CHAPTER 2

PRINCIPLES OF
MANAGEMENT
Principles Of Management
Principle
A principle is a fundamental statement of truth
that provides guidance to thought and action.
Principles of Management
Principles of management are broad and
general guidelines for managerial decision
making and behaviour (i.e. they guide the
practice of management).
Nature of Principles of
Management
Universal applicability
General Guidelines
Formed by practice and experimentation
Flexible
Mainly Behavioral
Cause and Effect relationship
Contingent
 Nature of Principles Of
Management
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.
 Nature of Principles Of
Management
4. Flexible: Which can be adapted and modified by the practicing managers as
per the demands of the situations as they are man-made 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

relationship between cause & effect 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”.
Significance of the Principles of
Management
Providing
managers with
useful insights
into reality Optimum
Management utilization of
training, resources &
education and effective
research administration

Fulfilling social Scientific

responsibility decisions

Meeting the
changing
environmental
requirements
 Significance of the Principles of
Management
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.
 Significance of the Principles of
Management
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. He
rose to the position of Managing Director in
1988. When the company was on the verge of
bankruptcy. He accepted the challenge and by
using rich and broad administrative experience,
he turned the fortune of the company. For his
contributions, he is well known as the “Father of
General Management”.
Principles of Management
developed by Fayol
 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, specialization,
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
 Principles of Management
developed by Fayol
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.

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.

6. Subordination of Individual Interest to General

Interest: The interest of an organization should take priority
over the interest of any one individual employee.
Difference between Unity of
Command and Unity of Direction
 Principles of Management
developed by Fayol
7. Remuneration of Employees: The overall pay and
compensation should be, fair to both employees and the
organization. The wages should encourage the workers to
work more and better.

8. Centralization and Decentralization: Centralization

means concentration of decisions making authority in few
hands at top level. Decentralization means evenly distribution
of power at every level of management. Both should be
completely centralized or completely be balanced as no
organization can be completely centralized or completely
decentralized.
 Principles of Management
developed by Fayol
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.

10. Order: A place for everything and everyone and everything

and everyone should be in its designated place. People & material
must be in suitable places at appropriate time for maximum
efficiency.
 Principles of Management
developed by Fayol
11. Equity: The working environment of any organization should be free from
all forms of discrimination (religion, language, caste, sex, belief or Basis Unity of
Command Unity of Direction nationality) and principles of justice and fair play
should be followed. No worker should be unduly favoured or punished.

12. Stability of Personnel: After being selected and appointed by rigorous

procedure, the selected person should be kept at the post for a minimum period
decided 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. Management should promote a team work.
 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.
Taylor conducted a number of experiments and came to conclusion
that workers were producing much less than the targeted standard
task. Also, both the parties – Management and workers are hostile
towards each other. He gave a number of suggestions to solve this
problem and correctly propounded the theory of scientific
management to emphasize the use of scientific approach in
managing an enterprise instead of hit and trial method. For his
contributions, he is well known as the “Father of the Scientific
Management”. Scientific Management attempts to eliminate wastes
to ensure maximum production at minimum cost
Principles of Scientific
Management
Science, not rule of Thumb

Harmony, Not discord

Cooperation not individualism

Development of each and every person to his or her greatest

Efficiency and Prosperity

Maximum, not Restricted Output

 Principles of Scientific Management
1. Science, not rule of Thumb: There should be scientific study
and analysis of each element of a job in order to replace the old rule of
thumb approach or hit and miss method. We should be constantly
experimenting to develop new techniques which make the work much
simpler, easier and quicker.

2. Harmony, Not discord: It implies that there should be mental

revolution on part of managers and workers in order to respect each other’s
role and eliminate any class conflict to realize organizational objectives.

