UNIT 1

INTRODUCTION TO PRINCIPLES OF MANAGEMENT

BASIC CONCEPTS OF PRINCIPLES OF
MANAGEMENT
• Management is what a manager does. (Louis Allen)
• Managing is the art of getting things done through people in formally
organized group.
• Management can thus be defined as the art or skill of directing
human activities and physical resources in the attainment of
predetermined goals.
• Management is the art of getting things done through people. (Mary
Parker Follet)
• To manage is to forecast and plan, to organize, to command, to
coordinate and to control. (Henry Fayol)
Various Concepts of Management
1) Management as a process: It is a process because it includes series
of actions. Like setting objectives for an enterprise and taking steps
to ensure that they are achieved. The steps include functions like
planning, organizing, staffing directing and controlling. Thus, the
management process involves laying down various goals and finding
ways to achieve the same.
Management as a process consists of 3 aspects:
i) Management as a social process: activities involved are mainly
concerned with relations between people(employees). This is useful for
achieving organizational goals.
ii) As an Integrating process: in an organization the humans work with
non-human resources like machines, materials, technology, financial
assets, buildings etc. management integrates human efforts in relation
to those resources.

iii) Management is a continuous process: It involves continuous

handling of problems and issues and solving them by taking
appropriate steps.
2) Management as an activity: it’s a process of making systematic use of
human and material resources in the organization. This includes what
managers do in the process of management.

i) Informational activities: Managers constantly communicate with

their subordinates as well as superiors. They exchange information
relating to various tasks, situations and persons and initiate action on
that basis.
ii) Decisional activities: Managers also need to devote time on activities
like decision making of different kinds. Practically all activities of a
manager are based on decision making.
iii) Inter-personal activities: Managers to achieve goals need to interact
with their superiors as well as their employees and also take care of
individual problems in a helpful manner.
3) Management as a group: refers to management as a class or section of
people who together carried out various managerial activities. Eg. All the
managers from the Chief Executive to first line supervisors are addressed
as management.
4) Management as a Discipline: Management is now recognized as a
formal discipline having an organized body of knowledge which can be
learnt through instructions and teaching.
5) Management as an Economic Resource: Effective use of 5 M’s (money,
materials, manpower, machinery, and methods.) and converting inputs
into product and services is the basic objective of management.
Management has to plan and coordinate so that men, materials,
machines, and money is best utilized and thus it can be considered as
economic resource.
 Need of Management
1. Management is creative: Management is a very powerful innovating force
that determines the progress of the society. Modern managers adapt to
the changing situation & environment.
2. Management assists the administration and makes group efforts more
effective: managerial techniques and principles are effective tools for the
administration of an enterprise.
3. Management creates link between the past and future: Planning is the
process by which past performance of the organization is improved upon
by planning for future.
4. Management reduces and controls cost of operation: Better planning and
control enables the administration to fulfil the objectives with minimum
group efforts and survive in the intense of competition.
5. Management minimizes risks: economic, political and social
environments are likely to bring uncertainties and add to business risks. It is
through planning and controlling tasks of management, that risks arising on
account of environmental changes are minimised and made more
controllable.
6. Management establishes good industrial relations: Management
minimises industrial strike and contributes to establishing good industrial
relations, particularly it is based on human orientation and motivation.
 Scope
1. Economic Resource: Business Economics classifies the factors of
production into four basic inputs, viz. land, labour, capital and
entrepreneur. By the use of all these four, basic production can be done.
But to turn that into a profitable venture, an effective utilization of man,
money, material, machinery and methods of production has to be
ensured. This is guaranteed by application of management fundamentals
and practices. The better is the management of an enterprise, the higher
is its growth rate in terms of profit, sales, production and distribution.
Thus, management itself serves as an economic resource.
2. System of Authority: As already discussed, management is a system of
authority. It formalises a standard set of rules and procedure to be
followed by the subordinates and ensures their compliance with the rules
and regulations. Since management is a process of directing men to
perform a task, authority to extract the work from others is implied in the
very concept of management.

