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BY

M.ARCHANA
ASSISTANT PROFESSOR

Unit-I: OVERVIEW OF MANAGEMENT

Objective
Meaning of management
Concept of management being both art and

science.
Difference between management and
administration.
Important management thoughts
Major contribution of F.W.Taylor and Henry Fayol.
Various functions and their importance.
Various types of management.
Unit-I: OVERVIEW OF MANAGEMENT

DEFINITION OF
HAROLD KOONTZ defined as
MANAGEMENT
Management is an art of
getting things done through and
with people in formally
organized groups.
HENRY FAYOL defined as To

manage is to forecast, to plan,


to organize, to co-ordinate and
to control.
Unit-I: OVERVIEW OF MANAGEMENT

DEFINITION OF
PETER DRUCKER defined as
MANAGEMENT
Management is a multipurpose
organ that manages a business
and manages manager, and
manages worker and work.
FEDRICK WINSLOW TAYLOR defined

as Management is the art of


knowing exactly what do you want
to do and then seeing that it is
done in the best and cheapest
way.
Unit-I: OVERVIEW OF MANAGEMENT

WHAT IS MANAGEMENT ?
DEFINITION:
Management is the art of getting things done through and with people.

CONSIDERING VARIOUS ASPECTS OF


MANAGEMENT
Management is the process of achieving organizational

goals by engaging in the four major functions of planning,


organizing, leading and controlling by co-ordination of
human, material, technological and financial resources

Unit-I: OVERVIEW OF MANAGEMENT

A process of designing and maintaining an environment

in which individuals working together in groups, achieve


their objectives effectively and efficiently.
A process consisting of all those functions required in
getting work done through others without confusion,
wastage of resources and overlap.
Means to manage resources by planning, organizing,
directing and controlling various activities of an
enterprise such that all efforts are directed towards
specific and objectives.
These implies,
management is a process and has universal applicability.
Management is applicable to all levels in an organization.
Management is concerned with productivity
(effectiveness and efficiency).
Unit-I: OVERVIEW OF MANAGEMENT

Requirements for
management
Human resource

Unit-I: OVERVIEW OF MANAGEMENT

material

Unit-I: OVERVIEW OF MANAGEMENT

Financial resource

Unit-I: OVERVIEW OF MANAGEMENT

CHARACTERISTICS OF MANAGEMENT
1) Is a Process /a function.
2) Is a Social Process.
3) Involves Group Effort.
4) Aims at achieving predetermined objectives.
5) Required at all levels of management
6) Is a Profession
7) Is comprised of following functions:

Planning
Organizing
Directing
Controlling
Co-ordination

8) Is an art and science.

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Activity
based &
continuou
s

univers
al
Aims at
productivi
ty
Both
art
&
scienc
e
Is a
proces
s

Purposef
ul

Nature of
Manageme
nt

Management
&
administratio
n are
synonymous
Unit-I: OVERVIEW OF MANAGEMENT

Integrative
Process

Involves
decision
making

Emphasizes
people &
not things

Social
proce
ss
11

Nature of management
and its Purpose.
Universal:

- has universal applicability.


- applies to all types of organizations.
- applicable to all formally organized group efforts.
Activity based and continuous:

- applicable to organized activities that takes place on a continuous


basis.
- organized activity can take a variety of forms.
Purposeful:

- Management has a purpose is a goal oriented organized activity.


- focus is to achieve predetermined objectives.
- the focus is to bring about successful action.
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Nature of management and


Integrative process:
its
Purpose
.
- Management aims to establish integration between
1. various resources of the organization.
2. objectives of the organization and the requirements of its
external environment. E .g., customers, society, government etc.
Involves decision-making:
- Management involves decision making -means the evaluation and
selection of alternatives in a complex environment with a purpose of
getting things done through others.
- exists at all levels of management.
Emphasizes people and not things:

-the basic principle is that people are more important than things.
- this principle emphasizes that managers are to be leaders whom
people will
like to follow and not bosses who must be obeyed.
-people are to be made to work through motivation, morale etc and
not
through fear, fine and threats.
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13

Nature of management and


Is a Purpose
its
.
process:
-In management there are specific inputs, processes and
outputs.
INPUT
S

OUTPUTS
PROCESS

Ex: Men
Machine
Material
Money
Methods

Ex:

Planning
Organizing
Staffing
Directing
Controlling

Unit-I: OVERVIEW OF MANAGEMENT

Ex: Objectives

14

Nature of management and


Aim at
Productivity (creating
its
Purpose
. surplus):

-Aim of management is to reach the objective using minimum resources


and productive operations.
-Productivity is defined as the human efforts to produce more and more
with less and less input of resources as a result of which the benefits of
production is distributed more equally among maximum number of
people.