3. Cooperation not individualism: It is an extension of the

Principle of Harmony not discord whereby constructive suggestions of
workers should be adopted and they should not go on strike as both
management and workers share responsibility and perform together.
 Principles of Scientific
Management
4. Development of each and every person to his or her
greatest Efficiency and Prosperity: It implies development of
competencies of all persons of an organization after their scientific
selection and assigning work suited to their temperament and abilities.
This will increase the productivity by utilizing the skills of the workers
to the fullest possible extent.

5. Maximum, not Restricted Output: Both the management and

workers should try to achieve maximum output in place of restricted
output. This will be beneficial to both the parties. Maximum output will
result in higher wages for the workers and greater profit for the
management. Increased productivity is also in the interest of the
consumers and the society at large.
Techniques Of scientific
Management
Functional Foreman-ship
Standardization &
Simplification of work
Method Study

Motion Study

Time study

Fatigue study
Differential piece wage
system
 Techniques Of scientific
Management
1. Functional Foreman-ship: Functional foreman-ship is a technique in
which planning and execution are separated. There are eight types of
specialized, professionals, four each under planning and execution who keep
a watch on all workers to extract optimum performance.

Planning In charges:
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.
 Techniques Of scientific
Management
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.
2. Standardization and Simplification of work:
Standardization refers to developing standards for every business
activity whereas Simplification refers to eliminating superfluous
varieties of product or service. It results in savings of cost of
labour, machines and tools. It leads to fuller utilization of
equipment and increase in turnover.
 Techniques Of scientific
Management
3. Method Study: The objective of method study is to
find out one best way of doing the job to maximize
efficiency in the use of materials, machinery, manpower
and capital.
(1) Which technique of scientific management is being
violated here? (Hint: Functional Foreman ship.)
(2) Write one consequence of this violation.
4. Motion Study: It is the science of eliminating
wastefulness resulting from using unnecessary, ill-
directed and inefficient motions by workers and
machines to identify best method of work.
Techniques Of scientific
Management
5 Time study: It determines the standard time taken to
perform a well-defined job. The objective of time study
is to determine the number of workers to be employed,
frame suitable incentive schemes & determine labour
costs.

6. Fatigue study: Fatigue study seeks to determine time

and frequency of rest intervals in completing a task. The
rest interval will enable workers to regain their lost
stamina thereby avoiding accidents, rejections and
industrial sickness.
 Techniques Of scientific
Management
7. Differential piece wage system: This system links wages and
productivity. The standard output per day is established and two
piece rates are used: higher for those who achieve upto and more
than standard output i.e. efficient workers and lower for inefficient
and slow workers. Thus, efficient workers will be rewarded &
inefficient will be motivated to improve their performance.

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.
 Basis Fayol Taylor
He developed the theory of He developed the concept of
1. Nature of Functional management or Scientific management.
Research Management process

His principles are concerned His principle and techniques

2. Concern with management efficiency are concerned with workers
efficiency

He designed principles for top He designed principles for

3. Level level of management. lower level of management.

Improving overall For him increasing

4. Focus administration by observing productivity through work
certain principles was his main simplification was main focus.
focus

He developed the personality He developed the personality

5. Personality of a researcher and practioner of scientist and was called as
and was called as ‘father of ‘father of scientific
general management. management
 Hid main contribution was to He provided a basis on
6. Major produce a systematic theory of accomplishment on production
contribution management with the help of
fourteen principles of general
line with the help of scientific
techniques and management
management.

He gave due emphasis to He ignored the human element

7. Human human elements by suggesting and emphasized more on
element principles like equality,
initiative, fair remuneration
increasing productivity.

etc.

His principles were flexible He was rigid in his approach

8. Rigidity and and he felt that there should be
flexibility no deviation from fixed
standards

His principles are applicable to His principles are applicable to

9. Applicability business as well as non- production and manufacturing
business organizations i.e. are i.e. are applicable to specific
applicable universally. situations

He strictly follow this He did not follow this

10. Unity of principles i.e. one boss for one principle instead he insisted on
command employee. minimum eight bosses.