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Contents ​ ecruitment: Meaning

Meaning and ​Importance ​13. R

and ​Sources ​14. ​Selection: ​Meaning and ​Process ​15.
Ti"aining and Development
PART:A: ​Principles ​and ​Rrnctions ​of Management ​Unit ​- ​I ​1. Unit ​- ​7 ​16. ​Directing:
Management ​: ​An ​Introduction ​2. M Importance and Principles 1 ​ 7. ​Supervision: Meaning an
​ anagement ​As Science, ​Art ​and ​Profession
Importance 1 ​ 8. ​Motivation: ​Meaning and Importance ​1

3. ​Levels ​and ​Functions ​of ​Management ​4. ​Coordination:

Leadership: Nature
Meaning and Importance ​20. ​Communicati
Importance ​and Barriers
Unit ​- ​2 ​5. ​Principles of Management: ​Nature ​and ​Significance ​6.

Scientific ​Management: Principles ​and Techniques

Unit ​- ​3 ​7. ​Business ​Environment ​: ​Importance and ​Dimensions ​ 25

105. ​tt7 1

Unit ​- ​4 ​8. P​ lanning

and ​Types ​of ​Plans t37 ​t46 ​156 ​r62
Unit ​- ​5 ​9. ​Organising: ​Importance
and ​Process ​10. ​Organisation Structure: Meaning ​and ​fyp"t ​I ​l. 172 ​178
Delegation ​of ​Authority a​ nd Decentralisa[ion 182 ​195 ​202

Unit ​- ​6 ​12. ​Staffing:

​ lg
Unit ​- ​8 ​21. ​Controlling: Importance ​and ​Process Z

PARTIB: Business ​Finance and M

​ arketing

Unit ​- ​9 ​1. ​2. 3. Planning Financial

​ Management, Financial ​Decisions ​and

Financial ​Capital ​Structure: ​Meaning and ​

Determinants ​Fixed ​and ​Working ​Capital
​ Zg ​zbl 2​ 62
: ​Meaning and ​Determinants Z
Model ​CBSE Sample T
​ est Papers ​Question ​ Paper-2009 ​(
Unit ​- ​l0 ​4. ​5. ​Stock Concept

Question Papers

​ ​Financial ​Meaning Market
Exchange: of ​ ​and ​Functions
270 ​281

Unit ​- ​tl ​6. ​7. 8. 9. Marketing

​ ​and Markering ​Mix ​Advertising
295 328 ​336 342
: ​Role, ​Limitations ​and ​Objections P
​ ersonal ​Selling :​ ​Meaning and

Importance ​Sales ​Promotion and Publicity

349 ​367 ​381

Unit - ​12 ​10. ​Consumer Protection: Importance and ​Ways ​. ​* x​


​ ll ​I ​llIR ​0 II ​U ​GII ​011

MAI|AG ​Etll ​E ​lll: A

Learning Obiectives ​After ​studying ​this

chapter, you ​will ​be acquainted ​with: ​o M

​ anagement: ​Concept
o ​Det'initions of ​Management ​o ​Charocteristics of
​ bjectiues of ​Management ​c l​ mportance
Management ​o O
of ​Management

I ​Management: Concept
Detailed ​description ​about ​the ​Management ​concept ​has ​been ​given ​in the ​following ​Analysis Box:

4 ​Business ​Studies

Managemenl An Introduction

Business ​Sfudies
Management: ​An ​Introduction

o ​Definitions of ​Management

Following ​are the ​main definitions of ​management. ​

(1) A​ ccording ​to ​Harold Koontz, ​"Monagement ​is the ​art ​ot' ​getting ​things
organised ​groups." ​
done through ​others ​ond ​with Jormally ​ (2) ​According ​to ​George ​R. ​Terry, ​"Management ​is ​a ​distinct process
consisfing ​oJ ​planning, ​orgonising ​actuating ​ond controlling; ufi/ising i​ n e​ och ​both ​science ​and art, ​ond ​followed in
​ ​order ​to ​occomplish

pr ​e- ​determined ​obj ​ectiu ​es. ​" ​

(3) A​ ccordingto F.W. ​Taylor, ​"Manogementisthe ​artof ​o k​ nowing ​whot ​you ​want ​to do ond ​then seeing thot
they do it in ​the ​best ​and ​the cheapest ​way." (4)
​ ​ ccording ​to ​Peterson ​and ​Plowman ​, ​"Manogement ​may ​be ​det'ined ​osthe ​process by means ​oJ

which ​the ​purpose ​and ​objectiues ​of ​a ​porticular human group ​are ​determined, clarified and ​et'Jectuated." ​
o ​Characteristics ​of
On ​the analysis of ​various definitions, ​the ​following ​characteristics ​of ​management emerge: ​(1) ​Management ​is ​Goal Oriented
Process: ​No ​goal in the ​hand-no ​need ​of ​management. In other words, we need management when ​we ​have ​some goals ​to ​be ​achieved.
A manager ​on ​the ​basis ​of h​ is ​knowledge and ​experience ​ties ​to a​ chieve ​the ​goals ​which ​are ​already decided. Hence, nothing ​is
wrong to ​say ​that management ​is ​a ​goal oriented ​process.
(2) Management ​is ​all P ​ ervasive: Anything ​minus management ​is ​nothing or ​zero. ​Here by anything we mean all
types ​of ​activities-business ​and ​non-business. ​If w​ e deduct management out ​of ​these ​activities, ​the result ​will ​be ​failure ​or zero. ​It ​means
management ​is ​necessary ​to ​conduct ​any type ​of a​ ctivities. ​Hence, it ​is ​pervasive ​or ​universal.
8 ​Business ​Studies

(3) ​Management is Multidimensional: ​The management i​ s ​a ​three ​dimensional activity: ​(i) ​Management ​of ​Work: ​Every

organisation ​is ​established ​for doing ​some ​work, like ​a school provides education, ​a ​hospital ​heats ​patients, ​a ​factory produces, ​etc. ​Of

​ anagement. (ii)
these no ​work ​can be ​completed ​satisfactorily ​without m ​ ​ anagement ​of ​People: ​Each ​organization ​is ​established ​for

doingsome workand ​the same ​is ​conducted b​ y ​people. Hence, i​ t ​is ​necessary ​to manage the people s​ o ​that the ​work c​ an be ​accomplished

in ​a ​better way. (iii)

​ ​Management ​of O
​ perations: ​To ​achieve ​the ​goals ​of ​an ​organisation many operations ​or ​activities are need
to be conducted, such ​as, ​production, ​sale, p​ urchase, ​finance, accounting, R&D, ​etc. ​Again, management ​is ​needed ​to make sure ​that
operations a​ re ​accomplished efficienfly and effectively.
(4) ​Management is ​a ​Continuous ​Process: ​The various managerial
activities cannot ​be p​ erformed ​once ​for ​all, ​but ​it ​is ​a continuous ​process. ​A
manager ​is busy sometimes ​in d​ oing one managerial activity and at other time
some ​other activity.
(5) Management ​is ​a ​Group ​Activity: ​It ​means ​that ​it ​is ​not a
single person ​who ​consummates ​all ​the ​activities ​of ​an ​organization ​but ​it i​ s

always ​a ​group of ​persons ​(Managers). ​Hence, management ​is ​a ​group effort.

(6) ​Management ​is a ​Dynamic ​Function: ​Management ​is ​a

dynamic activity ​as ​it ​hasto ​adjust ​itself ​to ​the regularly changing ​environment. ​In
this ​context, it ​can be ​rightly ​said ​that nothing ​is ​etemal ​in ​management.
(7) ​Management is an ​Intangible ​Force: ​Management ​is ​that ​power which cannot ​be ​seen. ​It ​can ​only ​be felt."If ​any

organization ​is ​heading ​toward ​higher ​levels ​of achievement, ​it ​signifies ​a ​existence ​of good ​management and vice-versa. ​ !
Objectives ​of ​Management

objectives of ​management can be ​broadly divided into ​the ​following ​three ​( ​1 ​) ​Organisational ​Objectives (2)
​ ​SocialObjectives ​(3)

Personal ​or Individual ​Objectives. ​(1) ​Organisational Objectives: ​It ​refers ​to ascertain
​ objectives ​for ​the ​whole

organisation. While ​fixing t​ hese ​objectives, m

​ anagement keeps into consideration
​ benefit of all related parties ​(like ​owner,

employee, customer, government, etc.). This also ​fulfil ​organisational economic ​objective ​which ​are ​survival, ​profit ​and ​groMh. (i)

Survival: ​Every ​business ​wanh ​to ​survive ​for ​long. ​So, ​management ​by ​taking positive decisions ​with ​regard ​to different ​business

activities ​should ​ensure ​that ​business ​survives ​for ​long.

Management: ​An ​Introduction

(ii) Profit: ​Profit ​plays an important ​role ​in ​facing ​business hazards ​and ​successful ​running ​of ​business activities. ​So, it
must be ensured ​that ​adequate ​profit ​is ​earned ​by ​the ​business.
(iii) ​Growth: ​Every ​business w
​ ants to grow. Management must ​ensure ​growth ​of business. ​Growth can ​be ​measured ​by
sales, ​number ​of ​employees, ​products, capital investment, etc. ​If ​all ​these show increasing ​trend ​then it ​can be ​concluded ​that
business ​is ​heading ​towards growth.
(2)SocialObjectives: ​Itreferstotheconsiderationoftheinterestofthesociet5rduringmanagerial ​activities. An
organisation ​is ​established in ​a ​society. ​It ​runs through the ​resources ​made ​available ​by the society. ​That ​is ​why it ​becomes ​the
responsib;ility ​of ​every organisation t​ o ​account f​ or ​social benefits. Thus, social objectives are ​defined ​as ​the ​fulfillment o​ f
responsibility o​ f an organisation towards society. ​Under t​ his ​objective ​manager promises ​to a​ ssure ​health, s​ afety and ​price c​ ontol.

Main ​social ​objectives of ​management are ​included in ​the ​following ​list: ​(i) T
​ o ​make ​available employment opporhrnities. ​(ii) T​ o ​save

​ o ​contibute ​in improving living s​ tandard. For

environment from ​getting ​polluted. ​(iii) T ​ ​example: ​fuian ​Paints has ​provided funds under
its community development programme, which ​made possible the effective ​utilisation ​of local ​resources ​by ​the ​farmers. ​In ​the ​same
manner, ​Steel ​Authority o​ f ​India r​ egularly provides ​services ​related to agriculture, industry, ​education, h​ ealth, ​etc. ​to the ​people living
nearby ​to ​its steel ​plant.
(3) ​Personal or ​Individual ​Objectives: ​It refers ​to ascertainment ​of ​the objectives ​in ​reference to ​the ​employees.
Employee ​class ​is ​an ​initiative ​and e​ mpathetic ​resource ​of ​a company. Thus, ​special ​attention ​needs ​to ​be given ​towards ​its ​feelings.
If ​the c​ ompany ​is ​able to satisfu ​its ​employees it ​will ​be able ​to pro$ess ​in ​'leaps and ​bounds'.

Main ​objectives ​of management towards ​employees are ​as ​follows: ​(i) ​To give ​deserving ​remuneration, (ii) To provide good working

environment, (iii) To provide ​a share ​in profit. ​

! l​ mpoitance of ​Management

The ​above ​mentioned mathematical equation highlights ​the ​importance ​of ​significance of managemenl ​very
well. ​Here ​by ​anything ​we ​mean ​all ​types ​of ​activities whether ​business or ​non-business. ​If ​we are ​not going to manage ​these
activities ​the result ​will ​be ​Zero ​or ​Failure ​or ​Nothing. ​In short, the ​importance of ​management ​is ​explained through ​the ​following ​facts:
(1) ​Management helps ​in ​achieving Group Goals: ​In ​is ​the most important ​characteristic ​of ​manag€ment ​that ​it i​ s
goal-oriented ​activity. ​A ​manager ​achieves ​these goals ​by ​giving the ​proper direction to ​the efforts ​of all individuals.
(2) ​Management ​Increases ​Efficiency: ​A ​manager ​increases ​efficiency ​through the optimum utilization of ​all the
resources, such ​as, ​Man, Machine, Material ​and ​Money.
(3) ​Management Creates ​a ​Dgmamic ​Organisation: ​Every organisation ​work ​in ​an ​ever ​changing environment.
To ​face ​the c​ hanging environment, ​many ​changes ​need ​to ​be made ​in ​the ​organisation ​as ​well. But ​people ​resist changes. ​Manager
creates ​a ​favourable environment through introducing ​employees ​to ​the benefits arising ​by adapting ​changes.
10 ​Business ​Shrdies

(4) ​Management ​helps ​in ​achieving ​Personal ​Objectives: ​Every employee wants ​to ​get suitable ​remuneration,
personal ​objectives. a​ ​share in ​profit, participation in ​management, ​promotion, ​etc. in the ​form ​of his ​This ​objective ​can ​only

be achieved, ​if ​they ​work ​while using their ​full ​abilities. Managers
​ ​make ​employees able ​through motivation, ​result, ​they

attain their individual ​objectives. good

​ ​ s a ​(5) ​Management ​helps ​in ​the
​leadership ​and open communication. A

Development ​of ​Society: ​Management ​has some ​responsibility ​towards ​society. Managers ​by ​fulfilling their ​social

responsibilities helps ​in ​the development of ​society. ​These responsibilities are ​to provide employment opportunities, to

prevent ​environment ​from ​getting ​pollution, to ​make available ​good quality products ​at ​a ​reasonable ​price, ​etc.
I ​. ​Meaning ​of ​Management: ​Management ​is ​the process of ​conducting ​a ​set ​of ​functions, ​such ​as, ​planning, ​organizing,
staffing, ​directing ​and ​controlling ​to ​get ​the ​work ​done ​in ​an ​a​efficient and ​effective manner. 2.
​ Characteristics ​of
Management:(i) ​Management ​is a ​goal oriented ​process, ​(ii) Management i​ s ​allpervasive, ​(iii) Management i​ s

multidimensional, ​(iv) Management i​ s ​V​function, ​a ​3' c​ ontinuous ​Objectives ​(vii)Management ​process, ​of

Management: ​(v) Management ​is ​an Intangible ​(i) ​is ​Organisational ​a force. ​group activity, (vi) ​Objectives:

​ ascertainment ​or Individual consideration

Management ​It r​ efers ​is ​a the ​ ​of ​Objectives: objectives
​ of the interest for ​It the

​ ​whole ​the ​to society

refers of ​ ​the organisation.
​ ​ascertainment during
​ ​managerial ​(ii) ​of Social
​ ​the objectives activities.

Objectives: ​(iii) ​in r​ eference ​Personal ​It ​dynamic ​to ​the refers
​ ​to

​ employees. ​V
to the

4. ​(ii) lmportance
​ ​Management ​orgnisation, (iv) of
​ Management: ​(i) ​increases ​efficiency, ​Management helps

in Management ​ ​in achieving ​creates ​achieving personal objectives, (v) group ​ dynamic
​ ​ anagement helps
(iii) M ​ ​ a​
goals, ​Management hblps
​ ​in ​the ​development o​ f ​societ5r.

I ​Management: Concept
1. ​What ​is ​meant ​by ​Management? ​Explain any four ​characteristics. ​2.'Management i​ s ​Multidimensional.' Explain.

3. ​4. 5. Clarify
​ ​the ​meaning ​of ​'Group ​Efforb' ​in ​management. Explain
​ ​any ​four ​characteristics ​of ​Management. Explain ​any ​five ​feahrres

of ​management.

6. ​8. 7. Define
​ ​management. ​Clarifu ​the f​ ollowing equation ​: ​'Anything ​- Management
​ ​: ​Zero, ​ Explain ​in ​brief, 'management' ​as ​an

6 ​Marks
4/5 ​Ma*s
(c.B.s,E.2005) (c.B.s.E.2006)
(c.B.s.E. 2004,06)
Management ​An Intoduction

g. 'Explain,inbrief,'Management'asaprocess. ​(C.B.S.E.20U,06) ​10. 11. 12. ​13. ​74. 15. H​ ow

Management ​is ​a 'Goal Oriented ​Process'? ​Management i​ s ​not visible, it can only ​be ​felt. Explain. ​How ​is ​management ​a ​Continuous

Process? ​'Explain, in brief, management ​as ​a 'Dynamic Function.' Explain 'Management ​of ​people' ​as ​a ​dimension of ​management. ​Explain

in ​brief, 'management' ​as ​a ​group ​of people ​having ​managerial ​responsibility ​for an enterprise.
76. ​State any ​two characteristics ​of ​management.


(c.B.s.E.2004) (c.B.s.E.2004) ​1'[{ark 77. ​What is meant ​by ​the ​term ​Management?
Ans. ​Management is ​the ​process ​of conducting ​a set o​ f functions (planning, organizing, ​staffing, directing ​and controlling) to ​get ​the
​ hat ​does a manager ​aspire ​while ​doing work?
work ​done ​in ​an efficient ​and ​effective manner. ​18. W
Ans. A ​manager ​wanh ​to ​make optimum utilisation ​of ​resources (manpower, ​money, ​material, ​machlnes, etc.) ​in order ​to ​accomplish
the ​work efficiently and ​effectively. ​79. ​Clarify t​ he terms efficiency ​and ​effectiveness ​in m
​ anagement.
Ans. ​Efficiency ​refers ​to do ​the ​job ​in ​a ​cost ​effective manner. Effectiveness ​refers ​to complete ​the ​job on time, no ​matter ​whatever ​is ​the ​cost.
20. ​What is meant ​by 'Doing ​things ​Right' in ​management?
​ hat is the meaning ​of ​'Doing the Right Things' ​in
Ans. ​'Doing ​things ​Right' ​refers ​to do ​the ​job ​in ​a ​cost ​effective ​manner. ​27. W
​ hy ​is ​it ​said ​that ​management ​is ​all
Ans. ​'Doing ​the Right ​Things' ​refers ​to ​complete the ​job, ​no matter whatever ​is ​the ​cost. ​22. W
penrasive? ​(c.8.s,E.2009)
Ans. ​Because ​it ​is ​needed ​in ​all spheres say ​- ​business ​and ​non-business organisations. ​'Management is ​uniformty n​ eeded ​at ​all ​places.'
Explain. Ans. ​It ​is ​needed ​throughout ​the ​world whether it ​is ​India, America ​or Japan. ​'Management is ​multi-dimensional.'
Enumerate ​any ​tow ​dimensions of ​management. ​Ans. ​(i) ​Management ​of ​work. ​(ii) ​Management of ​people. '​ Nothing is
permanent i​ n management.'Give ​an ​example. A ​ ns. ​For e​ xample, ​principles ​of ​management ​are ​changing according ​to ​the
changing ​business ​environment. ​'Management cannot ​be ​seen.' Explain. Ans. ​Management cannot ​be seen, it can ​only ​be ​'In a​ n
organisation ​employees are ​happy ​an ​management ​is ​noticeable.' Which characteristic ​of ​management ​is highlighted by

this ​statement? (qB.s.E.2oo8) ​28. Ans.

​ ​Name Management
​ ​the process is ​ ​working intangible
​ ​of an ​ ​
with force.
​ ​and ​through

by ​efficiently ​using ​its limited ​resources ​in ​the changing

others ​to effectively ​achieve ​organisational ​ / ​- objectives

environment. ​
Ans. ​Management.
72 ​Business ​Studies

​ ​the ​statement? 'ln

/ 2/ ​ ​order ​environment.' to
​ ​be ​successful ​Which an
​ ​organization ​characteristic must
​ ​of change

management its ​ ighlighted ​to ​thl ​needs ​in t​ he of

​ ​goals ​according ​is h ​ ​30. Ans.
​ ​Give Management
​ ​any ​two
​ ​dynamic. ​of ​management. (C.B.S.E.
characteristics is ​ Somple ​Paper)

3Ja Ans.
​ ​(i) ​Management ​is ​goal-oriented ​process. ​(C. ​B. ​S.E. ​Sampl ​e ​Paper ​) ​(ii) ​Management ​is ​all pervasive. ​The management

​ ​management ​is ​highlighted ​by ​this statement?

principles ​can b​ e ​applied to ​all ​types of ​activities.'Which ​characteristic of

(c.B.s.E. ​2008) ​32. A

​ ns. ​Management ​is ​all ​pervasle. ​Name ​the ​process ​of ​designing and maintaining ​an ​environment

working together ​in groups, ​efficiently accomplish ​selected ​aims. ​ ​Why ​is
​in ​which individuals ​(c.8.5.E.2008) ​33. Ans.
Management. ​it ​said ​that ​management ​is ​a ​goal-oriented ​process? ​(c.B.s.E.2009) ​
34. Ans.
​ ​Management ​various individuals. said
​ to

goal ​oriented ​process ​as ​it helps in getting ​goals ​by coordinating ​the efforts ​of ​Why is ​Ans. ​It ​"management ​meains ​that ​it ​is called not

a ​a ​single ​group.activity"? p​ erson ​(manager) ​who c​ onsummates ​the ​whole ​(C.B.S.E. process 2009) ​of ​35. ​management ​but it ​is
conducted by ​a ​group ​of persons (managers). ​Ans. ​'Management ​Management ​creates ​creates a ​dlmamic ​such ​type ​organisation." of

organisation ​How? which is ​able ​to ​face the

​ ​regularly (Foreign changing 2009)

environment ​easily. ​ f ​Obiectives ​of ​Management

6 ​SIarks ​36. ​Explain ​the objectives ​of ​management.

'4lE ​ftrarks 37.

​ ​38. Explain
​ ​Discuss ​tlre ​inbrieftheobjectivesofmanagement. ​social objectives ​of ​management.


​ ​What ​List the are

N. 39. ​ ​three the
​ three ​examples categories
​ ​ ​objectives ​Objectives of
​of Social of ​ management? ​of ​management.

47. ​What ​are ​the organisational ​obJectives ​of m​ anagement?

$ ​[Iarks
f ​Mark

42. Ans.
​ ​It includes ​survival, profit and ​groMh. ​"Management helps in ​development ​of ​society." ​How? (c.8.s.E.2009)

Ans. ​Management enables ​the ​organisatlon ​to ​make available ​employment

opporfunities, ​hence ​43. W

​ hat helping
​ ​do in
​ ​you the
​ ​development ​mean ​by personal of
​ ​society. ​obiectives ​of management?

Ans. ​It refers ​to the consideration of the ​interest ​of ​employees d​ uring managerial ​activities. ​I ​ ​physically ​achieve. meet
J To ​ ​the

challenged ​obiectives of ​petsons. ​the f​ irm Identifu ​the ​management ​the ​organization's ​of Angora ​Ltd. ​obiective

offers employment ​it ​ is ​trying ​to ​to ​

(C.B.S.E. ​ Somplepaper) ​ Ans. I​ t ​is ​social ​objective.
Management An ​Intoduction

45. ​Management of any ​organization sMves ​to attain ​different obiectives. Enumerate ​any ​two​such ​objectlves?
Ans. ​(i) ​Organisational objectives, ​(ii) Social objectives. ​ I ​lmportance ​of ​Management
​ ample ​Paper)
(C. B. ​S.E. S

46. ​'Anything ​minus management is ​zero.' Explain the ​importance ​of ​management ​in ​the light ​of ​this ​47. ​48. statement.

Explainthesignificance 'Management ​of ​managementinrunningof ​modementerprise. (​ C.B.S. ​is ​the ​art of ​getting things ​done

through ​others.' ​Explain the importance ​of

E.2001) management
​ ​ ow ​is ​management ​essential ​for ​the s​ uccessful ​running of ​an enterprise? ​50.
​in ​the light ​of this statement. ​49. H

​Explain ​'Lack ​of ​any ​proper ​Give ​five ​reasons ​reasons ​management ​why ​in ​support ​management ​results ​of ​your ​in ​wastage

51. statement?
answer. ​is ​essential of
​ time, ​in any money
​ ​
​ ​efforts.' ​Do you ​(C.B.S.E. ​(C.B.S.E. agree
organisation? and ​ ​with ​2006) 2003)
​ ​this

52. ​Explain by giving any four ​poinJs ​why management ​is ​important in any ​organisation?​53. ​'ln ​the ​absence ​of management' the
productive ​resources ​will remain resources and shall ​(c.B.s.E. ​never become ​2005) production.'
​ ​Explain ​the ​importance ​of ​management ​in the

light ​of the ​above statement.​(c.B.s.E.2006) ​ ​statement. ​of ​an ​organization largely ​depends ​upon ​its ​management."
54. ​"success above

(C-B-S-E. ​ Sample ​ Paper) ​
Explain ​any ​five ​ reasons ​ to ​justify ​ the

55. ​How ​does ​management help in ​the ​development ​of society?

56. ​,'Anlrthlng minus

​ management is ​nothing.'rWhat ​does ​this ​statement ​tell? ​
​ ​'Anything It​ tells ​minus about
57. Ans. ​ ​the

management importance
​ of ​is management.
​ ​nothing.' ​Hete what is the meaning of 'anything'? ​
​ ​'Anything It​ refers
58. Ans.
​ ​all types ​management of
minus to ​ ​activities, ​is ​nothing'. such
​ ​as, ​business ​Here ​what and
​ ​non-busiriess ​is the meaning activities.
​ ​of

​ ​Name It​ ​the refers

'nothing'? ​59. Ans. ​ ​ failure ​points or
​two to ​ ​of loss.
​ ​the importance ​of management.

Ans. ​(i) ​It ​helps ​in achieving group ​goals. ​

​ ​"Management It​ ​increases ​efficienry. ​increases ​efficiency." ​How?
60. (ii)
(c.8.s.E.2009) ​Ans. ​A ​manager ​increases ​efficiency ​through ​the ​optimum utilisation ​of ​all ​the resources, such ​as, ​mdn, machine, material
and money.
light ​of ​this

​ ​Solution, who ​
t\ Mr. ​ as ​been
is ​an ​M.B.A., h ​appointed ​at ​the post ​of ​General Manager in Sa-re-ga-ma ​Ltd. ​
Company. ​Just after his
appointment, ​he ​took ​a decision ​to ​set ​up a ​chemical ​plant near ​a ​residential colony. ​(The chosen ​location ​to ​set ​up the plant ​was ​favourable for
many ​reasons to ​the ​company). After s​ ome ​time, ​an ​another important d​ ecision to the ​amount o​ f ​charity ​been ​given annually to educational

t4 ​Business ​Shrdies

instifutions and religious institutions ​was ​withdrawn giving ​the ​justification that it ​was ​an ​unnecessary ​burden ​on the ​company. ​More
emphasis ​was ​given to the share of ​company ​in the market and in search ​of modern ​procedures. ​Apart from this, ​a ​long time labour-dispute ​was
resolved ​by taking ​a ​balanced ​decision. ​(i) ​Tell whether Mr. ​Solution ​is ​at ​fault? ​(ii) ​If ​yes, the ​fault ​is ​in ​which ​context? ​(iti${ow ​can the ​mistake be
amended? ​Ans. ​Yes, ​Mr. Solution ​is ​at ​fault. He ​is ​avoiding ​the social ​objective of management. There ​is ​need ​of ​rethinking on two ​issues: ​(i)

Establishing ​Chemical Plant and (ii) Giving Charity. ​ l2l, ​Mr. PROBLEM ​is ​working ​at ​the post of ​Sales ​Manager in ​Surabhi ​Tel. ​Ltd. ​Last ​year,

the targeted ​sales ​ increased ​to 20,000 ​units ​from ​earlier target ​of ​:18,000 ​units. ​This ​he achieved ​very ​easily. ​To ​achieve
this, ​he increased ​the expendifure on ​advertisement ​to ​almost ​double. ​(i) ​Did ​sales ​manager ​perform ​his ​duty efficiently and ​effectively? ​(ii) If not,
Is ​there any difference ​in
then ​how? ​Ans. ​Mr. Problem ​is ​effective ​as ​he ​gets his ​job ​done but not efficient ​as ​the ​job ​is ​done ​at ​a ​very high ​cost. W
​ ​
planning, ​organising, staffing, directing and ​contolling ​of ​vaiious ​organisations ​
​ ​as ​a school, a ​club, ​a restaurant ​and ​a ​steel ​plant. ​' ​This ​case is
V such
​ o, t​ here is ​no ​difference as ​far ​as ​the ​functlons ​of ​management ​are ​performed ​by ​various
related ​to which ​characteristic ​of ​management? ​Ans. N
organisations. In ​other ​words, all the ​functions ​of ​management ​are ​performed in ​a ​similar ​manner in ​all tlrpes ​of ​organisations, ​i.e., ​business ​or
ncn-business. ​This ​case is ​related ​with the ​characteristics ​of management, namely, 'management i​ s ​all pervasive'.

Mr. Question ​: ​Sir, ​a ​manager ​while performing his duty ​efficiently ​and ​effectively ​tries ​to ​best utilise ​the

resources. ​This ​is ​absolutely correct. However, ​while ​doing ​this what ​is his focus ​of ​thinking? Mr.
​ ​Answer :

Right, ​a ​very ​nice ​question ​raised. ​The ​central ​focus of ​thinking of ​a manager ​is ​'establishment ​of ​coordination'. I​ n ​all

​ ants ​to e​ stablish

ways, ​he/she w

coordination. ​Mr. Question; Sir, coordination ​among whom....? ​Mr. ​Answer : *​

Coordination among ​objectives ​* ​Coordination among ​activities ​* ​Coordination among people ​* ​Coordination among divisions

Mr. Question ​: ​O.K. ​sir, ​thus a ​manager ​can ​achieve ​his ​obiectives ​by ​establishing ​coordination.
Sir, ​Thank ​U.

OIIAPTTR ​2​t[AlrAG ​tt[

​ S ​SG ​r ​tl{ G​
​r]il A

Different ​Management ​experts ​have d​ escribed the nature ​of
management ​differently ​in ​their ​own time.

Learning Objectives ​After ​Studying

this ​Chapter, you ​will ​be ​Acquainted with: ​o ​Nlanqgement: ​As

a ​Science ​* Meaning ​of Science ​* ​Testing ​of ​Management ​as ​a ​Science

a ​Nlanagement: ​As ​qn ​Art ​* Meaning ​of ​Art * ​Testing ​of

Management ​as ​qn Art o ​ lanqgement: ​As a ​Profession ​* ​Meaning

​ N

of P​ rot'ession ​* ​Testing ​of ​Manogement a​ s ​Prolession

! ​Management: A Science or An Art

There ​is ​a ​conflict ​about ​the nafure ​of ​management ​whether ​management ​is a ​science ​or ​an art. Some management

experts consider it ​as a ​science, ​while s​ ome place it in the category of ​Art. ​It ​is a ​very ​old ​and ​misleading ​conflict.

Before understanding ​the ​issue ​about ​the ​nature o ​ f ​management, ​it ​is important
​ to u​ nderstand ​the meaning o​ f
​ eanings of science ​and a​ rt ​and i​ ts ​presence ​in ​management ​will ​become ​clear ​in ​the
science and art. ​The f​ eahrres ​and m

following ​description. ​ ! ​Management as ​a ​Science

It ​is ​important ​to ​understand ​the ​meaning ​of science ​before accepting management ​as ​a ​science. ​
​ eaning
of ​Science
Science ​refers ​to that ​systematic ​body of knowledge which ​is ​acquired ​on the basis ​of observation ​and experiments
and ​verification ​of this ​knowledge ​is ​possible. For example, ​a ​person completes ​his ​sfudy ​of ​engineering. ​During ​the

course of ​his ​shrdy, ​he gets a ​complete theoretical ​knowledge ​of the subject. ​His acquiring of knowledge in ​this

manner ​is a science.

