Lecture Notes: 02: Module 1: Introduction to CM: Concept of Management, Principles

of Management

1.1 .2 Threefold Concept of Management:

Management is a process of planning, decision making, organizing, leading,
motivation and controlling the human resources, financial, physical, and information
resources of an organization to reach its goals efficiently and effectively.
Threefold Concept of Management
To understand the definition of management and its nature, a threefold concept of
management for emplacing a broader scope for the viewpoint of management.
Management is an Economic Factor
Management is a System of Authority
Management is a Class and Status System

Management is an Economic Factor:

For an economist, management is one of the factors of production together with

land, labor, and capital.

As the industrialization of a nation increases, the need for management becomes

greater.

The managerial resources of a firm determine, in large measure, its productivity and
profitability. Executive development, therefore, is more important for those firms in
a dynamic industry in which progress is rapid.

Management is a System of Authority

From an administrator’s point of view, management is a system of authority.

Historically, management first developed an authoritarian philosophy.

Later on, it turned paternalistic (autonomy)

Still, later, constitutional management emerged, characterized by a concern for

consistent policies and procedures for dealing with the working group.

Finally, the trend of management turned towards a democratic and participatory

approach.

Modern management is nothing but a synthesis of these four approaches to authority.

 Management is a Class and Status System

As viewed by a sociologist, management is a class-and-status system.

The increase in the complexity of relationships in modern society demands that

managers become elite of brain and education.

Entry into this class of executives is being more and more dependent on excellence
in education and knowledge rather than family or political connections.

Some scholars view this development as a “Managerial Revolution”.

But you might have a different point of view about management but the purpose of it
remains static; reach the goal effectively and efficiently.

Management as a systematic process of planning, organizing, staffing, leading and

controlling. As managers, people carry out the managerial functions of planning,
organizing, staffing, leading, and controlling.

The concepts and activities of management apply to all levels of management, as

well as to all types of organizations and activities managed. The aim of all managers
is universal: to create a surplus. Management identifies a special group of people
whose job is to direct the effort and activities of other people towards common
objectives. Management is concerned with productivity, thereby implying efficiency
and effectiveness .Management as a concept has broadened in scope with the
introduction of new perspectives by different fields of study, such as economics,
sociology, psychology and the like.

1.1.3 Features of Management

Management is the process of setting and reaching goals effectively and efficiently.
Management process has some qualities or features;

1)Management is Associated with Group Efforts

2)Management is Purposeful

3)Management is Accomplished Through the Efforts of Others

4)Management is Goal-oriented

5)Management is Indispensable

6)Management is Intangible

7)Management can Ensure Better Life

1) Management is Associated with Group Efforts: It is usual to associate
management with a group. Although people as individuals manage many personal
affairs, the group emphasis on management is universal. Every enterprise entails the
existence of a group to achieve goals. It is now established that goals are achieved
more readily by a group than by any one person alone.

2) Management is Purposeful: Wherever there is management, there is a purpose.

Management deals with the achievement of something definite expressed as a goal
or objective. Management success is commonly measured by the extent to which
objectives are achieved. Management exists because it is an effective means of
getting the necessary work accomplished.

3) Management is Accomplished Through the Efforts of Others: Management is

sometimes defined as “getting things done through others’ efforts.”Besides the
manager of a firm, there may be accountants, engineers, system analysts, salesmen
and a host of other employees working but it is the manager’s job to integrate all
their activities. Thus it can well be said that participation in management necessitates
relinquishing the normal tendency to perform all things oneself and getting tasks
accomplished through group efforts.

4) Management is Goal-oriented: Managers focus their attention and efforts on

bringing about successful action. Successful managers have an urge for
accomplishment. They know when and where to start, what to do with keeping
things moving, and how to follow a goal-oriented approach.

5) Management is Indispensable: Management can neither be replaced nor

substituted by anything else. Even the computer which is the wonderful invention of
the twentieth century can only aid but not replace management. We know that the
computer is an extremely powerful tool for management. It can widen a manager’s
vision and sharpen his insight by supplying more and faster information for making
key decisions. The computer has enabled the manager to conduct analysis far beyond
the normal analytical capacities of man. But what happens, in reality, is that the
computer can neither work by itself nor can it pass any judgment. The manager plays
his/her role by providing judgment and imagination as well as interpreting and
evaluating what the information/data mean in each case.