-Production: Concerned only with the volume of o/p totally ignoring the
resources used to achieve that level of o/p.
-Productivity: takes into account the quantity and quality of resources
employed, i.e., the efficiency with which the resources are employed.
- efficiency is the achievement of result with fewer amounts of resources.

Unit-I: OVERVIEW OF MANAGEMENT

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SCOPE OF MANAGEMENT
Management as an Art
Management as a Science
Management as a profession

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Management as an Art
The following features states that it is a art.
Creative
Individual approach
Application and dedication
Initiative
intelligence

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Unit-I: OVERVIEW OF MANAGEMENT

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Management
as a
The following features states that it
is a social science.
Science
Systematic decision making
Situational output
Universal management process
Universally accepted principles

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Management as a
profession
Basic criteria's of a profession are mentioned below
Systematic knowledge
Experimental attitude
Code of ethics
Entrance into an association
Requirements of license
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MANAGEMENT AS A SCIENCE
PROVIDES PRINCIPLES AND AS
AN ART HELPS IN TACKLING
SITUATIONS.

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MANAGEMENT
MAN + AGE
(EXPERIENCE)
FOR AND BY
PEOPLE
ART

SCIENCE

Organizes and uses human talent


using motivation, leadership, human
relations etc.,

Accumulated knowledge
such
as clear Concepts, Theory
etc.,

BY USING OPTIMAL RESOURCES TO


PRODUCE OPTIMAL RESULTS
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Management Science or
Art
Science concentrates on Knowing.
Art concentrates on doing.

Thus management is a blend of art and


science,
which
is
used
to
achieve
effectiveness and efficiency. It is an art as it
consists of organizing and using human talent
to get the job done. It is a science as the
management techniques are
subjected to
measurement and factual determination.
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Management and
administration
Management

Administration

1. Function

Directing humangoals

Determination of goal
and policies

2. Position

Servant of
administration

Controlling
management and
organization

3. Technical ability

Requires to function
properly

Does not requires

4. Productive nature

Productive in nature

Non productive

5. Levels

3 levels

Only relate to top


levels

6. Role

It executes the work

It gives the proper


direction

Unit-I: OVERVIEW OF MANAGEMENT

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Management and Administration


Management- It is an art of getting things done through & with

the people in formally organized groups.


Administration-

According to Theo Haimann, Administration means


overall determination of policies, setting of major objectives, the
identification of general purposes and laying down of broad
programmes and projects.
According to Newman, Administration means guidance,
leadership & control of the efforts of the groups towards some
common goals.

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Management and
Administration
Two subdivisions of management
Administrative management.
Is basically a thinking function mostly performed

by higher levels of management.


Is concerned with determining goals and laying
down policies.
Operative management.
Is basically a doing function mostly performed by
lower levels of management.
Is concerned with execution of policies for the
attainment of goals.
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Management and
Administration
ADMINISTRATION

MANAGEMENT

1. Is a determinative function

1. Is a execution function i.e.,


executing policies within the limits
setup by administration.

2. Determines the organization


and defines the goal.

2. Uses administration for the


particular objectives set before it
and strives to achieve it.

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Management functions
PLANNING

COORDINATING

ORGANISING

CONTROLLING

LEADING

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MANAGEMENT
PROCESS
HUMAN
RESOURCE

PHYSICAL
RESOURCE

ORGANISATIONAL
GOALS

INFORMATION
RESOURCES

FINANCIAL
RESOURCES

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WHAT A MANAGER DOES?