76 ​Business ​Studies
Science ​seems ​to ​have the ​following ​three characteristics: ​(1) ​Systematised ​Body ​of ​Knowledge. (2) ​Principles Based ​on

Experimentation ​and ​(3) ​Universarl Validitv.
​ o ​Testing ​of ​Management as ​a ​Science
It ​is ​important ​to ​apply ​these ​characteristics of ​science ​to management in order to ​find ​out ​whether ​management ​is a ​science ​or
(1) ​Systematised Body of Knowledge: ​It ​is necessary ​for ​science ​to ​be a​ ​systematised b​ ody ​of ​knowledge. Management ​is
also a systematised ​body of ​knowledge ​because ​it ​has its ​own theory and ​principles ​which ​are ​developed by ​the management
experts after years ​of ​research.
(2) ​Principles Based ​on ​Experimentation: ​After applying this ​characteristic ​of ​science to management, ​analysis and
​ anagement ​management ​came ​took ​into ​-trears existence
experiments. ​we ​find that ​In ​development ​other ​words, ​of m ​ ​for ​the
because ​collection ​of the ​of ​continuous ​fach, ​their
and encouraging labour ​of the theorists and ​various people ​concerned.
(3) ​Universal ​Validity: ​Scientific ​principles ​are based ​on truth and they ​can be ​applied ​al ​every ​time and ​in ​every
situation. Thus, ​its ​universal application ​is ​possible. ​In the field of management too, ​managerial knowledge and principles of
management ​are ​considered to ​be ​based on ​truth ​and they, ​too, ​can be ​applied anywhere and in every ​situation ​But ​the principles
of management ​are ​not ​as ​exact ​as ​the ​principles of s​ cience ​as ​their application may not yield t​ he desired results always.
Conclusion: ​The ​management cannot ​be ​treated ​as ​a ​perfect ​science, ​but ​as its ​principles ​are ​subject to change ​with time,
situations ​and human ​nafure, ​it ​is ​better to call it ​Applied ​Science ​or ​Inexact ​Science ​Ernest Dale has called management a soft

science ​because ​its ​principles ​are ​not very rigid. ​

! ​Management as an ​Art ​o ​Meaning of A
​ rt
Art ​refers ​to ​the ​practical ​application ​of ​knowledge. For example, when ​a ​person after ​completing ​the ​course ​of ​engineering
working ​as a​ n engineer ​in ​a ​company, ​his ​this ​work ​is ​known ​an art.

Science ​and ​Art ​In ​simple words ​it ​can ​be ​soid ​thot ​to ​get inJormotion ​about ​o subject ​is ​science ​and ​

o Following ​(iii) (ii) ​
Testing E​ xistence ​PersonalisedApplication. ​Based ​are ​of o​ n ​the ​Practice of ​Management T​ heoretical ​important ​and Creativity.

Knowledge. ​characteristics ​as an ​Art

of ​Art: ​For science
​ ​putting ​example, thot
​ ​ond ​information a
​ fter ​studying study
​ ​to ​engineering proctice
​ ​working ​is ​on ​os ​is afi.
​ ​on
engineer ​is ​an aft.
Whether management ​is ​an art ​or not ​will ​be ​known b​ y the ​application ​of ​the characteristics of art ​in ​management, ​description
of which ​is as ​under:
(1) ​Existence ​of ​Theoretical Knowledge: ​Art ​is ​always b​ ased ​on certain theoretical knowledge. O ​ n ​the basis of this
knowledge ​one can ​understand how ​a ​particular work ​can be ​accomplished. ​In this ​context management ​is ​an ​ar1 ​as ​a ​lot ​of
literature i​ s ​available in various ​areas ​of ​management
(2) Personalised ​Application: ​The ​use ​of ​available theoretical knowledge ​is ​found in ​varying ​degree ​among different
persons. ​For example, two ​teachers, ​two ​players, ​or ​two g ​ oldsmith ​will a​ lways ​differ ​in ​performing ​their ​jobs. ​Management
​ here ​are ​various ​principles
possesses ​this feature of ​art ​too T
Management ​as ​Science, ​Art and ​Profession
of ​management as developed ​by ​management experts. Managers ​apply ​these principles differently depending ​on ​their
level of ​knowledge. ​Sometimes ​they may ​get ​exacfly opposite ​results ​while applying ​the same principles.
(3) ​Based ​on ​Practice ​and ​Creativity: ​Just ​as ​art can be ​embellished with the ​help of ​practice, ​ih the ​same ​way ​managerial
skill also improves ​with practice.Every ​manager ​has ​a ​desire ​to ​become ​a complete expert in ​his ​field. They ​can ​fulfil ​his
desire ​by ​continuous practice. A ​fully ​developed manager ​not only moulds the organisation according to ​the ​changing
circumstances ​but ​also ​has ​the capacity ​to ​change the ​outer circumstances according to ​his ​will. Thus, management ​.nossesses this

feature ​of art ​too.
The a​ bove ​analysis clearly ​establishes ​that ​management ​possesses ​all the characteristics of art and ​on ​this ​very ​basis ​it ​has ​been

accepted ​as ​an ​art. ​

o C​ onclusion
​ ​science ​as ​well ​as ​an ​art. As ​a ​science, m
Therefore, ​we ​can ​say ​that ​management ​is ​both a ​ anagement ​with the ​help of
its ​principles provides the ​necessary ​guidance to the managers ​to ​achieve ​practical efficiency. ​With ​reference ​to ​art,
management, ​in ​the ​form ​of ​best ​work t​ echnique, ​helps the ​managers to face ​every lype ​of ​sifuation ​successfully. ​It is, ​therefore,

reasonable ​to treat ​management ​both ​as ​a science ​and ​an art. ​ ! ​Management: As ​a ​Profession ​or
Professionalisation of ​Management ​a M
​ eaning ​of ​Profession
The ​nafure ​of ​management gives ​rise ​to ​an ​important question ​- ​whether ​management ​is ​a ​profession. ​One ​has ​to
learn ​the ​meaning ​of ​profession ​and ​understand ​its ​characteristics before answering this question.
Profession refers ​to t​ hat economic activity ​which i​ s conducted ​by a​ person having some ​special ​knowledge ​and skill ​which
is ​used ​impartially to ​serve ​various ​sections of the society. ​Following ​are the ​main ​characteristics ​of ​profession:
(1) ​Well Defined Body of ​Knowledge (2) Restricted ​Entry

(3 ​)
​ ​Ethical Code of Conduct ​(5) Service ​Motive ​
​Professional Association (4) o ​Testing ​of ​Management as a
After ​having ​understood ​the ​meanings ​of ​profession ​it ​now ​remains ​to ​be ​decided ​whether ​management should ​be
heated ​as a ​profession. ​In ​order to ​find ​an ​answer to this question ​it shall ​have ​to ​be ascertained ​whether ​all the characteristics of a
profession are ​found ​in ​management. ​To ​find ​out ​an answer ​to ​this ​euerV, the
​ ​following ​analysis ​is ​important:

Defined ​Body ​of ​Knowledge ​: ​The ​foremost quality ​of ​a ​professional ​is ​the possession ​of specialised
(1 ​) ​Well ​ ​knowledge.
Management ​has ​ih ​own ​principles ​based ​on ​experiments and which ​requires ​special ​competence ​to ​bringthem ​into ​use. On
the basis of this ​speciality, management ​can be ​accepted ​as ​a profession.
(2) Restricted ​Entry: ​The ​entry ​to ​a ​profession is ​restricted ​through ​acquiring ​an ​educational ​degree. ​For ​example, ​a
degree ​in [​ -aw ​is ​essential ​for ​joining ​the Law ​profession. ​But ​as ​for ​as the​

Profession? ​Profession refers ​b t​ hat economic odiuity ​which ​is ​conducted ​by aperson hauingsome ​speciol ​knowledge ​and ​skill ​which ​is
ured ​impofiiolly to ​serue uorious ​seclions ​of ​the

18​management ​is ​concemed ​there ​is ​no ​such condition ​for b

​ eing
Business ​Studies
a ​manager. ​Hence, ​on ​this ​basis ​management ​cannot ​be accepted ​as ​a ​professiorr. ​profession ​(3) ​Professional is that ​it
must ​Association: ​have ​a r​ epresentative ​The ​third ​characteristic professional ​of
association ​which ​performs the ​following important ​functions:
(i) ​To ​regulate ent4r, (ii) To grant certificate of practice, ​and (iii) ​To ​create a ​code of conduct for guiding the activities of ​the
In ​India, ​Representative Professional ​fusociations with ​regard to other professions have already been established. There are
​ .awyers. ​Medical ​Cor-rncil ​of I​ ndia ​for D
representative professional associations like ​the Bar Council ​o1 ​India ​for L ​ octors:
Institute of ​Charteled ​Accountants ​for ​Chariered Accountarrts. etc. For managers ​All ​Irrdia ​Mariargenrcrrt ​Assc.rciation ​(AIMA)
has ​been established. But ​it ​is ​not ​essential ​to ​be ​a ​member ​of the ​AIMA ​in ​order to be a manager. ​Therefore, ​ort this b.tsis

ilatrargenrent ​cannot ​be acccpied ​as a​ ​llofe-ssictrr

(4) ​Ethical ​Code ​of ​Conduct: ​Membersof ​aprofessionareboundtofollowacodeof ​conduct. ​By ​Code ​of ​Conduct, ​we ​mean
the rules ​and regulations framed to guide ​the ​behaviour ​of ​professionals. The ​code of conduct of already ​recognised professions
like ​Law. Medical and C ​ hartered ​Accountant. e​ tc., ​have already been prescribed b ​ ut ​no ​such code o
​ f ​conduct h​ as ​been
laid down ​in ​connection with ​management. ​On t​ his basis ​it ​can be ​asserted ​that ​marrragenrent is ​not at ​all a​ ​profession
​ otive: ​The main motive ​of ​a ​profession ​isto ​serve the ​society. For example, ​no ​doubt ​a ​doctor follows ​his
(5) ​Service M
profession for ​his ​living but to ​ensure ​that ​his ​patients ​get ​justice ​happens to be ​his ​chief ​motive. Though there ​is ​no code of ​conduct
​ iew, ​the,re
regarding management but ​its ​social ​responsibilities ​are ​being ​stressed ​upon ​increasingly. ​From this ​point ​of v
should ​not ​l:e ​any ​hesitation ​to ​accel:t ​managemenl ​
o as​ a ​profcssion ​Conclusion
On ​the ​basis ​of ​the ​above ​study ​it ​can ​be ​said ​that ​management ​does ​fulfill ​some ​of ​the characteristics of the
profession ​and ​some ​of ​the characteristics have yet ​to ​blossom ​or develop. ​In this ​way, management ​as a ​profession ​in ​India ​is ​still ​in
its ​infanry ​and ​ib development ​is ​moving ​at ​a ​slow speed.

g ​1. ​Management: ​A ​Science or An ​Art: are:

​ ​(l) ​Management (i)
​ ​Systematised ​as Body
​ ​ ​Iftowledge.
​a ​Science: of

Management (ii)
​ ​Principles ​has all ​the Based
​ ​characteristics on ​ ​Experimentation, ​of science. ​These (iii) ​ ​ niversal ​Validity.
Therefore, management ​can be called ​a ​science ​but ​it ​cannot ​be ​classified ​as a ​science ​like ​Physics ​and Chemistry. ​It ​will ​be ​more

appropriate ​to describe ​it ​as ​an ​applied ​science ​Existence ​(ll) M ​ ​of ​inexact ​Theoretical ​science ​as ​an Knowledge
​ anagernent or ​ ​or

Art: ​soft ​Management ​science. ​(ii) P​ ersenalised ​has ​all the ​Application ​characteristics ​(iii) ​of ​Based ​art. These ​on ​Practice

are: ​(i)
and Creativity.
Six ​Main ​Management
Institutes ​of l​ ndia ​7.IIM ​Ahmedabad 2. ​IIM ​Bangalore ​3.lIM ​Kolkata ​4. ​IIM ​Indore ​5.IIM ​Kozhikode ​6. ​IIM ​Lucknow
79 Management ​as ​Science, ​Art ​and ​Profession

g ​2. ​IVlanagement ​as ​a ​Profession: ​Under ​profession ​a ​man after haining and ​long experience
​ acquires ​proficiency

with which he ​impartially ​serves ​different ​sections ​of ​socie$. profession ​Is ​Management (like
​ ​Well ​a ​Profession?

defined ​body ​Management ​of ​knowledge satisfies ​ ​and ​some ​Service ​of the ​Motive) ​conditions ​but ​for ​the ​being ​other ​a
characteristics ​(like Restricted ​entry, Professional association, Ethical code ​of ​conduct) have ​still ​not developed adequately. In
India, the ​development ​of management ​as ​a ​profession ​is ​still at ​its ​infancy and ​is ​moving ​ahead gradually. ​Its ​recognition ​as a
profession w​ ill ​increase i​ n ​accordance ​with ​the pace ​of ​its ​development.

! ​Management: As ​a Science
6 Marks ​1. ​"Management ​is a ​science ​like ​physics or ​chemishy." ​Do ​you ​agree ​with ​this ​statement? Give reasons ​in ​2. support
​ of your

answer. ​Is ​management a ​'Science'? ​Explain.

3. ​4. Explain.
​ ​
"Management is neither ​as ​precise ​nor ​as ​comprehensive ​as ​the ​natural ​and pure ​

,.,iJ.U"5fif; ​
'Management ​is ​a science.' ​Do you ​agree? ​Give any ​three reasons ​in support ​of ​your ​answer.

3 Marks ​5. 6. ​State ​Explain ​why ​through ​management ​an ​example, ​is ​not ​a Pure ​how ​Science2

'Universal ​Validity' one ​of ​the ​feafures ​of ​Science ​exist ​in Management? ​7. E
​ xplain 'Management ​as ​a Science'. ​ ​ ark ​8.
'Management ​is ​a ​Soft Science'. ​How?
​ tate two features ​of ​science.
Ans. ​Management ​is ​a soft science as ​its ​principles ​are not ​very rigid' ​9. S
​ ame ​the type of ​science ​to ​which management is related.
Ans. ​(o) Systematic ​body ​of ​knowledge. ​(b) ​Universal ​validity' ​10. N

Applied ​science. ​
11. ​Why ​management is ​not called a​ s ​perfect ​science? Ans.
​ ​Because ​it ​is ​related w
​ ith ​human ​being. ​
12. ​"The
(C.8. ​S.E. Somple Poper ​
Principle(s) ​of Management are ​different from those ​used ​in ​pure ​science." Write ​any one
​ ​difference. ​ )

​ ​"The The
13. Ans. ​ ​PrinciplesofManagementaredifferentfromthoseusedinpurescience."Writeanyonedifference. management

principles ​are ​not ​as ​rigid ​as ​principles ​of ​pure ​science. (C.B.S.E. Somple Poper ​) ​! ​Management: As ​an ​Art
6 Marks ​14. ​Test ​the ​fact ​that ​'management ​is ​an art'. ​t ​A5. 16. ​How ​is ​management ​a ​social science ​as ​well ​as ​an art?
Management ​is ​considered ​to be ​both ​an art ​and ​science. ​Explain
(c.8.s.E.2002) ​(N.C.E.R.T./

Business ​Studies

'7' ​18' 'Management

​ is ​an ​art.' ​Do you ​agree? ​Give ​any three reasons ​in ​support ​of ​your ​answer.​4/5 Marks ​(c.B.s.E.2006) ​What ​is ​the

meaning of management ​as ​an ​Art? Briefly ​describe ​any three of ​its feafures.

27. 20. 1​ 9. ​Clarifi7, ​Explain'Managementasanart'. "​ Management how ​management ​is ​both ​Science ​possesses ​and

​ ​Marks ​22. W
Art." ​the feature ​Explain ​of this ​Art ​statement ​namely the ​in ​brief. 'Personalised ​Application'? ​rc.8.5.E,2007) 3 ​ hat is
​ ark ​23. Ans.
meant ​by art? l​ M ​ ​Give It​ refers ​to ​achieve the desired result t​ hrough ​any ​two ​points ​of ​the features ​of ​Art.
application of ​skill. ​
​ ns. ls management ​(o) Existence ​contains ​of ​rheoretical ​all ​the ​Knowredge, ​features ​of ​(b) ​the
24. A
personarised ​art? ​Application. ​Ans. ​Yes, ​the management contains a​ ll the feafures ​of ​the art. Management:
​ As ​a ​

25' ​reasons ​"Management in support ​is a ​profession of y​ our ​answer. like ​medical or ​legal ​profession." Do you ​agree ​with ​this statement? 6​
Marks ​Give 26.

Explain critically if management ​is ​a profession. 27.
How ​is ​management ​not ​a ​full- fledged profession? ​28.
​ anagement ​has ​the characteristics ​of ​a ​fun-fledged profession?
Do you ​think m
29. 30.

35. 33. 34. I​ s ​Is Write management ​'Management' ​shortnote on'managementas a aprofession'. a profession? profession ​on ​the ​basis ​of
'Ethical ​code ​of ​conduct,?

36. ​Name ​two feafures ​of ​profession which ​are ​not a​ vailable ​in ​management. ​37. Ans.
​ ​Name (i)
​ ​any Resticted
​ ​two main

Entry. ​management (i,)

​ ​Ethical Code ​institutes of
​ conduct. ​of ​India. ​ ​ ​what (i)llM,
38. Ans. ​ ​Ahmedabad. ​(ii)ilM, ​Bengaluru.

function ​does a​ ​representative professional association perform?

Ans. ​It regulates the ​behaviour of ​its members.
(c.8.s.E.2002) ​(N.C.E.R.T.)

Discuss the basic feafures of ​management ​as a ​ profession. ​"Management ​is ​regarded ​as ​fully-developed profession." Do you ​agree? ​Give
reasons. 4/5
​ Marks ​(N.C.E.R.T.) (c.8.s.E.2005)
​ ​"Management ​is ​a ​profession." Do ​you ​agree? ​Give reasons ​in support of your ​answer.

"Management ​is ​profession." Give one argument in favour and ​against ​of ​this statement.
(c.8.s.E.2006) ​3 Marks ​(c.B.s.E.2007)

l ​Mark
Management ​as ​Science, ​Art ​and ​Profession


Ms. ​Bharti ​passed her ​M.B.B.S. examination ​in the first ​division ​in ​2006. ​Later on in the year ​2009 ​she ​passed her ​M.S. examination ​as ​an
eye specialist. She was ​awarded ​a ​gold medal in ​this ​examination. ​After completing ​her sfudies ​she ​joined ​a ​big hospital ​as ​an eye ​surgeon. ​She ​is
​ ow ​tell, ​what ​aspect ​of Ms. ​Bharti's ​above experience ​is ​a ​science ​and ​what ​aspect ​is ​an
performing ​ten ​operations ​successfully every ​day. ​Q. N
​ tr,rdying ​for M.B.B.S. and M.S. ​is ​science ​and ​working ​as ​an eye-surgeon ​is ​an art.
art? ​Ans. S
Mr. ​Amol ​Khan ​passed ​his B.Sc. ​(Non-medical) examination ​in the year ​2006. After ​this ​he ​successfully ran the business of ​his ​father.
Suddenly, ​he ​thought ​of ​seeking ​employment. ​He got ​the ​job o​ f ​a ​finance manager ​in ​a ​company ​on ​the ​basis ​of ​his k​ nowledge, ​experience
​ r. do Khan
​ as ​not tell, it ​is ​necessary ​the appointment for him ​of ​to M
and proficiency. ​He ​is ​doing ​his ​job ​successfully. ​Q.1: Q.2: Now W
M.B.A. ​as ​or ​a some manager ​other ​valid?
course ​for t​ his ​job? ​Ans. ​(1)Yes, ​(2) ​No.
0rrry, ​Session
For this ​query ​session, ​questions ​from ​readers' side are ​invited.

lrurlsffi0 r​ ultGrloils 0r
All ​the ​functions of ​management ​are ​performed ​at ​allthe ​levels of management but there
is ​only a​ ​difference of d​ egree.

Learning Objectives ​After ​studying

this ​chapter, you ​will ​be acuainted ​with: a

​ L
​ euels of
Management ​* ​Top Leuel ​Monagement *​ ​Middle ​Leuel ​Manogement

* Lower Leuel ​or ​Superuisory ​Monagement o ​ unctions of

​ F
Management ​* ​Planning * ​ rgonising x Staffing ​* ​Directing
​ O

​ ​Communication o​
o ​Superuision o
Leadership ​o

Motiuation ​*


After clarifuing meaning ​and ​nafure ​of ​management, ​now the ​question ​arises ​what ​different ​functions a​ re

pertormed ​by ​management? ​Apart from this, ​in ​order ​to ​successfully ​accomplish ​pre- ​determined ​targets ​of ​an

organisation, ​how ​does ​an ​idea ​pass ​through ​various managerial ​levels to become a​ ​reality? Answer to ​both ​these

questions are ​duly replied in ​this chapter. ​ I ​Levels ​of ​Management It ​will ​be ​beneficial ​to ​first
understand ​the levels ​of ​organisation ​and ​then ​the levels ​of ​management. All
​ ​the employees ​working in ​an
organisation/instifution ​can be ​divided into two ​categories. (1) Managerial Members (2) ​Non-Managerial ​Members
23 Levels ​and ​Functions ​of ​Management
On ​the basis of this ​division of ​employees, an ​organisation ​can be ​divided into two broad ​levels: ​(a) ​Managerial ​(I)
​ anagement ​In ​this ​category, ​and ​(b) ​Chief ​Non-Managerial ​Executive
Managerial ​Levels ​or ​Members: ​Levels ​of M
Officer levels.
(CEO), ​Departmental ​Managers, ​Supervisors, ​etc. ​are ​included. They ​are called managers because ​they ​manage some or the
rnanages ​ someboclv). ​
other ​CEO, ​person. ​ranks ​highest il,,1,ri;rgei ​in t​ he ​is ​hierarchy. ​tirarf ​i;ersc:rli,lro ​Departmental ​ manager ​ is

Thus ​they ​ all have ​ subordinates. ​ The

subordinate ​ to ​the ​ CEO. ​ Supervisors ​work ​
subordinate ​under the departmental ​to s​ upervisors. ​managers ​Except ​and ​workers, ​so ​they ​are ​all ​subordinate ​others ​are ​to
called ​them. ​In ​managers ​the ​same ​irrespective ​manner, workers ​of t​ heir ​are
designation. ​He ​is ​the ​manager ​only who builds ​managerial ​levels. ​Their ​link ​among ​themselves ​is ​clarified in t​ he
following d​ iagram.

,, ​ .t ​ \i ​ \1, ​,%_ ​ Chief ​Departmental Executive ​Suoervisors ​o..-^Y-^-- ​*.Lo
ti t​

Officer-CEO Managers ​.)r ,,.f,'

​ ​'' It
​ ​is ​uite evident ​from ​the above diagram that ​all ​the employees ​working ​in an organisation builds a
chain ​of ​hierarchy. This ​is ​known ​as c​ hain ​of ​authority. Chain ​of authority ​explains ​the ​link ​between superior ​- ​subordinate.
In this chain one manager ​is ​linked to the other in ​a ​vertical ​form. I​ n this manner, this chain from top to ​bottom b​ uilds ​many
managerial ​posts, ​which a​ re ​termed ​as ​managerial ​levels. ​The term '​ Level ​of ​Management' r​ efers ​to ​a ​line ​of ​demarcation between
various management positions in an organisation. ​Levels of ​management ​decides ​the ​authority ​of ​managers. ​As we ​move from top
to ​bottom, ​the degree of a​ uthorities ​goes o
​ n ​decreasing.
(2) ​Non-urtrrragerial Members: ​In ​this category, workers a​ re ​included. They a​ re ​those ​employees who w
​ ork ​directly on t​ he ​job.
The ​place ​at ​which ​such ​employees ​work ​is ​known a​ s ​platfolrn ​area. ​As ​they ​are ​cannot ​at the be lowest called managers. level ​of
chain ​For i​ n ​this an reason, o​ rganisation, they ​are t​ hey not ​do ​counted not ​have a​ mong any ​subordinates, '​ Level ​of
Management'. that ​is ​why They they

form the non-managerial ​level. ​ t ​Number ​of ​Levels ​of ​Management

Levels of management ​do not ​have ​a ​definite number. ​Its ​number ​is ​fixed ​according to the nahtre, ​size, ​etc. ​of the business.
Brech ​has d​ ivided ​levels ​of management into ​the f​ ollowing ​three categories:
​ op ​Level Management (2) M
(1) T ​ iddle ​Level Management (3) L ​ ower ​Level o​ r ​Supervisory Management
24 ​Business ​Studies
Levels of ​organisation along with

its ​various components ​are ​shown in ​the ​following ​diagram: ​ t

Board ​of ​Chief ​Execr ​Chairman, ​Director, Man

Directors ​ttive ​Officer ​Managins ​ager ​General /​ ​/ /​ Management ​
/ ​- ,/
​ ​toq ​\ \
Depa(mental ​Manager
Manage Deputy Departmental rtmental Manager

/ ​*,oo,"L"r"r v"nrg"r"n\
​ ​

:tional Mgr Supervisors


​or ​Operation"t ​trrtrnrg"r"n\

/ ro*.rlevet


f​ Non-managerial ​members ​
Level ​ L ​ I Workers
​ I ​platfor

Levels ​of Organisation​ r​ __l

(l) ​Top Level ​Management: ​In ​top ​level ​management, ​Board ​of Directors, ​Chief ​Executive Officer, etc. ​are

included. Chief Executive Officer can be ​a single ​person ​or a committee of ​officers. ​Chief Executive officer ​can be ​called

by ​many ​names, ​like ​Managing ​Director, General

​ Manager, President, ​etc. ​Top ​Management ​has ​all

Levels ​in ​The ​Form of ​Pyramid-A ​Pyromid. Leuels

​ ​of ​By Manogement
​ ​this we ​get ​the are
​ ​ ​the ​form ​that ​of os
​information in ​ ​the we

​ ​go ​to ​on bottom

number ​moue ​of ​down ​employees ​from top ​ ​increosing. ​leuel, ​the ​owners management
​ ​or ​shareholders authorities,
​ ​of

the and
​ ​company. because
​ ​of ​these ​authorities ​officers of ​these levels ​are accountable to ​example' Following
​ ​(i) ​Determining

an ​objective functions
​ ​can ​Objectives: are
​ ​be ​set included
​ ​that ​in ​Top in
​ ​the the
​ ​level following list
​ ​for ​management Top

year Level
​ ​the ​sales ​sets Management:
​ ​of ​objectives ​the ​company ​for the ​has ​crore.​organisation. ​For to ​cross Rs ​1,000 are

formed. fixed, ​(iii) ​(ii) F

​ or ​Determining ​Determining ​such ​example, ​as ​sales, ​it ​purchase, ​Policies: ​can ​Activities: ​be
a sales ​advertisement, ​Only ​Different ​policy at this of ​activities ​levelpolicies ​a ​production, company ​to ​be ​to performed related
research, ​just ​make ​to ​for ​the ​etc. cash the ​realisation fulfillment ​sales. ​of ​objectives ​are of an ​objective (iv)
​ ​Assembling

Resources: ​Needed ​resources ​objective, ​like ​capital, raw-material, fixed ​assets, etc. are
​ ​assembled (ananged) for ​the ​realisation

of an (v) ​Controlling ​to ​get desired ​results. ​the ​Work ​Performance: ​The ​work ​in progress ​is ​closely ​monitored ​in ​a ​company

(vi) Approving ​Budgets: ​approval ​is ​given ​to ​the budgets. ​Budgets prepared ​by ​different ​managers ​are given ​final ​shape,

​ M
i.e., ​superintendents, ​management. (2) ​ iddle ​Under ​and Level
​ ​operations ​this, Management:
​ ​divisional ​managers ​heads,

Middle ​(Functional departmental level

​ management ​Managers) heads, lies
​ ​are ​deputy between
​ ​included. ​departmental top

level and ​heads, lower
​ ​plant level

Levels ​and ​Functions ​of ​Management 25

Following ​are the ​main functions of Middle ​Level Managers: ​(i) ​Interpreting ​Policies: ​At this level, policies
framed by top level managers ​are ​interpreted. ​Like t​ he ​marketing m
​ anager introduces ​his ​salesman to the ​sales ​policy
of the ​company t​ hat at ​no c​ ost ​credit s​ ales ​will ​be made.
(ii) ​Preparing Organisational set-up: ​Every middle ​level manager prepares ​outline ​of ​his respective
department in ​accordance ​with the ​objectives of the organisation.
(iii) ​Appointing ​Employees: ​Every departmental manager appoints employees ​to ​fulfill ​the activities ​of ​his
(iv) ​Issuing ​Instructions: ​Departmental managers direct their subordinates about what to do ​and ​how ​they have ​to
do. ​Needful ​resources ​are made available ​to ​subordinates so that ​they ​can ​do ​the ​assigned j​ obs intermittently.
(v) ​Motivating ​Employees: ​Middle ​level ​managers motivate their employees ​by ​various ​means so ​that they work ​most
efficiently to ​achieve ​organisational ​objectives.
(vi) ​Creating Cooperation: ​Cooperation among ​different divisions ​is ​reuired ​to ​successfully ​achieve ​company's
objectives and this ​done by middle ​level managers.
(3) ​Lower Level or ​Operational ​Management: ​It ​is ​also ​known ​as ​Supervisory Management. ​Under t​ his, ​various
formen ​and supervisors are ​included. They ​are called First ​Line ​Managers.

Following ​are ​various functions of lower ​level managers: ​(i) ​Submitting ​Workers' ​Grievances: ​Lower ​level
managers ​are ​in ​direct ​contact ​with ​the ​workmen ​employees. ​They ​themselves ​sort out the ordinary problems of

workmen and submit ​serious ​workers' ​grievances ​to middle ​level managers. ​
(ii) E​ nsuring Proper ​working
Environment: ​Lower level ​managers ​ensure ​that ​proper arrangement
​ ​of water, elechicity, ventilation,
cleanliness, etc. ​is ​made at the ​work ​place. ​This ​increases ​efficiency.
(iii) ​Ensuring Safety ​of ​Workers: ​Probability ​to ​accidents ​can be annuled by ​building ​fences ​around ​machines.
(iv) ​Helping Middle ​Level Management: ​They help middle ​level ​managers ​in ​recruiting, ​training ​and ​promoting
(v) ​Inviting ​Suggestions: ​They ​invite ​suggestions ​from ​their subordinates, ​as ​to ​how ​the ​uality ​of ​work ​can ​by
(vi) Creating ​better ​Human Relations: ​They ​create better ​human ​relations ​so ​that ​altercations can be ​avoided ​at
the workplace. ​ ! ​Functions of ​Management
Management ​has ​been defined in the ​form ​of ​a ​process. ​Under the management process ​(planning, ​organising, ​staffing,
directing and controlling), many activities ​inter-related ​to ​each ​other ​are ​included. ​These activities are ​known ​as
functions or ​elements o​ f ​management.
26 ​Business ​Studies
Functions ​of ​management are ​pictorially ​presented ​in seriatim in ​the ​following ​diagrams:
Functions of ​Management

5. ​controllins ​j

(1) ​Planning: ​It ​refers ​to thinking before ​hand. ​In ​other ​words, planning ​is ​the ​determination ​of a ​future ​course of ​action to

achieve ​a ​desired result. ​Under planning it ​is ​ascertained ​that what should ​be done,
​ ​how ​it ​should ​be ​done and ​who ​should do
it. ​If ​before the commencement of ​a ​job ​all these ​points ​are ​not contemplated than ​the ​objective of ​a ​business ​cannot ​be

Planning ​(vii) ​(iii) (i) (v) is​ ​a ​long ​process, ​for the consummation ​Setting ​Identifuing ​objectives ​altemative ​courses ​of

​ ​which ​Developing ​following ​premises ​steps ​are taken: ​(iv) E

action ​(ii) of ​ valuating altemative ​courses Selecting an ​altemative ​(vi)

Implementing ​the ​plan Follow up action (2)

​ ​Organising: I​ t ​refers ​to ​harmonious ​adjustment ​of ​various ​parts ​to achieve ​common
objectives. ​In ​order to ​make the first ​function ​of ​management ​(i.e., ​planning) functional, ​'a ​stmcture ​of ​roles' ​needs ​to ​be ​famed
and sustained. The ​process ​of creating ​this ​sktrcture ​of roles ​is ​known ​as ​organising. Planning ​is j​ ust to put ​some ​idea in ​writing,
but to convert that idea into r​ eality, ​a ​group o​ f ​people i​ s ​needed. F
​ urther ​to s​ teamline ​the activities of this g
​ roup ​of p
​ eople,

organising ​is ​reuired. Under ​this, the ​whole project i​ s ​job divided
​ ​will ​be into
​ ​performed various
​ ​small ​at ​which jobs,
​ to ​post),

assign ​to unite these

​ ​various jobs
​ to designated ​jobs into ​one posb
​ ​departnent, (which
​ ​will ​to clarifu
​ ​clarifu that
​ ​the a​ ​rights

particular ​and duties

​ ​of ​employees ​to ​be appointed ​at ​various ​posts, ​and ​to ​define relationship among various ​posts

Following ​
(iii) ​(i) ​Assignment ​Identification steps
​ ​are ​of and taken
​ ​Duties

​ ​organising ​(iv) (ii) ​Deparhnentalization ​Establishing ​function ​of management: ​Reporting

​ culminate ​of ​Work the
Division to

Relations ​(3) ​Staffing: I​ t ​refers ​to filling and keeping filled the p​ ost ​with ​people. I​ n ​planning, i​ deas are ​given a written
​ ​shape, ​on
the other hand organising, ​with ​the objective ​of ​converting ​these ideas ​into ​reality, ​prepares ​a ​stucfure ​of ​various ​posts. ​After
organising ​comes ​staffing which deploys people ​on these ​posts ​so ​that ​jobs ​can b​ e ​performed. I​ n ​view ​of the fact that the s​ uccess

of ​an ​organisation ​is ​commensurate ​to howadroiflyeveryemployeeperformshisjob, ​the ​importance ​of ​staffingfunction

increases even ​more.