6) Management is Intangible: Management is often called the unseen force; its

presence is evidenced by the results of its efforts – motivation among employees,
discipline in the group, high productivity, adequate surplus, etc.Conversely, the
identity of management may also be felt by its absence or by the presence of its
direct opposite mismanagement. The consequence of mismanagement is anybody’s
guess.

7) Management can Ensure Better Life:A manager can do much to improve the
work environment, stimulate people to perform better, achieve progress, bring hope
and accomplish better things in life. The study of management has evolved into more
 than just the use of means to achieve ends; today it includes moral and ethical
questions concerning the selection of the right ends towards which managers should
strive. Management is the science and art of getting people together to accomplish
desired goals and objectives by coordinating and integrating all available resources
efficiently and effectively.

1.2 Principles of Management:

Principle: It refers to a statement which reflects the fundamental truth about some
phenomenon based on cause and effect relationship.
(A cause-effect relationship is a relationship in which one event causes another to
happen. ... The cause must occur before the effect. Whenever the cause occurs,
the effect must also occur. There must not be another factor that can explain
the relationship between the cause and effect.)
Management Principles: These are the statements of fundamental truth; they serve as
a guide to thought and actions for managerial decision actions and their execution.
The principles of management are the means by which you actually manage, that is, get
things done through others—individually, in groups, or in organizations.
Formally defined, the principles of management are the activities that “plan, organize,
and control the operations of the basic elements of [people], materials, machines,
methods, money and markets, providing direction and coordination, and giving
leadership to human efforts, so as to achieve the sought objectives of the enterprise.”
For this reason, principles of management are often discussed or learned using a
framework called P-O-L-C, which stands for planning, organizing, leading, and
controlling.
Derivation of Management Principles
Management principles have been derived on the basis of
(i) Deep observations
(ii) Repeated experiments

1.2.1 Nature of Principles of Management

(i) Universal Applicability The principles of management are universal in nature

that means they can be applied to all types of organisations irrespective of their size
and nature.

(ii) General Guidelines Management principle give guidelines to solve the

problems; these principles do not provide ready made solution for all the problems.

(iii) Formed by Practice and Experiments The management principles are

developed only after deep and through research work.

(iv) Flexibility These are not set of rigid statements. These can be modified by the
managers who are using them.

(v) Mainly Behavioural Management principles are formed to guide and influence
the behaviour of employees.
 (vi) Cause and Effect Relationship Management principles are based on cause and
effect that means these principles tell us if a particular principle is applied in a
situation, what might be the effect.

(vii) Contingent Management principles are contingent or dependent upon the

situation prevailing in organisation.

1.2.2 Significance of Principles of Management:

(i) Providing managers with useful insight into reality

(ii) Optimum utilisation of the resources

(iii) Scientific decisions

(iv) Meeting changing environment requirements

(v) Fulfilling social responsibility

(vi) Management training, education and research

1.3 Contribution by eminent personalities towards growth of management thoughts:

1) Henri Fayol: (29 July 1841–19 November 1925)