3. Class or Elite: Management is considered to be a distinct class that has

its own value system. Managerial class, often referred to as a collective
group of those individuals that perform managerial activities is essential
component of each organisation. The importance the class has become so
huge that the entire group of mangers is known as “management” in every
organisation.
Approaches to Management
 Scientific Approach
• The impetus for the scientific management approach came from the first industrial
revolution. Because it brought about such an extraordinary mechanization of
industry, this revolution necessitated the development of new management
principles and practices. The main contributors Notes to scientific management
were Frederick W. Taylor, Henry L. Gantt, Frank Gilbreth, Lillian Gilbreth and
Harrington Emerson.
• F.W. Taylor (1865-1915) was the first person who insisted on the introduction of
scientific methods in management.
• Scientific management means application of scientific methods to the problems of
management.
• Taylor advocated scientific task setting based on time and motion study,
standardization of materials, tools and working conditions, scientific selection and
training of workers and so on.
• It is to be noted that Taylor’s thinking was confined to management at the shop
level. However, he demonstrated the possibility and significance of the scientific
analysis of the various aspects of management.
• The basic idea behind the principles of scientific management is to
change the mental attitudes of the workers and the management
towards each other. Taylor called it ‘Mental Revolution’ which has three
implications:
1. all out efforts for increase in production;
2. creation of the spirit of mutual trust and confidence; and
3. inculcating and developing the scientific attitude towards problems

Scientific management is focused time studies especially on the efficiency

of the worker and reducing the process time and not on any specific
behavioural qualities of the worker.
 Systems Approach
• A system is a set of interrelated but separate parts working towards a
common purpose. The arrangements of elements must be orderly and with
proper communication facilitating interaction between the elements
leading to achieve a common goal.
• Thus systems approach to management views the organization as a unified,
purposeful system composed of interrelated parts. Hence managers have to
deal with the organization as a whole rather than dealing separately with
various segments of an organization.
• Systems theory reveals that the activity of any segment of an organization
affects the activity of every other segment in different degrees.
• The essence of the systems approach is that each manager cannot function
in isolation and within his organizational boundary of authority and
responsibility of the traditional organizational chart.
 System approach to management
1) Inputs: A system has flows of information, materials and energy. These enter the
system from the environment as inputs like human, capital and raw materials.
2) Transformation Process: System transforms inputs into outputs. This
transformation has 3 processes- inputs, mediator and outputs. This process is
essential for the survival of the system.
3) Outputs: these are the final products after the transformation process. Outputs
vary with the enterprise; they usually include products, services, profits,
satisfaction and integration of the goals of various claimants to the enterprise.
4) External environment: it includes the analysis of the strength and weakness
prevailing in the environment. Managers should regularly scan the external
environment.
5) Feedback: the reaction of the outputs environment is known as feedback.
Feedback is useful in evaluating and improving the functioning of the system.
 Contingency Approach
• Contingency or situational approach is an important addition to the paradigm
of modern management theory and approach. In one way it is and extension of
systems approach.
• The basic idea of contingency approach is that there cannot be a particular
management action which will be suitable for all situations.
• contingency approach as regards organisation as an open and dynamic system
which has continuous interaction with environment.
• The contingency theory takes –off from the systems theory and utilizes it in
tackling specific situations. It relates each situation, comprising the goals of the
organization, demand of its members, its environment of different categories,
and so on to the organization’s structure process and policies.
• It is action oriented and directed towards the application and implementation
of system concepts. It focuses on external dynamics but systems approach
focused on internal dynamics
 Contributions of
• F.W.Taylor: Fredrick Winslow Taylor (F.W Taylor) – the father of
management. He was born in USA in 1856. He joined Midvale steel
company where he worked as a machine shop worker for two years as
gang boss for some years and as chief engineer at the age of 28.he also
joined Bethlehem steel company where he served for a long time. Later
he devoted his time to develop the concept of scientific management.
• He noticed that there were much disorder and wastage of human as well
as other resources at work place. The managers and staffs had no
concept about systematic and efficient performance of task. And all were
following traditional ways of doing work. So he tried to remove these
problems through the development of new concept. Thus the scientific
management concept was developed.
• While working in Midvale Company as a manager Taylor observed that
employees were not performing as per their capacity of productivity. And
he considered that this condition was occurring because of no care towards
the waste. Taylor worked towards the experiments at his work place to
increase the worker’s efficiency so that maximum output could be achieved
by utilizing effort at maximum level.