Levels and ​Functions of ​Management

Following ​(4)
​ irecting: ​Selection ​Training ​Estimating ​Recruitment P​ lacement steps
​(iii) (iv) (ii) (v) ​(i) D ​ ​and are

​ evelopment taken
the ​and ​It D ​ ​ ​to culminate
​refers manpower Orientation to ​ ​instructing. ​reuirements the
​ ​guiding. staffing

function ​communicating ​of ​management: ​and ​inspiring people ​in t​ he ​organisation ​Under directing following four
activities are included:

​ ​Supervision ​Leadership
(iii) (i)
(ii) ​Communication ​(iv) ​Motivation Brief description ​of ​these ​four activities ​is ​as ​follows: ​(i) ​Superuision: ​It refers ​to
monitor ​the progress of ​routine work of one's subordinates and ​gr-riding ​them ​properly ​Supervision ​is ​an ​important ​element ​of the
directing ​function o​ f ​management. ​Supervision h​ as an ​important f​ eature that face ​to f​ ace contact between supervisor ​and h​ is
subordinate ​is ​a must.
(ii) ​Communication: ​It refers ​to an art ​of ​transferring ​facts. ideas, ​feelir-rg, ​etc. ​from ​one person to ​another and making him
understand ​them. ​A m ​ anager has ​to ​continuously tell ​his subordinates ​about ​what to do, how to do, and when to do various
things. Also, it ​is ​very ​essential ​to know their reactions. ​To ​do ​all t​ his ​it b ​ ecomes ​essential ​to ​develop e​ tfective
telecommunication facilities. Communication by developing ​mufual u​ nderstanding ​inculcates ​a ​sense ​of c​ ooperation
which b​ uilds ​an e​ nvironment ​of c​ oordination in ​the organisation.
(iii) ​Leadership: I​ t ​refers ​to influence ​others ​in ​such a manner ​to do work what ​the leader wants ​them ​to do. L ​ eadership
plays ​an i​ mportant role ​in d​ irecting. Only through this ​uality, a​ manager ​can inculcate ​tust a​ nd ​zeal ​among ​his subordinates.
(iv) M​ otivation: ​[t ​refers ​to t​ hat ​process ​which ​excites ​people ​to work for a​ ttainment ​of d​ esired ​objective. Among the
various ​factors ​of production, ​it i​ s ​only the human factor which ​is ​dynamic and ​provides mobility t​ o ​other p ​ hysical
resources. ​If ​human r​ esource goes static ​then ​other r​ esources ​automatically ​fum ​immobile. Thus, ​it b​ ecomes ​essential ​to
motivate human r​ esource ​to k​ eep them dynamic, ​aware and ​eager ​to perform their ​duty. B ​ oth monetary and ​non-monetary
incentives ​are ​given ​to ​employees ​for motivation.
(5) ​Controlling: ​It ​refers ​to ​bring the actual ​results closer ​to ​the ​desired results. ​Under this, ​the manager ​check ​whether
monitors ​the ​whether ​uality ​the ​and ​jobs ​uantity ​are b​ eing ​of job ​performed ​performed ​in accordance ​is ​in ​alignment ​to
the ​set ​to p​ lans ​the o​ r ​pre-determined ​not. S/he ​also
standards/parameters ​or ​not. ​Deviations are ​then ​checked ​for ​by ​matching actual performance with pre-determined
standards. ​After ​this ​corrective ​action ​is ​taken ​for ​negative deviations ​so ​that ​the ​difference between actual ​result ​and
desired results ​can be minimised. Thus, ​with ​the enforcement ​of ​conkolling ​process ​all the bottlenecks ​coming ​in the ​way ​of
work-progress ​are ​removed ​and efforts of all the people start ​approaching in ​the desired ​direction. ​In the ​form of conclusion,

controlling ​process ​has ​five main ​(iv) ​(iii) ​(v) ​(ii) ​(i) ​
steps: ​Setting Measurement ​Analysingdeviations Taking Comparison

performance ​corrective ​of of ​actual actual ​action

standards ​performance performance with ​standards

28 ​Business ​Sfudies

g​1. Levels ​of ​Management: ​(i) ​(ii) Top

​ ​Middle Level
​ ​Level Management:
​ ​ i​ ncludes ​It ​includes board
​Management: It ​

​ ​directors ​and ​manager, chief

departmental of ​ ​executive ​deputy ​departmental officer.
​ ​g​manager ​(iii) Lower and ​Level

operations ​Management: ​or functional It ​includes managers. Supervisors ​and ​foremen. ​2. ​Functions ​at different ​Levels:
​ ​Top Level ​(iv) To Management:
activities, (a) ​ ​arrange ​for ​resources, (i)
​ ​To ​fix ​objectives, ​(v) ​controlling (ii)
​ To ​the frame

work policies,
​ ​performance, (iii)
​ To ​determine ​set-up, ​(vi) ​(vi) ​(b) ​Approving ​Creating ​Middle (​ iii) Appointing ​Level

cooperation. budgeh. ​Management: ​employees, ​(iv) ​(i) ​Issuing ​Interpreting instructions, policies, ​(v) ​(ii) ​Motivating

Preparing ​employees, ​organisational ​g​g

working ​management, ​(c) ​Lower environment, Level ​(v) ​Inviting ​Management: ​(iii) ​suggestions, ​Ensuring ​(i)

​ orkers' w
Submitting (vi) ​safety ​creating ​of w ​ orkers, ​better grievances, ​human ​(iv) r​ elations. ​Helping ​(ii) ​Ensuring

​ ​Non-Managerial ​not ​managers ​they Level:

middle ​proper level ​are 3. ​ ​are ​not In
​ ​the this
​ ​part level
​ ​of of
​ ​any management,

managerial workers
​ ​levels. ​are ​included. ​As ​workers ​4. ​Functions ​of ​Management: ​(ii) (​ i) Planning: Organising: ​It r​ efers

It ​refers ​to thinking ​to ​harmonious before ​hand. ​adjustment of various ​parts ​to ​achieve ​common ​objectives. ​(iii) s​ taffing:

(iv) ​Directing: ​It ​refers ​to filling and ​keeping ​filled ​the ​posts ​with ​people. ​It refers ​to ​instucting, ​guiding, communicating

and inspiring people in the organisation. ​(v) ​Controlling: I​ t ​refers ​to bringing ​the actual results closer ​to ​the desired ​results.

I ​Levels ​of ​Management

1. ​2. 3. 4. Describe,
​ ​in brief, ​the ​functions ​of ​top ​level ​management in an ​organisation. ​Describe, ​in brief, ​the ​functions of middle ​level

management in ​an organisation. Describe, in ​brief, ​the ​functions of lower ​level ​management in ​an organisation. ​What ​are the ​functions of

different ​levels ​of ​management?

6 Marks

​ hat ​are the three levels ​of management? ​State ​any ​three ​functions ​of the ​middle ​level management. 4/5
5. W ​ Marks ​6. 7.

(c.B.s.E.2007) ​Write ​the ​meaning of 'Level ​of ​Management' ​. ​What ​are the ​main functions ​of ​top ​level ​management? ​What ​are the ​three ​levels

of ​management? State ​any ​three ​functions ​of ​top ​level management. (c.B.s.E.2007)

8. ​Enumerate any ​three ​functions of a General ​Manager.

3 Marks
Levels ​and Functions of ​Management

9. ​10. 11. 72. 13. 74. Enumerate

​ any three functions of a Departmental ​Manager. ​State ​any three functions of lower ​level

management. Enumerate any ​three ​functions ​of ​middle ​levelmanagement. (​ C.B.S.E.2006) ​Enumerate any ​three ​functions ​of ​top ​level

management. ​(C.B.S.E.2006) What do ​you ​mean ​by ​'Levels of ​Management'? Write ​names and ​two ​functions ​each ​of ​the levels or

tenets of management engaged ​in: ​(a) Overseeing ​15. ​ activities ​of ​the ​workers, ​(b) T​ aking key ​decisions. ​Name any two
76. 77. the
​ hat ​does the ​pyramid form of ​levels ​of management ​indicate? ​Name (i)
designations ​and two functions given to ​the First ​Line ​Managers. W ​
Determining ​the ​Levels Policies
​ ​of management (ii)
​ Assembling ​engaged in:

Resources ​(iii) Interpreting ​Policies. ​I ​Mark 18.

​ ​Name the ​two ​categories ​in ​which ​all ​the ​employees ​of ​an ​organisation

can be ​divided. ​19. Ans.

​ ​Which (o)
​ ​are Managerial
​ ​the ​two members.
​ ​main ​categories (b)
​ ​Non-managerial ​of levels of

members. ​organisation. ​
20. Ans.
​ ​Workers (o)
​ ​Managerial ​are ​included level.
​ ​at (b)Non-managerial
​ ​which ​level of ​management?

level. ​
27. Ans.
​ ​ ​they ​are are
​Workers fu ​ n​ on-managerial ​at ​which ​level members,
​ ​included the ​ ​ ​they can't ​be the
​of organisation? so

part of any managerial ​level. ​

22. Ans.
​ ​What At
​ ​is non-managerial
​ ​meant by levels level.
​ ​of ​management? ​
23. Ans.
​ ​It refers ​to ​a

line of demarcation ​between ​various ​managerial ​positions in ​an ​organisation. ​To determine the ​policies ​is the ​function ​of ​which

level of ​management? ​Ans. 24. Ans.

​ ​Departmental A
​ t middle ​Top ​level ​Level ​management. ​Management. ​managers are

included ​at ​which ​level of ​management? ​ I ​Functions of ​Management

25. 26. ​Discuss ​the functions of management ​in ​brief. 'Management ​is a series ​of continuous intenelated functions.' Comment. 6​
Marks ​27. E​ xplain Planning and ​Organising ​as ​functions of ​management. ​4/5 Marks ​31. ​ hat Explain Explain
29. 30. 28. W
Explain ​are ​briefly the 'direction' the meaning ​elements ​any ​as ​three of a ​of function ​staffing ​functions direction? function of of

management. management. ​of ​management. 3

​ Marks ​32. W ​ ark ​33. Ans.
​ hat is meant ​by ​planning? l​ M ​ ​What It​ ​is refers
​ ​meant

to thinking ​by organising before

​ hand. ​as a f​ unction ​of management? ​
34. Ans.
​ ​It refers ​to ​harmonious adjustment of various

elements ​to ​achieve ​common ​objectives. ​What ​is m

​ eant ​by ​staffing?
Ans. ​It refers ​to filling and keeping ​filted the posts ​with ​people.
30 ​Business ​Studies

35. ​What is meant ​by ​directing? ​36. ​What Ans.

​ ​It ​is refers
​ ​ instructing, ​by ​superuision? guiding,
​meant to ​ communicating and

inspiring people in ​the organisation. ​

​ ​It ​refers ​to monitoring ​the progress ​of work of ​one's subordinates ​and guiding them properly.
37 Ans.

​ ​What It​ ​is refers

What is meant by communication? ​39. Ans. ​ ​ ​the ​by process
​meant to ​ ​ ​passing ​information from
​leadership? of

one ​person ​to another. ​

​ ​What L-eadership
39. Ans. ​ ​is meant ​by means
​ ​motivation? that
​ uality ​which ​influences ​people for ​the

attainment of ​a goal. ​
40. Ans.
​ ​What Motivation
​ ​is meant means
​ ​by ​controlling?

a process ​which ​excites ​people to work for the attainment of ​a desired object. ​Ans. ​It refers ​to bring ​the acfual results closer ​to ​the desired
​ ​uncle ​is ​working

as ​'Marketing Manager' ​in ​a ​company. ​At ​what ​level of ​management ​is ​he ​working? ​What functions do you think ​he ​is ​performing? ​State ​any

four. ​Hint: ​My ​uncle ​is ​working ​at the ​middle l​ evel ​management. Explain any four functions of middle ​level ​management. ​t2)

Your ​working? father

​ ​what has
​ ​retired ​functions as
​ t​ he ​do director
​ ​ ​he a​ ​manufacfuring ​was ​performing company.
​you think of ​ ​ ​that ​level?

At what ​State level

​ ​any of
​ ​management ​two. was
​ he ​Ans. ​(i) Determining He ​was ​working objectives. ​at ​the ​(ii) top Determining ​level

mnagement. ​policies. He was ​performing ​the ​following ​functions: t3l ​

Your friend ​is ​working ​as ​a ​'worker' ​in ​a ​company. ​At ​what ​level ​of ​organisation ​is ​he ​working? ​What ​is ​the ​name of ​the place/area ​where ​he
is ​working? ​Ans. ​Non-managerial Level. Platform ​Area. ​t4l
Rifu ​is ​the manager ​of ​the ​northern division ​of ​a ​large ​corporate ​house. ​Atwhat ​level ​does ​she ​work ​in ​the organisation? ​What ​are her basic

functions? ​Ans. ​(i) Interpreting Ritu

​ ​is ​working policies
​ ​ ​middle ​(ii) Preparing level
​at ​and the ​ ​of ​organisational management
​ ​strucfure. in

the organisation. Her ​basic ​functions ​are: ​tsl ​You h​ ave three brothers. They ​are ​working ​in ​three different MNCs ​as ​General Manager,

Supervisor ​and ​Deputy ​Personnel Manager. ​What functions ​of ​management do you think they ​are ​performing ​in ​their companies?
​ ​Are they
performing ​the same ​functions of ​management? If yes, how? ​Ans. ​All ​the three ​brothers of mine ​are ​working on three different ​levels ​of

management, ​such ​as, ​top ​planning, performed example,

​ ​level, ​lower planning
​ ​organising, at level all the and is ​
​ ​considered three ​staffing,

​ ​levels ​They ​most ​of ​and ​imporant ​are ​management. controlling. performing function
middle ​these level. ​directing the ​ ​It ​But ​the ​means at

​ ​top ​all functions ​is ​the while

same ​there the ​ ​only ​functions at ​ ​management, lower
​ ​a of difference the ​ ​of ​management level
​ ​of degree

​ ​all ​important. t6l

directing ​such ​For ​are ​as, is
Raman ​is ​working as 'Plant Superintendent' ​in Tifco Ltd. ​Name ​the ​managerial level at ​which ​he ​is ​working? ​State ​any four functions ​he
will ​perform ​as ​'Plant ​Superintendent' ​in this ​company.

(c.B.s.E.2008) ​Hint: ​He ​is working ​at ​Middte Level ​Management. Refer ​to ​any four ​functions ​of ​Middte ​Level ​
. try
Management. ​Dheeraj ​is ​working as 'Operations Manager' in ​Tifco Ltd. ​Name ​the ​managerial level at ​which ​he ​is ​working. ​State any ​four

functions ​he ​will ​perform ​as ​'Operations Manager' ​in this ​company. ​Hint: ​He ​is working ​at ​Middle Level ​Management. Refer ​to ​any

four ​functions ​(c.8.s.E.2008) ​of ​Middle ​tevel ​Management.

Levels ​and Functions of ​Management 31

(lrrn, ​Session,
Mr. Question: Sir, at ​one ​place, you ​are ​calling organisation ​as ​the ​second ​function ​of management ​but ​at
​ ean ​organisation ​is
​ oes ​this m
another place you ​have used ​the word ​'company ​organisation'? ​Sir, d ​a
function ​of management ​and even ​a ​company ​can be ​called ​an ​organisation? How ​is ​this ​possible? ​Mr.
​ ​very good ​uestion. Listen ​carefully.The ​word ​organisation ​can ​be ​used
Answer ​: A
synonymously for two ​meanings: ​(i) In the ​form ​of ​Function ​of Management: ​Organising ​means ​to decide ​about ​the
stnrcture ​of roles. ​Thus ​to ​decide about how many ​posts are ​needed to ​culminate ​the ​different activities.and what ​will ​be ​the

authorities and ​responsibilities ​of ​these ​posts, ​etc. ​(ii) In ​the form ​of ​Company/Institution/Enterprise: ​Organisation
means 'Group
​ of people.' In ​this context, ​a ​company, ​a ​school ​and a ​club, etc., ​all ​are ​organisations. To conclude, ​we can ​say
that organising ​is ​a ​function ​of management and ​even ​a ​company ​or a ​'group ​of ​people' ​can be called an ​organisation ​as ​well. ​Mr.
Question ​: ​Ok, thank ​you sir.


Coordination ​makes ​2 + 2 ​= 5​ ​possible

Learning Objectives ​After ​o ​Meoning studying

​ ​of ​Coordination this
​ ​chapter, you ​will ​be acquainted ​with: ​o
​ oture ​of ​Coordination ​a C​ oordination ​is ​the ​Essence ​of ​Manogement ​a C​ oordinotion ​is
Definitions ​of ​Coordination ​a N

needed ​at ​all ​Leuels ​ol Monagement ​o I​ mportance ​of ​Coordination

! ​Meaning of Coordination
The dictionary ​meaning ​of ​coordination is ​rapport. T
​ hus, ​coordination ​is ​to synchronize ​the ​various activities ​of ​an

organisation. ​In t​ he ​context ​of a ​business ​unit, ​the meaning

​ of coordination ​is ​to ​balance its ​various ​activities (purchase,

sales, ​production, ​finance, personnel, etc.) ​so ​that ​objectives of business can be easily achieved. ​ I ​Definitions of
Different ​management experts have ​defined coordination from ​different ​points ​of ​view. ​A ​few ​of ​such ​definitions ​(1) (2)

​ 'Donnell, ​below ​in ​order 'Coordinotion

According have ​to ​been ​Koontz ​reproduced ​and O ​ ​to ​make clear ​is ​the ​the e​ ssence

meaning ​of r​ tonagement of coordination: ​ochieuement of h​ ormony of ​indiuidual ​et'lorts lowords ​the ​or:cornplishn'tenl of ​group
"Coordinotion ​
​ ​According ​to
goo1s. '​ ​t'or the ​Mcfarland, ​ ​ ​the ​process ​and
pottern ​of group ​ef.forts ​omong ​his ​purposes '​ ​subordinotes is

secures uhereby ​unitgt on ​ol execttiue ​octior-t ​irt deuelops ​prrrsuit ​of an
​ ​comrnon orderly ​Coordination ?​ ​hormony Coordination
​ ​ ​ ​ ​ ​

actiuities ​is ​of e​ stablished ​is ​an a​ ​organisation, process

​ ​omong through
​ ​different ​so which
​ ​that orgonisotional
​ ​objecliues ​can ​be
successfully achieued.
Coordination: Nature and Importance
In conclusion, ​coordination ​can ​be a​ ppropriately ​defined ​as ​fhe ​process ​which ​establishes ​harmony among ​the
​ rganisotion ​in ​order ​to ​achieue ​the objectiues of ​the ​organisation ​in ​on ​effectiue
uarious ​actiuities ​being ​performed ​in an o

manner. ​ I ​Nature ​of ​Coordination

Coordination ​is ​a process ​to establish ​harmony ​among the different activities of ​an ​organisation, ​so ​that the desired objectives can
be ​achieved. ​Definitions ​of ​coordination ​present the ​following ​facts ​about ​its nafure:
(1) ​Coordination ​lntegrates Group Effort: ​The ​need ​for ​coordination ​is f​ elt ​when group effort ​is ​needed for the
accomplishment ​of ​an objective. In short, ​it ​can ​be ​said that coordination ​is related ​to ​group ​effortand ​not ​individual ​effort.
The ​question ​of ​coordination ​does ​not ​arise, i​ f the ​job ​is ​done b
​ y ​one person
​ ​only.
(2) ​Coordination ​Ensures ​Unity ​of ​Action: ​The nature of coordination ​is ​of ​creating ​unity ​in action. ​It means ​during
coordinating ​process an ​effort ​is ​made to ​create ​unity ​among ​the ​various activities of ​an ​organisation. For example, ​the ​purchase
and ​sale ​departments ​have ​to coordinate their effort ​so ​that supply of ​goods ​takes ​place ​according to ​purchase orders.
(3) ​Coordination ​is ​a ​Continuous ​Process: ​It ​is ​not ​a ​job which ​can be ​performed ​once and ​for ​all, ​but ​its ​need ​is ​felt at
every ​step. ​Many activities ​are ​performed ​in ​a ​business. ​Sometimes ​or ​the other, ​if ​any one of the ​activity ​goes ​on ​flucfuating
either for more or ​less ​than ​required, ​the ​whole organisational ​balance ​is ​disrupted. ​Thus, a ​close ​watch ​has ​to ​be ​kept on ​all the

activities ​to ​maintain ​the balance. ​(4) Coordination ​is ​an All-Pervasive ​Function: ​Pervasiveness refers ​to ​that ​truth

which ​is applicable

​ ​to ​all spheres ​(business ​and ​non-business organisations) and places ​uniformly. ​The nafure ​of ​coordination ​is
pervasive. Like making of time-table ​in a​ n educational instifution ​is ​an apt example ​of e​ stablishing ​coordination. ​In the
game of cricket, the placement of players ​at ​pre-determined ​positions i​ s ​nothing ​but ​coordination. ​In the same ​manner, ​to
synchronize the activities ​of ​different departments, like ​- ​purchase, ​sales, ​production, finance, ​etc. ​in ​a ​business ​organisation ​is
(5) ​Coordination is the Responsibility of ​All ​Managers: ​Coordination ​is needed ​at all ​the ​three, i.e., ​top, middle
and lower managerial ​levels. ​Different activities performed at all the ​levels ​are ​equally ​important. T ​ hus ​it i​ s ​the
​ hy, ​it ​could not be s​ aid ​that
​ anagers ​that t​ hey make ​efforts ​to e​ stablish ​coordination. That i​ s w
responsibility ​of a​ ll ​the m
coordination is ​of ​more ​importance ​to ​any ​one ​particular managerial ​level ​or ​a manager. ​Coordination ​(6)
Coordination ​is ​never ​established ​is a ​Deliberate by ​itself ​but ​Function: ​it ​is ​a ​coordination ​9tbsrut"
effort. ​ Only ​ cooperation ​ is ​ not ​ suffice ​ but
is ​also ​ needed. ​ For example, ​ a​ teacher ​ aspires ​
to teach effectively ​(this ​is ​cooperation) ​but ​the ​time-table i​ s ​not prepared ​in the ​school ​(this ​is ​lack of ​coordiation). ​In ​this
situation, ​classes ​cannot be arranged ​for. ​Here, the effort made ​by ​the ​teacher is meaningless, i​ n ​the a​ bsence ​of c​ oordination.
On the o​ ther hand, ​in the a​ bsence ​of c​ ooperation, coordinatlon ​dissatisfies ​the employees. Thus, b ​ oth ​are r​ equired ​at a g
​ iven
point ​of t​ ime.
Cooperation ​? collectiuely. ​Cooperation ​It ​originotes ​meons ​the ​effoftlessly.
​ ork
desire ​to w

I ​Coordination ​is ​the ​Essence ​of ​Management
An ​important ​question that arises ​in r​ elation to ​coordination ​is ​whether ​or ​not ​it ​is ​to be ​recognised ​as ​the ​sixth ​function ​in ​the

chain of management ​functions ​(e.g. ​planning, ​organising, staffing, directing and ​to controlling). ​
​ be a​ ​separate Some

managementexperts ​function ​of m

​ anagement. (e.g.
​ ​Fayol, ​However, L.A.
​ ​Allen, ​Tead) ​consider ​coordination ​modern

management experts ​are ​of. ​the view ​that coordination

​ is ​not a s​ eparate ​function ​of ​management, ​rather ​it f​ orms ​a
major part ​of ​all ​the ​other ​functions ​of ​management. ​In ​other ​words, management cannot ​be ​establishment
accomplished ​management ​without has ​of c​ oordination. ​to c​ oncentrate proper coordination ​Modern ​its
efforts ​management ​and ​on ​hence ​the
"Coordination ​
experts ​relation ​Koontz t​ hat they ​and h​ ave stated, ​O'Donnell ​ are also ​the ​is ​the supporters ​essence ​of ​of
this ​management". line of thinking, ​It ​means ​and ​when ​it ​is ​only ​a ​manager ​in ​this
diligently ​performs all the management ​functions, ​he ​or ​she ​remains busy ​in ​establishing ​coordination. ​This ​fact ​is ​highlighted
through t​ he ​following ​discussron.
(1) ​Coordination ​and ​Planning: ​While performing ​the ​function ​of ​planning, coordination forms the ​centre ​or ​focus ​of the
thinking ​of a manager. Planning ​is ​undertaken keeping ​in ​mind the various ​activities ​being ​performed by the different
departments ​in ​an organisation. For ​example, ​when ​a sales ​manager is ​making ​a ​plan ​to ​increase ​his ​sales ​target, he also
consults ​the ​production ​manager, ​the purchase manager, the finance manager, ​etc. ​in ​order to ​avoid ​any ​problem ​that may
arise ​in the fufure. ​This ​clearly shows ​that coordination ​is ​very ​essential ​while performing ​the ​function of planning.
(2) ​Coordination ​and ​Organising: ​While performing ​the ​function ​of organising, the ​main ​work of the ​organisation is
divided into ​various sub-functions, ​and ​the r​ elationships between the various ​people performing ​those ​sub-functions ​are
defined, ​with ​the aim of ​accomplishing ​all ​the ​activities ​of ​the ​business ​in ​a ​systematic manner. ​While ​performing ​the ​function
of ​organising, ​the manager ​has ​to make ​efforts ​to ​establish ​coordination ​among ​the ​various departments ​as ​well ​as ​the ​various
people working in ​the ​same department. ​For ​example, ​work is divided among ​the p​ eople ​working ​in ​the ​production
department ​in ​such a ​manner ​that where ​the ​work ​of ​one ​person ends, ​the ​work of the next ​person begins. Since any
deficiency in the ​work ​of one person also ​affects ​the ​work ​of others, ​everybody ​makes efforts ​to ​complete ​his ​work on time,
and ​the ​workers do ​not ​create ​hurdle in ​each ​other's work.
(3) ​Coordination ​and ​Staffing: ​Organising ​results in the ​establishment ​of ​various positions ​in ​the organisation while staffing
​ eople. ​Even ​while
breathes life ​into s​ uch ​positions, i.e., the various positions ​established during ​organising ​are ​filled ​with p
perforining the function of ​staffing, ​the ​manager ​is ​also ​concerned ​about ​coordination. ​It ​is ​his ​effort to ​fill ​all ​the positions
witi ​cala-bElnd ​experienced people ​so ​that ​the ​various ​activities ​of ​the business ​may ​proceed ​without ​any ​hinderance.
Business ​Sfudies

Coordination ​and ​Functions of Management ​to con There

​ coordination ​estoblish ​be is
​ ​occomplished no
​ ​coordination.

​ ​which ​oJ ​does ​management ​in ​the not

function or ​ ​obsence make
​ ​which ​ellofi ​oJ

Coordination: Nature and Importance 35

(4) ​Coordination ​and ​Directing: ​While ​performing ​the ​function of ​directing, ​a ​manager ​gives ​due ​priority
to coordination. While ​issuing orders ​and instructions to ​a ​subordinate, ​he ​has ​to ​keep ​in mind ​the ​effect ​they ​will
have on other people, and ​he ​should ​make ​all ​efforts to ​avoid ​any ​such ​adverse effect. ​Such ​a ​line ​of ​thinking ​is
nothing ​else ​but ​an effort ​to ​establish ​coordination. For ​example, ​two people performing ​the same ​work ​are treated
equally in order to avoid any ​animosity ​among them.
(5) ​Coordination ​and ​Controlling: ​Controlling ​is ​the ​constant evaluation ​of progress of ​work, ​so ​that ​adverse
results ​can ​be avoided and ​conective ​action c​ an ​be ​taken ​in ​time. ​In ​the c​ ontext ​of ​coordination, controlling
results ​in the ​harmonisation ​of the objectives of the organisation, the ​resources ​available ​to ​achieve those objectives
and the human ​efforts required.
From the above ​discussion, ​it ​can ​be seen ​that ​coordination ​is ​concerned with ​all ​the ​functions of ​management.
Therefore, ​it can ​be ​stated ​without ​any doubt that ​coordination ​is ​not ​a ​separate ​function ​of ​management, ​rather it ​is ​the

essence ​of ​management. ​ I ​Coordination is ​Needed ​at ​all ​Levels ​of ​Management

Level. There ​If ​the are ​various three ​levels ​different ​of ​management ​levels of ​management ​are e​ valuated ​ Top ​Level,
Middle ​Level and Supervisory ​or ​Low from ​the ​point ​of ​view of ​coordination, ​it can ​be ​seen ​that it ​is ​not ​concerned
​ anagement level, ​rather i​ ts need ​and importance i​ s ​the ​same a​ t all ​managerial l​ evels. ​If ​any
with ​a ​particular m
work ​is being ​done ​solely ​by ​one person, then ​the problem of ​coordination ​does ​not ​arise ​at all ​since ​everything
​ nly. Therefore, ​it can be s​ aid ​that coordination is mainly c​ oncerned with
is ​being done ​by ​that ​one person o
​ ork at ​every level ​of m
group e​ fforts. ​The w ​ anagement ​is ​performed by ​a ​group ​of ​people ​and h​ ence, ​coordination ​is
required ​in ​order to ​complele ​the ​work ​successfully. ​Therefore, ​it ​can ​be ​said ​that ​coordination ​is ​required ​at ​all levels of

Not ​only this, ​if all ​the ​levels ​of ​management ​are ​looked ​at ​together, they become ​a ​group ​in ​themselves, ​and ​as ​in ​the
case ​of. ​every ​group, they ​also ​require coordination among ​themselves. Thus, ​coordination ​is ​required ​at ​each level ​of

management indMdually ​and ​also ​by ​all of them collectively ​as ​a ​group. ​ ! ​lmportance ​of ​Coordination
The ​following ​reasons ​bring out ​the ​need ​and importance of coordination:

(1) Size of ​the ​Organisation: ​These days, the ​scale ​of doing ​business is ​increasing ​day by ​day. ​Any ​increase ​in
the ​scale ​of ​the b​ usiness ​also ​results ​in an ​increase ​in the number of people ​employed in ​the o ​ rganisation, ​with e​ ach
person having different ​interests, ​way of working, m ​ utual ​understanding, objective ​of ​working, t​ olerance, ​etc.
However, ​all these ​people ​have ​to ​worktogether a​ s ​a ​group despite ​these ​differences, which ​is ​not ​a ​very ​easy ​task.
Therefore, ​it ​is ​very ​necessary ​that through ​coordination ​a ​proper e​ nvironment ​is ​created ​so ​that ​everybody ​gives ​in ​his
full ​contibution t​ owards the ​attainment ​of ​organisational ​goals.
36 ​Business ​Studies
(2) ​Functional ​Differentiation: ​There may ​be ​a ​clash ​of ​interests a​ mong ​the ​various ​departments ​in an
organisation. ​Such ​a ​sifuation becomes avery big hindrance in ​the ​achievement ​of ​organisational goals. ​There ​is only ​one
way ​to ​avoid ​clashes, ​and that is ​by ​establishing proper ​coordination ​between the departments.
(3) ​Specialisation: ​ln every organisation, ​in ​order to avail ​the ​benefits ​of ​specialisation, ​one ​main activity ​is ​divided into
various s​ ub activities, and each of ​these ​are a​ lloted ​to ​different persons ​who ​are experts in ​their particular sub-activity. Every
person wants ​to do ​his ​work in ​his ​own ​way, ​without h ​ aving any ​regard ​for ​the '​ total ​work' t​ o ​be ​performed. ​In ​such a​
sifuation, ​in o​ rder ​to c​ omplete ​the ​activities ​being performed ​by v​ arious people ​successfully, ​it i​ s ​very n​ ecessary ​to e​ stablish

coordination among ​them. ​It ​is ​only upon ​the establishment of ​coordination ​that everyone completes ​his ​or her ​own work on
time k​ eeping in ​view the 'total ​work' ​to ​be ​performed.
(4) ​Inter-dependence ​of ​Different ​Processes: The next major ​point ​which ​delineates ​the importance ​of ​coordination
​ reater ​is ​the
is ​that the ​various units ​in an ​organisation ​are ​inter-dependent.The ​h ​igher ​the inter-dependence among the units, ​the g
need ​for coordination.

