PRINCIPLES OF MANAGEMENT

Unit I: Introduction
Modern Concept of Management ............................................................................................3
Trends in Management.............................................................................................................3
The a classical theory. ............................................................................................................... 4
2. The neoclassical theory ......................................................................................................... 4
3. Modern organizations theory ................................................................................................. 4

Importance of Management .....................................................................................................4

Function of Management .........................................................................................................5
Emerging challenge for management ........................................................................................5
Scope of Management..............................................................................................................6
Production Management ..........................................................................................................6
(iii) Financial Management: ......................................................................................................7
Nature of management ............................................................................................................7
Universal in Nature .................................................................................................................. 7
Multidisciplinary ...................................................................................................................... 7
Management is a group activity.................................................................................................. 7
Management is goal oriented .................................................................................................... 8

Levels of Management .............................................................................................................8

Top Level Management ............................................................................................................9
Middle Level Management ..................................................................................................... 10
Lower Level or Supervisory Level Management ....................................................................... 10

Unit II: Evolution of Management

Evolution of Management Theory ........................................................................................... 11
The Classical theory of management ....................................................................................... 11
Principles of Scientific Management ....................................................................................... 12
Techniques of Scientific Management ..................................................................................... 12
Criticism of Scientific Management ......................................................................................... 12
Bureaucratic Management ..................................................................................................... 12
Administrative Management .................................................................................................. 13
Neo—classical theory ............................................................................................................. 13
Modern Concept of Management
Management is that field of human behaviour in which managers plan, organize, staff, direct,
and control human, financial resources in an organized group effort in order to achieve
desired individual and group objectives with optimum efficiency and effectiveness. In the
past, management was not considered as an important part of development. With industrial
revolution during 17th and 18th century, several economists expressed their ‘concepts and
function of management’. Only in 19th century, management became the separate field of
study because business organization faced various problems regarding labour efficiency and
wage payment system. In search of solution of these problems, people began to recognize
management as a separate field of study.

Trends in Management
Trends in Management means movement of management thought in particular direction.
Management thought developed gradually, from past to present and passed through various
distinct phases.
1. The classical theory.
It mainly consists of 3 theories

o Bureaucratic theory.
o Scientific management theory
o Administrative theory.
Concerned with production of efficiency and productivity through the one best way

Scientific method should be used to define the best way. There should be standardization.

2. The neoclassical theory

o Human classical theory
o Behavioural theory.
Concerned with importance of human element in management, the theory emphasizes
importance of individual within the organization. According to human relation, theory
productivity is not only technical but also a social phenomenon. Workers' attitude govern
productivity. Workers are motivated by social need. They respond to pressures of informal
work groups. Money is not the only motivator. Workers are social and they advocated that
people are different than machines.

3. Modern organizations theory (The system theory and contingency theory)

o The system theory- concerned with total picture of interdependence and

environmental influences.
o contingency theory concerned with inquires of each situation for managerial practice

The modern organizational theory is regarded as recent development in management theory.

They represent integrative approach to management. There is no one best way of doing things
under all conditions. Methods and techniques which are highly effective in one situation may
not work in other situations. Situation plays an important role in application of management
function. Functions are universal but their application is situational. Management takes a
situational approach.

Importance of Management
1) Acquisition and utilization of resources

Management performs efficient acquisition effective development and utilization and proper
coordination of resources.

2) Environmental adaptation.

Management adopts organization to changing environmental forces.

3) Goal achievement

Management achieves goals by balancing the requirement of jobs and people.

4) Problem solving.

Management solves organizational problems. It identifies and evaluates various alternatives

and choose appropriate course of action.

5) Performance control.

Management measures and evaluates the actual performance.

6) Social responsibility

Management anticipate and act before hand to social expectations.

Function of Management
1. Planning

2. Organizing

3. Staffing

4. Leading

5. Controlling

1. Planning

Planning is setting goals and deciding how best to achieve them planning is predetermining
future. Planning is deciding in advance about what to do how to do it when to do it and who
is to do it.
2. Organizing: Organizing is establishing structure. It includes grouping tasks, producing
authority – responsibility structures creating channel of communication and creating
coordinating mechanism.

3. Staffing: Staffing is hiring and assigning people to carry out tasks. It is filling and keeping
filled positions in the organization structure. It is human resource management.
4. Leading is influencing, communicating and motivating people to perform tasks for goal
achievement.
5. Controlling is maintaining, comparing and correcting organizational performance toward
goal achievement

Emerging challenge for management

1. Globalization: Managers need to think globally and act locally.

2. Technology: The new economy will base on digital revolution. The development in
information technology will provide greater access to management. Management will need to
manage changing technology effectively.
3. Quality: Quality assurance is getting important.

