have some of the
features of a profession –
1) All over the world there is marked growth in management as a discipline. It is based on a
systematic body of knowledge comprising well-defined principles based on a variety of business
situations. This knowledge can be acquired at different colleges and professional institutes and
through a number of books and journals.
2) There is no restriction on anyone being designated or appointed as manager in any business
enterprise. Anyone can be called a manager irrespective of the educational qualifications
possessed.
3) There are several associations of practising managers in India, like the AIMA (All India
Management Association) that has laid down a code of conduct to regulate the activities of their
members. However, there is no compulsion for managers to be members of such an association.
4) The basic purpose of management is to help the organisation achieve its stated goal. This may be
profit maximisation for a business enterprise and service for a hospital.
At present, management cannot be treated as a profession but it may be certainly called as a progressing
profession, since it is advancing towards profession.
Some Interesting Cross-disciplinary Perspectives
 Anthropology – It is the study of societies, which helps us learn about human beings and their
activities. Anthropologists’ work on cultures and environments has helped managers to understand
differences in fundamental values, attitudes, and behavior between people in different countries and
within different organisations.
 Economics – It is concerned with the allocation and distribution of scarce resources. It provides us
with an understanding of the changing economy as well as the role of competition and free markets in
a global context.
 Philosophy – It inquire into the nature of things, particularly values and ethics. Ethics are standards
that govern human conduct.
 Political Science – It is the study of the behavior of individuals and groups within a political
environment.
 Psychology – It is the science that seeks to measure, explain, and sometimes change the behaviour of
humans and other animals. Psychology courses are also relevant to managers in terms of gaining a
better understanding of motivation, leadership, trust, employee selection, performance appraisals, and
training techniques.
 Sociology – Sociology is the study of people in relation to their fellow human beings.

Levels of Management
It is the managerial hierarchy which forms chain of command between various
managers & explains vertical relations between them. There are various levels
in organisation structures which state the differences of authority, post &
position etc. which are called hierarchy.
Thus, the term ‘managerial level’ refers to the layers of managerial positions
demarcated according to their level of authority & status in the organisational
hierarchy.
Number of Managerial Levels
It depends upon the size of organisation, philosophy of employers, features or limitations of organisation,
efficiencies of mangers, policy of centralization and decentralization etc. Generally there are three levels
in the hierarchy of an organisation.
Forms of Managerial Levels
(I) Top Level Management – Generally, the group of managers working on high or top posts are
called top level management. According to the functional thought of management, planning &

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 policy formulation in the organisation is called top level management. The executives at this
level represent the owners & regarded as the centre of authority.
Top level management includes Board of Directors, Chairman, M.D., General Manager. Their
basic task is to integrate diverse elements and coordinate the activities of different departments
according to the overall objectives of the organisation. These are also responsible for the welfare
and survival of the organisation.
Functions of Top level management -
1) To decide the objectives of enterprise & analyse / explain the policies.
2) To issue required orders and directions.
3) To have consultation on important matters.
4) To create long term stability in the enterprise.
5) To examine the plans & results.
6) To approve the budgets.
7) To develop feeling among the subordinates to work voluntarily.
8) Safeguarding the assets of the enterprise.
(II) Middle Level Management – It means the management which exists in between the top level
management & lower level management. It includes all types of managers, like plant, divisional,
departmental, production, human resource etc. They are subordinate to top managers and
superior to the first line managers.
The main function of middle level management is to establish co-ordination between functional
or operational management & top level management. Middle management is responsible for
implementing and controlling plans and strategies developed by top management. They are
responsible for all the activities of first line managers.
Functions of Middle level management –
1) To analyse & interpret the policies framed by top managers.
2) To give detailed instructions for work operation.
3) To provide co-operation in departmental activities.
4) To ensure that their department has the necessary personnel.
5) To assign necessary duties and responsibilities to personnel.
6) To evaluate the progress of daily activities.
7) Settlement of disputes arising at the level of supervisory management.
8) To make efforts for research & investigation.
9) To solve the problems of supervisory managers.
(III) First line/ Lower level/ Supervisory/ Operational Management – It means those posts providing
leadership whose function is mainly to inspect the work of operating employees & provide them
directions & support. It includes branch operating mangers, chief supervisors, head clerk,
accountants, foreman, divisional incharges etc.
The main function of first line management is to accomplish work according to the plan,
establishing co-ordination between activities & solving the problems of supervisors & workers
etc. Supervisory management plays a very important role in the organisation since they interact
with the actual work force and pass on instructions of the middle management to the workers.
Functions of First line management –
1) To prepare operational plans of an organisation.
2) To assign workload to the employees or workers.
3) To send the matters of the employees to the higher authorities.
4) To evaluate the functions of employees.
5) To inspect the work of employees & correcting errors of them.
6) To establish co-ordination between various departments & sub-departments.
7) To motivate the employees & maintain discipline among them.
8) To provide advice & guidance to the employees & to solve their problems.
9) To maintain contact with the officers & provide them required information.