V​1. Meaning ​of Coordination: ​It ​refers ​to ​establish ​harmony among various parts ​of ​a ​g​system.

2. Nature of Coordinaiion: ​(i) Coordination ​integrates ​group effort, ​(ii) ​Coordination ​g​ensures ​unity ​of ​action, (iii)

Coordination ​is ​a ​continuous process, (iv) Coordination ​all-pervasive ​(vi) Coordination function,
​ ​is ​a deliberate (v)

Coordination ​function.
is ​the ​responsibility ​of ​All ​managers, ​is ​an

3. ​Coordination ​is ​the ​Essence of ​Management: ​As ​per ​modern management experts, ​g​coordination i​ s ​not ​a ​separate

​ Coordination ​is ​needed ​at ​all ​Levels ​oI ​Management: ​The

function ​of ​management, but ​it ​is ​the ​essence ​of ​management. 4.
work ​atevery ​level ​of ​management i​ s ​performed ​by ​a ​group of people, that i​ s ​why, ​coordination i​ s ​required ​at

every ​ ​to ​complete ​ ​ ​work ​successfully. ​(i) ​Size ​of ​the ​organisation, ​(ii)
5. ​Importance level
​ of ​Coordination: the
Functional Differentiation, ​(iii) Specialisation, (iv) ​Inter-dependence ​of different ​processes.

! ​Meaning ​and ​Nature ​of ​Coordination

1. ​Discuss ​the ​meaning and nature of coordination.
6 Marks
4/5 Marks ​2. ​commonpurpose." ​"Coordination ​is ​the ​Inthelightof ​orderly arrangement ​thisstatement, of ​group ​explainthenafureof
efforts ​to provide ​coordination. u​ nit5r ​of ​action in ​(C.8.5.E.2009)
the ​pursuit of ​a
Coordination: Nafure and ​Importance 37

3 Marks ​3. ​4. 5. 6. DefineCoordination.

​ ​How i​ s ​coordination a 'Continuous ​Process'? ​Clarifu that coordination ​does ​not ​get

established spontaneously. ​Coordination ​is ​more than cooperation. How? Give an ​example.

l ​Mark ​7. ​To ​make ​t'he ​time-table ​in ​an ​educational ​institution ​is ​the
example ​of ​coordination. ​Comment. ​
​ ​Through it harmony ​is ​established ​among various ​classes. ​The ​coordination ​is
8. Ans.
required at which level of ​management?

Ans. ​At ​all the ​three ​levels. ​I ​Coordination ​is ​the ​Essence ​of ​Management ​and lmportance ​of
6 Marks ​9. ​"Coordination ​is ​the ​essence ​of management." Do you ​agree? ​Give ​reasons. ​10. ​"Coordination ​is ​the ​essence ​of

management." ​Explain ​this statement ​with the ​help ​of ​examples.

4/5 Marks ​11. ​72. the

​ ​"Coordination ​"Coordination help
​ ​of ​a ​suitable ​is ​is not
​ ​needed example.
​ ​a ​separate ​at all function
​ ​levels

​ the ​is ​the ​essence ​function ​of ​management." ​of all managers." ​(C.8.S.E.2009) ​Explain ​Explain.
​ ​management ​management. ​and ​lt ​is it
of of ​

(c.B.s.E.2ooe) ​13. ​ rite ​Explain a ​note ​the ​term on ​the ​'Coordination' importance ​and ​of coordination. ​its ​importance ​in
74. W

management. (​ C.B.S.E. ​SomplePaper) 3​ Marks ​15. ​'Coordination ​is ​the essence of ​management.' C​ tarifiy this ​point ​of ​view ​of
​ ark ​16. W
modern managementexperts. ​l M ​ hy ​coordination ​is known ​as ​the ​essence of management?

Ans. ​Because ​it ​is ​not ​a separate ​function of management, rather it ​forms a ​major part of ​all ​the other ​ ​'Inter-dependence
77. functions

of ​management. ​of ​different ​processes' ​is ​one ​point ​of the importance of ​coordination.
Clarifu. ​Ans. ​The ​higher ​the inter-dependence ​among ​the ​activities, the greater ​is ​the need ​for coordination.
38 ​Business ​Studies

Mr' ​Question: ​Sir, there ​is ​still ​confusion ​between ​the ​meaning ​of ​words, ​coordination ​and
​ K,
cooperation. ​PIease ​clarify it ​with ​the ​help ​of ​an ​example ​from ​daily routine. Mr. ​Answer ​: O

Listen ​carefully......... The

​ ​difference has already ​been clarified ​in ​the given ​chapter, ​but ​for m ​ ore
clarification, ​let u​ s ​take up ​an ​example. Suppose Mr. X ​gets a ​houser stitched. ​On trying i​ t, ​he ​finds ​it ​is ​4 ​inches
longer ​in ​length. N ​ ext morning, while all the four ​members o​ f the ​family ​are ​sitting o​ n the breakfast ​table Mr. X ​
says, get ​this ​houser 4​ ​inches short by the t​ ime ​I ​retum from ​the office. E ​ verybody ​carefully l​ istens ​to the
instmction. After ​this M ​ aughter ​for ​college, respectively. After
​ r. X ​leaves ​for office, ​son f​ or ​school a​ nd ​the d
some t​ ime, ​when Mrs. X remembered about the w ​ ork, ​she t​ ook the ​trouser t​ o ​the ​tailor a​ nd got ​it ​short ​by ​4
inches ​and kept ​it ​in ​the almirah. When ​the son ​returned from ​his ​school, ​he ​recalled ​the ​job ​assigned ​by his father.

Without communicating with any ​other member of the ​family, ​he ​took ​the ​trouser ​to ​the tailor, got ​it ​short

by ​4 ​inches ​and kept ​it ​at ​its previous ​place (assuming

​ that ​everybody ​had different tailors). Then daughter
came. ​As ​soon ​as ​she ​refurned, ​she a​ lso recalled of the ​work, ​assigned ​by ​her father. She repeated ​the same ​action,
as ​had already been performed by ​her ​mother and ​brother. ​In ​the evening, when Mr. ​X ​refurned from the office

and ​tied ​the ​trouser, ​he ​found that ​it ​was ​now ​half the length. Just ​contemplate, why did this ​happened? ​All ​
Mr. ​X's ​wife, ​son ​and daughter ​ loves ​him dearly, ​have ​full attachment ​with ​him and ​also ​want to ​keep ​him
happy. That ​is ​why ​all three ​hied t​ o ​fulfil ​the task ​assigned. ​Their this feeling ​is ​called cooperation. Thus, they
want t​ o ​cooperate ​with Mr. ​X. This feeling does not ​arises ​because ​of ​any pressure ​but ​comes ​on ​its ​own. ​On the

other hand, this error, ​shows ​the ​lack ​of ​coordination ​among all. ​If ​at ​ the ​time o​ f ​breakfast, decision had b​ een
taken ​as ​to who ​will ​perform ​this ​job, ​then this
​ ​error could have been avoided. Thus, ​coordination ​does ​not

originate by itself ​but for ​this ​effort ​has ​to ​be made. ​Mr. Question: Sir, quite ​right, ​thank ​you.

"Principles of ​management every type ​are ​of ​universal nature and apply:to
of ​organisatiotl," ​- Henry Fayol

Learning Obiectives ​After ​o studying

​ ​this c​ hapter, you ​will ​be acquainted ​Principles ol Monagement :​

Meaning and Definitions with:

​ ​ ow ​are ​Principles of ​Monagement ​deriued? ​o N​ ature ​ot' ​Principles ​oJ ​Monagement ​o
​o H
​ undomentol Principles o​ f ​Monagement
lmportonce ​ot' ​Principles of ​Manogement ​o F

! ​Principles of ​Management
These days business has assumed ​wider ​dimensions ​as ​a ​result of ​which ​numerous problems ​arise ​in ​day ​guidelines ​to day ​to
activities ​grapple ​and ​with t​ he ​manager ​the p
​ roblems ​of the ​and e​ nterprise ​run the ​has ​organisation ​to ​solve these
efficiently. ​problems. ​The ​A ​manager ​prirrciples ​needs ​of ​management, management guide ​it i​ s ​necessary ​the ​manager.
'Principle'. ​ Different ​ scholars ​ have
to ​know ​Before ​the ​entering ​meaning ​into ​of ​a ​ detailed discussion ​ about ​ the ​
defined ​
principles ​ of

'principle' ​ ​Terry, "Principle

​ ​According the
(1) in ​
​ ​t'undomental (2) ​Accordingto guide
​ following ​to G
​ .R. manner:
​ ​
stotement ​or t​ ruth ​ prouiding ​a
to the ​thought ​or ​oction'' ​ Edwin ​B'
​ lippo, ​is a​ ​

​ ccording is​ ​in ​a ​the ​t'undomentol ​t'orm of

"A ​principle ​(3) A ​ ​to couse ​
​ Koontz truth
​ ​and ond ​et'fect ​and it
​ ​is ​generolly
relotionship." ​O'Donnell, stated

"manogement ​principles are ​t'undomental ​truth ​oJ ​generol ​ualidity which ​haue ​ualue ​in ​predicting ​the ​result ​ol ​monogement
Principles ​and ​Techniques ​of ​'-----'
the'techniques ​ oi ​*onog"^"ntlJhe ​
Management ​from ​The ​principles ​ of ​monogement ​ ore dfferent
​ odem ​use ​of ​o ​technique the ​help ​ol ​a ​pnnciple ​is taken.
​ hile help ​making ​of m
while ​machines ​produchon ​is ​a ​technique. ​with the W

40 ​Business ​Studies

explains The
​ ​the definitions
​ ​ ​between these
​relationship of ​ scholars ​cause ​and show
​ ​effect that
​ ​and principles
​ ​experts are
​ ​play in

an the
​ ​important form
​ ​of ​role that
​ ​in basic
​ ​their ​preparation. truth
​ ​which ​ I ​How ​are ​Principles of ​Management
certain Like
​ ​definite all
​ ​other ​principles. social
​ sciences ​These management
​ ​principles have too,
​ ​ ​developed are
​has ​been its ​
the ​outcome ​by the ​management of
​ ​the ​varjous ​experts. problems
​ ​These faced
​ ​principles by-
​ the ​managers. ​First ​the problems

were ​born, ​then efforts were ​made ​to ​solve ​them and ​these efforts resulted ​in ​a ​lot of ​know r​ esearch ​these ​and ​solutions

finally, the ​in s​ olutions ​the form ​were ​of ​found ​principles ​out. ​We ​of ​management. leads ​principle ​that assigned

particular following ​as The ​ ​possible stated ​the w

​ (l) t​ o ​far ​better ​was ​work ​on t​ wo ​event ​as principles
​ ​ ays: performance.

according which ​basis ​when of ​ he ​management ​whole ​faces ​to ​of i​ t ​was ​his ​observation: i​ n work ​ability ​observed
​ the

actual should are

​ ​and ​practice. by derived
​ ​ ​managers ​this ​example, the
​taste. ​be ​Under ​some ​divided ​For If ​we in ​ ​do ​into

method, ​so, different that ​it ​the ​will ​dividing ​a ​principle l​ ead p​ arts ​manager ​to ​and the increase ​of e​ ach ​observes ​work

'division ​individual in ​the ​a ​of ​and ​proper efficiency. ​work ​analyses should ​manner ​tells ​This be ​us ​a may groups

Command'was ​conducted ​be (2)

​ ​of compared. On
​ ​
people, ​by ​a the
​ ​researcher(s) ​derived. ​in ​When basis
​ ​which ​it of
​ ​is ​one
found to Experimental
​ ​derive ​is ​headed that ​a ​the ​principle by ​performance ​a Studies:
​ ​single of management. ​boss Under
​ ​of

whereas ​the first this

​ ​group For the method,
​ ​ ​is ​the headed experimental
​example, second ​is ​higher, an ​ ​principleof ​performance

by two ​'Unity study

​ ​bosses ​of ​two ​of is
​ ​to ​learn After
​ ​about having
​ ​the understood
​ ​nafure and the
​ ​need meanings
​ ​for ​the

​ 'Principle' ​of ​management. and

principles of ​ ​'Principles of ​management', ​it ​is ​necessary ​ ! ​Nature ​of Principles of

their ​spheres ​offices, business The

​ ​(1) ​objectives ​playgrounds, ​(both ​Universal ​(industrial following
​ ​
business has points
​ ​to

units, ​Applicability: a​ gricultural a​ nd ​apply etc.) bring

​ ​non-business). ​more ​and out
​ ​farms, ​or the
​ ​non-business

Universalit5r ​less army, nafure

​ ​The the clubs principles same of
​ ​refers ​principles ​organisations ​and ​principles. ​to ​other of ​that

management ​of ​social ​management: ​huth ​(education ​organisations), ​which ​are is also ​equally ​institutions, ​universal ​in

applicable ​order in ​government to ​nature. achieve ​in ​All ​all general physics ​outcomes ​(2) ​guidelines, ​and ​General ​can

chemishy. be predicted. ​Guidelines: ​and ​The they principles c​ annot ​The The principles ​be ​principles of ​applied ​physics

of management, ​strictly. ​of and management chemistry ​on ​arc the ​are ​very ​hot ​other ​definite ​clear ​hand, and are like

definite, ​of ​the ​the principles ​nafure ​and their ​of of Principles
​ ​of ​Management ​and ​Values ​of ​of The
​ ​basictruth ​on

​ ​management ​ualues ​common a​ rethe are

principles ​indiuiduol's ​while of ​ ​conduct. ​generol in
​ ​the ​form ​rules ​For
Principles of Management: ​Nafure and ​Significance 47

(3) Formed ​by Practice ​and ​Experimentation: ​Principles ​of ​management ​are ​the ​results ​of ​various problems
faced ​by t​ he professional people. First ​of ​all ​problems appeared and then through careful ​research ​work solutions
were ​found. ​Thus, w ​ e ​recognise ​the solutions, ​found with t​ he help ​of p​ ractice and experience ​as ​principles, of
Similarly, ​researchers ​undertake ​experimental ​study ​to ​find ​out the principles of management. ​For ​example, ​the
principle ​of ​'Unity ​of ​Comrnand' must ​have emerged when two groups ​of ​people must have been compared wherein
​ osses. ​Undoubtedly ​the first ​group o​ f
the first ​group of people had one ​boss ​while ​the ​second group ​of ​people had ​two b
​ heprinciplesof
people ​must have ​performed ​better. ​(4) ​Flexiirility: T

managementastheyexisttodayarenotintheformoffinaltruths. ​fu a​ nd when political, ​economic ​and ​social

changes ​take p​ lace, ​new kinds of ​problems ​arise. ​Old prilrciples

​ ​at'e ​alter-,,ci ​,r!ril ​n.r',{ ​1;r-ir-rlrpir:s ​ale

propr.)Llndc,d ​Therefore,theprinciplesof management ​are ​dynamic in ​nature ​and cannot ​be ​called ​stagna:rt ​or
i5) ​Mainly Bclrar'iorrral. ​The principles ​of ​management ​are ​directly ​concerned with ​human behaviour. The
management ​activity ​is ​mainly ​concerned ​with management of ​man, ​who ​is ​a ​social ​animal ​having ​his ​own
nature, ​desires ​and expectations ​which ​cannot ​be repressed ​or eliminated. This ​is ​the ​main ​reason ​why ​the ​piincilries ​ol
​ ehaviour ​is ​the ​main hindrance in t​ he successful
​ uman ​behaviour. a​ nd often ​human b
maitzi.Ir.'n-rr,!ri aLe ​affected ​by h
application ​of management principles. For example, ​the ​principle ​of ​division ​of ​work ​is ​usually adopted for increasing
efficiency, but ​after ​doing ​the same ​work ​repeatedly ​a ​person ​gets ​bored ​(this ​is ​human ​behaviour), ​thereby ​resulting ​in
a ​decrease in ​efficiency.

(6) ​Relationship ​betureen Carrse ​and ​Effect: ​The ​principles o​ f ​management establish ​a ​relationship
between ​cause ​and effect. They ​specifu ​what ​the ​ultimate outcome ​will ​be ​if in ​a ​particular situation, work ​is ​done in
a ​particular ​manner. ​For ​example, ​if a​ ccording ​to ​the ​principle of division ​of ​work, ​the ​work ​is ​divided ​into
different ​parts, e​ ach ​part ​being ​assigned ​to ​a ​particular person according ​to ​his interests ​and ​capabilitgr, ​then ​it ​will ​result
in ​an increase i​ n overall efficiency. ​In ​this ​ca,se, ​the ​division ​ofworkisthecquseandtheincreaseinefficiency
istheet'fect.lnthesamemanner, theotherprinciplesof ​management also establish r​ elationship ​between c​ ause ​and
(7) ​Contingent: ​The principles of management ​are ​not ​fixed ​or permanent. They ​are ​affected ​by ​situations or
circumstances. Therefore, the ​decision to implement ​them or ​not ​is ​taken according to the sifuations or circumstances.
For example, according to the ​principle ​of ​division ​of labour ​a ​worker ​should ​be assigned ​a ​definite part ​of a ​job ​time

and ​again ​so ​that ​his ​efficiency ​is ​increased. But ​on ​the ​contrary, ​if a​ ​worker ​is ​fed ​up with ​doing ​a ​job ​repeatedly, the

application of this principle ​will ​not be b​ eneficial. ​Therefore, it ​will ​have ​to ​be changed. ​ f ​Signilicance ​of
Principles of ​Management

The principles ​of ​management are ​in ​the ​form ​of ​pre-determined ​solutions ​for ​repeatedly accuring ​The problems.

importance They
​ ​guide ​of the the
​ ​principles manager.
​ ​ ​is ​very ​important ​becomes for
​of ​management It ​ ​abundantly

​ ​from know
every manager ​clear to ​ ​the them
​ ​following thoroughly.
​ ​ rovides Useful ​Insight to
​facts: ​(1) P
Managers: ​The ​principles ​of ​management ​were ​developed ​on ​the basis ​of ​the experience of ​various ​professional
people. The principles ​inform ​the manager about t​ he manner managers. ​in ​which ​In ​this h​ e ​way, ​should ​timely ​act
​ ot ​resources repeat ​the ​and ​mistakes ​the
in ​guidance various ​situations reduces ​the ​so ​that wastage ​he ​does ​of n
objectives ​of the ​previous can ​be achieved ​in ​a ​less ​expensive manner.
42 ​Business ​Studies

For example, according to one ​principle ​of management, i.e., ​division ​of ​work, ​a ​job ​is ​divided into ​many ​small ​units.

Every unit or part ​is ​assigned ​to different individuals. ​Each ​individual ​does the same ​work ​repeatedly that ​has ​been

assigned. ​He ​gets used ​to i​ t ​which ​helps ​him t​ o ​perform ​his ​job efficiently and quickly. ​Consequently, the entire ​job ​is

completed in ​an ​economical ​manner. (2) ​ O ​ ptimum Utilisation ​of R ​ esources and ​Effective ​Administration:
In ​every organisation ​physical (material, machines, ​money, ​etc.) and ​human (man-power) ​resources are used. T ​ he
function o ​ f ​management ​is ​nothing b​ ut to put them to ​optimum u​ se ​or ​avoid w
​ astage ​of resources. ​And i​ t ​is ​possible

onlywhena ​manager ​makesuseoftheprinciplesof ​management. ​Accordingtotheprincipleof ​'unityof command' ​

there should ​only ​be ​one ​boss ​for ​an ​employee ​at ​a ​time. ​In ​case ​there ​is ​more ​than one ​boss, ​the employee ​will ​not be ​in
a ​position ​to ​work p​ roperly. ​Consequently, ​human r​ esource ​will ​be ​wasted. Therefore, ​if we desire ​to ​use ​the human
resource ​favourably, t​ his ​principle ​has t​ o ​be ​adopted. ​Similarly, many ​other p ​ rinciples ensure ​favourable utilisation
of ​various other ​resources.
The primary ​need ​of ​every ​organisation ​is ​that ​its ​administrative ​system ​should ​be effective. ​Only ​that
administrative ​system ​is ​called effective where the managers ​can ​take ​balanced and quick decisions. In ​order ​to take
​ ade possible ​with ​the help o​ f ​the
such decisions, sufficient ​information ​and ​authority ​should be available. ​This ​is m

​ anagement. For example, the principle ​of ​'authority ​and ​responsibility' ​advocates ​granting of
principles ​of m

sufficient authority, ​while ​the principle of ​scalar ​chain ​advocates ​making ​adequate ​provision for providing

information. (3)
​ ​Scientific ​Decisions: ​A ​scientific decision means a​ ​balanced decision. T ​ he ​principles o
​ f
management ​provide the n​ ecessary ​training to ​the ​managers ​so ​that ​they ​can take scientific ​/balanced ​decisions. In the

absence of ​these ​principles ​the managers have ​to ​adopt ​the ​method ​of ​trial ​and error. ​According ​to this ​principle, o​ ne

is ​expected to ​do ​a ​job i​ n ​a ​particular ​manner and if there ​is ​some error, some
​ ​ e adopted. In ​this
​other method ​has ​to b
way, the ​work ​is ​done ​in ​different ​ways ​till ​the error ​is ​eliminated. This ​method ​is ​not proper ​.Therefore,the
managers ​are ​trained with the help ​of the ​principles of ​management ​which ​makes ​them ​capable ​of t​ aking ​scientific

decisions. For example, the ​principle of 'authority ​and ​responsibility' ​tells ​us ​that ​if ​a ​subordinate ​is ​entrusted ​with

some respbnsibility, ​he ​should ​be ​allowed sufficient ​authority ​to ​accomplish ​it. ​Only ​in ​such ​a ​situation a​

subordinate will ​be able ​to ​take ​a scientific decision ​whenever ​needed. (4)
​ Meeting Changing ​Environmental
Requirement: ​In modern times only s​ uch a ​business ​unit c​ an remain alive and develop ​which ​can keep ​pace ​with ​the
rapidly ​changing ​environment. ​In every ​fieldof ​businessactivity (production, ​marketing, ​etc.)

newtechniquesareemergingeveryday.Amanager who
​ ​can understand the changing sifuation well ​in time ​can

alone face competition ​successfully. The ​principles ​of ​management enable the managers to face this challenge. For

example, the principle ​of ​'unity ​of direction' t​ ells ​us ​that all ​the ​activities ​connected ​with ​the ​attainment ​of the same
objective should ​be ​completed u​ nder ​the direction o​ f the same ​manager. ​In ​doing ​so a ​manager ​would ​be ​able ​to ​have
the ​detailed information c​ onnected ​with t​ he ​limited a​ ctivities ​being d​ one under ​his direction. I​ n ​case ​the ​activities
connected w ​ ith ​different objectives ​are ​being done ​under the direction o​ f ​one manager, ​he ​will not ​be able to
understand ​the changes ​being affected ​in ​any ​activity.
(5) ​Fulfilling ​Social Responsibility: ​The ​principles ​of management ​increase the ​efficiency ​of ​the ​managers
and ​enable ​them ​to ​fulfil ​their ​social ​responsibility. More ​efficient ​managers ​can ​make ​good ​quality ​products ​at

reasonable prices ​available.all ​the times.

Principles of Management: ​Nature and ​Significance 43

For ​example, ​the ​principle ​of ​'Fair ​Remuneration' advocates appropriate remuneration ​to ​the employees ​and ​helps
in fulfilling responsibility towards ​them.
(6) ​Management ​Training, Education and ​Research: The ​advantages ​of the ​principles ​of ​management
encourage ​the ​researchers ​to b ​ ring ​in m
​ ore ​improvement ​in t​ hem. The attifude of ​the ​managers has ​moulded
itself ​in s​ uch ​a ​fashion t​ hat they are doing, ​consciously o​ r u​ nconsciously, ​something ​new. ​It means ​that ​the
managers have ​come ​to acquire ​an ​attifude titled towards ​research ​and ​development. ​This ​has ​helped ​the
managerialknowledge ​to ​be ​more solid and scientific. The principles ​of m ​ anagement are actually ​providing
education a​ nd training ​to t​ he ​managers ​by e​ nriching their ​theoretical ​and practical ​knowledge.
For example, in order to ​take ​advantage ​of the ​change ​of ​attifude among ​the ​managers, various ​big ​companies have
established ​Research ​and ​Development Departments- HRD. ​Consequently, ​many ​new techniques have ​come ​to light

in ​the ​field of marketing, production, finance, ​etc. ​ I ​Fundamental ​Principles of ​Managernent

towards ​its ​functions. ​Wlriic p​ resenting the principles ​of m ​ arnaga
Different management experts have explained different principles ​on thebasis ​of
kepL ​rw-o ​thinEs ​in ​nrrnci. ​Firstly. the ​list o
​ f the principles of manageme
theirresearch. ​Henry Fayol, ​afamous industrialistof ​France, ​has ​described ​[ndustrial
long but should be suggestive ​and only t​ hose ​principles should b​ e ​e
"​ become applicable in most of the situations. Secondlv. the principles
'elements' N'lanagenteni ​ ​makes principles
​fourteen he ​ Explaining ​clear of
​ ​ it ​ ​
should b​ e ​flexible and not rigid ​so ​that ​changes can be ​made ​in ​them ​in ​c
fourteen ​principles g
​ iven by Fay
that management
​ ​the ​the difference
​ ​ ​between ​his ​of book
​principles in ​ Henry Fayol
'principles' ​"Generol ​ (1847-7925)
management ​ and ​and ​are fundamentally
​ ​true and ​establish ​a
'elements' ​
relationship between ​cause ​and ​effect, ​while ​the ​ of ​management ​point

(1) ​Division ​ol Work: ​This ​principle ​of Fayol ​tells ​us ​that ​as ​far ​as ​possible the whole ​work should ​be ​divided ​into
different ​parts ​and ​each ​individual ​should ​be assigned ​only one part ​of the ​work according ​to h ​ is ability and ​taste
rather fhon giving the whole ​work to o​ ne ​person. ​When a particular individual ​performs ​the same ​job ​repeatedly, ​he
will ​become ​an ​expert ​in ​doing that ​particular ​part ​of the ​whole ​job. ​Consequently, the benefits of specialisation ​will
become available.
For example, ​a ​furniture manufacfurer ​gets ​an order ​for ​manufacfuring ​100 lecture stands. ​He ​has ​five workers ​who
will ​do t​ he ​job. ​There a​ re ​two w
​ ays ​to complete t​ his o​ rder. First, ​every ​worker should be ​asked ​to complete
20lectrxestands. ​The second m ​ ethod c​ an be ​dishibuting different ​parts o​ f ​the lecture s​ tand-legs, ​top b ​ oard, ​cenhe
support, assembling and p ​ olishing ​- ​to a​ ll the ​five workers in a​ ​manner t​ hat ​only one worker d​ oes the ​same j​ ob ​for a​ ll
the 100 lecfure s​ tands. ​Here, Fayol's i​ ndication ​is ​to t​ he ​second w ​ ay ​to do ​this j​ ob ​and not the former one. The
principle ​of ​division ​of ​labour ​applies ​not ​only ​to ​the workers but ​also ​equally to the managers. For example, ​if ​a
manager ​is ​attained to work on ​the same ​kind of ​activities ​for ​a ​long period ​of ​time, ​he ​will c​ ertainly ​be an expert ​in

his ​particular ​job. ​Consequently, more

​ ​and b​ eneficial ​decisions can be ​taken in ​a ​comparatively ​less ​time by him.

M ​Business ​Studies
Positive ​Effect ​
Violating ​Effect
Advantages ​*​,*​increase ​in ​the of ​ ​obtained, ​decrease such
​ specialisation ​speed ​ofproduction, are ​ ​ ​the i.crease
​in as, ​ ​ t​ h" ​quality ​of
​wastage ir

work, ​ofresources.

The Increase
​ ​ ​the ​mentioned work
​above in ​ ​efficiency ​positive of
​ ​the workers. ​effects of specialisation ​will not b​ e available. ​*
The ​work ​efficiency ​of ​the workers ​will ​be reduced.

(2) ​Authority ​go hand ​in ​hand. ​It and

​ ​Responsibility: ​According to this principle, ​means ​that when ​a ​particular individual

is ​given authority
​ ​and responsibility should ​a ​particular work and ​he is made responsible ​for ​the r​ esults, ​this can be possible

only when ​he ​is ​given sufficient ​authority to ​discharge ​his ​responsibility. ​It ​is ​not proper to ​make ​a ​person ​responsible ​words ​of

Fayol, "7'he
​ ​result ​ol ​ctuthority ​is ​responsibi/ity. ​lt ​for any ​work ​in ​the ​absence ​of ​authority. ​In ​the ​is ​the ​naturol ​result ​of

outhority ​ond ​essentially ​onother ​aspect ​of authoritg and wheneuer authority ​is ​used, responsibility ​is ​outomoticolly ​born." For

​ ​this CEO
example, ​year. ​To a​ chieve the ​ ​target, of
​ a​ ​authority Co.
​ ​has ​doubled ​for a​ ppointing the
​ ​sales ​necessary target
​ ​of

the ​sales Sales

​ ​representatives, Manager
​ ​for the ​advertising coming
​ ​according ​cannot ​be ​to the need, etc. shall have to be

allowed. ​In ​case ​these ​things ​are ​not allowed ​the ​sales ​manager ​than ​is ​needed Positive
​ ​Violating ​held ​responsible Effect

- Effect

​ ​* ​* ​Wrong Difficulty ​Increase ​Helpful ​* ​* ​Cannot ​Decline ​for not ​achieving the ​target. ​(Note: ​Giving ​less
both ​are ​* *

authority or more authority undesirable.)

​ ​in achieving ​the target. ​in ​the ​confidence of ​the employees. ​use ​of authority in ​case ​more

authority ​is ​given than ​is ​needed. ​in ​achieving the target ​in ​case less ​authority ​is ​given ​than ​is ​needed. fix ​accountability ​of ​the subordinates in

case ​the desired ​results are ​not ​obtained. in ​the ​confidence ​of ​the ​employees.

(3) Discipline: ​Discipline ​is ​essential ​discipline t​ o mean obedience, ​respect ​for authority, be
​ ​established ​by ​providing ​good

supervision ​at ​system ​of ​reward-and punishment. ​A m

​ anager disciplining ​himself.
for ​any ​successful ​work ​performance. ​Fayol ​considers ​and observance of ​established ​rules. Discipline ​can all
​ levels, ​clearly

explaining ​the rules, ​and implementing a ​can present ​a ​good ​example ​to h
​ is subordinates by For
​ example, ​if the ​employees

break ​their ​promise ​of ​working ​upto their full capacity, ​to t​ he ​violation case ​he allows of obedience. ​Similarly a​ sales ​manager

​ eneral customers ​but only to ​his ​relatives and friends, it​ ​will amount
has ​the ​authority ​to do ​business ​on this ​facility ​not to ​the g

credit. ​But ​in ​then ​it ​will ​amount to ignoring ​his ​respect ​to ​his ​authority. ​(Note: ​Both these examples ​give ​a ​message of

indiscipline which ​is ​an ​undesirable ​situation). PositiveEffect*Adisciplinedorganisationha.abetter@

Violating ​Effect ​ ​* * * ​An Decline Height ​Increase Better atmosphere ​labour of in in ​disorder. the the ​management ​reputition
efficienry of doubt and of of the ​employees. relations. ​the organisation and ​efficiency ​of ​the employees. suspicion.
* ​Decline in the ​confidence ​of ​the employees.
45 ​Principles ​of ​Management: ​Nature ​and Significance
(4) ​Unity ​of ​Command: ​According to ​the ​principle ​of ​unity ​of ​command, ​an ​individual ​employee ​should ​receive ​orders
from only o​ ne superior at ​a ​time a​ nd ​that e​ mployee should be answerable ​only to that ​superior. ​If ​there ​are ​many superiors
giving ​orders to the same ​employee, ​he ​will notbe a​ ble ​to decide ​as ​to which order ​is ​to ​be given ​priority. ​He ​thus ​finds ​himself
in a​ confused ​situation. S
​ uch a ​situation a​ dversely ​affects ​the efficiency of the subordinates. ​On t​ he ​other hand, when t​ here are
many s​ uperiors, every superior ​would l​ ike his orders ​to b​ e given ​priority. T ​ his ego ​problem c​ reates a ​possibility o​ f ​clash.
Consequently, ​their own e​ fficiency ​is ​likely to b​ e affected.
The ​principle ​of ​unity ​of ​command ​has b​ een ​shown in ​the ​following ​diagram:
In ​the ​first d​ iagram, ​Sr, ​S, ​and ​S. all ​the three ​subordinates ​have one ​manager ​Mr. ​S, ​gets ​orders ​only from ​M, and the
same ​is ​the case with S, ​and ​53. Here ​the principle ​of ​unityof ​command ​is ​being followed. Therefore, it ​is ​the ​right
In ​the second ​diagram, ​all the ​three subordinates ​S,, ​S, ​and ​S. ​get ​their ​orders ​from two managers ​M, ​and Mr. ​S, ​gets ​orders from
both M, and ​Mrsimultaneously. ​(Same ​is ​the ​position ​of S, and S. also.) He ​is ​unable to understand ​as ​to ​which ​order ​is ​to ​be
given ​priority. ​Both ​the ​managers ​would ​like ​their ​orders ​to ​be ​given priority. There ​is ​likely to ​be heart ​burning ​between ​the
two. ​Here ​the ​principle of unity ​of command ​is ​being ​vlolated. Therefore, ​this ​is a ​wrong ​approach.
Positive ​Effect ​ * * ​* ​* There
​ ​is ​no ​confused ​situation for the ​subordinates. ​The efficiency ​of the subordinates ​increases. ​The

efficiency ​of ​the superiors ​increases. ​It ​is ​easy t​ o fix responsibility. An ​atmosphere ​of coordiality ​prevails. Violating
​ ​Effect ​ It ​creates
a confused ​sihration for ​the subordinates.