4. Social responsibility: Management will pursue long term goals that are good for society.

5. Empowerment: To empower worker is a challenge to management.

6. Human resource management: Management needs to deal with diversified work force,
requires visionary leadership on the part of management.
7. Organization design: Organization will be lean flat and less hierarchical

8. Cultural sensitivity: Cultural value will change cross cultural influences. Organizations
are emerging as cultural systems.
9. Change management Manager will face the challenge of managing change. They will
need to aware specific changes and their likely impact on the practice of management.
10. Learning organization: Management needs to create learning environment. Organization
of future will be predominantly knowledge based.

Scope of Management
The field of management is very wide. The operational areas of business management may be
classified into the following categories:

Production Management
Production management implies planning, organising, directing and controlling the
production function so as to produce the right goods, in right quantity, at the right time and at
the right cost. It includes the following activities:

(a) Designing the product

(b) Location and layout of plant and building

(c) Planning and control of factory operations

(d) Operation of purchase and storage of materials

(e) Repairs and maintenance

(f) Inventory cost and quality control

(g) Research and development etc.

(ii) Marketing Management:

Marketing management refers to the identification of consumer’s needs and supplying them
the goods and services which can satisfy these wants. It involves the following activities:
(a) Marketing research to determine the needs and expectation of consumers
(b) Planning and developing suitable products

(c) Setting appropriate prices

(d) Selecting the right channel of distribution, and

(e) Promotional activities like advertising and salesmanship to communicate with the
customers.

(iii) Financial Management:

Financial management seeks to ensure the right amount and type of funds to business at the
right time and at reasonable cost. It comprises the following activities:

(a) Estimating the volume of funds required for both long-term and short-term needs of
business
(b) Selecting the appropriate source of funds

(c) Raising the required funds at the right time

(d) Ensuring proper utilisation and allocation of raised funds so as to maintain safety and
liquidity of funds and the creditworthiness and profitability of business, and

(e) Administration of earnings

Thus, financial management involves the planning, organising and controlling of the financial
resources.

Nature of management
Continuous Process: Management is a never ending process. It will remain the part of
organization till the organization itself exists. Management is an unending process as past
decisions always carry their impact for the future course of action.

Universal in Nature: Management is universal in nature i.e. it exists everywhere in universe

wherever there is a human activity. The basic principles of management can be applied any
where whether they are business or non-business organization.

Multidisciplinary: Management is basically multidisciplinary. Though management has

developed as a separate discipline it draws knowledge and concepts of various other streams
like sociology, psychology, economics, statistics etc. Management links ideas and concepts
of all these disciplines and uses them for good-self of the organization.

Management is a group activity. Management is a vital part of group activity. As no

individual can satisfy all his needs himself, he unites with his co-workers and work together
as an organized group to achieve what he cannot achieve individually.
Management is goal oriented: Management is a goal oriented activity. It works to achieve
some predetermined objectives or goals which may be economic or social.

Levels of Management

Every business organisation, irrespective of its size, has many managerial positions in its
structure. These positions are created through the process of delegation of authority from top
to lower levels. Each position is marked by authority, responsibility, functions, roles and
relationships. The contents and nature vary, depending in the level at which the position lies.
As one moves upward in the organisation, the managerial position plays an important role,
larger the contribution, greater the authority and higher the responsibility. These managerial
positions lying in the chain of command may be classified into various groups or levels of
management. Broadly speaking, an organisation has two important levels of management,
namely functional and operative. The functional level is concerned with the process of
determining primary objectives, formulating basic policies, making vital decisions and
controlling and coordinating activities of personnel. The operative level of management is
related to implementation of plans and decisions, and pursuit of basic policies for achieving
the objectives of the organisation.

Generally, the levels of management consisting of various managerial positions in the

structure of an organisation differ from oneorganisation to another, depending on the size of
business activity, philosophy of management, span of control and other related factors.

But, in a joint stock company, for conducting its business efficiently, managerial personnel
may be placed in three levels, that is, top, middle and lower or supervisory level.

Top Level Management

The top level management is generally occupied by the ownership group. In a joint stock
company, equity shareholders are the real owners of the company. Thus, they elect their
representatives as directors; form a board, known as board of directors, which constitutes the
top level of management. Besides the board, other functionaries including managing director,
general manager or Chief executive to help directors, are included in this level. It is the
highest level in the managerial hierarchy and the ultimate source of authority in the
organisation. The top level managers are accountable to the owners and responsible for
overall management of the organisation. The major functions of the top level management
are as under:

(i) To make a corporate plan for the entire organisation covering all areas of operations.

(ii) To decide upon the matters which are vital for the survival, profitability and growth of the
organisation such as introduction of new product, shifting to new technology and opening
new plant etc.