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Functions of Management
Planning
Generally, determining today, the activities for tomorrow is called planning. Thus, advance determination
of what, how, when, by whom & why is to be done & what means are to be used is called planning.
Planning is a primary function, universal function, continuous process, dynamic process, intellectual
process, futuristic, time bound & basis of planning is forecasting.
The primary object of planning is to achieve better results. Every person, group, department &
organisation work with any specific purpose & fulfilment of these objectives depends upon planning.
Planning cannot prevent problems, but it can predict them and prepare contingency plans to deal with
them if and when they occur.
Organising
It is a process /task/activity to accomplish some work or distributing among persons. It is such
management function or process which determines essential works & activities, distributes it among
person, delegates them the powers and responsibilities, all aiming to achieve objectives of the enterprise.
It is an important function of any enterprise, which contributes towards systematic execution of plans,
encourages specialisation, increases managerial efficiency & encourages creativity. That’s why it is
regarded as backbone of any organisation.
Staffing
It means finding the right people for the right job. A very important aspect of management is to make sure
that the right people with the right qualifications are available at the right places and times to accomplish
the goals of the organisation. This is also known as the human resource function and it involves activities
such as recruitment, selection, placement and training of personnel.
Directing
It includes giving orders and directions to the subordinates for work to achieve the pre-determined
objectives, and also provide leadership, guidance to them & supervising their activities.It is one of the
most important functions of management because its success of plans, accomplishment of work, best
utilization of resources, establish effective co-ordination & develop managerial ability.
It involves following main factors –
(i) Discipline: It helps to get work done in an organised manner and it also ensures that there is
healthy work environment.
(ii) Orders & instructions: Issuing orders or instructions to do or not to do a work is another
factor of direction. It helps to motivate subordinates to work.
(iii) Delegation of Authority: Under this factor the subordinates are given powers, so that they
can perform their duties effectively. But at the same time, it should be ensured that a
reasonable amount of responsibility is also given, which is neither more nor less than
required.

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 (iv) Motivation: Through this, people are made to perform work willingly. It helps to satisfy the
employees & motivates them to work better.
(v) Leadership: It is influencing the behaviour of others. Under this factor, the leader uses his
skill to influence the subordinates.
(vi) Supervision: It means overseeing the activities of subordinates.
Controlling
It means checking & correcting activities in order to ensure that things occur in accordance with the
plans. It involves setting of standards, measuring actual performance, correcting the performance if it
deviates – more or less (+/-) from the standards.
The process of control involves four main elements (1) Determination of standards (2) Evaluation of
actual performance (3) Ascertaining deviations, by comparing actual performance with desired
performance (4) Taking corrective actions.
Control is essential for achieving objectives of enterprise. The planning of various activities does not
ensure automatic implementation of policies. Control enables management to get its policies implemented
& take corrective action, if required.
Co-ordination – The Essence of Management
Koontz & O’Donnel said that Co-ordination is the essence of
management because various functions of management may be
effectively fulfilled/ performed through proper co-ordination.
Manager of any organisation has to perform five interrelated
functions in the process of managing. A manager has to link the
diverse groups towards the achievement of a common goal. The
process by which a manager synchronises the activities of
different departments is known as co-ordination.
Coordination is the force that binds all the other functions of
management. It is the common thread that runs through all
activities such as purchase, production, sales, and finance to
ensure continuity in the working of the organisation.
The process of coordinating the activities of an organisation begins at the planning stage itself. Top
management plans for the entire organisation. According to these plans the organisational structure is
developed and staffed. In order to ensure that these plans are executed according to plans directing is
required. Any discrepancies between actual and realised activities are then taken care of at the stage of
controlling. It is through the process of coordination that a manager ensures the orderly arrangement of
individual and group efforts to ensure unity of action in the realisation of common objectives.
Coordination therefore involves synchronisation of the different actions or efforts of the various units of
an organisation.
Characteristics of Co-ordination
1) Co-ordination integrates group efforts - Coordination unifies unrelated or diverse interests into
purposeful work activity. It gives a common focus to group effort to ensure that performance is as
it was planned and scheduled.
2) Co-ordination ensures unity of action - The purpose of coordination is to secure unity of action
in the realisation of a common purpose. It acts as the binding force between departments and
ensures that all action is aimed at achieving the goals of the organisation.
3) Co-ordination is a continuous process - Coordination is not a one-time function but a continuous
process. It begins at the planning stage and continues till controlling.
4) Co-ordination is an all pervasive function - Coordination is required at all levels of management
due to the interdependent nature of activities of various departments. It integrates the efforts of
different departments and different levels. In the absence of coordination there is overlapping and
chaos instead of harmony and integration of activities.
5) Co-ordination is the responsibility of all managers – Coordination is the function of every
manager in the organisation. Top level managers need to coordinate with their subordinates to
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 ensure that the overall policies for the organisation are duly carried out. Middle level management
coordinates with both the top level and first line managers. Operational level management
coordinates the activities of its workers to ensure that work proceeds according to plans.
6) Co-ordination is a deliberate function - A manager has to coordinate the efforts of different
people in a conscious and deliberate manner. Cooperation in the absence of coordination may lead
to wasted effort and coordination without cooperation may lead to dissatisfaction among
employees.
Thus, co- ordination is not a separate function of management, but essence of it. It is like thread in a
garland which helps an organisation to effectively and efficiently achieve its objectives.
Importance of Co-ordination
1) Growth in size - As organisations grow in size, the number of people employed by the
organisation also increases. All individuals differ in their habits of work, background, approaches
to situations and relationships with others. It becomes necessary to ensure that all individuals work
towards the common goals of the organisation. Therefore, for organisational efficiency, it is
important to harmonise individual goals and organisational goals through coordination.
2) Functional differentiation - In an organisation there may be separate departments of finance,
production, marketing or human resources. All these departments may have their own objectives,
policies and their own style of working. However, all departments and individuals are
interdependent and they have to depend on each other for information to perform their activities.
The process of linking the activities of various departments is accomplished by coordination.
3) Specialisation – Modern organisations are characterised by a high degree of specialisation.
Organisations need to employ a number of specialists. Specialists usually think that they only are
qualified to evaluate, judge and decide according to their professional criteria. They do not take
advice or suggestions from others in matters pertaining to their area of specialisation. This often
leads to conflict amongst different specialists as well as others in the organisation. Therefore,
some coordination is required by an independent person to reconcile the differences in approach,
interest or opinion of the specialists.

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