* ​It reduces the ​efficiency ​of the subordinates. *​ ​It reduces the e​ fficiency ​of ​the ​superiors. *​ ​Conflicts ​due ​to the ​injured ​ego of the superiors.

* ​It ​is ​difficult to ​fix ​accountability. *​ ​Height ​of disorder.

(5) ​Unity ​of ​Direction: ​Unity ​of ​direction m ​ eans ​that ​there should be ​one ​head ​for ​one ​plan for ​a ​group of ​activities
having the ​same ​objective. In other words, there should be one plan ​and o​ f ​there ​action ​should ​for ​a ​group ​be ​one o​ f activities
manager ​having ​to c​ ontrol ​the same ​them. o​ bjective ​For example, ​suppose ​an ​automobile company is manufacturing ​two
products, namely, ​scooters ​and ​cars, hence ​having ​two
R ​ght Approach
Wrong Approach

t\,4 ​
l ​M2
J1 J2 ​s2 v​ l

Mr, ​Mz ​) ​Manage6 ​51, 52, ​53:, ​Subordinales​Unity ​ ​Direction ​ln ​efficient ​this connection ​running ​ol ​Foyol ​an ​orgonisation
​of Command ​& ​Unity of

​ the ​unitg unity

feelsthatfor the ​ of ​
ol direction
​ ​ ​impoftant, ​is i​ mportont whilethe
​command is ​ ​to enhonce
​ ​the ​elficiency ​of the ​employees.

46 ​Business ​Studies

​ irection. ​an ​employee, ​over ​all Positive

divisions. ​targets. ​It d ​ ​is Now ​the Unity ​necessary fu
​ ​Effect ​activities each
​ ​each

while of ​command product
​ ​division ​the ​ ​ ​must the ​of means its
to ​having ​Advantage ​unity distinguish has ​ ​direction of
​ ​same ​plan
own ​specialis

between ​that its objective. markets

​ ​there m
​ eans t​ arget ​the ​should a​ s ​and ​that ​meaning per ​there problems
​ ​be ​its only

environmental ​should ​of ​one therefore

​ ​the ​be ​manager ​unity ​only each
​ ​conditions ​of ​one ​at ​command ​-unug". division
​ ​a

time ​to ​to must

​ ​get ​"*"rcising ​give ​and ​better ​command have
​ ​ ​own ​results. ​unip o
​the its ​ f ​to control
​ ​Violating ​Effect *​ ​* *

​ dvantange ​activity. ​It ​Increase ​Easy ​helps t​ o ​in a​ chieve in ​coordination the ​of specialisation ​efficiency ​objectives. ​due of ​the ​to ​is
Difference between ​Unity of ​Command and ​Unity of Direction

such ​should contrary, ​manager interest ​interest ​'Priority ​a (6)

​ ​decision ​certainly ​of ​in ​to Subordination
​ ​takes if the ​order

​ ​helps ​is ​definitely ​over

General some organisation ​some ​should ​of ​give ​decision priority, ​Interest ​decision ​priority ​never of

above Individual
​ ​to which ​be ​Individual ​the t​ he taken. everything) interest harms manager the geneial lnterest
​ ​him I​ nterest.'

​ ​hccording ​is General

of ​personally ​the ​If ​personally interest one ​company to ​ ​asked ​will but ​but ​be results ​and ​to ​results to

placed place Interest:

​ ​this ​take in ​in principle, ​individual a​ ​at ​the a​ ​great the g​ reat ​decision This
​ ​first l​ oss ​profit t​ he ​principle

interest place. ​to g​ eneral ​accordingly. ​to the the For ​and company, can
​ ​interest ​company, ​example, t​ he ​be ​general ​On named
​ ​or

​ ​example, ​from ​to ​but ​be ​the ​the ​a ​supplier ​firm a​ ​company purchase
then the the if he ​a ​personally, ​material happens For ​ ​of
his along ​will manager
​ ​son ​with ​incur ​at a other of
​ ​heavy rate a​ ​company ​higher suppliers l​ oss. ​This ​than has
​ ​in ​situation to

the the purchase

​ ​market market. i​ s ​undesirable. ​rate. 100
​ ​The tonnes
​ ​This manager ​will of
​ ​raw ​profit ​purchases material.
​ ​the

​ ​raw son
manager ​the His ​ ​organisation. ​the ​unity ​in a​ ctivities. ​not obtained. ​* ​Decrease ​in ​the ​efficiency of the organisation. *
​ ​Difficulty
Difficulty ​in achieving coordination in the a​ bsence ​of unity of ​activities.
​ ​
in achieving ​the ​objectives. .*

Difference Basis
​ ​of Unity ​of ​Comnrand ​Unity ​of D
​ irection
l. ​Meaning ​According to ​this ​principle, every employee ​should ​get ​orders only ​from ​one manager at ​a ​time and ​he ​should ​be ​responsible for
that ​manager ​alone.

person action ​completed According

​ ​ ​under there this
​having f​ or a​ nd ​similar s​ uch to ​ ​type ​objective t​ he ​should principle,
​ ​of

activities. ​supervision ​be one all

​ ​should activities
​ ​ Aim ​It prevents ​dual subordination. Itprevents overlapping ​of
​plan ​of ​one ​be ​of 2-

various activities. ​3. ​Implications I​ t affects ​an individual ​employee. ​It ​affects the ​entire ​organisation.
47 Principles of Management: ​Nature and ​Significance
Positive ​Effect ​ Observing ​humanity. ​
* E​ verybody ​profih ​in ​the ​profit ​of the ​company. ​* O
​ rganisational ​objectives are ​obtained. ​*

​ iolating ​Effect
Coordination ​between ​the ​individual ​and organisational ​objectives. V *​ ​Humanity violated. ​* ​Increase ​in ​jealousy.

* ​Hindrance in achieving organisational ​objectives. ​* ​[-ack ​of coordination ​between ​the individual and organisational ​objectives.
(7) Remuneration ​to ​Employees: ​Fayol ​is ​of the ​opinion ​that the ​employees ​should ​get a ​fair remuneration ​so ​that the
emplbyees and the owners ​find ​equal amount of satisfaction. ​It ​is ​the ​duty ​of ​the manager ​to ​ensure ​that everybody ​is ​being ​paid
remuneration ​according ​to their work. ​If ​however, they are ​not ​paid properly ​for ​their ​work, ​they ​will ​not do ​their ​work
with ​perfect dedication, honesty and ​capacity. ​As a ​result of this the ​organisation ​shall have to face ​failure. ​Proper
remuneration ​depends on ​some ​factors like the ​cost ​of living, demand ​of ​labour and their ​ability' ​Fayol ​feels ​that in order to
motivate ​the e​ mployees, ​apart ​from ​general remuneration, ​they ​should ​be g
​ iven some n)onetary ​and ​non-monetary
For ​example, ​suppose ​that ​the ​things ​are ​getting dearer and dearer and the company ​is ​getting ​good profits. ​In ​such ​a ​situation,
the ​remuneration ​of the ​employees ​should be increased even ​without their ​asking. ​If t​ his ​is n​ ot done, the employees ​will ​leave
the ​company ​at ​the ​first ​opportunity. ​Expenses ​shall have ​to be incurred on new recruitment which ​shall ​bring ​loss ​to ​the
company. Positive ​Effect ​ Increase in the encouragement and ​satisfaction of ​the ​employees. ​
* ​Development of t​ he ​spirit of

​ ecline in ​the ​labour furnover ​rate. ​Violatlng ​Effect

dedication among ​the employees. ​* D ​ ​Decline ​in the ​encouragement and

satisfaction of ​the ​employees. ​* E​ ncouragement ​to ​dishonesty. ​" ​*' I​ ncrease in the ​labour turnover ​rate.
(8) Centralisation a​ nd ​Decentralisation: ​According ​to ​this ​principle, the ​superiors ​should ​adopt ​effective
cenhalisation instead ​of ​complete centralisation ​and ​complete decentralisation. By ​effective ​centralisation, Fayol ​does ​not
mean ​that authority should be completely ​centralised. ​He ​feels ​that ​the superiors should keep the ​authority ​of ​taking important
decisions ​in their own ​hands, ​while ​the ​authority ​to take ​daily decisions and decisions ​of ​less ​importance should ​be ​delegated ​to
the ​subordinates. ​The ​ratio​of ​cenhalisation ​and ​decentralisation ​can differ ​in different ​situations. ​For ​example, ​it ​is
advantageous ​to ​have more centralisation ​in a​ small business ​unit ​and more decentralisation ​in ​a ​big ​business ​unit.
For ​example, ​the ​decisions ​in r​ espect ​of d​ etermining ​the o​ bjectives ​and p​ olicies, expansion ​of b​ usiness, etc. ​should remain
in the ​hands ​of the ​superiors. ​On the ​other hand, ​authority ​for the ​purchase ​of ​raw material, granting ​leave to ​the ​employees, etc.
should ​be ​delegated ​to ​the subordinates.
48 ​Business ​Studies

Violating Positive
​ ​Effect Effect
​ ​ ​Unnecessary B​ etter ​Increase Decrease ​and in in quick the the ​increase ​encouragement
​* ​* ​* *

​ ecline ​decisions in by ​the the encouragement

work-load ​decisions. in-the ​* ​Impatient the subordinates and wrong ​in ​case ​decisions ​of ​* D

subordinates ​of ​superiors. ​decentalisation. workJoad to the ​subordinates. ​of ​tht ​ilp;;iors ​in ​case ​of centralisation and ​of ​by the ​superiors ​in

​ nd ​weak
case ​of ​complete ​centalisation a in ​case ​of complete decentalisation. to ​subordinates ​in ​case ​of complete ​centralisation.

(9) Scalar Chain: ​here communication ​lowest ​(ii) (i)

​ ​is ​ranks ​that Meaning
​ ​Fayol's n
​ o ​in ​a must ​step ​straight of

Opinion: Scalar
​ ​move ​(post) ​line. ​from should ​Chain: ​This ​top ​be ​to ​Itrefers ​chain ​bottom overlooked ​must ​to ​a ​and

​ ​of ​authoritywhich ​in ​a ​in s​ traight ​a

formal ​be v​ ice-versa ​followed line ​strict ​line. ​manner. moves
​ ​The ​important from
​ ​
highestto ​the ​means ​each ​condition ​during communication. (iii)
​ ​ ayol's Ladder: ​Fayol has ​explained this principle

with ​the ​help ​of ​a ​ladder ​or ​double chain ​as ​shown in ​the diagram. For
​ example, ​wants ​to ​have ​According ​to ​the ​contact
,F, ​ ,p,. ​,F,
principle ​in ​a ​company ​with ​of ​scalar ​the ​the ​employee ​chain ​employee ​ shall ​
have ​to reach ​'A' ​through the medium of E,D,C,B and then having contact ​with ​L,M,N,O ​shall reach 'P'. Thus ​'F'shall ​have
to take the help of all the ​nine ​steps ​(posts) ​to ​have business contact ​with ​'p,. ​(iv) ​Utility: ​Due ​to ​more ​clear system ​of

​ ​Gang ​Plank: ​It ​is ​the exception ​of the ​principle ​of
authority ​and communication, problems ​can be solved ​faster. (u)

Gang ​Plank: ​A ​Special ​Note ​emergency scalar

​ ​direct ​contact chain.
​ ​to This
​ ​with ​avoid concept
​ ​the ​employee ​delay

was ​in developed

​ ​of ​communication. ​equal rank ​to ​establish ​in ​case ​For of ​a example, ​as ​shown in the diagram ​employee

​ ​the ​the onlg

'F, can have ​Gang ​Plonk ​employees ​plonk ​example, ​can ​in ​of con ​ ​present ​equol be
​ ​or estoblished
​ ​example ​some ​leuel.

no with
​ ​gong ​For the
​ ​be ​established between ​F ond ​O. ​direct contact w
​ ith ​employee'P'. ​But ​for ​doing so employees ​permission

of ​their immediate ​bosses ​'E' ​and ​'O'. ​The ​details of them. ​'F' ​and ​'P' ​shall have ​to ​seek ​their talk ​also shall have ​to ​be ​the
prior ​given to Positive
​ ​Effect ​ *​Violating E
​ ffect ​'t :t​​ *​:t
Flow of orderly information. ​Better relations because ​of ​absolute respect ​for authority. Disorderly Quick solution flow of of problems.
information ​Bittemess ​in ​relations ​because ​of ignoring ​the close superiors. Increase ​in problems ​because ​of non-availability of information

​ ccording to ​the ​principle o​ f order, ​a ​right ​a ​right thing should ​be placed at the ​right ​place. ​Accordingly
in time. ​( ​I ​O) ​Order: A

person should ​be ​placed ​at ​the right ​job ​and ​to Fayol every ​enterprise ​should h
​ ave ​two
Principles ​of ​Management: ​Nature and ​Significance

different ​orders- ​Moterial Order ​for ​Physical Resources a​ nd ​S ​ocictl ​Order ​lor ​Human ​Resources. ​Keeping ​the ​physical
resources ​in ​order ​means ​that 'a ​proper ​place ​for e​ verything and everything ​in ​its ​right place'.
​ ​Similarly, ​keeping the human
​ rders properly
resources ​in order means ​'a place ​for everyone and everyone ​in ​his ​appointed places'. Maintaining ​these ​two o
will ​ensure ​that ​everybody knows ​his ​workplace, what ​he ​is ​to do ​and ​from ​where ​he ​would ​get his ​required material.
Consequently, all ​the ​available ​resources ​in ​the ​organisation will ​be utilised ​properly.
For example, ​an ​employee ​working i​ n ​a ​factory should know ​the ​place ​or source ​from where ​he ​can ​get his ​tools in ​case ​of need.
Similarly, h​ e ​should ​know t​ he ​place ​where ​his ​supervisor ​will b​ e ​available in ​case ​of ​anv n​ eed. It ​is, ​however, i​ mportant ​to
note ​that it ​is ​not ​sufficient ​to ​have an alloted place ​for ​a ​tool-box ​and ​for the ​supervisor ​but ​the ​availability ​of ​both ​at ​their
​ eavy ​loss as ​a result ​of ​damage ​to ​the machines.
decided place ​is ​absolutely ​important. If this ​is ​not t​ he ​case, ​it ​can lead ​to ​a h
Positive ​Effect {'​​ *​* Violating
​ ​Effect ​ *​*
Complete utilisation of material and human ​resources. ​No ​loss ​of ​time in ​tacing ​the resources ​in ​need ​of ​time. ​Better ​discipline. Misuse ​of
resources. Increase ​in ​the ​possibility of accidenb. ​Height ​of ​disorder.

​ his ​principle ​tells ​that the managers should treat their subordinates ​in ​a ​just ​and ​kind manner
(1 ​1) ​Equity: T ​ ​so ​that they
develop ​a ​feeling ​of ​dedication and ​attachrnent ​for their work. ​All ​the ​employees should ​be ​treated equally and ​impartially.
Fayol ​tells us ​in connection ​with ​this ​principle ​that there ​should ​not ​be ​any equality ​of ​treatment between ​a ​person ​whose ​work ​is
really good and ​a ​person ​who i​ s a ​shirker ​by nature. R
​ ather the ​latter should b​ e treated sternly. ​Doing s​ o ​would b​ e ​equitable. It i​ s
because of this ​point ​of ​view that Taylor h​ as ​presented his ​differential remuneration method.
For example, ​a ​labourer completes ​10 ​units ​of ​goods in ​a ​day. ​Another l​ abourer ​who h​ appens to be ​a ​relative ​of the ​supervisor
completes ​8 units ​but both ​get ​equal ​remuneration. This v​ iolates ​the ​principles ​of equality. T ​ he second ​labourer should g​ et ​less
remuneration than ​the first one.
Positive ​Effdct ​ {.

* Violating
​ ​Effect ​ *​'t​*:F​

​ f ​to ​devotion improve to upon the organisation.

The ​employees ​remain ​satisfied. ​Skilled ​Increases employees the s​ ense ​ty o
their ​skill. ​Unskilled ​employees ​try to ​achieve some skill, Creates dissatisfaction ​for the ​skilled workers. Skilled workers lose ​confidence in ​the
organisation. Decline in ​the ​efficienry of ​the skilled workers. Increase ​in the ​carelessness ​of ​the ​unskilled workers.
(12) Stabilitgr of Personnel: ​From ​the ​point ​of ​view of ​management ​it ​is ​absolutely ​harmful to c​ hange the employees
frequently ​as ​it ​is ​a ​reflection of inefficient ​management. Therefore, according ​to ​this ​principle ​there ​should ​be ​stability of
tenure o​ f ​the ​employees ​so ​that ​the ​work ​continues efficienfly. Fayol thinks ​that instability ​in the tenure of employees ​is ​a cause
of ​poor m​ anagement and ​results. ​High r​ ate ​of labour turnover w ​ ill ​result ​in ​increased ​expenses ​because ​of s​ electing ​them time
and again, and g​ iving them training ​afresh. ​It ​also lowers the prestige of the ​organisation and ​creates ​a ​feeling of insecurity ​among
the e​ mployees ​which k​ eeps ​them busy i​ n f​ inding o ​ ut ​new a​ venues ​of work. C ​ onsequenfly, the ​sense ​of dedication cannot b​ e
created ​among t​ hem.
50 ​Business ​Studies
Forexample,itistruethatiftheworkers inacompanyarenottreatedwell andtheatmosphereinthe ​company ​is ​also ​unhealthy,

the employees ​will ​not ​stay ​for ​a ​long time. In other words, they ​will ​leave ​the ​company ​at the first p,:,i1:1'e ​[]r{r,, ​ I'io!11lnir

​ ​* * ​* *​ ​* * opportunity
[:.fJ.,c! ​* * ​ ​An Skilled Decline Company Heavy ​Less ​Increase lncrease ​atmosphere ​expenses

recruitment ​workers ​in in in ​is ​the ​the ​the ​available. ​left reputation on reputation confidence ​are ​of by training. ​disbelief ​and good inclined

This ​taining ​workers. of of of ​for the towards ​the situation

​ ​the ​the company. ​expenses.

​harmful. ​ i13)
employees. c​ ompany. ​employees. ​the is​ ​company. absolutely
​ i​
lnitiativr::lnitiativemeansthecapacitSrtoworkwhileexpressingone'sthoughts.Accordingto ​Fayol it ​is ​the ​duty ​of the
manager ​to ​encourage the feeling ​of initiative among ​his employees ​for doing ​some ​work ​or ​taking ​some ​decision but ​within ​the

limits of ​authority ​and discipline. ​It ​will ​be ​possible ​only ​when the ​manager ​will ​welcome the ​thoughts of ​his/her subordinates.

By doing ​so the subordinates ​will present new ​and ​useful ​ideas ​time and ​again ​and ​gradually they ​will ​become ​an ​integral

part ​of ​the organisation.

​ ​In order ​to ​make this process a ​success ​a ​manager ​will ​have ​to ​abandon ​his ​false sense ​of ​prestige. ​The

sales For
​ example, ​manager a​ ​sends salesman
​ ​
him suggests
​ ​ ​his ​telling sales
​away ​by to ​ ​him manager
​ ​that ​it to
​ ​is implement
​ ​not

possible a​ ​new ​and advenisement

​ ​ignores ​the ​suggestion technique.
​ ​altogether. ​In such ​a ​situation ​the salesman, ​who ​has ​been

admonished ​and ​belittled, ​will nevervenfure to ​offer any ​suggestion in ​fufure ​because ​his ​desire of t​ aking ​initiative ​has ​been

​ ​Violating ​i.-sr+.'ile ​suggestion ​to ​offer Effect

suppressed. ​On ​the ​contrary, ​if c​ ourage his ​
l'i.r,.'ct ​had ​some been
​ ​* * * * ​ * ​An Decline ​Increase ​Cooperation ​Increase ​Decline ​suggestion listened
​ ​atmosphere ​in ​in ​in in

​ ​the the
the ​the to ​ ​in ​of carefully
​ ​thinking ​employees' future. ​sense thinking
​ ​the of non-cooperation. ​employees ​of ​Such ​power (even

power ​attachment attachment ​an though

​ ​of in of
​ ​the a​ ction implementing the
​ ​to ​employees. employees
​ ​not ​the ​to w
​ ould ​the

​ ​be ​company.
organisation. to

simply implemented)
​ ​decisions. ​have encouraged he
​ ​could ​have ​his initiative. taken
​ the ​(14) Esprit De ​Corps: ​As per this
principle, ​a ​manager ​should ​continuously make efforts ​to ​develop ​a ​team ​spirit ​among the subordinates. ​To ​do ​this, ​helshe

should ​use ​the ​word ​'We' ​instead ​of ​'l' during

​ the conversation ​with ​subordinates. ​For example, ​a manager ​should ​always ​say

that ​'we ​will ​do ​this ​work' ​instead ​of 'l will do it'. ​This ​behaviour of ​a ​, P
​ osi{iue ​Effect I I​ ​i ​Violating ​Effect ​manager
*​ *​
* ​ * ​ will ​keep alive the ​spirit of cooperation among ​the subordinates. M
​ otivation to work with ​team-spirit.
Easy ​to ​achieve ​objective. ​Sweet ​relationship. Kills
​ team spirit. ​i*​i*
relationsh ip.
Difficulty in achieving ​objective. ​_p!ttg-rnep_i1 ​
51 Principles of Management: Nah-re ​and ​Significance
Clarifuing his principles ​of ​management, Fayol ​has ​pointed out ​that since management ​is ​related ​to ​human ​what ​situation ​beings
nothing ​and ​to c​ an ​what b​ e said ​degree ​with ​(or ​a sense ​exltent) ​of ​finalig. ​ decision-making power ​of the ​manager. Thus, ​the

it ​all ​depends o​ n ​the ​experience, ​efficiency ​and ​

principles ​What ​principles are ​to ​be ​applied ​at ​what time, in ​ advocated by Fayol

have ​an ​element ​of ​fleibility.

I ​. ​Meaning ​of ​Principle ​of ​Management: ​Management principles ​are those basic ​truths ​which have the ability to predict
the ​results ​of managerial ​activities. ​IZ​2. How ​are ​Principles of Management Derived? ​(i) On the ​basis ​of Observation,

and ​g​(ii) On ​the basis ​of Experimental ​Shrdies.

3. Nature of ​Principles ​oI ​Management: ​(i) ​UniversalApplicability, (ii) G ​ eneral ​Guidelines, (iii) ​Formed ​by ​Practice
and Experimentation, (iv) Flexibility, ​(v) ​Mainly ​Behavioural, (​ vi) Relationship between ​Cause ​and Effect, (vii)
Contingent. ​V​4. ​Significance ​of ​Principles o
​ f ​Management: ​(i) Provides Useful Insight to ​Managers, (ii) ​Optimum
Utilisation of ​Resources ​and ​Effective ​Adminisbation, ​(iii) Scientific Decisions, (iv) Meeting ​Changing ​Environmenhl ​Requirement,

(v) Fulfilling Social ​Responsibility, ​(vi) ​Management ​Training, Education and ​Research. ​
5- ​Fundamental ​Principles ​of Management: ​Principles advocated ​by ​Henry ​Fayol: ​(i) ​Division ​of ​work, ​(ii) ​Authority
​ emuneration ​to ​(vi) Subordination
and ​responsibility, (iii) Discipline, ​(iv) ​Unity ​of ​command, (v) Unity of direction, ​(vii) R
of Individual to ​General Interest,
employees, ​(viii) ​Cenhalisation ​and ​Decentralisation, (ix) ​Scalar ​Chain, ​(x) ​Order, ​(xi) ​Equity, ​(xii) ​Stability ​of personnel,
(xiii) Initiative, and (xiv) Espiit ​de corps.

! ​Principles of ​Management : ​Meaning ​and ​Nature

1. ​Explain the meaning and ​nahrre ​of management ​principles.

2. ​3. How
​ ​are ​principles of management ​derived? C​ larifu in detail' ​Briefly ​discuss ​any four points ​of ​the nafure ​of the ​principles of

4. ​5. 6. 8. 9. 7. What
​ ​is ​meant ​by ​'Principle of Management'. ​Whatdo ​you understand ​by ​the universality o​ f ​principle ​of

management? ​Explain ​in ​brief, the meaning ​of ​'Universal Applicability of Management Principles'. What do ​you ​understand ​by ​the

'Flexibility' ​of principle of ​management? 'Principles ​of management ​are general ​guidelines.' Explain. ​'Principles ​of management ​are

contingent.' ​Explain.
6 Marks
4/5 Marks
3 Marks
52 ​Business ​Shrdies
10State ​and explain any ​three ​points ​which ​highlight the nafure ​of ​principles ​of ​management.

(c.8.s,E.2004\ ​11
Explain the meaning of management principles and ​state ​how ​they ​are derived?

12. ​Principles of management are ​derived 'on ​the ​basis ​of ​Experimental sfudies'. Explain. (c.8.s.E.2004)
​ ​13. ​what ​is ​meant by

'Principles ​of ​Management'? l​ ​Mark ​(c.B.s.E. ​200g) ​Ans. ​Management principles are thhose basic ​truth which ​have ​the
​ hy ​are ​the ​principles ​of ​management calted ​contingent?
ability ​to p​ redict ​the r​ esults ​of ​managerial activities. ​14. W
​ ive ​any ​two ​points ​of ​the nature of ​principles ​of
Ans. ​Because principles ​of management ​are affected by sifuations. ​15. G
​ tate how the management ​principles ​are ​flexible?
Ans. ​(o) Universal ​Applicability. ​(b) ​General ​Guidelines. ​16. S
​ ow ​have ​the management
(c.8.s.E,2008,2009) Ans. ​They ​are ​not in ​the f​ orm of final truth and ​can be changed ​any ​time. ​17 ​. H
principles ​been ​derived?
(c.8.s.E,2008) Ans. ​On ​the basis ​of observation and experimental ​studies.
25. 26.

18' ​difference. "The

​ ​principles ​of management ​are ​different ​from ​those of pure sciences." ​(c,8.s.E.2008) State
​ any ​one

Ans. ​19. W
​ hy The
​ ​is ​ principles of management ​are ​not definite like ​the ​principles of pure ​science. ​said ​that ​management
it ​

principles ​are ​universal?Ans. ​(C.8. ​S.E. Sample ​Paper, ​2008, 2009 ​) ​Because these are ​applicable in both ​business ​and ​non-business

spheres ​in ​a ​similar manner. ​I ​Significance ​of Principles of ​Management

6 Marks ​Explain briefly the importance of management ​principles. State ​any five ​reasons ​as ​to why proper understanding of ​management
principles ​is necessary.
Explain any four ​points ​regarding ​significance ​of principles of ​management.
4/5 Marks ​(N.C.E.R.T.) Explain any two ​reasons ​why proper understanding of management principles ​is ​necessary.
(c.B.s ​E. ​200e) ​3 Marks ​State ​any ​three ​reasons as ​to ​why ​proper ​understanding ​of ​management principles ​(c,B.s.E.20ul is

necessary. ​'Principles ​of ​management ​provide ​useful insight ​to managers.' ​Clarifu ​with the ​help of an example. ​How do principles of
management make ​possible ​'effeclive ​administration,?

​ anagers ​in
​ anagement ​are helpful ​for m
responsibilitlr? ​How principles ​of m ​fulfilling l​ ​their Mark
​ ​social Ans.

their ​social The

​ principles ​responsibility. of
​ management ​increase ​the efficiency of the ​managers ​and ​enable ​them to fulfill
Principles of Management: ​Nature and ​Significance
28. ​How ​principles ​of management ​are ​helpful ​in ​developing ​'management research'?
Ans. ​The various ​advantages ​of the principles of management ​encourage ​the ​researchers ​to ​bring ​in ​more improvement ​in ​them. ​ !
Fundamental ​Principles of ​Management
6 Marks ​29. E​ xplain the principles of management given by Fayol with ​example:
(i) ​Unitv of ​Direction ​(ii) E​ quity (iii) ​Esprit ​De ​Corps ​(iv) ​Order (​ v) ​CenkalisationandDecentralisation ​(vi) ​Initiative
(N.C.E.R.T.) ​30. W ​ hat ​is ​the principle ​of ​'scalar chain'? Explain ​briefly the utility ​of ​'gang ​plank' with the ​help ​of ​a

4/5 Marks ​(c.8.s.E.2001) (c.8.s.E.2001) (c.8.s.E.2001) ​34. "​ Fayol's ​principles ​of ​Equity ​and Order ​can be ​applied ​in acfual ​work
sifuation." ​Do ​you ​agree? ​Explain
​ xplain ​the ​principle ​of 'Scalar ​Chain'. ​Explain your ​viewpoint ​by giving
your ​viewpoint ​by giving examples. ​(c.8.s.E.2003) ​35. E

example. ​(C.B.S.E. ​2003) ​36. ​Which ​principle ​of ​management ​envisages ​that each group ​of ​activities having the ​same ​objectives must have

​ xplain ​the ​principles of ​'Unity ​of ​Direction' and

one head and one plan? Explain ​the ​principle ​with ​a ​suitable ​example ​(c.8.s.E.2004) ​37 ​. E

'Esprit ​De ​Corps'. (​ C.B.S.E. ​2006) ​38. E

​ xplain briefly the principle ​of ​'unity ​of command'. ​How ​does ​it ​differ from the principle o​ f

​ hat ​is ​'Gang Plank'? Show i​ t ​through ​a ​diagram. (​ C.8.5,E.2002) 40.

'unity ​o{ ​direction'? ​39. W ​ ​ hich principle ​of management

suggests ​that ​employees should be treated ​with ​Justice and ​ hy ​is ​this ​principle ​essential ​in ​management? ​
kipdness'? W
​ 41. ​Which principle ​of

management ​suggests ​that ​employees should ​not ​leave the organisation frequenfly? Give ​tr,uo ​adverse ​effects ​if this ​principle ​is ​violated. ​
​ 42.

​ ​Discipline ​(ii) Harmony, ​not discord ​43. E

Explain the following principles in ​management: (i) ​ xplain ​the ​following principles of
​ ​Scalar chain; (b)Science not ​Rule of ​Thumb. ​4. N
management: (a) ​ ame and explain that ​principle ​of ​Fayol which ​suggests ​that ​communication
from top to ​bottom ​should follow
​ the official ​lines of ​command. ​fC.B.S.E. ​Sample ​Paper ​) 3
​ Marks ​45. ​Explain ​the ​principle of

'Equity'. ​(C.8.5.E.2001) ​46. G​ ive ​the ​meaning ​of the ​principle 'Unity of Direction' with ​the ​help of ​a suitable example.

(c.8.s.E.2001) 47.
​ ​ ive ​the ​meaning ​of the ​principle ​of ​'Unity of Command' with the help of ​a suitable example. ​(c.8.s.E.2002) 48.
G ​
Fayol points out the danger and ​costs of ​unnecessary labour ​hrrnover ​in ​one of ​his ​principles. Name and
​ n ​organisation follows ​the ​principles ​of ​management. ​What ​are ​the ​positive ​effects ​of ​each
explain ​the ​principle ​(c.8.s.E.2004) ​49. A
of ​the
53 ​
following principles of management on ​the organisation? (​ i) ​Scalarchain, ​(ii) ​Equity, and (iii) Division ​of ​Work. ​(c.8.s.E.2005\​ 31.