Henri Fayol pioneered the concept of management as coordinated functions and a

comprehensive framework from which management could be studied and developed.
The fundamental notion of principles of management was developed by French
management theorist Henri Fayol (1841–1925).
He is credited with the original planning-organizing-leading-controlling
framework (P-O-L-C), which, while undergoing very important changes in content,
remains the dominant management framework in the world.
As one of the oldest and most popular approaches to management thought; Henri
Fayol’s (29 July 1841–19 November 1925) theory holds that administration of all
organizations—whether “public or private”, or “large or small” requires the same
rational process or functions. It has rightly been said by some scholars that “perhaps
the real father of modern management theory is the French industrialist Henri
Fayol”. 1916 he published “Administration Industrielle et Generale”.
It was translated and republished in English in 1929.In 1949 His book was published
in the USA and from then his ideas became famous. In the world, his book left a
permanent mark on management thinking. A successful industrialist, Fayol headed a
steel and coal combine in France.
He is by now considered the father of the Universal process of Operational
management or Administrative management theory because he made universal
generalizations about management based on his keen insight and practical
management experience. As opposed to Taylor, Fayol endeavours to deal with
“classical administration.” He focuses his attention on the enterprise as a whole
rather than on a single segment of it.
He pioneered the concept of viewing management as being made up of functions,
and his work supplied a comprehensive framework from which management could
be studied and developed.
He also repeatedly emphasized that his principles apply not only to business but also
to political, religious, philanthropic, military and other undertakings.
Industrial Activities Identified by Fayol
Fayol identifies the following six major activities of any industrial or business
organization:
Technical (production and manufacturing);
Commercial (buying, selling and exchanging);
Financial (search for optimum use of capital);
Security (safeguarding property and people);
Accounting (including statistics); and
Managerial.
Specifying the functions or elements of the management process
While pointing out the existence of these activities in the business of any kind or
size, Fayol particularly stresses the analysis of the sixth, devoting a substantial
portion of his book (mentioned earlier) to this aspect of management.
He specified 5 managerial functions;
Planning.
Organizing.
Commanding.
Coordinating.
Controlling.
Fayol’s Principles of Management
In addition to these management activities, Fayol identified fourteen universal
principles of management which are aimed at showing managers how to carry out
their functional duties. He followed them. Fayol thought that the application of these
principles should be flexible enough to match each specific organizational situation.
Subsequently, however, the rigid application of these functions by managers came
under criticism. Fayol suggested the “management” be accepted as a body of
knowledge and suggested to include it in college and universities as a field of study.
His contention that management is a continuous process beginning with planning
and ending with controlling also remains popular today and can be found in nearly
 all management texts. It’s him who we should thank for the place where
“management” is now.

14 Management Principles by Henri Fayol:

14 management principles by Henri Fayol are universally accepted guidelines for

managers to do their job according to their responsibility.
14 management principles are:
1) Division of Work, 2) Balancing Authority and Responsibility.
3) Discipline, 4) Unity of Command.
5)Unity of Direction, 6) Subordination of Individual Interests to the General Interest.
7) Remuneration, 8) Centralization.
9) Scalar Chain, 10) Order.
11) Equity, 12) Stability of Tenure of Personnel.
13) Initiative, 14) Esprit De Corps.
Henri Fayol, a French industrialist, is now recognized as the Father of Modern
Management. In the year 1916 Fayol wrote a book entitled “Industrial and General
Administration”. In this book, he gave the 14 Principles of Management.
1. Division of Work: Dividing the full work of the organization among individuals
and creating departments is called the division of work. Division of work leads to
specialization, and specialization helps to increases efficiency and efficiency which
results in improvements in the productivity and profitability of the organization.

2. Balancing Authority and Responsibility: Authority must be equal to

Responsibility. According to Henri Fayol, there should be a balance between
Authority (Power) and Responsibility (Duties).The right to give orders should not be
considered without reference to responsibility. If the authority is more than
responsibility then chances are that a manager may misuse it. If responsibility is
more than authority then he may feel frustrated.

3. Discipline: Outward mark of respect in accordance with formal or informal

agreements between a firm and its employees. Discipline means respect for the rules
and regulations of the organization. Discipline may be Self-discipline, or it may be
Enforced discipline. No slacking or bending of rules, not allowed in any
organization. The works must respect the rules that run the organization. To establish
discipline, good supervision and impartial judgment are needed.

4. Unity of Command: According to this principle, a subordinate (employee) must

have and receive orders from only one superior (boss or manager).To put it another
way, a subordinate must report to only one superior. It helps in preventing dual
subordination. This decreases the possibilities of “Dual subordination” which creates
a problem is a function of managers.
5. Unity of Direction: One head and one plan for a group of activities with the same
objective. All activities which have the same objective must be directed by one
manager, and he must use one plan. This is called the Unity of Direction.