ROLES OF A MANAGER
- Achieve Objectives through and with people
- Identity and Utilitise Resources Optimum
Plan, Analyse, Interpret, Collobrate, educate, Problem solver,
Communicator, build team, Change agent, Chief executive.
Interpersonal
roles

Information
roles

Figurehead

Monitoring

Leader

Disseminator

Liason

Spokesman

Decisional
roles
Entrepreneur
Disturbance handler
Resource allocator
Negotiator

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MANAGEMENT LEVELS

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Controlling

Leadi
ng

Organ
izing

Middle
Level
Managers

Plann
in

Top
Level
Managers

First Level
Supervisors

TIME SPENT IN CARRYING OUT MANAGERIAL FUNCTIONS


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Top Level

Technical
Skills

Human
Skills

Conceptual
and Design
Skills

Supervisory Level
Solution
delivery
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THE GOALS OF ALL MANAGERS &


ORGANIZATIONS
Goal to make profit.
Profit the measure of a surplus of sales

dollars over expense dollars.


In business firms goal is long-term increase
in stock value.
- Managers can achieve as much as possible
of
a desired goal with the available resources.
In non-business firms not responsible for
total business profits.
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Performance of different
managers in an management
and
administration.
Higher level
Middle & lower level
Performed by
managers

managers

Type of
function

Determinative
thinking function

or

Concerned with

Determining goals & Execution of policies


laying down policies
attaining goals.

Note

Every manager spends time in both administrative


and operative management (but the properties vary
depending on the managerial level).

Unit-I: OVERVIEW OF MANAGEMENT

Executive or doing function

for

37

Administratio
n

Lists out the


required policies
Attainment of

Management

Brings the policies


to effect/reality

predetermined
organizational

Organization

Establishes
coordination between
administration and
management

Unit-I: OVERVIEW OF MANAGEMENT

goal / objectives

38

On the Basis of Functions


Basis

Management

Administration

Meaning

Management is an art of getting things It is concerned with formulation of broad


done through others by directing their objectives, plans & policies.
efforts towards achievement of predetermined goals.

Nature

Management is an executing function.

Process

Management decides who should do it & Administration decides what is to be done


how should he do it.
& when it is to be done.

Function

Management is a doing function because Administration is a thinking function


managers get work done under their because plans & policies are determined
supervision.
under it.

Skills

Technical and Human skills

Conceptual and Human skills

Level

Middle & lower level function

Top level function

Administration
function.

Unit-I: OVERVIEW OF MANAGEMENT

is

decision-making

39

On the Basis of Usage


Basis

Management

Administration

Applicabil It is applicable to business It is applicable to non-business


ity
concerns i.e. profit-making concerns i.e. clubs, schools,
organization.
hospitals etc.
Influence

The management decisions are


influenced by the values,
opinions, beliefs & decisions
of the managers.

The administration is influenced


by public opinion, govt. policies,
religious organizations, customs
etc.

Status

Management constitutes the


employees of the organization
who are paid remuneration (in
the form of salaries & wages).

Administration
represents
owners of the enterprise who
earn return on their capital
invested & profits in the form of
dividend.

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Management principles are the statements of


fundamental truth based on logic which provides
guidelines for managerial decision making and
actions. These principles are derived: -On the basis of observation and analysis i.e.
practical experience of managers.
-By conducting experimental studies.

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Principle was derived on the


basis of observation and
analysis i.e. practical
experience of manager
Not only to business but also
to political, religious,
philanthropic, and military.

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Fayol's definition of management roles and actions


distinguishes between Five Elements:
1.
2.
3.
4.
5.

Prevoyance: (Forecast & Plan). Examining the future and


drawing up a plan of action. The elements of strategy.
To organize: Build up the structure, both material and human,
of the undertaking.
To command: Maintain the activity among the personnel.
To coordinate: Binding together, unifying and harmonizing all
activity and effort.
To control: Seeing that everything occurs in conformity with
established rule and expressed command.

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Henri Fayol (1841-1925)-French Management Theorist20th century.


Fayol -The father of modern operational management
theory.
Fayol -one of the most influential contributors to modern
concepts of management.
Proposed five primary functions of management-planning,
organizing, commanding, coordinating, and controlling.
Daft (2005) have reduced the five functions to four:
planning, organizing, leading, and controlling.
Fayol suggested that it is important to have unity of
command-one supervisor for one person.
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Specialization allows the individual to


build up experience, and to continuously
improve his skills. Thereby he can be more
productive.

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The right to issue commands, along with


which must go the balanced responsibility
for its function.