Explain ​the ​principles of ​'Discipline' ​and 'Esprit D

​ e ​Corps'. ​
32. E​ xplain ​the ​principles of ​'Remuneration' and 'lnitiative'. ​33. E​ xplain ​the
principles of 'Stability ​of ​tenure ​of ​personnel' ​and 'Equity.'
54 ​Business ​Studies
50 ​An ​following organisation
​ ​principles follows
​ ​of management the
​ ​ ​the management
​principles ​on of ​ ​organisation?

What ​are ​the ​adverse ​effects ​of ​each ​of ​the ​(i) ​Unity ​of ​command, ​(ii) ​Order, and ​(iii)Stability ​of ​Tenure ​of ​personnel ​(c.8.s.E.2005) 51​
​ 52

violated?Whataretheconsequencesof ​If How ​an ​organisation ​is ​principle ​of ​does 'Unity ​ ​provide command'
​not of ​the right ​
​ ​ ​ it? usefulfor

place management?
​ ​for physical ​and Explain
​ ​human ​ briefly. ​resources, ​which (N.C (N. ​ ​E.R. ​E.R.T.) T./
​ ​principle c ​ is​ ​
53. 54. I​ ​Mark
State ​one ​violating ​effect ​of ​the ​principle ​of ​management ​Ans. ​Benefits ​of ​specialisation ​will ​not ​be available. ​- ​namely ​the

'Division o​ f ​Work, ​Responsibility'.

State one positive effect ​of ​the principle ​of ​management Ans.
​ ​Helpful in achieving ​the target.

- ​namely ​the 'Authority ​and

55. ​56. 57
​ ​. ​58' State
​ ​one ​violating ​effect of the ​principle ​Ans. ​Height of ​disorder. of
​ ​management ​- ​namely ​the

'Discipline,. ​State ​one ​positive ​effect ​of ​the ​principle ​of ​management Ans. ​The ​efficiency ​of ​the subordinates ​increases.

- ​namely the ​'Unity o​ f ​Command'. State

​ ​one ​violating ​effect ​of ​the ​principle ​of ​management ​Ans. D
​ ecrease in the efficiency ​of ​the

organisahon. -​ ​namely ​the 'Unity ​of ​Direction,. ​State one ​positive e

​ ffect ​of the principle ​employees'. ​of ​management ​-

namely ​the ​'Remuneration ​to 59

Ans. ​Why ​

Chain'? Decline ​ ​ the ​introduce labour
did F​ ayol in ​ turnover ​
the ​Ans. ​This concept was developed ​to avoid delay in

communication. ​rate. ​concept ​of '​ Gang ​plank' i​ n t​ he ​principle c​ ontact ​with ​the employees of equal ​rank ​in ​case ​of .Scalar-

rc.B.S.E ​2009) ​of emergency ​to state
​ ​one ​positive ​effect ​of ​the ​principle ​Ans. ​Motivation to work with ​team-spirit. of

.Esprit ​
management ​- ​namely ​the ​ De ​corps'. ​61​ ​employees ​According ​the does ​ ​for ​to
62. S​ tate Ans. ​his What
​ ​ ​principle the

principle ​doing ​this ​of p​ rinciple, ​'Order'. s​ ome ​of ​'lnitiative' ​work it ​is ​or ​the taking ​duty ​indicate? ​of some ​a ​manager decision to

encourage the feeling of ​@.B.S.E. initiative (Foreign2009) among 2009) ​Ans. ​organisation. ​The meaning ​of this ​principle ​is ​to ​provide ​the

right ​place for physical ​and human ​resources in ​an ​ CASE ​STUDY/APPLICATION ORIENTED
The ​production ​marketing ​violated ​in ​manager manager
​ ​ ​ABC ​on Ltd.
​is ​insisting of ​ ​fast ​selling instructs
​ ​to ​reach a​ ​salesman ​the target. to
​ ​go

Which slow in selling the ​product, ​whereas the ​this ​case? ​State ​any ​truo ​consequences ​of the ​violation ​of this ​principte ​
​ principle. o​ f
management ​li.S.S.E. i​ s ​ZOOqi ​being ​Ans. ​The ​principle o​ f ​'Unity ​of ​Comrnand' ​is ​violated ​in ​this case. ​The ​following ​are ​the ​violating ​effecb of ​it:
(i) It creates a confused ​situation for the ​subordinates. ​(ii) ​It reduces ​the ​efficiency of the subordinates. ​tzl

Hina and ​Harish are typists in ​a ​company ​having the same educational 3,000
​ ​of ​management per ​month i​ s ​and ​violated ​Harish ​in this ​Rs. ​4,000

Hina ​is ​getting ​Rs. ​working ​hours. W

​ nd explain ​as ​salary t​ he ​for ​
case? ​Name per ​month a principle ​the ​same qualification.
​ ​ hic[ prinliple

(c.B.s.E.2006) Hint:
​ ​The principle ​of 'Equity' ​is ​violating. ​Hence, ​explain ​this ​principle
​ rinciples of Management: ​Nature ​and Significance
55 P
​ Production Manager of Bharat ​Ltd. i​ nstmcts ​a ​salesman ​to ​go ​slow ​in selling ​the product, ​whereas ​the
t3l The
Marketing ​violatedinthecase?Stateanyoneof ​Manager ​is i​ nsisting on ​fast ​theconsequencesof ​selling to achieve the ​violation ​target. ​Which ​of
thisprinciple. ​principle ​of ​management ​(C.B.S.E.2006)
is ​being
Ans. ​should ​The ​receive ​principle ​oiders ​of ​from ​'Unity ​only ​of ​one ​Command' ​superior ​is at ​violating. ​a ​time ​and As that ​per ​employee ​this
Mohan, ​ a ​manager, ​ does not ​ distuibute ​
principle, ​should ​an ​be ​individual ​answerable employee ​only to ​t4] t​ hat ​ superior. ​ The violation ​ of ​ this
the ​work ​ amongst ​ his ​ subordinates, ​ either ​
principle ​ reduces ​ the ​ efficiency ​ of the ​ subordinates.
according ​to ​capabili$ or ​
proportionately. Which principle ​of ​management ​is ​being overlooked ​and why? ​Give ​one ​violating ​effect. ​Ans. ​The
principle of 'Equity' ​is ​violated ​as ​the manager ​is ​not ​impartial ​as ​far ​as ​the ​distribution ​of ​work ​among ​the ​employees i​ s ​concerned. ​It creates
​ ohan, H​ e does the not manager give them of parameters ​a ​business or ​undertaking ​rules for
dissatisfaction ​for ​the skilled workers. ​tsl M
reporting ​is ​very ​lax to ​with work ​his ​and ​fellow completion ​employees of assignments' and ​subordinates' Which principle of management ​is
being overlooked and why? Give ​one ​violating ​effect. ​Ans. ​The ​principle ​of ​'Discipline' ​is ​violated ​as ​the manager's b​ ehaviour ​is ​not
disciplined ​at ​all. ​It ​creates ​t6l a​ n ​Mohan, ​department ​atmosphere ​a m
​ anager, and of ​also ​doubt the ​very ​and other ​often ​suspicion.
​ rinciple ​all l​ evels, of passing management ​on i​ nstructions ​is ​being overlooked ​regarding ​and ​his
departments. ​speaks ​people ​Which ​at p
'scalar ​Chain' ​is ​violated ​as ​during communication the various ​steps ​of ​Scalar ​
why? Give one violating ​effect. ​Ans. ​The principle ​of ​ 17)
Chain Mohan, ​organisation. are ​a overlooked. manager ​Which p​ rinciple ​expects ​It ​creates ​his ​of ​management ​subordinates disorderly flow ​is
to ​being ​of work ​information.
overlooked ​for t​ he ​happiness ​andwhy? ​and ​Give pleasure ​one ​violatingeffect.
of b​ eing ​in t​ he
t8l ​Ans. ​without Mohan, ​giving The them ​providing ​a ​principle ​manager time to ​fair of ​settle ​expects ​'Remuneration remuneration down.
​ mployees' ​employees. ​to ​adapt ​of ​management ​is ​the ​violated l​ t n​ ew ​increases ​environs ​as ​is ​the being
his ​subordinates Which ​to ​to ​principle ​the E
the manager's ​labour ​and overlooked ​working turnover ​expectation and ​conditions ​rate.
why? ​has ​Give ​without ​no one ​use
violating ​effect. ​Ans. ​The ​principle ​being ​overlooked i​ s ​'stability ​of Personnel' ​as ​the manager ​opportunity ​to ​the employees ​so ​that they ​get
settled. ​It ​increases the ​recruitment ​is ​not ​providing so'much
The ​ subordinates ​ in ​ company ​ receive ​orders ​ regarding ​
and ​training ​expenses. ​t9l ​ same ​ task. ​Which ​ principle a​ ​ of management ​ is ​ being
their work ​ from ​ different ​ operative ​ heads ​
overlooked ​ and ​ why? ​ Give ​ one ​violating ​ effect.
for the

Ans. ​The principle ​being overlooked ​is 'Unity ​of ​Command' ​as ​at the ​same ​time there ​are many ​t10l ​superiors In
​ ln ​degree-holder
particular ​ company, ​
office, company. about ​a ​2007 ​ 1500 he giving t​ he ​started ​In ​suggestions a ​ company ​from very ​orders ​a sort Ll.M.
no ​ importance ​ had
short ​to ​of ​ were ​appointed ​the ​Ahmedabad time, campaign ​ same ​implemented there employee. ​Mr. a​ sking ​were with ​
been ​ attached ​ to ​ the ​
Lohrs ​about ​ an ​in ​for ​different ​It experience ​as s​ uggestions reduces ​ 10,000 ​its Chief ​fields. the suggestions. ​ of ​ from
suggestions ​ given ​
efficiency a ​Executive ​This ​decade. ​ ​ ig Officer. ​the assuming ​
every campaign After of On b studying ​or ​subordinates.
by the ​ subordinates. ​
fetched ​small ​He ​ the ​employee them the ​was ​ charge ​company ​an i​ ntensirrely ​M.B.A' ​of ​of ​the ​his
additional ​(i) ​What principle profit of of 50 ​management crore rupees.
will ​have been ​working behind Mr. ​Lotus's ​thinking? ​(ii) ​What will ​be the effect ​of implementing ​these suggestions on ​the ​empioyees? ​Ans.
(i) PrinciPle ​of initiative. (​ ii) ​Their attachment with t​ he ​company will i​ ncrease ​and they will offer new and u​ seful ​ideas.

[}urru ​Se*sinn
For this ​query ​session, ​questions ​from ​readers' side are ​invited'

GHIPITil ​6​$G I​ ​Tl{il ​TI ​G ​MA]IRG ​EM E​ ​I{T:

scientific ​management ​maximum ​production attempts
​ ​to ​at etiminate
​ ​minimum wastes
​ ​cost.

to ​ensure ​Learning Objectives ​After ​o M

​ eaning ​studying ​of ​Scientific ​this ​chapter, ​Management ​you ​will ​be
acquainted ​with: ​. D
​ efinitions ​ol ​Scientific ​Management ​o F​ eatures ​of ​Scientific ​Management ​o P​ rinciples ​of ​Scientific

​ echniques ​of ​Scientific ​Management ​a

Manogement ​o T . o ​Difference ​between ​Method ​Study ​and Motion ​Study
Dilference ​between ​Time ​Study ​and ​Motion ​Study Comparatiue ​Study ​of ​Contribution ​of ​Taylor ​ond ​Foyol

​ rdinary propounded ​Midvale Scientific

work the ​within o ​ ​and ​a labourer dedication, very Steel by short ​Fredrick

​ ​reach ​chief ​as ​-1994)

​ ​of ​to a
management ​Company to ​duration ​the ​he ​was ​position ​winsrow ​in ​able ​(1878 USA is

Tayror. new
​ ​a ​labourer ​the ​Engrneer. thinking
​ r​ ose ​position Tayror from
​ ​and, In ​was on
​ ​of ​1g7g, the
​ ​due ​chief

management ​a ​perstn ranks

​ ​ ​hard ​who an
​to ​he ​Engineer ​his ​joined of ​ ​thereafter to ​management. to ​Taylor ​that ​in ​what ​the

solve the ​same ​conducted ​he ​amount ​this ​started ​was ​company ​problem Taylor ​supposed ​of ​providing ​a ​work number worked
within and, ​a ​to labourer ​in ​be ​a ​of services ​doing in ​short doing. experiments Bethlehem ​was span ​so, ​He ​as ​doing ​he ​of gave ​a

six management ​gave Steel and ​a ​years. was ​number came a ​works scientific ​far During to ​ress ​upto ​of t​ he ​consultant. ​as

suggestions this ​conclusion ​outrook ​compared 1901 ​plriod, a​ nd In

to Fredrick
​ Winslow Taylor
( r ​856 ​

Scientific ​Management: ​Principles ​and ​ Techniques ​57

1903, ​he ​published ​a research ​paper ​titled '​ Shop ​Monagement' ​and ​in ​1911 ​his ​book ​'Principles ​ol ​Scientific

Management' created ​ripples ​in ​the f​ ield ​of ​management. ​Taylor died ​in 1
​ 915, ​but ​his ​contribution to

management ​will ​always ​remain immortal. ​ ! ​Meaning of Scientific ​Management

The literary meaning ​of ​scientific ​management ​is ​performing the ​work of management in ​a ​scientific ​manner. ​In other
words, discarding the ​traditional ​approaches ​to ​management and ​adopting ​newer and ​more scientific ​approaches ​in
their place ​is called s​ cientific management. Taylor ​has ​said that ​before commencing any work, a​ ​manager s​ hould

first analyse ​it ​thoroughly, ​and only then ​take ​any decision. ​ I ​Definitions of Scientific ​Management
Various experts ​have given many ​different ​definitions ​of ​scientific management. ​A ​few ​of ​the ​important

definitions ​are: ​
(1) A​ ccording ​to ​F.W. ​Taylor, "​ Monogement ​is ​the ​oct ​of ​knowing ​exoctly ​whot ​you ​want ​men to ​do ​and
then seeing ​to ​it ​that ​they do it in ​the b​ est ​and ​the cheopest ​way." ​
l2l ​According ​to ​Peter ​F. ​Drucker, '​ ​The core ​of ​scientific
manogement ​is ​the ​orgonised ​study ​ol ​work. the ​onolysis ​of ​work into ​the s​ implest ​elements ​ond ​the s​ ystemotic

improuement ​of t​ he ​workers' performance of ​each ​elernent." Based

​ ​on the above ​discussion, ​it can ​be ​said ​that ​scientific

management ​involves studying ​each activip

​ ​in ​detail ​and ​in ​doing ​so ​ensure ​that ​all the activities of the organisation

are accomplished ​in ​an ​economic and ​effective manner. ​ ! ​Features ​of ​Scientific ​Management
Based ​upon ​the ​definitions, ​the ​following ​are the ​main ​characteristics of scientific management: ​(l) S
​ ystematic
​ ​use ​ensures ​that all ​activities are
Approach: ​Scientific management ​is a ​systematic approach to management ​and its
completed in ​a ​systematic ​and ​scientific manner.
(2) ​Brings Complete Mental ​Change: ​Scientific management brings ​about ​a ​complete ​mental ​change ​both ​in the

owners ​as ​well ​as ​the employees of the organisation. ​Both ​the parties start ​aiming ​for ​more and ​better production

targets ​rather ​than ​merely ​chasing ​higher profits. ​They are ​able ​to comprehend
​ that ​increased ​and ​better
production ​will ​automatically ​result ​in ​higher ​profits which ​will ​benefit both ​the parties.
(3) Discards ​Traditional ​Management: ​The approach of scientific ​management ​completely ​discards
traditional ​management. ​It ​calls ​for ​the ​discarding of old ​techniques ​and adoption of new and modern ​techniques,

with ​the ​aim of improving ​the efficiency ​of ​employees. ​(4) R ​ ules:
​ bservance ​of R
​ equires ​Strict O

Scientific ​management ​requires ​very ​shict observance

​ ​of rules, because the rules are ​formed only ​after ​due analysis
and there ​is ​very litfle chance ​of ​error among ​them.
(5) ​lmproves the Efficiency ​of ​Workers: ​The ​main ​aim ​of ​scientific management ​is ​to increase ​the ​efficiency ​of
workers. ​This ​is ​done through conducting various kinds of ​sfudies such ​as ​time ​sfudy, ​motion ​shrdy and ​fatigue
58 ​Business ​Studies

(6) Gives due Weightage ​to ​Specialisation: S ​ cientific ​management involves ​dividing ​each ​work into
various small parts, ​each ​part being allotted to the person ​who ​is ​an expert ​in ​it. This ​results ​in ​better ​and ​more ​work
​ ence, ​it c​ an ​be ​seen ​that ​scientific ​management ​gives ​due ​weightage
being performed ​in ​much ​less ​time. H

to ​specialisation. ​(7) Useful ​for ​Large O

​ rganisations: ​Since ​the scientific management ​system ​is ​quite expensive ​to

​ ​Attempts ​to Minimise ​Wastes:

implement, ​it ​is ​useful ​only for ​larger organisations. (8)

Scientlficmanagementaimsatminimisingthewasteof ​time, ​materials, ​machine, ​etc. ​ I ​Principles ​of

Scientific ​Management
The ​scientific management ​approach ​propounded ​by ​F.W. ​I'aylor ​is ​based ​upon ​the ​following four ​principles:
​ cience, ​not ​Rule ​of ​Thumb: ​This ​principle ​says ​that ​we ​should not ​get ​sfuck ​in ​a set ​and continue with ​the
(I ​) S
old ​techniques ​of ​doing work, rather ​we ​should ​be ​constantly ​experimenting ​to ​develop new ​techniques ​which ​make
the ​work much ​simpler.
(2) ​Harmony, ​not Discord: fu ​per this ​principle, ​such an atmosphere should be created ​in ​the ​organisation ​that
​ anagement consider each other ​indispensable. Taylor ​has ​rcf.ened
labour ​(the ​major ​factor ​of production) ​and m
to such ​a ​situation ​as ​a r​ ivif,rrrc/ ​R ​eooltiion' ​. ​Taylor firmly believed ​that the ​occurrence ​of ​a ​mental r​ evolution ​would
end all ​conflicts between ​the two ​parties ​and would ​be ​beneficial to both ​of them.
(3) ​Cooperatiotr, ​not ​Individualism: ​According ​to ​this principle, ​all the ​activities ​done ​by different
people ​must ​be carried ​on with ​a ​spirit ​of ​mutual cooperation. Taylor ​has suggested ​that ​the manager ​and ​the
workers ​should ​jointly ​determine ​standards. ​This ​increases ​involvement and thus, ​in ​furn, ​increases r​ esponsibility.
(4) ​Development ​of each and ​every- ​person t​ o hisAer ​greatest ​efficiency ​and ​prosperity: ​According ​to ​this
principle, ​the efficiency of each and every person should ​be ​taken ​care ​of right ​from ​his selection. ​A ​proper
arrangement ​of ​everybody's ​training ​should ​be ​made. ​It ​should ​also be ​taken ​care ​that e​ ach ​individual should ​be alloted

work ​according ​to ​his ​ability and ​interest. ​I ​Techniques ​of Scientific ​Management
The principles of ​scientific management ​only ​bring out the ​basic ​philosoplry behind ​the theory. The question
which now ​arises ​is ​how to ​implement ​these ​principles practically? ​Taylor ​has ​devised the ​following ​techniques

for ​actually ​implementing ​the ​principles ​of scientific management: ​ 1. ​Functional Foremanship
F.W. ​Taylor ​has ​propounded ​the ​functional ​organisation. ​This ​form ​of ​organisation ​is ​totally based on the ​principle
of specialisation and makes ​full utilisation ​of expertise of various experts. In ​a ​functional ​organisation, ​work ​is
divided ​into many small ​parts ​and ​each ​part ​is ​assigned ​to ​an ​expert. ​In this ​manner, all the benefits of specialisation are
availed ​of.
"Functional ​
Taylor ​has ​defined functional ​organisation as ​follows: ​ organisation ​consists ​of ​so ​clivicling ​tlte
ntanagement that each man ​from ​the ​assistant ​supelintendent ​shail have ​as ​few functions ​as
Scientific Management: ​Principles and Techniques 59

irr:1,-1i.rir' ​topelfoi'nr I​ lpr;rr:rrcabii:1lre'wotlrolrrcrcltrna.,nlirtlre :rianaqrrrit,nisiiouir.l ​tl,'cotittnr'ci i​ '.,r!-r. ​r

)(Jr-()lriLiirlcu ​c-,f ​a :;rnclie ​leaiinq ​tttnctii.rrr

Taylor ​has ​suggested the ​division ​of the ​work ​of ​factory ​manager into two sub-departments: ​(i) ​planning
department, ​and (ii) ​production department. Four ​experts ​are appointed ​in ​each ​department. ​The experts
in t​ he planning department ​do ​planning and ​the ​experts ​in ​the production department help in production.
Functional organisation ​has ​been ​clarified in ​the ​following ​diagram:

I​Factory ​Manager ​I

Planning Officer Production ​Officer ​I

Gang Boss

Speed Boss

Repair ​Boss ​ I



(i) ​Specialists ​of Planninq ​l)epartment ​and ​their ​F'unctions ​(a) Rou ​ie ​Clerk: ​This ​clerk ensures the
sequence ​of completing ​a ​particular ​work, ​meaning thereby the ​stages it ​shall have to pass before being finalised. He
also decides the ​job ​to ​be ​done for the ​day ​and ​where i​ t ​is ​to ​be done.

lb) lnstrrrction (]ard ​Clerk; ​This ​clerk prepares the ​inshuction ​cards ​for ​the workers ​and ​hands them
​ over to the
gang ​boss. These cards ​contain information ​about the nafure of the ​work, ​procedure ​of ​doing it, ​materialto ​be used
and the details ​about ​machinery.
(rl ​Tirre ​and Cost ​Clerl,.: ​This clerk ​decides ​as ​to ​when ​a ​particular ​work ​is ​to ​be ​started and ​finished, ​meaning
thereby ​as ​to ​what time ​the ​whole work will ​take place. ​It ​is ​also decided at the ​same ​time ​at ​what ​cost ​the ​product
will ​be ​produced.
ldi ​lliscipline ​Officer: ​The discipline officer ​ensures ​that ​every ​work ​is ​being performed ​in ​a ​disciplined
1ii) ​Speciaiists ​o{ ​Production f)epartment ​and ​their ​Functions ​(a) ​Gang ​Boss: The workers ​are
divided ​into ​various ​groups ​from ​the ​point o​ f ​view ​of ​control. ​A ​group ​leader ​is ​selected w
​ ho ​is ​known ​as ​the
gang boss. ​He i​ s ​expected ​to e​ nsure ​that both t​ he workers and the machines ​are ​fit e​ nough for ​production a​ nd
that the ​material required for their u​ se ​has ​been made ​available to t​ hem.
60 ​Business ​Studies

(b) ​Speed Boss: The ​main function ​of ​the ​speed boss ​is ​to ​ensure ​that all ​the ​workers ​are ​performing ​their

job ​at the ​required ​or expected speed. ​If it ​is ​not ​so, ​the speed ​boss tries ​to ​find ​out the cause
​ ​of slow speed ​and ​hence
a ​solution for ​it.
(c) ​Repair Boss: ​The main ​function ​of the ​repair ​boss ​is ​to ​keep the ​machines and tools ​in ​working condition.
(d) Inspector: ​He ​inspects ​the ​things produced ​and ​compares ​their quality ​with ​the ​standard prescribed for

them and ​hies to ​find out ​the ​difference. ​In ​case ​of ​unfavourable ​result ​he ​initiates corrective action.​
o ​2.

Standardisation of ​ work ,​ <1" h​ ​? r​ b ​enoa ​,lV "​ / ​brfif^

​ ​amount ​of ​work to ​be ​done ​by ​a
(Standardisationmeanssettingstandardsion.F;[;;;pi;; the
worker in ​a ​day may be ​standardised{ln ​other words, the ​worker ​is ​expected ​to do the ​standard amount ​of ​work
everyday. ​In the ​same manner standards may ​also be ​set f​ or ​raw materials, machines and ​tools, ​techniques, conditions ​of
​ he ​following ​is ​a ​brief description ​of ​such standards: ​(i)
work, ​et) T ​Standardised ​Material: ​By ​standardisation
of ​material ​we ​mean ​that the raw ​material ​provided ​should ​be ​according to the ​quality ​of finished goods required.

For ​example, ​if ​for ​producing 'A' quality ​of finished ​goods ​'X' ​quality ​of ​raw ​materials are ​required (and ​the same

has ​been ​determined after

​ ​ uality ​of finished goods ​'X' ​quality ​of raw
due ​deliberation), ​then we can ​say ​that ​for ​'A' q
materials have been standardised. ​In ​the fufure whenever it ​is ​required to ​produce 'A' quality ​of ​finished goods, ​'X'

quality ​of ​raw ​materials ​will ​be ​used ​without any ​hesitation. By ​doing ​so ​good quality ​of ​finished ​goods can
​ be
produced in ​the ​least ​possible time.
(ii)StandardisedMachines andTools: ​Standardisationofmachinesandtoolsensurethatthey ​are of ​the

required ​quantity ​and type ​to ​produce the ​desired ​finished goods. For example, ​if ​for ​producing ​'A' q
​ uality ​of finished

​ achine ​and ​M, N and O tools ​are ​required. ​Once this ​is ​determined, whenever
goods ​'X' m ​ finished goods ​of 'A'

​ achine ​and ​M,Nand O

quality ​are to be ​produced, ​it can be ​done ​with ​the use ​of ​'X' m ​ ​tools.Standardisationof

machinesand tools ​will ​reduceerrorsonthepartofworkersasto which

​ machine or ​tools are ​to ​be used. ​and ​hence
work ​can proceed ​at a​ ​much ​faster ​pace.
(iii) ​Standardised ​Methods: ​By standardising the ​optimum ​techniques of ​doing work, ​the latter ​can ​proceed ​at
with much ​greater ease. The ​technique determined for ​doing ​a ​particular work ​is ​used ​uniformly
a ​faster pace ​and
whenever such ​work ​is ​performed.
(iv) Standardised ​Working Conditions: ​Working conditions ​have ​a ​very ​deep ​impact ​on ​the ​efficiency ​of
workers. ​In s​ tandardising ​working conditions, i​ t i​ s noted ​that ​how much t​ emperature, ​ventilation, lighting,
cleanliness and safety ​is ​necessary at ​the ​work ​place. ​After ​due studies, the ​working conditions ​are standardised ​and

efforts are made ​to maintain them ​at ​the ​work ​place. ​ 3. ​Simplification

Simplification means ​putting an end ​to ​the u​ nnecessary ​types, qualities. ​sizes/weights. ​etc. For- ​examol ​bllt ​if ​it
)Y-"C. ​machines shall have ​to ​be installed, ​more ​stock shall have ​to ​be ​maintained and ​increased ​labour ​costs
Scientific ​Management: ​Principles and Techniques
shall have to ​be ​borne. Therefore, it ​is ​advisable to manufacfure ​shoes ​only ​of the ​proper ​sizg) ​In ​other words, simplification
​ roduct ​is ​the ​answer.
of the p

Objectives ​(ii) ​ ​down economy simplification:

(i) ​Effecting ​Bringing of ​ ​the ​labour in the u​ se cost ​of with ​machines.

​ be ​obtained by ​restricting specialization ​only to ​a ​few

the ​help ​of specialization. (The benefits ​of ​specialization ​(iii) can

products.) ​Affecting ​economy in ​the ​staff. According

​ to another example, a​ ​paper manufachrring company in ​the ​U.S.A.
started the ​work ​of ​simplification ​of ​the t​ ypes ​of ​papers ​it ​was ​manufacturing and ​succeeded ​in ​reducing their ​types ​from

2000 ​
o to​ ​4. 200
​ ​Scientific only.
​ ​Study of Work

It ​means ​to conduct ​the deep analysis of ​all ​the ​activities being performed ​in the ​organisation with the ​aim ​of ​producing
maximum ​possible ​quality ​output ​at ​minimum ​costs. ​Taylor ​has conducted ​the ​following ​studies:
(i) ​Method ​Study, (​ ii) Motion ​Study, (​ iii) Time Study, ​and (​ iv) ​Fatigue Study. ​this ​study, ​lfUlethod p​ rocess ​
It refers ​ to i​ dentify ​ the ​ most suitable ​ way ​ to ​ do ​a ​ particular ​
chart and ​ operation ​ research ​ techniques ​ are ​ used. ​ The ​ main ​ objective
activity. ​ To ​ conduct ​
of this ​ shrdy ​ is ​to minimise ​the ​cost ​of ​production and ​maximise the ​quality and ​level ​of ​consumer
(ii) Motion ​Study: ​It ​refers ​to ​conduct the study ​of ​motions being performed ​by ​workers ​and ​study ​machines ​is ​to ​while
eliminate ​doing the ​the ​unnecessary ​job. ​The ​movie ​motions. c​ amera ​is ​used ​to conduct this sfudy. The main ​(+
objective ​of ​this
For example, ​during ​an ​experiment ​it was ​found ​that ​while ​laying ​a ​brick, ​a ​mason ​wd-s ​conducting ​18 ​different activities, but
after ​eliminating the ​unnecessary activities ​the number of ​activities ​could ​be reduced ​to 5, and ​in ​certain ​cases ​even ​down to 2
(iii)Time ​Study(llrefers ​to determine the standard time required to complete ​a ​particular activityJ ​The standard time ​is
determined ​on the basis of average ​tlme taken ​by the several ​experiences ​of the same ​work. This ​shrdy ​is ​conducted with the help of
a ​stop ​watch) The main objectives ​of t​ he ​study are ​(i) ​to get the estimated figure of ​labour ​costs, ​(ii) t​ o ​determine ​thelnumber ​of
required workers ​and (iii) ​to decide ​about ​the suitable ​incentive ​plan.
Fatigue ​Study: ​It refers ​to determine ​the ​duration ​and frequency ​of rest ​intervals to complete ​a ​
,rr(iv) ​ particular job. The ​rest

refreshes the ​workers. They ​work ​again ​with ​their full capacity. The main objective ​of ​long ​this ​ o ​working ​study ​5.
t^.i ​
Differentaal ​is ​hours, to ​maintain poor ​wage ​the ​working ​efficiency ​System ​conditions, ​level ​ of ​workers.
p​ h-Lt! ​ p/gt,;'4
There may ​be so ​many relations ​ ?,.^ ​causes ​wlth ​ of ​fatigue, the ​|oss, ​ such ​
gtc. ​


Taylor ​has ​advised ​the ​adoption of ​diffe e​ r ​to motivate ​the employees. ​According ​to this ​system wages are ​paid ​on the ​basis
of ​work ​done and not on the ​basis ​of ​time ​spent ​ln doing ​the ​work. ​In this system ​two different ​wage rates are ​used ​: ​one ​is ​the ​high
wage rate ​and the other i​ s ​the l​ ow ​wage rate. Those workers w ​ ho ​are ​able to p​ roduce ​the standard n ​ umber ​of units w ​ ithin ​a
fixed duration ​are ​paid ​as ​per the high wage rate, and ​those ​workers ​who ​are ​not ​able ​to produce ​the ​standard ​number of ​units
within ​the ​same ​time ​are ​paid ​as ​per the ​lower ​wage ​rate.
62 ​Business ​Studies

For ​example, ​let ​the ​standard output ​per ​day ​be ​20 ​units ​and the ​two ​wage rates be ​Rs. ​5 ​per unit ​and ​Rs. ​4 per ​unit

respectively. ​Worker ​'A' p​ roduces ​20 ​units ​in ​a ​day and ​in doing ​so he earns ​Rs. 100 (20 ​unitsxRs.5

perunit).Another ​worker'B'producesonlyl8unitsinadayandhencehewillearnonly Rs.72

​ ​(18 ​units x ​Rs. ​4

per ​unit). ​In ​this ​way, even ​though ​'B' ​has ​produced ​only ​2 ​units ​less ​than 'A' ​the ​difference ​in ​theirwages ​will ​be

Rs.28 ​(Rs. ​100 ​-Rs.72). ​fu ​a ​result, ​less e​ fficientworkers ​will ​be ​motivated to work more and ​efficient

workers ​will ​be ​motivated to ​maintain ​their ​efficiency. ​ o ​6. ​Mental ​Revolution
Mental ​revolution ​calls ​for ​a ​change ​in ​the mind- ​set ​of ​both employers and ​workers. ​fu ​per ​Taylor, a​ ​revolution ​in

mind-set of ​both ​the employers and the workers ​is ​required because ​it ​will promote ​feelings ​of ​cooperation, ​and ​will

be ​beneficial ​to ​both the ​parties. ​Normally, ​it ​is ​seen ​that ​conflict ​between ​employers and workers ​results ​in

division of profits, ​with both ​the ​parties ​demanding ​a larger share ​of ​profits. This ​is the ​main ​reason ​why ​a
mental revolution ​is ​required. According ​to Taylor, ​insiy;:ri ​iri tightlrtg
​ ​r.rvet'dir;ision ​of ​lrroiits. ​bc;ilr ​tlie ​l.)(il'ri(.'s

should ​make ​i:ilorts ​iot ​inr:reasing ​tJ're ​profits, ​Such a situation ​will ​result ​in an ​increase ​in ​production, ​and ​as ​such ​a

high ​increase ​in ​profits ​that ​will make any talk of division of profits ​meaningless. ​ ! ​Comparative Study of
the ​Contribution ​of Taylor and ​Fayol

Both Taylor ​and ​Fayol ​have been ​outstanding ​management experts. ​Their conhibution ​in the ​field ​of ​management has

indeed ​been ​invaluable. Taylor ​was such a ​personalityr ​who ​started his career ​as ​a labourer. That ​is ​why h​ e ​has ​seen the

workers very closely, understood their problems and recognised the level of ​their ​efficiency. ​Taylor conducted many

experiments regarding the efficiency of the workers ​and finally ​reached the conclusion that ​a ​worker works much ​less

than ​what ​he ​should actually ​do. ​He gave a number of ​suggestions ​in order to ​increase ​the ​work ​efficiency of the
workers. The focus ​of ​Taylor's ​study was
​ the ​work ​efficiency ​of the workers. ​That ​is ​why ​he ​is ​called ef.ficienct
On ​the ​contrary, Fayol ​started ​his ​career ​as ​a ​high r​ anking manager. This ​is ​why ​he ​has ​observed ​and understood ​the

problems of the high ranking ​managers. ​Fayol brought ​into ​existence ​many invaluable ​principles i​ n ​order ​to ​solve

the problems ​of ​high ranking ​managers. ​His focus ​of ​study ​has ​been ​the ​problems ​of the ​high r​ anking ​managers

​ ​tr ​in ​lslr.oljr re ​st:r:cio/ ​There ​are some ​similarities and

and ​for ​this simple reason he ​has ​come ​to ​be ​known ​as an orit

dissimilarities ​in ​the ​contribution ​of ​both ​these specialists ​in the ​field ​of ​management. ​They ​are a​ s ​follows: ​

we ​find ​the ​following ​similarities ​in ​the ​thought ​process of ​raylor ​and ​Fayol: ​(1) ​Solution t​ o Managerial

Problems: ​Both the management experts have presented solutions to ​ the managerial ​problems ​based o​ n their
​ rinciples. ​(2)
experience and experiments. The solutions presented by ​both ​these experts are present in the shape ​of p

Stress ​on ​Practical ​Aspect: ​Taylor and Fayol ​have ​both ​been ​directly ​connected ​with ​the ​reality ​of ​work. That ​is

why they both ​have ​laid ​stress ​upon ​the practical aspect of ​work. ​In other words, they
​ gave ​their ​suggestions ​about

improvement ​where ​such ​improvements ​were possible. ​They did ​not ​lay down any principle which cannot ​be

brought into ​the parameters of p​ racticality.