For example, all marketing activities such as advertising, sales promotion, pricing
policy, etc., must be directed by only one manager. He must use only one plan for all
the marketing activities. Unity of direction means activities aimed at the same
objective should be organized so that there are one plan and one person in charge.

6. Subordination of Individual Interests to the General Interest: The interest of

one individual or one group should not prevail over the general good. The individual
interest should be given less importance, while the general interest should be given
the most importance. If not, the organization will collapse. The interest of the
organizational goal should not be sabotaged by the interest of an individual or on the
group.

7. Remuneration: Remuneration is the price for services received. Pay should be

fair to both the employee and the firm. If an organization wants efficient employees
and best performance, then it should have a good remuneration policy. This policy
should give maximum satisfaction to both employers and employees. It should
include both financial and non-financial incentives.

8. Centralization: It is always present to a greater or lesser extent, depending on the

size of the company and the quality of its managers. In centralization, the authority is
concentrated only in a few hands. However, in decentralization, the authority is
distributed to all the levels of management. No organization can be completely
centralized or decentralized. If there is complete centralization, then the subordinates
will have no authority (power) to carry out their responsibility (duties). Similarly, if
there is complete decentralization, then the superior will have no authority to control
the organization. Therefore, there should be a balance between centralization and
decentralization. The degree to which centralization or decentralization should be
adopted depends on the specific organization, but managers should retain final
responsibility but should give subordinates enough authority to do the tasks
successfully.

9. Scalar Chain: The chain of command, sometimes called the scalar chain, is the
formal line of authority, communication, and responsibility within an organization.
The chain of command is usually depicted on an organizational chart, which
identifies the superior and subordinate relationships in the organizational structure.
Or it is the line of authority from top to bottom of the organization. This chain
implements the unity-of-command principle and allows the orderly flow of
information. Under the unity of command principle, the instructions flow downward
along the chain of command and accountability flows upward. More clear-cut the
chain of command, the more effective the decision-making process and the greater
the efficiency.

10. Order: A place for everything and everything in its place’ the right man in the
right place. There should be an Order for material/things and people in the
organization. Order for things is called Material Order and order for people is called
‘Social Order’. Material Order refers to “a place for everything and everything in its
place.”Social Order refers to the selection of the “right man in the right place”. There
must be an orderly placement of the resources such as Men and Women, Money,
Materials, etc. Human and material resources must be in the right place at the right
time. Misplacement will lead to misuse and disorder.

11. Equity: While dealing with the employees a manager should use kindliness and
justice towards employees equally. Equity is a combination of kindness and justice.
It creates loyalty and devotion in the employees toward the organization. The equity
principle suggests that the managers must be kind as well as equally fair to the
subordinates.

12. Stability of Tenure of Personnel: Although it could take a lot of time,

Employees need to be given fair enough time to settle into their jobs. An employee
needs time to learn his job and to become efficient. The employees should have job
security because instability leads to inefficiency. Successful firms usually had a
stable group of employees.

13. Initiative: Without limits of authority and discipline, all levels of staff should be
encouraged to show initiative. Management should encourage initiative. That is, they
should encourage the employees to make their own plans and to execute these plans.
This is because an initiative gives satisfaction to the employees and brings success to
the organization. It allows the subordinates to think out a plan and do what it takes to
make it happen.

14. Esprit De Corps: Esprit de Corps means “Team Spirit”. Therefore, the
management should create unity, co-operation, and team-spirit among the
employees. They should avoid dividing and rule policy. Harmony, cohesion among
personnel. It’s a great source of strength in the organization. It is a quality in every
successful business.

These principles are guidelines for every management function. The manager must
act according to the 14 principles of management; in order to reach the goal and
create a surplus. These 14 management principles of Henri Fayol are universally
accepted. They work as a guideline for managers to do their job according to their
responsibility.
2) Frederick Winslow Taylor (March 20, 1856 – March 21, 1915) :

He was an American mechanical engineer. He was widely known for his methods to
improve industrial efficiency. He was one of the first management consultants.
Taylor was one of the intellectual leaders of the Efficiency Movement and his ideas,
broadly conceived, were highly influential in the Progressive Era (1890s–1920s). In
1911, Taylor summed up his efficiency techniques in his book The Principles of
Scientific Management which, in 2001, Fellows of the Academy of Management
voted the most influential management book of the twentieth century.