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Employees must obey, but this is twosided: employees will only obey orders if
management play their part by providing
good leadership.

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only one supervisor

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People engaged in the same kind of


activities must have the same objectives in
a single plan. This is essential to ensure
unity and coordination in the enterprise.
Unity of command does not exist without
unity of direction but does not necessarily
flows from it.

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Management must see that the goals of the


firms are always paramount.

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Payment is an important motivator although


by analyzing a number of possibilities, Fayol
points out that there is no such thing as a
perfect system

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This is a matter of degree depending on


the condition of the business and the
quality of its personnel.

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A hierarchy is necessary for unity of


direction. But lateral communication is also
fundamental, as long as superiors know that
such communication is taking place. Scalar
chain refers to the number of levels in the
hierarchy from the ultimate authority to the
lowest level in the organization. It should not
be over-stretched and consist of too-many
levels

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Both material order and social order are


necessary. The former minimizes lost time
and useless handling of materials. The latter
is achieved through organization and
selection.

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In running a business a combination of


kindliness and justice is needed. Treating
employees well is important to achieve
equity.

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Employees work better if job security and


career progress are assured to them. An
insecure tenure and a high rate of
employee turnover will affect the
organization adversely.

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Allowing all personnel to show their


initiative in some way is a source of
strength for the organization. Even though
it may well involve a sacrifice of personal
vanity on the part of many managers.

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Management must foster the morale of its


employees. He further suggests that: real
talent is needed to coordinate effort,
encourage keenness, use each persons
abilities, and reward each ones merit
without arousing possible jealousies and
disturbing harmonious relations.

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Fayol's definition of management roles and actions distinguishes


between Five Elements:

Prevoyance. (Forecast & Plan). Examining the future and drawing up


a plan of action. The elements of strategy.

To organize. Build up the structure, both material and human, of the


undertaking.

To command. Maintain the activity among the personnel.

To coordinate. Binding together, unifying and harmonizing all activity


and effort.

To control. Seeing that everything occurs in conformity with


established rule and expressed command.
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Change

and Organization.

Decision-making.
Skills

-Can be used to improve the basic effectiveness


of a manager.

Understand

that management can be seen as a variety


of activities, which can be listed and grouped.

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8 Key Result Areas Where Managers Must


Pursue Clear Objectives - Kotelnikov, 2008
Marketing
In order for a business to create a customer, there needs to be a
market.
Innovation
New ideas are required by a business in order to create a demand for
a product.
Human organization
Financial resources
Physical resources
According to Drucker, 2007 the above three Key Result Areas are
interlinked and all businesses depend on them. These are known as
the factors of production.
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Productivity
Resources must be used productively and the productivity must
grow in order for the business to survive.

Social responsibility
A business exists in a society therefore it has certain
obligations towards the community and is responsible for its
impact on the environment.

Profit requirements
Profit is essential for a business to succeed. It is one of the
main reasons behind the existence of a business and without it
there would be no way of covering the risk of potential losses,
financing future projects and most importantly none of the
other above areas would exist without profit.
Unit-I: OVERVIEW OF MANAGEMENT

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Contribution of Taylor
Fredrick Winslow Taylor ( March 20, 1856 - March 21, 1915) -

Father of Scientific Management.


Conducted various experiments during this process which forms the

basis of scientific management.


Implies application of scientific principles for studying & identifying

management problems.
Scientific Management is an art of knowing exactly what you want

your men to do and seeing that they do it in the best and cheapest
way.

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1. Development of Science for each part of mens job

Principles of Scientific Management

1) This principle suggests that work assigned to any

employee should be observed, analyzed with respect to


each and every element and part and time involved in it.
2) This is done by the use of method of enquiry,
investigation, data collection, analysis and framing of
rules.
3) Under scientific management, decisions are made on the
basis of facts and by the application of scientific
decisions.

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2. Scientific Selection, Training & Development of Workers

Principles
of Scientific
Management
1) There should
be scientifically
designed procedure for the
2)
3)
4)
5)

selection of workers.
Physical, mental & other requirement should be specified
for each and every job.
Workers should be selected & trained to make them fit for
the job.
The management has to provide opportunities for
development of workers having better capabilities.
According to Taylor, efforts should be made to develop
each employee to his greatest level, efficiency &
prosperity.
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3. Co-operation between Management & workers

Principles of Scientific Management


1) Taylor believed in co-operation and not individualism.
2) It is only through co-operation that the goals of the

enterprise can be achieved efficiently.