63 Scientific ​Management: ​Principles and Techniques
(3) ​Stress ​on Good ​Industrial ​Relations: ​Both the ​experts are ​of ​the opinion that ​if ​good relations between ​the

owner ​and the ​workers are ​established, ​the ​organisational aims can ​be ​easily achieved. ​
​ issimilarities
Following ​are the dissimilarities ​in the ​ideas of ​Taylor and ​Fayol:
Difference between Taylor and ​Fayol
Basis of Difference Taylor ​Fayol
1. ​Perspective ​Related ​to production ​activities/related
to ​factory a​ rea.
In ​conclusion, ​it can be said ​that ​these days ​many ​changes ​have crept into ​the ​world ​of ​management. ​It ​is ​because of these changes
that ​the ​principles ​of ​Taylor ​appear ​to be ​a ​little old ones' ​On the ​other hand, ​principles advocated ​by ​Fayol get credence ​in ​the
modern ​context. Even ​then ​Taylor's contribution ​cannot ​be C
​ onsidered ​insignificant ​as ​his ​principles certainly ​guide the
managers ​in some ​way ​or the ​other'
​ cientific ​adopt ​newer ​Management: ​and more ​scientific ​To ​discard approaches
V​management ​1. ​Meaning ​and ​of S

the ​traditional ​in ​their ​gg​g

approaches to place ​is ​called scientific management. ​2. ​Features of ​Scientific ​Management: ​(i) ​Systematic ​approach,
mental rules, (v) change, Improves ​(iii) the D ​ iscards ​efficiency the ​traditional o​ f ​workers, m
​ anagement, ​(vi) G ​ ives due (iv)
weightage Requires ​(ii) ​strict ​to R
​ elated to ​higher ​level of ​management. ​2. ​Unity o​ f ​Command w
​ orks ​Unity ​of ​under ​Command ​the
​ orker eight ​specialists ​simultaneously.
supervision ​is ​violated. ​A ​of w
Brings complete
observance ​of ​specialisation, ​(vii) ​Useful ​for ​large organisations, ​(viii) ​Attempts ​to minimise ​wastes. ​not 3. ​Principle
discord, ​(iii) ​of Scientific ​Cooperation, ​Management: not ​individualism, ​(i) Science, ​(iv) ​Development not rule ​of
thumb, ​of ​each (ii) ​and ​Harmony, ​every person ​to ​his/her greatest efficiency ​and ​prosperity. ​4. Techniques ​of Scientific
(i) ​Functional ​Foremanship: ​(a) ​Experts of Planning ​Department: ​Route Clerk, ​Instruction ​Card Clerk, Time and ​Cost ​Clerk,
Discipline Officer; ​(b) ​Experts of ​Production Department:
The Principle ​is ​applied ​stricflY.
3. ​Applicability ​It ​is ​applied in ​special situations. ​It ​is ​applied ​universally. ​4. ​Basis of ​Formation Established management
principles ​by ​observations ​of ​scientific ​and ​experimentation.
Presented ​personal experiences ​in ​the ​form of ​universal ​tnrth.
5. ​Focus ​Increasing ​simplification, ​productivity ​the s​ tudy ​with ​of ​the ​time ​help and ​of
speed, ​etc.
Reforming the entire adminishation by following different ​principles.
Professional ​
6. Personality ​Scientific ​ 7. ​Expression ​Scientific management. ​General thinking about adminishation.

64 ​Business ​Sfudies

tools, Gang
​ ​(iii) ​(ii) ​Standardisation Simplification ​(c) Boss,
​ ​standardised Speed
​ Boss, ​of ​methods, ​work: Repair

(a) Boss,
​ ​(d) ​Standardised standardised Inspector.
​ ​material, working (b) conditions. Standardised machines ​and

(iv)Scientificstudyof ​work:(a)Methodstudy, ​(v) Differential ​wage ​system. ​(b)MotionShrdy, (c)Timestudy, (d)Fatigue

sh-rdy. ​Z (​ vi) Mental ​Revolution. ​Formation, (iii) (B) ​5. ​(A) ​Comparative ​Stress ​Dissimilarities:
Similarities: ​on ​(v) ​good ​Focus, ​study ​(i) ​industrial Solution ​(i) ​(vi) ​Perspective, ​of ​Personality, ​the ​relations.

​ anagerial ​(ii) ​(vii) Unity E​ xpression. Problems, of ​of ​Command, ​Taylor ​(ii) ​and ​Stress
of ​Contribution M

(iii)Applicability, Fayol: ​on practical ​(iv) ​aspect Basis ​of ​ I ​Meaning ​and ​Features ​of Scientific

organisations. ​ ! ​Principles of Scientific ​Management

1. ​Write any four ​feafures ​of Scientific ​Management.

2. ​3. What ​does scientific ​management ​mean? ​Write 7​ . ​Explain ​the ​principles ​of ​Scientific Management given by ​Taylor.

three feafures ​of '​ scientific ​Management,. 8. ​Explain ​anytwoprinciplesofScientificManagement. ​9.

​ Explain ​the ​principles ​of ​scientific management.

4. ​Name ​the petson who ​has ​propounded .Scientific
​ Management'. ​5. Ans.
​ ​Fredrick

Winslow Taylor. ​State ​any ​two features of ​scientific ​management. 10. ​Describe ​Taylor's principle ​of ​'Harmony, not discord' in about ​50 wo

Ans. ​(a) ​It ​is ​a systematic ​approach. ​6. (b) 11. ​State ​any two principles ​of ​'scientific M
​ It brings c​ omplete mental ​change. ​scientific ​ anagement,.
Ans. ​(i) Science, ​not rule ​of ​thumb. ​(ii) Harmony, not ​discord.
management is useful ​for ​which type of organisations? Ans. ​It ​is ​useful ​for ​larger 4/5 Marks
(N.C.E.R.T./ ​4/5
3 Marks Marks ​(Foreign
l ​Mark

l ​Mark

6 Marks
65 ​Scientific Management: ​Principles and Techniques
12. ​What ​is ​the meaning ​of ​the ​principle ​of ​scientific ​management namely ​the 'Cooperation ​not
Individualism'? ​Ans. ​According ​to this ​principle, ​all activities done by ​different ​people must ​be ​carried on w
​ ith ​a ​spirit ​of mufual

cooperation. ​
13. ​List ​any ​two organisation
​ ​principles ​scientifically ​of .​ ​'Scientific Management'formulated ​by ​Taylor ​for

managing ​an
(C.B.S.E. ​SomplePaper) ​
Ans. ​(i) Science, ​not rule ​of ​thurnb. (ii) Harmony, not ​discord. ​ Techniques ​of Scientific

14. ​Explain in brief ​the techniques ​of ​scientific management. ​15. ​Explain ​the ​technique ​of ​'Functional Foremanship' ​and ​the ​16.

​ Taylor. ​following ​techniques ​of ​scientific ​work ​sfudy:

enunciated ​Discuss ​the by
6 ​Marks
concept ​of '​ Mental Revolution' ​as
(a) ​Time Study (b) Motion Study
(c) ​Fatigue Shrdy ​(d) MethodStudy

(N.C.E.R.T.) ​4/5 Marks ​17. ​Explain 'Differential ​Piece ​Rate' ​and 'Functional Foremanship'as ​techniques ​of ​scientific ​management
Explain any five techniques ​of ​scientific management.
(c.8.s.E.2009) (c.8.s.E.2009) ​shirts. ​Develop an ​imaginary ​plan ​of ​differential piece ​rates to ​be introduced for ​the ​workers, engaged

in ​sewing

20. ​What ​Foremanship' contradiction ​and why? do ​you find ​in ​the ​principle of 'Unity ​of ​Command' ​and the ​iechnique (c.8.s.E.2002)
​ of

​ ​Explain ​Explain ​'Time-Study' and ​'Fatigue Shrdy' ​as ​techniques ​of ​scientific ​management. ​'Method ​Study' and 'Motion
22. 21,.
(C.8.5.E.2004) ​(C.8.5.E.2004) ​
Str-rdy' ​as ​techniques ​of ​scientific ​management. ​ 23. H​ ow ​does the ​technique of ​'Motion ​Sh-rdy' ​help ​to
​ ​two Marks
improve ​the efficiency ​of ​workers. Give any 3 ​ ​points ​24. in
​ ​How support
​ ​does ​the of
​ your ​technique answer.
​ ​of 'Time Shrdy'

help ​to improve ​the efficiency of workers? Give any ​two points ​ ​ support ​technique of
​ hich in
25. W ​ your ​designation ​of ​any answer. ​of

Taylor ​suggests ​that ​each worker should be ​supervised ​by ​specialists? ​Give ​the two
​ ​types ​of ​specialists suggested by ​Taylor. ​(c.B.s.E.2005)

26. ​Name and explain ​the ​technique ​of ​Taylor which ​is ​the strongest ​motivator ​for ​a ​worker ​to ​reach standard ​27. 29. 30. 31. 32.

28. performances. ​What What How What What Write do ​you ​mean ​by ​'Differential ​Wage System'? does ​mental revolution i​ mply ​in

scientific management? does scientific ​management bring complete mental ​change? are ​the ​aims ​of 'time' and 'motion' s​ tudy? ​do ​you m
​ ean

by ​'Simplification'? ​a ​note ​on ​'functional foremanship'.

33. ​What is the ​job ​of ​'Speed ​Boss' under ​functional ​foremanship?
Ans. ​He ​ensures ​that ​all the ​workers ​are ​performing their j​ ob ​at ​the ​required ​speed
I ​Mark
66 ​Business ​Studies
34. ​35. As
​ ​a ​technique ​of ​scientific ​management what ​is ​the meaning of ​'standardisation ​Ans. ​It refers ​to s​ et ​the standards ​for
​ ​Work'? ​As ​a ​technique ​of ​scientific ​management ​what is the meaning ​of
different ​factors, after ​due deliberation. of

'simplification'? ​36. Ans.

​ ​What It
​ ​is means
​ ​meant putting
​ ​ ​end ​to ​Study'? unnecessary
​by'Method an ​ types, ​qualities, ​sizelweight

etc. ​37 ​. ​Ans. ​It refers ​to ​identify ​the most suitable ​way to do ​a ​particular ​activity.

What ​is ​the ​main objective ​of ​'Motion ​Study,? ​

​ ​What The
38. Ans. ​ ​is meant main
​ objective ​by'Time of
​ ​Study'? this
​ ​study ​is ​to

eliminate the ​unnecessary ​ ​

39. ​Ans. ​What ​It ​is ​refers ​meant ​to determine ​by'Fatigue ​the ​Study'? ​standard ​time required ​to

complete a ​particular activity. ​ 40. Ans.

​ ​What lt​ ​is ​refers ​meant ​to determine ​by'Mental ​the ​Revolution'? duration
​ and frequency of

rest intervals ​to complete ​a ​particular ​job. ​

41. Ans.
​ ​Whatismainobjectiveof It
​ ​calls ​for ​a change i​ n the ​'Method-Study'?

mind-set of both ​the employers ​and ​the workers. ​Ans. ​Its ​main ​objective ​is ​to ​minimise the cost ​of ​production and ​
42. consumer

satisfaction. ​What ​is ​main objective ​of ​'Time-Study'?
(c.8.s.E.2008) ​maximise the ​quality and ​level of

(c.8.s.E.2008) Ans. ​The main objective of time-study ​43. D

​ ifferent ​number of required ​techniques ​workers ​were ​and
management. ​One of ​them ​is (c.8.s.E.2003)
​ ​(N.C.E.R.T.) ​3 Marks

I ​Mark ​is ​to ​get ​the ​estimated ​figure of labour ​developed t​ o ​'Fatigue d​ ecide ​about ​Study'. ​by t​ he ​Taylor ​What s​ uitable ​is ​to ​the
​to determine ​the ​ ​Somple Poper) ​
​ bjective ​plan. ​principles o​ f costs,
incentive ​facilitate o ​ of s​ cientific ​this study ​? (C.B.S.E.
​ M.
Ans. ​The main objective ​of this ​study ​is ​to maintain the ​efficiency level ​of ​workers. ​What ​is ​the ​main objective ​of ​fatigue ​study?

​ ns. '​ k ​Refer ​to ​Q 43. ​What ​is ​the ​main objective ​of ​simplification ​in ​scientific ​management?
(c.8.s.E.2008) ​45. A


Ans. ​Effecting ​economy in the ​use ​of ​machines. ​ I ​Comparative Study ​of Contribution ​of Taylor and ​Fayo!
46. ​complementary.' ​'Taylor's principles ​Do of y​ ou ​scientific ​agree ​management ​with ​this ​view? and ​Fayol's ​Give any

principle ​four ​6 Marks ​of ​management ​are ​mutually ​reasons ​in s​ upport ​of y​ our ​47 ​. a​ nswer.
Discuss the ​difference between ​the ​contribution ​of ​Taylor and Fayol.
48. ​Write ​the similarities ​found in ​the views of ​Taylor and ​Fayol.
49. ​Distinguish ​between ​Taylor ​and ​Fayol ​on ​the basis ​of ​'unity ​of ​command'. ​Ans.​Basis of Difference Tavlor ​Favol
Unifu of Command ​A ​Unity worker of Command ​work ​under ​is ​violated.
the ​supervision ​of ​eight specialists simultaneously.
The Principle ​is ​applied shictly.
Scientific Management: ​Principles and Techniques

50. ​Distinguish ​between ​Taylor and Fayol ​on ​the basis of ​'Personality'.
Ans.​Basis of Difference Tavlor ​Fauol Personality
​ ​Scientific Professional

cAsE ​sTUDy/AppLrcATroN ​oRTENTED ​QUESTTONS ​t1l ​Ms. ​Libra ​ is ​working a​ s

​ ari ​Patti, ​Lal ​Patti, Swad,

CEO ​in ​the Bagan Tea ​company. Her ​company manufactures ​tea ​with ​ten ​brand ​names (e.9. H
Mehak, Khushboo, Morning Tea, etc.). Every brand ​has f​ ive flavours. Tea ​of ​every ​taste is ​packed in the packing ​of ​10
grams, ​20 grams' 30 ​grams, ​40 ​grams, ​50 ​grams, ​60 ​grams, 70 grams, ​80 ​grams, ​90 ​grams, ​100 ​grams, ​150 ​grams, ​200
grams, ​250 g​ rams, ​300 grams,350 grams,400 g​ rams, ​450 g​ rams, ​500 g​ rams, 600 grams, 700 grams, ​800 g​ rams, ​900 g​ rams,
​ ackets ​and all the ​brands put
1 ​Kg, 2 Kg, 3 Kg, 4 Kg ​and ​5 Kg. In this ​way the company ​sells ​tea of ​one brand in 135 ​(1x5x27) p

together ​are ​sold ​in ​135 ​x ​10 ​= 1​ 350 packets. ​Q. ​1. ​What in ​your ​opinion ​is ​the ​mistake ​being committed by ​Ms ​Libra?
Q. ​2. With what technique of ​scientific ​management ​can ​she ​improve ​upon ​her mistake? Q. ​3. What benefit ​shall s​ he ​get
with the help of ​the ​technique ​suggested ​by ​you? ​Hint: ​Intensive study ​points out that ​there ​is ​no ​justification ​in selling tea
in s​ o ​many ​brands, so ​many ​tastes ​and ​huge ​number ​of packings. This ​variety ​of ​production ​can be decreased, e.g. ​let ​there
be ​only four brands ​with ​each ​brand having only one ​taste ​and ​each taste ​should ​be ​packed ​in ​10 grams, ​50 ​grams, 100
grams ​, 200
​ ​ g ​packets. Thus the ​number ​of ​packets ​can ​be reduced ​to ​32 ​(4x 1x8) ​packets.
grams, 500 grams, ​lKg,2Kg,S K
By doing ​so ​all ​the advantages ​of ​simplification ​can be ​obtained, e.g.,less ​number of ​machines, ​economy in ​stock, decrease i​ n
the ​cost ​of labour, ​etc.
0rrrr, ​Session
For ​this ​query ​session, ​questions ​from ​readers' side are ​invited.


BUSTITESS ​rlrurn0ilMHtr ​: ​I ​M
The ​study ​of the business environment is ​compulsory ​for ​the
survival ​and ​growth ​of the business.

Learning Objectives ​After ​studying ​this ​chapter, you

will ​be acquainted ​with: ​o ​Meaning o/Business Enuironment a​ ​Characterisfics o/ ​Busi ​ness
Enuironment ​a l​ mportance ​ol ​Busirress ​Enuironment ​o C
​ omponenh o/Business Enuironment
a ​Internal Enuironment ​a ​External ​Enuironment ​a ​Dimensions o/ ​Business ​Enuironrrtent ​o
Economic ​Enuironment ​in India ​c E​ conomic Reforms ​since 7997 ​or ​New ​Economic ​Policy ​or
Changing ​Scenario ​of

Indian'Ecortomic Enuironment ​a I​ mpact ​of ​chcnges ​in Gouernment ​Policy on

Business and ​Industry

-: ​ Mr. ​Answer :​ ​Genflemen, ​let us ​talk about ​business
​ ir, ​we ​have heard ​about environment. but what ​is ​this ​business
environment today. ​Mr. ​Question ​: S
environment? Mr. ​Answer ​: ​Well, ​first ​of ​all ​you tell ​us, ​what do you ​think ​about environment? ​Mr.
​ ir, ​in ​my opinion ​the forces present ​around ​us (e.g. ​air, sunlight. ​noise. weather,
Question ​: S
etc- ​) ​form ​environment.
69 ​Business ​Environment ​: ​Importance and ​Dimensions
​ uestion ​: ​Mr. ​Answer
Mr. Answer ​Mr. Q
Mr. ​Question Mr.
​ ​Answer
Mr. ​Question
Absolutely ​correct. ​Well, now teli ​us ​what ​is ​their ​importance? ​Sir. ​allthese ​forces ​(environment) ​affect ​us. ​They provide ​us ​both
joy ​
and ​distress. ​You ​Since ​example, a​ re we ​telling a​ re ​the ​influenced ​moment it r​ ight ​..........
we ​by ​these ​get ​information ​forces, studying ​about ​them ​the winter ​regularly season, ​is ​important' ​we ​should For
arrange ​for ​the ​winter ​clothings otherwise physical ​distress is ​certain. ​Now t​ o ​listen........ ​Just ​as ​we ​do not live ​in ​a ​vacuum and
remain ​sunounded ​by ​various ​forces, ​in t​ he
Mr. ​Question
same ​way ​business ​cannot Sir. ​does ​it ​mean ​thzrt ​Air, ​be ​run ​in ​a ​vacuum, ​but ​.............. ​.
Sunlight. ​W<:ather. ​etc ​at'r ​lhe b​ r-rsirtess ​environment.
Mr. Answer
No. ​have ​In ​broad ​patience ​and ​listen ​carefully ....... ​.
terms. ​The ​sum ​total ​of ​alt the ​factors influencing ​business ​is ​called business ​environment. ​A ​come ​business ​in c​ ontact ​is
run not ​with ​in ​various ​a ​vacuum ​social ​but in factors. ​a ​society. ​These While ​factors ​doing ​are ​business ​- c​ ustomers' ​it ​has
suppliers, etc. ​All ​these competitors, ​factors are ​government ​outside the ​policies, business ​political and ​business structure, has
constifutional n ​ o ​contol ​laws, o​ ver them. They ​are called external factors i​ nfluencing b​ usiness. ​NIr. ​Questior-t
Sir. hotv ​clo i.he ​customers inlluencr: b​ usit-rcss? M
​ r. Ansruer
e.g. ​if ​the ​customers i​ n ​large company, the ​sales ​will ​come numbers stop ​down ​and ​its b​ uying ​the ​products ​of ​a ​particular
profits ​will d​ ecline. The example ​of ​COKE and ​PEPSI ​is ​there ​for you to ​see. ​Mr. ​Question
O ​K. ​Sir. ​Sir. ​you ​have ​tolcl ​us ​that ​customers. ​sup,pliers. ​etc. are ​the ​external ​factors ​ilfluencing ​business Do ​yotr ​thir-rk.
ihere ale ​some ​internal ​factors ​also? ​Mr. ​Answer
Yes, objective, policies, ​organisation s​ tucture, ​production methods, production capacity, ​etc. management ​information
system, ​are ​the f​ actors ​which e​ xist ​within ​ihe b
​ usiness ​and i​ nfluence the decisions of the ​business. ​They a​ re called ​intemal
Mr. ​Question
​ ir. ​it ​means ​that ​the ​sun'i ​total ​of ​both ​the external ​and ​the ​control ​of
factors ​influencing ​business. These are generally ​within S
internal ​factors constiiute the ​business ​environment. ​Mr. ​Answer
You ​are ​right ........... Now, ​This ​is ​listen ​the ​broad ​ahead
meaning of ​business ​environment. ​There ​is ​a ​limited ​meaning ​of ​business ​environment and, in reality, that ​is ​in ​prevalence- Sir,
kindly tell in ​detail. Listen .......... The external factors influencing b​ usiness ​are called e​ xtemal environment ​and the i​ nternal
factor influencing ​business ​are called ​intemal environment. Sorry ​tlte ​for the interruprion. ​Sir ​The ​factors ​of the internal
etrvironment ​are ​within control ​<,,i tl ​ie ​ltusinr-1,:, ​r-r:til lltt-: ​i,tclr;rs ​i.ri ​11.v.ii.:,,lu1 ​etivirottment ​are ​beyond ​cor,trol ​Arn ​Iright
Mr. ​Answer
Mr. ​Question Mr.
​ ​Answer

Mr. ​Question
Mr. ​Answer ​Mr. ​Question
Mr. ​Answer
Mr. ​Question
Business ​Studies
​ ow ​listen ​further The extemal environment ​can ​further ​be ​divided into two ​parts:
Absolutely conect..... ​Well ​done N

which ​suppliers, ​and ​(i) ​Micro ​they a​ ffect ​can ​competing ​environment: ​be ​or t​ aken influence firms, under Micro ​the

etc. ​control ​firms ​environment ​These ​by ​of ​factors ​making ​a i​ ndushT ​means ​are efforts. closely ​separately, ​the ​sum ​related

total ​e.g., ​to ​of those ​the ​customers, ​business ​factors ​stmcture, almost ​(ii) Macro all ​constitutional ​the ​Environment: ​firms

of ​the ​laws, This ​industry ​etc. i​ s ​the ​The ​equally s​ um ​business total ​e.g. o​ f all ​has government t​ hese ​a ​distant ​factors

policies, relationship ​which influence ​political with ​these ​factors ​and conhol ​over ​them ​is ​almost impossible. Sir,
​ Sir ​No, not

yet, ​listen ​ahead ​........ ​We ​(i) ​Intemal can

​ ​draw ​environment: the
​ ​following ​Complete conclusion
​ ​Control. from
​ ​the ​foregoing

analysis: ​(ii) Micro environment: Control ​is ​possible. ​Limited (​ iii) Macro ​and e​ nvironment: ​generally C
​ ontrol

accepted ​almost ​meaning ​impossible. ​of b​ usiness ​environment: ​Sir. ​control ​business ​'Business ​it ​ ​over ​ond

enuironment it ouer ​that ​is ​impossible

which ​only ​means ​rracro ​the ​business ​the ​ettvironurent ​sum ​hos ​total ​no ​of c​ ontrol., ​is ​those ​business ​factors ​environnrent

which ​influence because

​ ​the 101%
​ conect. ​I ​have understood ​of studying ​it. the
​ meaning of ​business e​ nvironnrent, ​but. ​sir. ​what

is ​the ​rreefl ​A very good question..... At ​continuous Sir.

​ ​ ​it ​environment. means
​from ​opporfunities the ​ beginning ​scanning

and that
​ ​ t​ his ​The ​the order
​of ​threats in ​ ​ ​always live
​discussion ​same opportunities ​are to ​ ​thing you
​ ​and ​present. ​applies and

had ​develop ​can observed

​ ​ ​In today's
​An here. ​forestall ​organisation in ​ that ​the ​the we
​ ​business possible competitive
​ ​get ​can

joy ​benefit ​environment ​threats. and age

​ ​itself distress the
​ ​by ​businessman shou]d ​continue studying ​business ​environmeni Sir,

any example regarding this ​... ​..... ​Mr. ​ es, listen ​...........
Answer ​: Y

business The
​ motorcycle ​environment. industry
​ ​in ​ the ​did U.K.
It ​ ​ ​not declined
​ ​attack due ​ ​importance not
​ ​any to ​

keeping ​a ​to watch

​ ​produce over
​ ​international-level product ​to match ​the ​Japanese motorcycle ​indusbry. ​Therefore, they

suffered. ​If ​the ​U.K. ​motorrycle ​Mr. Q

​ uestion ​ would not ​have suffered O.K. Sir. ​Thank ​U.
​ he ​encl ​:--
like this. ​industry had adopted ​the ​right policy ​in ​time, ​it ​: T
7t ​Business ​Environment ​: ​Importance and ​Dimensions

! ​Meaning ​of Business ​Environment

Business ​environment ​means the sum ​total ​of those factors ​which ​influence the business and ​over which ​the ​business ​has ​no

control. ​ ! ​Characteristics of Business ​Environment

Following ​are the ​chief ​characteristics of the business ​environment: ​(1) ​Totalality ​of ​External ​Forces: B ​ usiness
environment ​is ​the sum ​total ​of ​all ​those ​factorVforces ​which ​are ​available ​outside the business ​and ​over ​which ​the business ​has
no ​control. I​ t ​is ​the ​group o​ f ​many s​ uch forces, ​that i​ s ​why, i​ ts ​nature i​ s ​of ​totality.
(2) ​Specific ​and ​General Forces: ​The ​forces present ​outside ​the business can be ​divided ​into ​two ​parts ​(i) ​ specific ​and
Specific: ​They ​are the forces ​which ​affect the ​firms of ​an ​industry ​separately, e.g., customers, suppliers, ​competitive firms,
investors, ​etc.
(ii) ​General: ​They ​are ​the ​forces ​which ​affect ​all the f​ irms ​of ​an ​industry equally, e.g.. ​social. ​political, ​legal ​and
technical situations.
(3) ​Inter-relatedness: ​The different factors of ​business ​environment ​are co-related. For example, ​let ​us ​suppose ​that there ​is ​a
change in the ​import-export ​policy with the coming of ​a ​new government. In ​this ​case ​the ​coming ​of new ​government ​to ​power
and change ​in the ​import-export ​policy ​are ​political ​and ​economic ​changes respectively. ​Thus, ​a change ​in ​one ​factor ​affects ​the
other ​factor.
(4) Dynamic Nature: ​As is clear t​ hat environment ​is ​a m ​ ixfure of many ​factors a​ nd ​changes i​ n ​some or the ​other factors
continue ​to take place, ​therefore, ​it ​is ​said ​that ​business ​environment ​is ​dynamic. (5) ​Uncertainty: ​Nothing ​can be said ​with any
amount ​of ​certainty about ​the factors of the business ​business ​environment ​strategy because ​take ​they ​into ​consideration
continue ​to ​change ​the likely quickly. ​changes ​The ​before professional ​hand. ​people ​But this who ​is ​a ​determfne risky
job. ​For the
example, technical ​changes ​arevery rapid. Nobody ​can anticipate the ​possibility ​of ​these ​swift technical changes. ​Anything ​can
happen, anytime. The ​same i​ s ​the s​ ituation ​of fashion.
(6) Complexity: ​Environment ​comprises ​of ​many ​factors. ​All ​these ​factors are related ​to ​each o​ ther. Therefore, ​their
individual ​affect on the ​business ​cannot ​be ​recognised. This ​is ​perhaps the reason ​which ​makes ​it difficult for ​the ​business ​to ​face
(7) ​Relativity: ​Business ​environment ​is related ​to ​the local conditions and this ​is ​the ​reason ​for b​ usiness ​environment

happens ​to ​be ​different ​in ​different countries ​and ​different even ​in ​the ​same countryr ​at ​different ​places. ​! ​lmportance
of Business ​Environment
​ now ​as ​to why ​we ​want
It ​is ​not sufficient to ​know ​only the meaning ​of business ​environment. ​The more ​important ​aspect ​is ​to k
to ​study ​it. I​ n ​other words, ​what ​is ​its ​importance. The importance ​of business ​environment ​is ​highlighted by ​the ​following
​ over Advantage: ​The sfudy ​of ​business enVironment enables ​us ​to know about ​the ​opporhrnities available. ​A
(1) ​First M
company ​which ​is ​more ​conscious ​about ​the ​changes ​taking place ​in ​the business ​environment ​is ​the first ​mover. ​It ​takes
​ ecoming ​the first ​supplier. ​In ​other
advantage ​of ​it ​by b

72 ​Business ​Studies

words, ​a ​company ​which ​has ​the capacity to ​know ​the possibilities of the ​opportunities ​available can be ​the ​greatest

beneficiary. For ​example, ​the ​ASIAN ​PAINTS ​a ​leading ​company ​of the ​paint ​industryr, ​at ​one ​stage lagged ​behind

because ​of t​ echnology. This ​was ​smartly understood ​by ​another company, GOODLASS ​NEROIAC ​(GN). 1​ n

order ​to ​exploit this situation, the latter company ​entered ​with ​a ​contract ​with ​a f​ oreign company named

KANSAI PAINTS ​(KP) ​with t​ he purpose ​of ​acquiring ​latest ​technology. The ​KP ​made ​available ​to the GN the

Cathodic ​Electro ​Depcsition ​(CED) ​technology. ​On ​this ​very ​basis,theGNwasabletoobtain ​thecontractfor
theentire paintrequirementsoftheMARUTI ​UDYOG. ​In ​this ​way, the GN earned ​huge ​profits ​by ​entering ​the ​market

​ ​Warning Signal: ​Along ​with ​the

with ​the latest ​technology. ​It ​was a first ​mover ​advantage of the ​company. (2)
availability ​of ​opportunities provided ​by ​the ​study of ​business ​environment, ​we ​also ​come to ​know ​about the ​threats

accompanying them. I​ f ​the ​knowledge about the threats i​ s ​available i​ n ​time, ​efforts c​ an easily be ​made to f​ ace ​or

surmount them. ​This ​is possible ​only ​by ​regularly studying the ​changes ​taking ​piace in the ​business ​environment. ​For

example, there ​was a ​time when ​the customers got dissatisfied at the slow supply of ​cars ​in the market. The ​Maruti

Udyog Ltd. ​was sharp enough ​to r​ ecognise the ​threat ​of new ​companies entering the ​market in ​time. ​Bef.orethe ​other

​ dyog ​Ltd. ​was able ​to ​increase the ​supply of ​its ​cars ​manifold ​and ​was thus
companies could do ​anything, ​the ​Maruti U

able ​to nullifu ​the ​effect ​of ​the possible ​threat. ​In this ​way, ​the ​Maruti ​forestalled ​the ​possible danger ​by ​the s​ tudy ​of

business ​environment. (3)

​ ​Taping Useful ​Resources: ​An ​organisation ​needs ​a ​member ​of ​resources ​to ​camT ​on

its ​business ​(e.g. ​material ​machine, ​man, money ​etc.). ​With ​the help of ​these resources ​goods and ​services ​are ​produced.