1. Scientific task setting:- Taylor observed that the management does not
know exactly the works – pieces of work- volume of works- which are to be
performed by the workers during a fixed period of time- which is called
working day. In a working day how much work is to be done by a worker but
be fixed by a manager and the task should be set everyday. The process of
task setting requires scientific technique. To make a worker do a quantity of
work in a working day is called scientific task setting
2. Differential payment system:- under this system, a worker received the
piece rate benefit which will attract the workers to work more for more
amount of wages and more incentives would be created to raise the
standardization of output to promote the workers to produce more and
perform more task than before and utilize waste time to earn more wages.

3. Reorganization of supervision:- concepts of separation of planning and

doing and functional foremanship were developed. Taylor opines that the
workers should only emphasize in planning or in doing. There should be 8
foreman in which 4 are for planning and 4for doing. For planning they were
route clerk, instruction cord clerk, time and cost clerk and disciplinarian.
And for doing they were speed boss, gang boss, repair boss and inspector.
4. Scientific recruiting and training:-staffs and workers should be selected
and employed on scientific basis. Management should develop and train
every workers by providing proper knowledge and training to increase their
skills and make them effective

5. Economy:- efficient cost accounting system should be followed to

control cost which can minimize the wastages and thoroughly reduced and
thus eliminated.

6. Mental revolution:- Taylor argued that both management and workers

should try to understand each other instead of quarreling for profits and
benefits which would increase production, profit and benefits.
• Henry Fayol (1841-1925) started his career as a junior engineer in a
coal mine company in France and became its general manager in 1880.
• He not only saved a large coal and steel company from bankruptcy, but also
led to crowning success.
• His ideas on management have been summed up as the Administrative
Management Theory, which later evolved into the Management Process
School. A contemporary of Taylor, Fayol for the first time attempted a
systematic analysis of the overall management process. In 1916, he
published his famous book in French language ‘Administration Industrielle
Generale.’
• It was reprinted several times in French and later published in English
language under the title, General and Industrial Management in 1929.
Fayol’s contribution to management can be discussed under the following
four heads:
• Fayol found that all activities of the industrial enterprise could be divided
into six groups:
• (i) Technical (relating to production);
• (ii) Commercial (buying, selling and exchange);
• (iii) Financial (search for capital and its optimum use) ;
• (iv) Security (protection of property and persons);
• (v) Accounting (Preparation of various statements, accounts, returns etc.)
and
• (vi) Managerial (planning, organisation, command, co-ordination and
control)
• He pointed out that these activities exist in every enterprise. He further said
that the first five activities are well known to a manager and consequently
devoted most of his book to analyse managerial activities.
• Henry Fayol’s 14 Principles of Management