His pioneering work in applying engineering principles to the work done on the
factory floor was instrumental in the creation and development of the branch of
engineering that is now known as industrial engineering. Taylor made his name, and
was most proud of his work, in scientific management; however, he made his fortune
patenting steel-process improvements.

Frederick Winslow Taylor (1856-1915) is generally acknowledged as “the father of

scientific management.” The core ideas of scientific management were developed by
Taylor in the 1880s and 1890s and were first published in his monographs; “A Piece
Rate System” (1895), “Shop Management” (1903) and “The Principles of Scientific
Management” (1911).

The terms “scientific management” is also known as “Taylorism”. Taylorism can be

defined as the division of labour force pushed to its limit, with a consequent
deskilling of the worker and dehumanization of the workers and the workplace.

In management literature today, the greatest use of the term “scientific management”
is with reference to the work of Taylor and his disciples as classical approaches of
management. Because it’s no longer being used in management areas but still
respected for its seminal value. Because of an eye problem, Frederick Winslow
Taylor could not attend Harvard University. As a result, he started working as a
common labourer in a small machine shop in Philadelphia, USA. Later on, he
worked as an apprentice, a foreman, a master mechanic and rose to the eminence of
a chief engineer of a steel company after obtaining a degree in engineering through
evening study. This varied experience gave him ample opportunity to have firsthand
knowledge and intimate insight into the problems and attitude of workers and to
explore great possibilities for improving the qualities of management in the
workplace. Wherever he worked, he found a very ineffective use of employees,
unsystematic methods of work, utterly poor co-operation between management and
labour. He also observed gross inefficiency, waste and widespread output restriction
among workers which he termed “systematic soldering”.

Taylor found out that there is a difference among the workers in terms of skill,
talent, dedication to work. He also found that workers compensation has a link to the
work rate he puts in.

He pointed out that the methods of handling labour were actually slowed the
productivity and its efficiency. So he proposed that the labour force should be paid a
fair amount of remuneration and there should be a window in work time for workers
to rest and recover from the physical and mental fatigue or exhaustion.

Nevertheless, he had a condescending view of less intelligent workers, whom he

sometimes compared to “draft animals”. His methods faced with challenges and
criticism. Hence Taylor dedicated himself to the relentless pursuit of “finding a
better way” and developing and practicing the “science” of work—the underlying
laws or principles that govern various activities. He attempted to do it by using
systematic study of time, motion, and fatigue involved in work with a view to
identifying the best way of doing a job.

Taylor’s major concern throughout his life was to increase efficiency which he
considered the best recipe to serve the competing interests of both managers and
workers for a larger share of a fixed economic pie. To him, the solution lies in
increasing the size of the pie by raising productivity through scientific management.
He called for a “mental revolution” or a radical change of mind among workers and
management in order to fuse the interests of both groups into a mutually rewarding
one.

Mental Revolution and Taylor’s Principles: Mental revolution, propounded by

Taylor, was based on 5 vital principles:

1) Replacing rules of thumb with science (organized knowledge).Obtaining harmony

in the group action, rather than discord.

2) Achieving cooperation of human beings, rather than chaotic individualism.

3) Working for maximum output, rather than restricted output.

4) Developing all workers to the fullest extent possible for their own and their
company’s highest prosperity.

5) Taylor’s theory of scientific management gave rise to a host of disciples who took
up the task of spreading the “gospel of efficiency.”
Carl Barth, Henry Gantt, Frank and Lillian Gilbreth, Harrington Emerson and Morris
Cook are his prominent followers who made valuable contributions to the growth of
management in a scientific manner. The essence of this school of thought is to make
a constant endeavour to find better means of management using scientific methods.

Historically, it is associated with economic considerations such as cost-effectiveness,

efficiency, and productivity.