CHAPTER 2-PRINCIPLES OF MANAGEMENT
Concept of Principles of Management
Principles of Management are the broad and general guidelines for managerial
decision making, behaviour and action.
The management principles are derived from observation, analysis, experimental
studies and personal experiences of the managers.
Nature of Principles of Management
The nature of principles of management can be described in the following points:
1. Universal applicability i.e. they can be applied in all types of organizations,
business as well as non-business, small as well as large enterprises.
2. General Guidelines:They are general guidelines to action and decision
making however they do not provide readymade solutions as the business
environment is ever changing or dynamic.
3. Formed by practice and experimentation:They are developed after
thorough research work on the basis of experiences of managers.
4. Flexible: They can be adapted and modified by the practicing managers as
per the demands of the situations as they are manmade principles.
5. Mainly Behavioural:Since the principles aim at influencing complex human
behaviour they are behavioural in nature.
6. Cause and Effect relationship:They intend to establish cause & effect
relationship so that they can be used in similar situations.
7. Contingent:Their applicability depends upon the prevailing situation at a
particular point of time. According to Terry, “Management principles are
‘capsules’ of selected management wisdom to be used carefully and
discretely”.
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Significance of the Principles of Management
The significance of principles of management can be derived from their utility which
can be understood from the following points:
1. Providing managers with useful insights into reality:Management
principles guide managers to take right decision at right time by improving
their knowledge, ability and understanding of various managerial situations
and circumstances.
2. Optimum utilization of resources and effective administration:
Management principles facilitate optimum use of resources by coordinating
the physical, financial and human resources. They also help in better
administration by discouraging personal prejudices and adopting an objective
approach.
3. Scientific decisions: Decisions based on management principles tend to
be more realistic, balanced and free from personal bias.
4. Meeting the changing environmental requirements: Management
principles provide an effective and dynamic leadership and help the
organization to implement the changes.
5. Fulfilling social responsibility: Principles of management not only help in
achieving organizational goals but also guide managers in performing social
responsibilities. Example: “Equity” and “Fair” remuneration.
6. Management training, education and research: Management principles
are helpful in identifying the areas in which existing and future managers
should be trained. They also provide the basis for future research.
Fayol’s Principles of Management
About Henry Fayol: Henry Fayol (1841-1925) got degree in Mining Engineering and
joined French Mining Company in 1860 as an Engineer. For his contributions, he
is well known as the “Father of General Management”.
Principles of Management developed by Fayol
1. Division of work: Work is divided in small tasks/job and each work is done
by a trained specialist which leads to greater efficiency, specialisation,
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increased productivity and reduction of unnecessary wastage and
movements.
2. Authority and Responsibility: Authority means power to take decisions
and responsibility means obligation to complete the job assigned on time.
Authority and responsibility should go hand in hand. Mere responsibility without
authority, makes an executive less interested in discharging his duties.
Similarly giving authority without assigning responsibility makes him arrogant
and there is fear of misuse of power.
3. Discipline: It is the obedience to organizational rules by the subordinates.
Discipline requires good supervisors at all levels, clear and fair agreements
and judicious application of penalties.
4. Unity of Command: It implies that every worker should receive orders and
instructions from one superior only, otherwise it will create confusion, conflict,
disturbance and overlapping of activities.
Superior Superior 2
Subordinate
Unity of Command Multiplicity of Command
5. Unity of Direction: Each group of activities having the same objective must
have one head and one plan. This ensures unity of action and coordination.
Difference between Unity of Command and Unity of Direction
Basis Unity of Command Unity of Direction
(1) Meaning One subordinate should Each group of
receive orders activities
from & should be having same
responsible to only objective, must
one superior. have one head.
(2) Aim Prevents dual subordination. Prevents
overlapping of
activities.
(3) Implications Affects an individual Affects the entire
employee. organization.
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6 Subordination of Individual Interest to General Interest: The interest ofan
organization should take priority over the interest of any one individual employee.
Forex’ a manager cancels his pleasure trip in under to attend animportant meeting
in the company.
7. Remuneration of Employees: Remuneration of employees should be just
and equitable so as to give maximum satisfaction to both the employees
and organisation.
The employees should be paid fair wages/salaries which would give at least
a reasonable standard of living. At the same time, it should be within the
paying capacity of the company.
8. Centralisation and Decentralisation: Centralisation means concentration
of decisions making authority in few hands at top level. Decentralisation
means evenly distribution of power at every level of management. Both should
be balanced as no organisation can be completely centralised or completely
decentralised. Small organisations can have centralisation where owner
has complete authority over the business and no decision making power is
given to the subordinates. In large organisations top management takes
only strategic/ important decisions and operational authority is given to
middle and lower level managers. The panchayat system in our country is a
good example of decentralisation where the government being the big
organisation gives thedecision taking rights to its subordinates i.e., village
Panchayat.
9. Scalar Chain: The formal lines of authority between superiors and
subordinates from the highest to the lowest ranks is known as scalar chain.
This chain should not be violated but in emergency employees at same level
can contact through Gang Plank by informing their immediate superiors.
B E
C F
D G
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Gang Plank
10. Order: According to the principle of order, a right person should be placed at
the right job and a right material should be placed at the right place. According
to Fayol, every enterprise should have two different orders – material order
for physical resources and social order for human resources.