1. Division of Work: The work should be divided among the individuals on

the basis of their specializations, so as to ensure their full focus on the
effective completion of the task assigned to them.
2. Authority and Responsibility: The authority and responsibility are
related to each other. Authority means the right to give orders while the
responsibility means being accountable. Thus, to whomsoever the
authority is given to exact obedience must be held accountable for
anything that goes wrong.
3. Discipline: The individuals working in the organization must be well-
disciplined. The discipline refers to the obedience, behavior, respect
shown by the employees towards others.
4. Unity of Command: According to this principle, an individual in the
organization must receive orders from only one supervisor. In case an
individual has the reporting relationship with more than one supervisor then
there may be more conflicts with respect to whose instructions to be
followed.
5. Unity of Direction: Unity of direction means, all the individual or groups
performing different kinds of a task must be directed towards the common
objective of the organization.
6. Subordination of Individual to General Interest: According to this
principle, the individual and organizational interest must coincide to get the
task accomplished. The individual must not place his personal interest over
the common interest, in case there a conflict.
7. Remuneration of Personnel: The payment methods should be fair enough
such that both the employees and the employers are satisfied.
8. Centralization: Fayol defines centralization as the means of reducing the
importance of subordinate’s role in the organization, and the extent to which
the authority is centralized or decentralized depends on the organization type in
which the manager is working.
9. Scalar Chain: This means there should be a proper hierarchy in the
organization that facilitates the proper flow of authority and communication. It
suggests that each individual must know from whom he shall get instructions
and to whom he is accountable to. Also, the communication either going up or
down must pass through each level of authority. In certain circumstances where
the quick flow of communication is required, the rigidity of a scalar chain can
pose problems. Thus, Henry Fayol has suggested “gang plank” which means
anybody in the hierarchy can interact with each other irrespective of their
authority levels.
10. Order: This is relating arrangement of things and people. Material things
should have a place and should be its place. In social order, there should be a
right man in the right place.
11. Equity: All employees should be treated as equally as possible. E.g. workers
performing similar jobs should be paid the same
wage.
12. Stability of tenure of personnel: Retaining productive employees should
always be a high priority of management. Recruitment and Selection Costs, as
well as increased product-reject rates are usually associated with hiring new
workers.
13. Initiative: Management should take steps to encourage worker initiative,
which is defined as new or additional work activity undertaken through self
direction.
14. Espirit De Corps: Management should encourage harmony and general good
feelings among employees. Helps develop an atmosphere of mutual trust and
understanding.
 Elton Mayo
• In 1927, a group of researchers led by Elton Mayo and Fritz Roethlisberger of
the Harvard Business School were invited to join in the studies at the
Hawthorne Works of Western Electric Company, Chicago.
• The experiment lasted up to 1932. The Hawthorne Experiment brought out
that the productivity of the employees is not the function of only physical
conditions of work and money wages paid to them.
• Productivity of employees depends heavily upon the satisfaction of the
employees in their work situation.
• Mayo’s idea was that logical factors were far less important than emotional
factors in determining productivity efficiency. Furthermore, of all the human
factors influencing employee behavior, the most powerful were those
emanating from the worker’s participation in social groups.
• Thus, Mayo concluded that work arrangements in addition to meeting the
objective requirements of production must at the same time satisfy the
employee’s subjective requirement of social satisfaction at his work place.
• The Hawthorne experiment consists of four parts. These parts are briefly described
below:-
1. Illumination Experiment: This experiment was conducted to establish relationship
between output and illumination. When the intensity of light was increased, the
output also increased. The output showed an upward trend even when the
illumination was gradually brought down to the normal level. Therefore, it was
concluded that there is no consistent relationship between output of workers and
illumination in the factory. There must be some other factor which affected
productivity.

2. Relay Assembly Test Room Experiment: This phase aimed at knowing not only the
impact of illumination on production but also other factors like length of the working
day, rest hours, and other physical conditions. In this experiment, a small
homogeneous work-group of six girls was constituted. These girls were friendly to
each other and were asked to work in a very informal atmosphere under the
supervision of a researcher. Productivity and morale increased considerably during
the period of the experiment. Productivity went on increasing and stabilized at a high
level even when all the improvements were taken away and the pre-test conditions
were reintroduced. The researchers concluded that socio-psychological factors such
as feeling of being important, recognition, attention, participation, cohesive work-
group, and non-directive supervision held the key for higher productivity.
3. Mass Interview Programme: The objective of this programme was to make a systematic
study of the employees attitudes which would reveal the meaning which their “working
situation” has for them. Initially, a direct approach was used whereby interviews asked
questions considered important by managers and researchers. The researchers observed that
the replies of the workmen were guarded. Therefore, this approach was replaced by an
indirect technique, where the employees were given a questionnaire and asked to answer
freely without getting identified. The findings confirmed the importance of social factors at
work in the total work environment.
4. Bank Wiring Test Room Experiment: This experiment was conducted by Roethlisberger
and Dickson to find out the real influencing factors of productivity. The experiment was
conducted to study a group of workers under conditions which were as close as possible to
normal. This group comprised of 14 workers. After the experiment, the production records of
this group were compared with their earlier production records. It was observed that the
group evolved its own production norms for each individual worker, which was made lower
than those set by the management. Because of this, workers would produce only that much,
thereby defeating the incentive system. Those workers who tried to produce more than the
group norms were isolated, harassed or punished by the group. The findings of the study
are:-
• Each individual was restricting output.
• The group had its own “unofficial” standards of performance.
• Individual output remained fairly constant over a period of time.
• Informal groups play an important role in the working of an organization.
 Findings of Hawthorne Experiments
1. Workers are essentially are social beings and they must be understood as
people if they are to be understood as organization members. Their attitudes
and effectiveness are conditioned by social demands form both inside and
outside the work plant.
2. Work is a group activity. Workers may react to management, the
organization, and work itself as members of groups of informal organizations
rather than as individuals.
3. The need for recognition, security and sense of belongings is more important
in determining a worker’s morale and productivity than the physical ability
or stamina and the physical conditions under which he works. In other
words, productivity is strongly affected by social and psychological factors,
not simply by conditions of work.
4. Non-economic factors, i.e., social rewards and sanctions are significant
determinants of worker’s motivation and their level of job satisfaction.
Economic incentives by contrast are less powerful as motivators on the job.