A ​business g​ ets resources ​from ​the ​environment ​and ​provides ​goods ​and s​ ervices ​to ​the s​ ame ​environment. A
​ ​study o​ f

business ​environment ​tells ​a ​business the ​requirements ​of the ​environment ​and what ​can ​it ​make ​available ​to ​get its ​needs

fulfilled. Therefore, ​it ​is ​possible to ​get ​useful resources ​from ​the ​business ​environment. ​(4) ​Coping ​with ​Rapid
Changes: ​These days ​business ​is being ​run ​in ​a ​rapidly ​changing ​environment. ​Various factors connected ​with

business, ​e.g. ​competition, fashion, number ​of customers, ​technology, etc. are changing quickly. ​Changes ​do not

affect business as ​much ​as ​the ​rapidity of ​the ​changes. It means ​that ​if ​the speed of ​the change ​is ​a ​little ​less ​it can be faced

with ​comparativl ​ease ​but to face ​the ​rapidity of ​change is a ​very difficult ​task. ​This ​can ​be ​possible ​only ​by ​constant

​ ​Assisting in Planning ​and ​Policy: ​The

vigil ​over ​the ​business ​environmeni ​and ​sfudying ​it simultaneously. (5)
knowledge of ​the business ​environment ​presents ​the ​basis ​for ​pianning ​and ​policy. ​For example, the ITC Hotels decided

to establish ​many ​new ​hotels ​abroad ​and ​irr ​India only ​after ​a c​ areful sfudy ​of the business ​environment. ​They ​felt ​that

tourism industry ​was ​the biggest ​indusky ​in the ​worid. ​Its ​future ​was ​particularly bright in India. The ​Government ​also

​ evelopment ​of this industry b​ ecause ​of ​many ​reasons (for example, the receipt of ​foreign
has a ​special interest in ​the d

exchange, ​increase ​of ​employment, ​etc.). The ITC Hotels ​formulated their ​future shategy ​onthe ​basis ​of ​this

information. ​In t​ his ​way, ​anyone ​can defeat ​their competitors by f​ ormulating ​their ​plans. ​(6) ​lmprovement in

Performanc ​e: ln ​every organisation the sfudy of ​business ​environment ​has an ​important ​role ​as ​far ​as ​its ​performance ​is

concerned. Those organisation which k​ eep ​a ​constant e​ ye ​on i​ t ​and a​ nalyse it ​correctly definitely win t​ he race ​and remain

alive for ​a ​long time. ​On ​the other hand, those organisations ​which do ​not ​care ​about ​it cannot remain steadfast in the
market, ​are ​likely to ​close ​down.
Business ​Environment ​: ​Importance and ​Dimensions

Therefore, ​it can safely ​be ​asserted ​that an organisation can ​improve ​its ​present ​as ​well ​as ​future ​with ​the ​help of ​the sfudy of

business ​environment. ​ I ​Components ​of Business ​Environment

The different components ​of the business ​environment a​ re ​shown in ​the ​following ​diagram:
Components ​of ​Business ​Environment ​I
!nternal ​Environment ​I ​External ​Environment ​I
1. Objectives 2. Policies ​Micro Environment ​or 3.
​ Organisation Structure ​Operating Environment ​4. ​Management
lnformation System 5. Production Method 6. Production Capacity

​ Competitors 4. Public 5. ​Marketing ​lntermediaries

​ ​Customers ​Suppliers 3.
2 1.

I ​A. ​lnternal ​Environment

Internal ehvironment includes ​all ​those factors ​which ​influence ​business ​and which ​are ​present ​within ​the business itself.

These factors are usually ​under the conhol of ​business. ​The sfudy ​of ​internal ​factors ​(vii) ​(ix) (iii) (") (i) is​ ​really

Management Composition Organisational ​Objectives ​Production important ​of ​

​ Capacity, o​ f ​Business, I​ nformation
​the ​of shrdy
Struchrre, ​Board for
​ ​ ​
Directors, ​ internal environment. ​(viii) (iv) ​(x) ​(vi) (ii) ​Policies
System, of
Production ​Managerial ​Participation ​Features ​These ​of ​factors ​of ​Business, ​Methods, ​Attihrde, Human in ​Management, are:
​ ​Resource, ​etc.
Note: ​All ​the above ​factors ​do ​influence the ​decisions ​of ​business, ​but ​since ​all ​these factors ​are ​usually ​under the control ​of

business, ​they cannot ​be ​wholly included in ​the business ​environment. ​ I ​B. ​Externa! Environment
External ​environment ​includes ​all ​those factors ​which ​influence ​business ​and ​exist outside ​the ​business. Business has ​no
conhol ​over ​these ​factors. The ​information ​about ​these ​factors ​is ​important ​for ​the sfudy of the external ​environment. ​Some of
these ​factors ​are ​those ​with which a​ ​particular company​1. Economic Environment 2. Political Environment 3. Social Environment ​4. ​Legal
Environment ​5. ​Technological
Environment etc.
74 ​Business ​Studies
has ​very ​close r​ elationship. However, there ​are some ​other ​factors ​which influence ​the ​entire ​business c​ ommunity. On ​this
very ​basis, ​the external e​ nvironment ​can be d​ ivided into two ​parts:
(1) Micro ​Environment ​or ​Operating Environment: ​Micro ​environment ​means that ​environment which
includes those factors ​with which ​business is ​closely related. These factors influence every ​industrial unit differently. ​These
factors are ​as ​under:

(ii)Suppliers ​(iii) Competitors

(i) Customers ​(iv) ​Public ​

(v) ​Marketing ​Intermediaries. ​(i) Customers: ​Customers of an ​industrial unit ​can be of different types. ​They ​include
household, ​government, industry. commercial ​enterprises, ​etc. ​The number of different ​types ​of ​customers ​highly ​influence ​a
firm. ​For example, suppose ​a ​firm ​supplies goods ​only ​to the ​government. ​It ​means ​that ​firm ​has ​only ​one customer. ​If because
​ ill ​stop a​ nd in that ​case ​the closure of that f​ irm ​is ​certain. This
​ f ​goods w
of some ​reason their relations g​ et ​soured, the supply o
clearly indicates that the customers ​do ​influence business. ​Therefore, ​a ​firm should ​make efforts ​to ​have ​different ​kinds ​of
(ii) ​Suppliers: ​Like the customers, the suppliers ​also ​influence ​business. If ​a ​business has ​only ​one supplier and ​he gets ​annoyed
because ​of some reason, the supply of goods can ​be ​stopped and the ​very ​existence ​of ​the ​business ​can ​be ​threatened ​or
endangered. Hence, efforts should ​be ​made ​to h​ ave ​various ​suppliers.
(iii) ​Competitors: ​The competing firms can influence ​business ​in ​a ​number of ways. They can ​do ​so ​by ​bringing ​new and
cheap products ​in the ​market, ​by ​launching ​some ​sale ​promotion ​scheme ​or ​other similar ​methods.
(iv) ​Public: ​Public h​ as ​different constituents l​ ike the ​localpublic, ​press ​or media, e​ tc. ​The attitude ​or behaviour ​of ​these
constituents can affect b​ usiness ​units. ​For example, the local p ​ opulation ​can oppose some established ​firm ​whose ​business ​is
excessively ​noisy. ​Similarly, ​if ​the media g​ ives some ​favourable report about ​a ​particular company ​the ​price of ​its ​share can
register an increase o ​ n ​this count.
​ arketing Intermediaries: ​The marketing intermediaries play a​ ​significant role in d
(v) M ​ eveloping any ​business u ​ nit. They
are those persons w ​ ho ​reduce the distance between the producers a​ nd ​agents. ​For example, a​ ​company s​ ells its ​goods ​with t​ he help
of agents ​and i​ f ​because of some reason ​all ​the agents ​get a​ nnoyed with the company and ​refuse t​ o ​sell i​ ts ​goods, there can be a

crisis ​for ​the ​company. ​

(2) ​Macro ​Environment ​or ​General Environment: ​Macro environment ​means that
environment ​which ​includes those factors ​which ​have ​a ​distant relation ​with ​business. ​A ​prominent ​feature of ​these ​factors
is ​that they influence ​all the business units almost ​in ​the same way.
NOTE: ​We haue ​alreody ​seen that ​the ​internal ​enuironment ​is ​under ​the ​control of ​business, and ​therefore, ​it c​ annot be ​wholly ​included ​in ​the
business ​enuironment. Similorly, ​the ​micro ​enuironment ​hos a ​uery close relahonship urith business and, ​therefore, ​if ​not immediotely ​ot l​ eost
it ​can ​be ​controlled to ​a ​large extent within ​o ​short s​ pan ​ol ​time. On the contrary, t​ here is ​remote r​ elotionship ​of ​macro ​enuironment

with ​business. ​In ​othei ​words, ​business ​hos ​n ​o ​control ​ouer ​it. ​ln ​foct, macro
​ ​enuironment ​is ​in ​reolity the business ​enuironment.'lts ​foctors ​ore

called ​Dimensions ​o/ ​Business ​Enuironment. We ​shall ​now ​study ​these dimensions.

Business ​Environment ​: ​Importance and ​Dimensions

I ​Dimensions ​of Business ​Envaronment

following Dimensions
​ ​ ​factors: business
​important of ​ ​environment (or ​macro environment ​or ​general environment) have

the ​Environment, [Note:

​ ​ eneral ​(ii) N
G ​ on-economic environment
​ ​Environment can
​ ​be ​classified ​(Political into

Environment, two
​ ​major ​Socia[ ​categories: Environment,
​ (i)
​ E ​ conomic ​Legal Regulatory ​Environment ​and

Technological Environment)l 75

​ ​TechnologicalEnvironment SocialEnvironment. ​EconomicEnvironment ​(2) ​Political Environment ​(4) Legal ​Regulatory

(3) (5) (1)
Environment ​o (1) ​Economic Environment A ​ mong ​the ​various ​factors ​of m
​ acro environment, ​the ​economic
environment has ​a ​special ​significance. ​Economic environment c​ an be ​divided into ​three parts. We shall ​now ​sfudy ​their

effect on business. ​They ​are ​as ​under:

​ conomic ​system. ​(ii) Economic ​policies. ​(iii) Economic c​ onditions. ​(i) ​Economic ​System: ​It ​is ​necessary ​to know
(i) E
aboutthe ​economic s​ ystem ​prevailing i​ n ​a ​countryr in ​order to understand the economic ​environment. E
​ conomic ​system ​influences
​ penness ​of ​business. E
the ​freedom or o ​ conomic ​system i​ s ​mainly of ​three kinds:
(a) ​Socialistic Economic ​System, ​(b) ​Capitalistic Economic ​System, ​(c) ​Mixed Economic System. ​(a) ​Socialistic ​Economic
System: ​Under this ​system, business ​is ​directed and ​conholled ​by the ​government. ​In other words, ​individuals h​ ave no freedom
to run ​business. ​The ​government ​owns all the means
​ ​of ​productions. No individual ​has ​the right to have private ​property. ​All

persons ​enjoy the benefits ​of c​ entrally planned economy. ​Russia, China, Hungary ​and ​All ​have equal rights. This ​system

of ​economy is ​mainly ​adopted by ​Poland. (b)​ ​Capitalistic ​Economic System: ​Under ​this system, ​private ownership of
business ​is ​given ​importance. Hence, ​business gets ​extended. ​It i​ s also ​known a​ s ​free market economy. Under this, ​all means
of ​production ​(such ​as ​labour, land, ​capital, etc.) ​are ​owned ​by private ​people. What to produce, how to produce and by ​whom ​it
will ​be ​produced- ​all such ​considerations a​ re ​determined b​ y ​the m
​ arket ​forces. Hence, it can b​ e said ​that there i​ s a ​complete

freedom of ​consumption, ​production, ​savings, ​investment, ​etc. Such ​type of economic ​system ​is ​prevailing ​in ​U.s.A.

​ ​Mixed Economic ​System: ​Under ​this system, business ​is ​owned both ​by ​the ​government and ​individuals.
and ​canada. (c)

Under ​this, ​several ​basic ​indushies ​are ​run ​under ​the ​control ​and ​ownership ​of ​the government. ​ ​As ​far ​as ​the private
sector is ​concerned, ​it i​ s ​run b
​ y the private ​persons, ​but ​to s​ ave the interest ​of ​the ​country ​government regulates ​its ​activities.
India ​is a ​good example of countries ​following ​this concepts ​of ​economy. ​economic ​(ii) ​Economic p​ olicies ​are Policies:
laid ​down ​Economic ​to ​direct ​policies t​ he ​economic deeply i​ nfluence ​activities. ​the ​Economic ​business ​of ​activities
a ​country. ​include ​The
import-export, employment, ​tax struchrre, ​industry, public expenditure, public ​debt, foreign investment, etc. ​In order to
direct a​ ll these ​economic ​activities, the ​following economic ​policies are ​laid down:
(a) ​Export Import ​Policy, ​(b) ​Employment ​Poliry, ​(c) ​Taxation ​Policy, (d) ​IndustrialPolicy, (​ e) ​(g)Agriculture

Policy, ​(h) ​Public Expenditure Foreign ​Investment ​Policy, ​Policy.

(f) ​Public Debt ​Policy.
76 ​Business ​Sh.rdies

All ​these ​policies ​influence business. ​For example, under the import-export policy, ​restrictions on ​imports will
benefit the indigenous ​industry.
(iii) ​Economic ​Conditions: ​Economic conditions ​are ​those conditions ​which ​are ​related ​with ​the ​possibilities ​of
economic ​development ​of ​a ​country. ​On the ​basis ​of ​the ​economic conditions ​the ​government ​starts ​various
programmes ​for t​ he ​welfare ​of t​ he ​people. These programmes ​influence ​business. ​Businessmen ​are ​influenced ​by
these ​programmes and they ​start ​their own programmes like the advertisement ​policy, ​discovery ​of ​new market,
bringing new products ​in ​the market, new methods ​of ​production, ​etc. Some of the examples ​of economic
conditions ​are ​as ​under:
(a) Foreign ​Capital, ​(b) ​Supply ​of ​Natural Resources, (​ c) ​Level ​of Economic Development, (d) ​Rate ​of ​Interest, ​(e)
National ​Income, (​ f) ​Industrial Development. ​(g) Foreign ​Trade, (​ h) General Price Level. ​Impact of
Economic Environment on ​Business ​The following ​are the chief examples of the ​impact of economic

environment ​on ​business: ​

(i) ​After reforms were ​introduced ​in the ​banking ​sector. the ​bank ​loans were ​allowed ​on ​easy

terms. lt also ​led ​to ​better services. ​It ​helped ​really ​fast ​development ​of ​business. ​(ii) T​ hechange ​intheeconomic
environmentresulted ​inthe ​establishmentofLeasingCompanies.Mufual
Funds ​and ​Venture ​Capital ​Business. ​o (2)
Political ​Environment
Political ​environment ​is ​the ​outcome ​of ​a ​combination ​of various idealogies advocated ​by different political ​parties.
Factors ​connected w ​ ith ​the activities o​ f the ​government a​ re ​included in i​ t, e.g.. the ​type o​ f ​government (​ single ​party
government o​ r ​multi party government), t​ he ​attitude o​ f the ​governmenttowards ​different industries, p​ rogress in passing
different l​ aws, the ​platforms o​ f the ​political ​parties, the t​ endency o ​ f ​the ​applicants f​ or ​different ​posts, efforts b​ y
various ​groups t​ o ​get effective s​ upport for ​themselves, e​ tc. ​Every p ​ oliticalparty ​has ​a ​different a​ ttitude ​towards
business ​community. ​A l​ iving ​example of this c​ an b ​ e s​ een ​during ​elections i​ n the ​shape o ​ f fluctuations in the ​share
market. ​It ​is ​quite ​possible t​ hat the ​mere p​ ossibility ​of a​ ​particular political ​party c​ oming ​into p​ ower ​can make the
prices of s​ hare rise sky ​high. ​It ​is ​true ​conversely when t​ he ​possibility o​ f some ​other p ​ olitical p​ arty coming into power
may ​bring t​ he ​price o​ f ​shares ​really n​ ose-diving. It ​clearly shows t​ hat ​the a​ ttitude of ​the first p ​ olitical party towards
business ​is ​positive ​which ​gets ​reflected in the ​positive ​effect ​on the share market. ​On ​the other ​hand, ​the negative
attifude ​of the second p​ olitical ​party towards b​ usiness ​is ​reflected in the nose-diving of prices of ​shares ​in ​the share
market ​merely on ​the ​possibility of ​its ​coming to power. l​ mpact ​of Political ​Environment ​on ​Business

The following ​are some of the examples of ​the impact ​of the ​political environment on ​business: ​(i) I​ n the year 1977,

the Janata Government ​adopted ​a stringent ​attifude ​towards ​the ​multinational companies.
​ ​As ​a ​result of this attitude the

multinational ​companies ​tike ​the ​IBM ​and ​the ​Coca-Cola had t​ o ignore India. ​
(ii) T​ he ​new ​government ​encouraged the
multinational ​companies ​for ​investment i​ n India. ​This ​led to the opening
​ ​of the ​doors ​of ​the Indian ​marketforthe multinational

companies. Consequently, the ​Coca-Cola ​entered ​the Indian market ​once again. ​
(iii) l​ t ​was only ​because ​of ​the ​political ​interest
that ​Hyderabad ​came to ​be ​known ​as ​Cyberabad ​In ​other words,
​ it came to be recognised ​as ​the centre of ​Information

Technology (lT). ​fu ​a ​result of it ​many ​I.T. ​Companies ​came ​to ​be ​established there.
Business ​Environment ​: ​Importance and ​Dimensions
o ​(3) ​Social Environment
​ atr-tral. ​Social factors
Business ​is ​born ​and develops ​in ​society. Therefore, ​the effect of ​various ​social ​factors on ​business ​is ​but n
include ​customs, fashions, ​traditions, ​wishes, hopes, ​level ​of ​education, ​population, ​standard ​of living ​of the ​people,
religious values, ​distribution of income, corruption, family ​set-up, consumers' consciousness, ​etc.
lmpact ​of ​Social Environment on Business ​All ​social ​factors influence ​business in some ​way ​or ​the other. For
example, ​the ​production ​of ​things should ​be ​according to the fashion. ​Similarly ​religious values ​also ​influence ​business. ​For
example, some ​years ago the ​manufacfurers ​of ​Vanaspati Ghee ​used ​to ​import ​animal ​fat ​for manufach-rring ​ghee. On ​the basis ​of
​ ublic ​protests the g
the strong p ​ overnment ​cancelled t​ he import ​licence o ​ imilarly, ​with the ​news t​ hat
​ f ​these ​manufacfurers. S
some ​popular ​cold drinks contain pesticide ​elements, p​ eople ​protested against i​ t and minimised ​the c​ onsumption ​of these
cold ​drinks.
o (4) ​Legal Regulatory Environment
Many ​acts are passed ​from ​time ​to time in ​order ​to ​control and ​regulate business ​activities. ​The ​sum-total ​of all ​these ​Acts
creates ​legal ​regulatory environment. ​Acts ​are mostly ​passed ​to ​regulate ​such ​business ​activities ​as s​ ale-purchase, ​industrial
disputes, ​labour, ​regulating partnership ​business, ​regulating ​company ​business, ​foreign ​exchange, ​etc.
In India, ​the ​following ​Acts have been ​passed ​in c​ onnection ​with t​ he above ​business ​activities:
(i) ​Sale ​of ​Goods Act, ​(iii) ​Minimum ​Wages Act, ​(v) ​Companies Act,
(ii) ​Indushial ​Disputes ​Act. ​(iv) ​Indian ​Partnership Act, ​(vii) ​Trade ​Mark Act, ​(viii) EssentialCommodities ​Act, ​(ix)

Consumer ​Protection Act. ​ ​ eights ​and ​Measures ​Act. All ​these ​Acts influence ​business d​ ecisions. ​lmpact
(*) ​Standards ​of W ​
of ​Lega! ​Regulatory Environment ​on ​Business ​The ​(i) following
​ ​By removing are
​ ​control the
​ examples ​on the capital

of the ​market, impact

​ ​a of
​ ​huge the
​ legal ​amount regulatory
​ ​of ​capital environment
​ ​on ​business: ​was collected ​by ​issuing ​various

​ ​issues ​in ​the ​primary ​market. ​With i​ ntroduction of r​ elaxation ​in Foreign ​Direct I​ nvestment ​(FDI) and ​Foreign E​ xchange,
(ii) new
many multinational
​ ​companies entered ​the Indian ​market. Consequently, ​there ​has been ​a ​tremendous ​increase in the ​foreign ​exchange
reserves in ​the country. ​o ​(5) ​Technological ​Environment
I'echnology ​includes ​new ​methods ​of p​ roduction ​of ​goods, ​services ​and ​discovery ​of ​new ​implements. Technological
changes ​make available better methods ​of ​production and that ​makes the ​optimum ​use ​of the ​raw m
​ aterial ​possible. ​The
iechnological ​changes ​offer ​both ​the ​possibilities and threats for business. In ​case ​a ​company ​understands ​these ​things otherwise
the ​very ​existence ​of the company ​is ​threatened. For ​well ​example, ​in ​time ​it i​ t becomes can achieve a ​technological ​its
change ​for ​the a​ utomobile industry to produce ​vehicles ​which ​consume ​less ​petrol in view of the ​ever increasing prices of
petrol. Only that company will ​be able to survive ​which ​can move ​with ​the ​changes ​taking place ​in ​the environment.
Therefore, the companies should constantly watch the ​technological changes ​so ​that they ​are able ​to exploit ​the ​business
78 ​Business ​Studies

!mpact ​of ​Technological ​Environment on Business ​The ​following ​are the examples ​of impact ​of

technological ​environment on ​business: ​

​ iththe ​advent ​of ​televisioninthemarket,the
(i) W

​ ith the ​anival ​of the ​photostat machines ​in the ​market, the carbon
cinemaandtheradioindustryrwereadverselyaffected. ​(ii) W

paper industry suffered ​a ​setback. ​ ​ ith the entry of synthetic thread in the market, the cotton cloth industry ​was ​badly
(iii) W

affected. ​ ​ conomic
(iv) T​ he digital ​watches have almost ​eliminated ​the ​market ​of ​the ​taditional ​watches. !​ E
Environment in lndia
Economic environment ​is ​an ​important ​constifuent of ​business ​environment. ​There ​are ​three ​main ​constifuents of
this ​environment ​as ​indicated in ​the ​following ​diagram:

We have already studied economic system, ​economic ​policies and ​economic conditions ​under the dimensions of

business ​environment. Now we ​shall ​study it in the Indian ​context. ​

o ​(1) ​Economic System ​of ​lndia
Economic ​system ​is ​one of the ​major ​parts of ​economic environment. Economic ​system ​is ​of three ​types:​
​ ystem. ​ Mixed Economic ​System. ​
Capitalistic Economic S
Socialistic ​Economic ​System. ​ -​ -​ India ​has ​adopted ​the
mixed economic ​system. ​Features ​of Mixed Economic ​System: ​The chief characteristics of the ​mixed ​economic

system are ​as ​under: ​

(i) ​Different ​sectors of business -​ public,
​ private and mixed. ​
(ii) ​More attention to public ​interest.

​ (​ 2)
(iii) ​Encouragement to private ​sector. (​ iv) ​Cenhal planning. ​(v) ​Freedom in the ​choice of ​employment. o

Economic Policies ​of ​tndia

In order to direct the economic activities ​in India, ​the ​following major ​economic policies have been framed.​

​ mployment policy to ​make ​employment available to the

lmport-export policy to control import-export in the ​countryr. ​(ii) E

​ ax policy to form ​a ​stmcfure of direct and the indirect ​taxes.

people ​of ​the country. ​(iii) T
Business ​Environment ​: ​Importance and ​Dimensions

. (​ viii) (vii) (ix) (iv)

​ ​(vi) (v) ​(3) ​Economic ​Agriculture Public Foreign Monetary Industrial
​ ​Public ​debt expenditure

investment policy ​policy policy policy ​ ​ in in encourage

​ Conditions to
​ in ​ ​order policy policy order order to in ​to ​to to ​establish ​order

invite develop control industrial ​ ​capital ​debt. ​public ​between ​in in

​ in lndia ​to foreign ​a ​control public agriculture ​balance development

​ ​country. the
expendifure. ​the ​the in ​ ​country. the count4r.
​ ​demand and supply for money. The
​ major economic conditions ​and ​their
explanation ​is as ​under: ​(i) ​Foreign ​Capital: ​Foreign ​capital ​means investment made ​by ​foreigners ​in ​India. The foreign
capital in India ​is ​increasing at the rate of 4 ​billion ​dollars ​every ​ ​is ​a ​good ​sign ​for ​the ​economic environment ​in ​India.

(ii) ​Supply of ​Natural ​Resources: ​In ​India, ​the ​supply ​of nafural resources (like the coal mines, ​iron ​mines, ​(iii) L
​ evel
forests, ​of etc.)
​ ​ ​abundant ​Development: and
​Economic is ​ ​they ​are ​The fully
​ ​economic being
​ exploited. ​development in

India ​is ​also balanced. This

​ ​rate ​is ​about 5.5 per ​cent per year.
(iv) Rate ​of ​Interest: ​Sometime back the ​rate ​of interest ​in ​the ​system of ​banking ​was ​determined by ​the ​Reserve ​Bank. Now
all the banks ​in ​the ​counky ​have been given the ​freedom ​to ​determine their ​own ​rates of interest. ​That ​is ​why ​the rates of interest
in respect of ​various ​banks ​happen ​to be ​different.
(v) ​National ​lncome: ​In India, national income ​is ​increasing at a slow ​speed. ​(vi) ​Industrial ​Development: ​There ​is
instability in ​the ​industrial development of India. ​For the ​last ​one decade ​it has ​been observed that sometimes there ​is ​some
​ rogress at all.
progress ​and while sometimes there ​is ​no p
(vii) ​Foreign ​Trade: ​There ​is ​continuous ​progress ​in the ​foreign ​hade of India. ​(viii) ​General Price Level: ​In India, the

general ​price ​level ​is ​under complete conhol. This ​is a ​good indicator for ​the ​economic condition ​of the ​country. ​ !
Economic Reforms ​since ​1991 ​or ​New ​Economic Policy or Changing
Scenario ​of lndian ​Economic Environment
The ​process ​of economic ​reforms was ​started b​ y the government of India ​in ​1991 for taking ​the ​country ​out ​of ​economic
difficulty and ​speeding ​up t​ he ​development ​of t​ he country. The ​centre ​of ​economic reforms ​has ​been ​liberalisation,
​ iberalisation ​means ​to unshackle the
prioatisation a​ nd ​globalisation. T​ hese three terms ​mean: ​(A) ​Liberalisation: L

economy ​from ​bureaucratic cobweb ​to make ​(viii) (vii) (iv) (vi) (iii) it​ ​(v) (ii) (i) more
​ ​To Freedom Simplifuing

Simplifuing Freedom ​Removing Freedom ​Reduction competitive.

​ ​do away to from in ​reshictions ​in ​the ​import-export determining f​ ix

with the ​unnecessary the process rate ​the Following

​ ​prices ​necessip of for of ​taxes. the the ​of ​procedure. ​athacting control ​goods ​scale are

movement of ​its ​having of and over foreign ​chief ​business ​services. ​of ​economy. a ​features: ​license goods capital activities. ​for and and ​most

services technology.

of the from ​industries. ​one ​place ​to another. 79

80 ​Business ​Studies

(B) ​Privatisation: ​In brief, privatisation ​means such ​an economic ​process ​through which ​some ​public ​sector

undertaking ​is ​brought ​either ​partially or completely under private ​ownership. Broadly
​ ​speaking, establishing ​a new

enterprise ​in ​private ​sector instead ​of ​a ​public ​sector ​is also ​privatisation. ​Not only this, ​depriving public ​sector of ​the

​ or transfering ​its ​production, without depriving ​it, ​to the private

job ​of ​production ​which ​was ​earlier reserved ​for it

sector also ​amounts to ​privatisation. ​Its ​chief features are given below: ​
(i) R​ educing ​the role of public ​sector ​and ​increasing

​ educing fiscal ​burden ​of ​the government. ​(iii) R​ educing the ​size ​of the ​government machinery.
the role ​of ​private ​sector. ​(ii) R

(iv) S​ peeding ​up economic development. ​(v) I​ mproving management of ​enterprises. ​(vi) I​ ncrease ​in govemment ​treasury.

(vii) ​Increasing ​competition by opening ​industries reserved ​for ​the ​public ​sector ​to ​the ​private ​sector. ​(C) ​Globalisation:

Globalisation means integrating ​the ​economy ​with ​the ​rest ​of ​the ​world. Following ​are its chief features: ​
​ (i) F​ ree

​ ree ​flow of capital in ​all the countries. ​(iii) F​ ree ​flow of information and
flow ​ofgoods ​and ​services ​in ​all ​the ​countries. ​(ii) F

​ ree ​movement ​of ​people in ​all ​the ​countries. ​(v) T​ he ​same ​conflict ​solving ​technique in
technology in ​all the countries. ​(iv) F

all ​the ​counhies. ​ ​ biectives ​of ​Economic ​Reforms

Following ​are ​the ​objectives ​of economic ​reforms: ​(i) M
​ odernisation ​of ​the industrial ​system of ​the country. ​(ii)

​ ttracting foreign ​investment. ​(iv) E​ liminating unproductive ​controls. ​(v)

Encouraging private ​investment. ​(iii) A
​ ontrolling ​fiscal deficits. ​(Fiscal ​deficit ​comes ​into play ​when
Connecting Indian economy with ​the ​world economy. (​ vi) C

the ​total ​expendih-rres ​of the ​countryr exceeds ​its ​total ​incomes) ​
​ (vii) I​ ncreasing foreign ​exchange ​reserves. ​(viii) C
​ ontolling

unprofitable industrial ​units ​in ​the ​public ​sector. ​ ​ the ​attainment ​of ​the
o ​Maior ​Steps ​of ​Economic ​Reforms For
above-mentioned objectives, ​the ​government ​of ​India ​has taken ​the ​following major ​steps:
(1) ​New ​IndustrialPolicy, (​ 2) ​New ​Trade ​Policy ​(3)

FiscalReforms, ​(4) ​Monetary ​Reforms (5) ​Capital Market

Reforms, ​(6) Phasing ​out ​Subsidies (7) ​Dismantling ​Price ​Controls ​We shall

now ​sfudy ​these ​aspects ​of ​the ​economic ​reforms ​in ​detail. ​(l) N
​ ew
Industrial ​Policy
Under Indushial Policy, keeping ​in ​view ​the p​ riorities ​of the ​country and ​its ​economic development, ​the roles of the
public ​and ​private ​sectors ​are clearly decided.