(iii) To decide corporate goals.

(iv) To decide structure of organisation, creating various positions there in.

(v) To exercise overall managerial control through the process of reviewing over all financial
and operating results.

(vi) To make decisions regarding disposal and distribution of profits.

(vii) To select key officials and executives for the company.

(viii) To coordinate various sub-systems of the organisation.

(ix) To maintain liaison with outside parties having a stake in business such as government,
trade union and trade associations etc.

(x) To formulate basic policies and providing direction and leadership to the organisation as a
whole.

Middle Level Management

In order to fill up the gap which exists between functional and operative level, some
managerial positions are created at the middle level of management. Middle level
management consists of departmental managers, deputy managers, foreman and
administrative officers etc. These executives are mainly concerned with the overall
functioning of their respective departments. They act as a link between top and lower level
managers. The activities of middle level managers centres around determining departmental
goals and devising ways and means for accomplishing them.

The main functions performed by these managers are as under:

(i) To prepare departmental plan covering all activities of the department within the basic
framework of the corporate plan.

(ii) To establish departmental goals and to decide upon various ways and means for achieving
these goals to contribute to organisational goals.

(iii) To perform all other managerial functions with regard to departmental activities for
securing smooth functioning of the entire department.

(iv) To issue detailed orders and instructions to lower level managers and coordinate the
activities of various work units at lower level.

(v) Middle level managers explain and interpret policy decisions made at the top level to
lower level managers.

Lower Level or Supervisory Level Management

Lower-level management is known as supervisory management, because it is concerned
mainly with personal oversight and direction of operative employees. It consists of factory
supervisors, superintendents, foremen, sales supervisors, accounts officers etc. They directly
guide and control the performance of rank and file workers. They issue orders and
instructions and guide day to-day activities. They also represent the grievances of the workers
to the higher levels of management.

Supervisory management performs the following functions:

(i) Planning of day to day work

(ii) Assignment of jobs and issuing orders and instructions

(iii) Supervising and guiding workers

(iv) Maintaining close personal contacts with workers to ensure discipline and team-work

(v) Evaluating operating performance

(vi) Sending reports and statements to higher authorities

(vii) Communicating the grievances and suggestions of workers to higher authorities.

Evolution of Management Theory

The Classical theory of management

a) Scientific Management
b) Bureaucratic Management

c) Administrative Management

Principles of Scientific Management

1) Replacement of old rule of thumb method

2) Scientific selection and training

3) Labour-Management co-operation(mental revolution)

4) Maximum output

5) Equal division of responsibility

Techniques of Scientific Management

1) Scientific task setting-fair day’s work

2) Work study-method, time, fatigue and motion study

3) Planning the task

4) Standardisation

5) Scientific selection and training

6) Differential piece-wage plan

7) Specialisation

Criticism of Scientific Management

• Functional organization structure (An operator is controlled byeight foremen)– In
practice and violates unity of command.
• It concentrated on production management and ignores thearea of Finance,
Marketing, Accounting and Personnel.
• Workers objected Taylor’s Differential piece wage planbecause wages of workers are
not increased in directproportion to the increase in productivity.
• It undermined the human factor in industry. It resulted inmonotony of job, loss of
initiative, wage reductions, jobinsecurity etc.

Bureaucratic Management
• Max Web (1864-1920)

• Rules and regulations to eliminate managerial

inconsistencies Characteristics

1) Division of work
2) Hierarchy of position

3) Rules and regulations

4) Impersonal conduct

5) Staffing

6) Technical competence

7) Official records

Administrative Management
• Henri Fayol (1841-1925) Father of modern management

• Introduced pyramidal form of organisation.

Management consist 6 types of activities

1) Technical Activities (Production, Manufacturing)

2) Commercial Activities (Purchasing, Selling and Exchange)

3) Financial Activities (Optimum use of capital)

4) Security (Protection of property and persons)

5) Accounting (Stock taking, Balance sheet, costing, statistics)

6) Managerial (Planning, organizing, coordinating and controlling)

Neo—classical theory
1. Human Relations
• Elton Mayo- Founder of Human Relations.
• He conducted on experiment on Hawtrone plant of western electric company and
concluded thatproduction efficiency of workers depends uponemotional factors.
• Happy & satisfied employees trying to increase production.

2. Behavioural Science Approach

• Main contributors - Maslow, F. Herz berg &D. McGregor

• Application of behavioural science such as psychology, sociology& anthropology to the

study of human relationship.

1) Organisation is basically a social system and not just techno economical system.

2) Individuals may behave differently under different situations.

3) Attempts should be made to connect organisational goals &human needs.

4) Management must develop social skills in addition to technical skill. Man to man
relationship, team spirit & group harmony should be given top preference by management.