5. Informal groups within the work plant exercise strong social control over
the work habits and attitudes of the individual worker. Group standards
strongly influence the behaviour of individuals in organizations.

6. The most effective style of supervision will be created when the

managers implement participative management style. This style allows the
workers to influence decisions that affect them and leads to the highest
level of workers effectiveness. It only prevents the alienation but also wins
their acceptance of organizational goals.
 Mary Parker Follet
• Mary Parker Follett, or the "Mother of Modern Management," believed that
management was "the art of getting things done through people."
• Though she never managed a for-profit enterprise, she offered valuable insight
on the importance of "powering with" rather than "powering over," and
integrating with employees to solve conflicts.
• "Leadership is not defined by the exercise of power but by the capacity to
increase the sense of power among those led," Follett once said. "The most
essential work of the leader is to create more leaders."
Follett practiced these principles of coordination that helped develop her theory
of management:
• Early stages. Coordination must start at an early stage i.e at the planning stage,
in the management process. And implementing these plans with success. This
will result in making the best plans should be learned and mastered straight
away. No employee should feel less important than the next; each has a
significant role that compliments the roles of others.
• Continuous process. Coordination must be a continuous process. Don't just
learn it and forget about it; channel it in everything you do from the time the
organization starts and till it exists.

• Direct contact. Direct contact between employees and managers helps

organizations avoid conflict and misunderstandings. Holding regular meetings
or discussing assignments in person is a simple way to practice this principle.
• Reciprocal relationship. Every worker, regardless of their level in hierarchy, is
responsible for pulling their weight and integrating with the rest of the
organization. No one person should be trying less or more than another – it's a
team effort.
 Rensis Likert
• Likert was the Director of Institute of Social Sciences, Michigan, U.S.A.
• He conducted extensive research for fourteen years with the help of 40
researchers in the field of leadership.
• His famous writings included: New Patterns of Management (1961), Human
Organisation (1967).
• He was of the opinion that traditional job- oriented supervision was the cause
of low productivity and low morale.
• He emphasised participative management in the field of decision-making.
• He divided management styles into the following categories:
• Exploitive authoritative system (1)
• In this type of management system the job of employees/subordinates is to
abide by the decisions made by managers and those with a higher status than
them in the organisation. The subordinates do not participate in the decision
making. The organisation is concerned simply about completing the work. The
organisation will use fear and threats to make sure employees complete the
work set. There is no teamwork involved.
• Benevolent authoritative system (2)
• Just as in an exploitive authoritative system, decisions are made by those at
the top of the organisation and management. However employees are
motivated through rewards (for their contribution) rather than fear and
threats. Information may flow from subordinates to managers but it is
restricted to "what management want to hear".
• Consultative system (3)
• In this type of management system, subordinates are motivated by rewards and a
degree of involvement in the decision making process. Management will
constructively use their subordinates ideas and opinions. However involvement is
incomplete and major decisions are still made by senior management. There is a
greater flow of information (than in a benevolent authoritative system) from
subordinates to management. Although the information from subordinate to
manager is incomplete and euphemistic.