11. Equity:The working environment of any organization should be free from all
forms of discrimination (religion, language, caste, gender, belief or nationality)
and principles of justice and fair play should be followed. No worker should
be unduly favoured or punished.
12. Stability of Personnel:According to this principle, employees once selected,
should be kept at their post/position for a minimum fixed tenure. They should
be given reasonable time to show results.
13. Initiative:Workers should be encouraged to develop and carry out their plan
for improvements. Initiative means taking the first step with self-motivation.
It is thinking out and executing the plan.
14. Espirit De Corps: Management should promote team spirit, unity and
harmony among employees. This encourages mutual trust and
belongingness, which results in minimum need for using penalties.
Taylor’s Scientific Management
Fredrick Winslow Taylor (1856-1915) was a person who within a very short duration
(1878-1884) rose from ranks of an ordinary apprentice to chief engineer in Midvale
Steel Company, U.S.A. For his contributions, he is well known as the “Father of
the Scientific Management”.
SCIENTIFIC MANAGEMENT
Meaning: Conduct of business activities according to standardised tools, methods
and trained personal so as to have increased output through effective and optimum
utilisation of resources. Hence it stresses that there is always one best way of
doing things.
Scientific Management attempts to eliminate wastes to ensure maximum production
at minimum cost.
Principles of Scientific Management
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1. Science, not rule of Thumb:
There should be scientific study and analysis of each element of job rather
than using intuition, experience or adopting old rule of thumb approach on a
hit and miss method. Encourage “thinking before doing” and determining
standard output.
2. Harmony, not discord:
There should be complete harmony and proper understanding between
management and workers in achieving the organisation goals. For this he
emphasised mental revolution i.e., a complete change in mental outlook and
attiude of workers and management towards one another from competition
to cooperation. The management should create pleasant working conditions
and workers should work with full loyalty. Instead of fighting over distribution
of profits, they must focus attention on increasing it.
3. Cooperation not individualism:
Taylor emphasised on the importance of cooperative group efforts between
the management and workers in achieving the organisation’s goal and not
individualism. Both should realise that they need each other.
4. Development of workers to their greatest efficiency and prosperity:
The management should scientifically select the workers; assign job as per
heir physical, mental and intellectual capabilities; and train them as per thejob
requirement to increase their efficiency.
Techniques of Scientific Management
Taylor gave the following techniques for implementing the principles of scientific
management.
A. Functional Foremanship
• Supervision is to be divided into several specialized functions and each
function to be entrusted to a special foreman.
• Each worker will have to take orders from eight foreman in the related process
of function of production.
• Stress on separating planning function from execution function.
Factory Manager
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Planning Incharge
Production Incharge
Instruction Route Time & cost
Disciplinarian Speed Gang Repair
Card cle rk Clerk clerk Inspector
Boss Boss Boss
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Workman
Planning Incharges :
1. Route Clerk to specify the exact sequence and route of production.
2. Instruction card clerk is responsible for drafting instructions for the workers.
3. Time and cost clerk to prepare time and cost sheet for the job.
4. Shop Disciplinarian to ensure discipline and enforcement of rules and
regulations among the workers.
Production Incharges:
1. Gang boss is responsible for keeping tools and machines ready for operation.
2. Speed boss is responsible for timely and accurate completion of job.
3. Repair boss to ensure proper working conditions of tools and machines.
4. Inspector to check quality of work.
B. Standardisation and Simplification of work:
• Process of setting standards of every business activity to maximise
output is called standardisation.
• Simplification is eliminating unnecessary varieties, sizes and grades
of product manufactured in the organisation.
C. Method study:
• Finding one best way of doing a job.
• Critical analysis is made for plant layout, product design, material
handling and work processes using techniques like process chart,
operations research etc.
D. Motion Study
• Making a thorough analysis of various motions being performed by a
worker while doing a particular task.
• Identifying and determining the ideal productive movements.
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• Eliminate the unproductive movements and equipments.
E. Time study
• It is the technique used to determine the standard time taken by the
workmen with reasonable skills and abilities to perform a particular task.
• Here the job is divided into series of elements and the time required to
complete each element idealistically is recorded using a stop watch.
F. Fatigue study
• Determines the amount and frequency of rest intervals required in
completing a task.
G. Differential Piece Wage System
• Evolve a system wherein the efficient and inefficient workers are paid
at different rates. (as financial incentives act as motivators)
• First a standard task is establishedwith the aid of time and motion study,
then two rates are established. Higher, when standard output is produced
and lower, when the standard is not met.
For example: Standard task is 10 units. Rates are: Rs 50 per unit for
producing 10 units or more and Rs 40 per unit for producing less than 10
units
• Worker A produces 11 Units; he gets Rs 550 (11 units’ x 50 per unit)
• Worker B produces 09 units; he gets Rs 360 (9 units’ x 40 per unit)
• This difference of Rs 190 will motivate B to perform better.
H. Mental Revolution
It involves a complete change in mental outlook and attitude of workers and
management towards one another from competition to cooperation. The
management should create pleasant working conditions & workers should
work with devotion and loyalty. Instead of fighting over distribution of profits,
they must focus attention on increasing it.
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