3) There should be no conflict between managers &
workers.
4) Taylor believed that interest of employer & employees
should be fully harmonized so as to secure mutually
understanding relations between them.

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Principles of Scientific Management


4. Division of Responsibility
1) This principle determines the concrete nature of roles to

be played by different level of managers & workers.


2) The management should assume the responsibility of
planning the work whereas workers should be concerned
with execution of task.
3) Thus planning is to be separated from execution.

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5. Mental Revolution
1) The workers and managers should have a complete change of
Principles
of Scientific Management
outlook towards their mutual relation and work effort.
2)
3)

4)
5)
6)
7)

It requires that management should create suitable working


condition and solve all problems scientifically.
Similarly workers should attend their jobs with utmost
attention, devotion and carefulness. They should not waste the
resources of enterprise.
Handsome remuneration should be provided to workers to
boost up their moral.
It will create a sense of belongingness among worker.
They will be disciplined, loyal and sincere in fulfilling the task
assigned to them.
There will be more production and economical growth at a
faster rate.
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6. Maximum Prosperity for Employer & Employees

Principles
ofofScientific
Management
1) The aim
scientific management
is to see maximum
2)
3)

4)
5)

prosperity for employer and employees.


It is important only when there is opportunity for each
worker to attain his highest efficiency.
Maximum output & optimum utilization of resources will
bring higher profits for the employer & better wages for
the workers.
There should be maximum output in place of restricted
output.
Both managers & workers should be paid handsomely.

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1. Time Study
It is a technique which enables the manager to ascertain standard

Techniques
Scientific
Management
time taken forof
performing
a specified
job.
Every job or every part of it is studied in detail.

This technique is based on the study of an average worker having

reasonable skill and ability.


Average worker is selected and assigned the job and then with the
help of a stop watch, time is ascertained for performing that
particular job.
Taylor maintained that Fair days work should be determined through
observations, experiment and analysis by keeping in view an average
worker.

Standard Time Working Hours = Fair Days


Work
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2. Motion Study
In this study, movement of body and limbs required
Techniques
of Scientific Management

to

perform a job are closely observed.


In other words, it refers to the study of movement of an
operator on machine involved in a particular task.
The purpose of motion study is to eliminate useless motions
and determine the best way of doing the job.
By undertaking motion study an attempt is made to know
whether some elements of a job can be eliminated combined
or their sequence can be changed to achieve necessary
rhythm.
Motion study increases the efficiency and productivity of
workers by cutting down all wasteful motions.
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Techniques
ofForemanship
Scientific Management
3. Functional
4.
5.

6.
7.
8.

Taylor advocated functional foremanship for achieving


ultimate specification.
This technique was developed to improve the quality of
work as single supervisor may not be an expert in all the
aspects of the work.
Therefore workers are to be supervised by specialist
foreman.
The scheme of functional foremanship is an extension of
principle of specialization at the supervisory level.
Taylor advocated appointment of 8 foramen, 4 at the
planning level & other 4 at implementation level.
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3. Functional Foremanship

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6.

The names & function of these specialist foremen are: -

Instruction
card clerk concerned
with tagging down of instructions
Techniques
of Scientific
Management
1)

2)

3)

4)

5)

6)

7)

8)

according to which workers are required to perform their job


Time & cost clerk is concerned with setting a time table for doing a
job & specifying the material and labor cost involved in it.
Route clerk determines the route through which raw materials has to
be passed.
Shop Disciplinarians are concerned with making rules and
regulations to ensure discipline in the organization.
Gang boss makes the arrangement of workers, machines, tools,
workers etc.
Speed boss concerned with maintaining the speed and to remove
delays in the production process.
Repair boss concerned with maintenance of machine, tools and
equipments.
Inspector is concerned with maintaining the quality of product.
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4.

Standardization
1) It implies that the physical attitude of products should be such that it
meets the requirements & needs of customers.
2) Taylor advocated that tools & equipments as well as working
conditions should be standardized to achieve standard output from
workers.
3) Standardization is a means of achieving economics of production.
4) It seems to ensure
a.
The line of product is restricted to predetermined type, form,
design, size, weight, quality. Etc
b.
There is manufacture of identical parts and components.
c.
Quality & standards have been maintained.
d.
Standard of performance are established for workers at all levels.