• Participative (group) system (4)

• Management have complete confidence in their subordinates/employees. There is
lots of communication and subordinates are fully involved in the decision making
process. Subordinates comfortably express opinions and there is lots of teamwork.
Teams are linked together by people, who are members of more than one team.
Likert calls people in more than one group "linking pins". Employees throughout
the organisation feel responsible for achieving the organisation's objectives. This
responsibility is motivational especially as subordinates are offered economic
rewards for achieving organisational goals which they have participated in setting.
Chest Barnard

• Chester Barnard was the President of new Jerray Bell Telephone

Company. He served in various other organisations too. His important
writings include: The Functions of Executive (1938). Organisation and
Management (1948). Elementary Conditions of Business Morals.
• His writings had important impact on human organisation. In his
organisation theory he adopted a sociological approach and in dealing
with the functions of executives, he stressed the importance of
leadership and communication. Barnard divided organisation into
formal and informal. He said that informal organisation is an
important part of formal organisation.
1. Concept of Organisation :
• Barnard suggests that classical concept of organization does not fully explain the
features of an organization. He has defined formal organization, as a system
consciously coordinated activities or courses of two or more persons. He opined
organization, exists in the following conditions –
• There are persons able to communicate with each other.
• They are willing to contribute to the action.
• They attempt to accomplish a common purpose.
2. Formal and informal Organisations
• Bernard suggested that executives should encourage the development of informal
organisation, to serve as a means of communication, to bring cohesion in the
organisation, and to protect the individuals from dominance of the organization.
Both the formal and the informal organisations, depend on each other and there is
continuous interaction between the two. Therefore in managing an organization,
managers should take into account both types of organisation.
3. According to Barnard, there are four elements of a formal organisation they
are:
• a system of functionalisation so that people can specialize.
• a system of effective and efficient incentives to induce people to contribute to
group action.
• a system of power which will lead group members to accept the decisions of
the executives and.
• a system of logical decision making.

• 4. Authority
• Barnard does not agree with the classical view that authority transcends from
the top to bottom. He has given a new concept of authority known as “
acceptance theory of authority “ or “ bottom –up authority “. In his opinion, a
person does not obey an order because it has been given by a superior but he
will accept a communication as being authoritative.
5. Functions of the executive
• Barnard has identified three types of functions which an executive performs
in a formal organisation.
• These are – maintenance or organizational communication through formal
interactions.
• the securing of essential services from individuals to achieve organizational
purpose.
• the formulation and definition of organizational purpose.
• Motivation – Apart from financial incentives Barnard has suggested a number
of non – financial techniques for motivating people these are –.
• Opportunity of power and distinction.
• Pride of workmanship.
• Pleasant organization.
• Mutual supporting and personal attitudes.
• Feeling of belongingness.
 Douglas Mc Gregor
• Douglas proposed 2 distinct views of human beings: one basically negative
(Theory X) and the other positive (Theory Y). According to Gregor’s
observation he said that managers tend to mould and change their behaviour
toward employees according to the following assumptions:
• Assumptions of theory X
• This style of management assumes that workers:
• Dislike their work.
• Avoid responsibility and need constant direction.
• Have to be controlled, forced and threatened to deliver work.
• Need to be supervised at every step.
• Have no incentive to work or ambition, and therefore need to be enticed by
rewards to achieve goals.
Assumptions of Theory Y

• Happy to work on their own initiative.

• More involved in decision making
• Self-motivated to complete their tasks.
• Enjoy taking ownership of their work.
• Seek and accept responsibility, and need little direction.
• View work as fulfilling and challenging.
• Solve problems creatively and imaginatively.
 Peter Drucker
• Among the contemporary management thinkers, peters F. Drucker was legend
in the field of management. He has made may outstanding contributions to
the development of management principles. Following are some of his views
on management.
1. Nature of Management : According to Durcker the basic objective of
management is to lead towards innovation. He advocates that management is
creative and innovative in nature rather than bureaucratic. Because managers
practice their activities in an ever changing environment, they always deal with
the human beings whose behaviour is complex and unpredictable. He was
warned that too much professionalisation of management is dangerous. He has
also emphasized that managers should not only have skills and techniques but
should have right perspective putting the things into practice.
2. Management By Objectives : ( MBO) Mangement By Objectives is regarded as
one of the most important contributions of Drucker to the discipline of
management. He introduced this concept in 1954. It is regarded to be his
remarkable contribution to the management thought. It consists of
environmental scanning, identification of key result areas, setting objectives for
departments as well as to subordinates, motivation and performance appraisal.
He opines that MBO is a management Philosophy rather than a management
technique.

3. Management Functions : According to Drucker, management is the organ of its

institution. He sees management through its tasks. Drucker has attached great
importance to the objective setting function and has specified eight areas where
clear objective setting is remained. These are market standing, innovation,
productivity, physical and financial resources, profitability,managerial
performance and development, worker performance and attitude and public
responsibility.
4. Organisation Structure : Drucker always advocates for the parallel growth of second
line managers because whenever the existing managers vacate their offices,
organizations should not suffer form the non- availability of experienced managers, if
there is gap, it is detrimental to the performance of the organization.
5. Organisation Changes : Further Drucker has forecasted that organizations face
many changes because of rapid social and technological changes. Hence dynamic
organization structures are essential than static and bureaucratic structures.
6. Federalism : Federalism means centralization of control and decision making in
decentralized structure. Drucker has felt the need for close links between the
decisions adopted by the top management on the one hand and by autonomous unit
on the other hand.
7. Activity Analysis, Decision Analysis and Relation Analysis : In the words of Drucker,
organization is a means to the end of business performance and business results.
The first question that every manager must ask himself is what is our business and
what it should be? Then the organization should be designed to attain the objectives
of the business.
 MICHAEL PORTER
• Porter has been the Bishop William Lawrence University Professor at Harvard
Business School.
• He is a leading authority on competitive strategy and competitiveness, and
economic development of nations, states and regions.
• Professor Porter was a major contributor to strategic management theory
and was the first in making substantial contributions in this field and could be
rightly called the father of modern business strategy.
• Most prominent contributions of Porter are:
• Competitive Strategy: CS extended the analysis of competitive forces beyond
immediate rivals to include the power of suppliers and buyers, the threats of
new entrants and the attraction of substitutes. It outlined a set of generic
strategies that could create a long run defensible position with superior
returns in a given industry-overall cost leadership, differentiation and focus.
• Competitive Advantage: It was Porter’s 2 major work. It had an internal
perspective, focusing on the firm’s value chain. It argued that the appropriate
scope of the firm , which primary and supporting activities should be done
internally and which should be outsourced or shared with other
organizations, depended on whether the other activities were essential for
developing or maintaining the firm’s competitive advantage needed to be
owned by the firm.
• Competitive advantage of Nations: in this Porter turned his attention to the
external environment, but also shifted his primary attention from what
yielded above average returns for the individual firm to what factors made an
industry competitive internationally. There are four main elements of this
framework that determines the level of competitiveness of a country. These
four elements are: demand conditions, factor conditions, firm strategy,
structure and rivalry and related and supporting industries. According to
Porter, each element has a great influence on success of any business and
may influence each other to create a better and competitive business
environmentally.
• Value Chain: Other hugely influential ideas have been his exposition of
the ‘value chain’ – how a company performs and costs its activities
relative to its competitors – and his ‘cluster’ theory of the way in which
interdependent industries lead to success in a particular area. Value
chain is one of Porter’s favourite methods of identifying a firm’s
competitive position. All the activities it performs and how they
interact. Examining these components sheds light on the roots of costs
and how they behave and picks out existing and potential sources of
differentiation. A firm gains competitive advantage by performing these
strategically important activities more cheaply or better than its
competitors.
 Introductory Concepts: What Are
Managerial Competencies?

 Competency – a combination of knowledge, skills,

behaviors, and attitudes that contribute to personal
effectiveness

 Managerial Competencies – sets of knowledge, skill,

behaviors, and attitudes that a person needs to be effective in
a wide range of positions and various types of organizations
 Why are Managerial Competencies
Important?

 You need to use your strengths to do your best

 You need to know your weaknesses
 You need developmental experiences at work to become
successful leaders and address your weakness
 You probably like to be challenged with new learning
opportunities
 Organizations do not want to waste human resources
 Globalization deregulation, restructuring, and new
competitors add to the complexity of running a business
 What Is An Organization?
 A formal and coordinated group of people who
function to achieve particular goals
 These goals cannot be achieved by individuals acting
alone
 An organization has a structure,
 What Is A Manager?

 A person who plans, organizes, leads and

controls the allocation of human, material,
financial, and information resources in pursuit
of the organization’s goals

 What sets managers apart from individual

employees?

 Managers are evaluated on how well the

people they direct do their jobs
 Making decisions to guide the organization
through planning, organizing, leading, and
controlling

 Getting tasks done through people

Functional Managers: supervise employees having
expertise in one area, such as accounting, human
resources, sales, finance, marketing, or production

 Focus on technical areas of expertise

 Use communication, planning and

administration, teamwork and self-
management competencies to get work
done
 (cont’d)

General Managers: responsible for the operations of

more complex units—for example, a company or division

 Oversee work of functional managers

 Need to acquire strategic and multicultural
competencies to guide organization

Many Other types of managers

 Top
Managers

Middle Managers

First-Line Managers

Nonmanagers
 What are the Basic Levels of
Management?: First-line Managers

 Directly responsible for production of goods or services

 Employees who report to first-line managers do the organization’s
work
 Spend little time with top managers in large organizations
 Technical expertise is important
 Rely on planning and administration, self-management, teamwork,
and communication competencies to get work done
 What Are the Basic Levels of
Management?: Middle Managers

 Responsible for setting objectives that are consistent with top

management’s goals and translating them into specific goals and
plans for first-line managers to implement
 Responsible for coordinating activities of first-line managers
 Establish target dates for products/services to be delivered
 Need to coordinate with others for resources
 Ability to develop others is important
 Rely on communication, teamwork, and planning and
administration competencies to achieve goals
 What Are the Basic Levels of
Management?: Top Managers

 Responsible for providing the overall direction of an

organization
 Develop goals and strategies for entire organization
 Spend most of their time planning and leading
 Communicate with key stakeholders—stockholders,
unions, governmental agencies, etc., company policies
 Use of multicultural and strategic action competencies
to lead firm is crucial
 Communication
Competency
Planning and
Teamwork
Administration
Competency
Managerial Competency
Effectiveness
Strategic
Multicultural
Action
Competency Self-Management Competency
Competency
 Six Core Managerial Competencies:
What It Takes to Be a Great Manager

 Communication Competency

 Planning and Administration Competency

 Teamwork Competency

 Strategic Action Competency

 Multicultural Competency

 Self-Management Competency
 Communication Competency
 Ability to effectively transfer and exchange information that
leads to understanding between yourself and others
 Informal Communication
 Used to build social networks and good
interpersonal relations
 Formal Communication
 Used to announce major events/decisions/ activities and
keep individuals up to date

 Negotiation
 Used to settle disputes, obtain resources, and exercise
influence
 Deciding what tasks need to be done, determining how they can be done,
allocating resources to enable them to be done, and then monitoring progress
to ensure that they are done

 Information gathering, analysis, and problem solving from employees and

customers

 Planning and organizing projects with agreed

upon completion dates

 Time management

 Budgeting and financial management

 Accomplishing tasks through small groups of
people who are collectively responsible and
whose job requires coordination
 Designing teams properly involves having
people participate in setting goals

 Creating a supportive team environment gets

people committed to the team’s goals

 Managing team dynamics involves settling

conflicts, sharing team success, and assign tasks
that use team members’ strengths
 Strategic Action Competency

 Understanding the overall mission and values of the

organization and ensuring that employees’ actions match
with them

 Understanding how departments or divisions of the

organization are interrelated

 Taking key strategic actions to position the firm for success,

especially in relation to concern of stakeholders

 Leapfrogging competitors
 Self-Management Competency

 Developing yourself and taking responsibility

 Integrity and ethical conduct

 Personal drive and resilience

 Balancing work and life issues

 Self-awareness and personal development

activities