Techniques of Scientific Management

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Techniques of Scientific Management


5. Differential Piece Wage Plan
1)
2)
3)

4)
5)
6)

This tech of wage payment is based on efficiency of worker.


The efficient workers are paid more wages than inefficient one.
On the other hand, those workers who produce less than
standard no. of pieces are paid wages at lower rate than
prevailing rate i.e. worker is penalized for his inefficiency.
This system is a source of incentive to workers who improving
their efficiency in order to get more wages.
It also encourages inefficient workers to improve their
performance and achieve their standards.
It leads to mass production which minimizes cost and
maximizes profits.

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Techniques of Scientific Management


6. Other Techniques
1) Various other techniques have been developed to create

ordeal relationship between management and workers and


also to create better understanding on part of works.
2) Those includes use of instruction cards, strict rules &
regulations, graphs, slides, charts etc, so as to increase
efficiency of workers.

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Study of Fayol and Taylor


Both the persons have contributed to development of science

of management.
The work of Taylor & Fayol was, of course, especially
complementary.
They both realized that problem of personnel & its
management at all levels is the key to individual success.
Both applied scientific method to this problem that Taylor
worked primarily from operative level, from bottom to upward,
while Fayol concentrated on managing director and work
downwards, was merely a reflection of their very different
careers.
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80

Study of Fayol and Taylor


They both differ from each other in following aspects: Taylor looked at management from supervisory viewpoint & tried to

improve efficiency at operating level. He moved upwards while


formulating theory. On the other hand, Fayol analyzed management
from level of top management downward. Thus, Fayol could afford a
broader vision than Taylor.
Taylor called his philosophy Scientific Management while Fayol
described his approach as A general theory of administration.
Main aim of Taylor to improve labor productivity & to eliminate all
type of waste through standardization of work & tools. Fayol attempted
to develop a universal theory of management and stressed upon need for
teaching the theory of management.
Taylor focused his attention on fact by management and his principles
are applicable on shop floor. But Fayol concentrated on function of
managers and on general principles of management wheel that could be
equally applied in all.
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81

Study of Fayol and Taylor


Similarity - Both emphasized mutual co-operation between employment

and employees.
Spheres of Human Activity
Fayols theory is more widely applicable than that of Taylor, although
Taylors philosophy has undergone a big change under influence of modern
development, but Fayols principles of management have stood the test of
time and are still being accepted as the core of management theory.
Psychologists View Point
According to Psychologists, Taylor's study had following drawbacks: Ignores human factors - Considers them as machines. Ignores human
requirements, want and aspirations.
Separation of Planning and Doing.
Dissatisfaction - Comparing performance with others.
No best way - Scientific management does not give one best way for
solving problems.
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82

Study of Fayol and Taylor


Basis

Taylor

Fayol

Human aspect

disregards human
elements and there
is more stress on
improving
men,
materials
and
methods

Fayol
pays
due
regards on human
element.
E.g.
Principle
of
initiative,
Espirit
De
Corps
and
Equity recognizes a
need for human
relations

Status

Father of scientific Father


management
management
principles

Efficiency
administration

& Stressed
on Stressed
Unit-I: OVERVIEW
OF MANAGEMENT
efficiency
general

of

on
83

Study of Fayol and Taylor


Basis

Taylor

Fayol

Approach

It
has
microapproach because
it is restricted to
factory only

It
has
macroapproach
and
discuses
general
principles
of
management
which
are
applicable in every
field
of
management.

Scope of principles These


principles
are restricted to
production
activities

These
are
applicable in all
kinds
of
organization
regarding
their
management
affairs

Unit-I: OVERVIEW OF MANAGEMENT

84

FUNCTIONS OF MANAGEMENT
Planning
Look ahead and chart out future course of operation
Formulation of Objectives, Policies, Procedure, Rules,

Programmes and Budgets


Organising
Bringing people together and tying them together in the

pursuit of common objectives.


Enumeration of activities, classification of activities, fitting

individuals into functions, assignment of authority for


action.
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85

FUNCTIONS OF MANAGEMENT
Directing
Act of guiding, overseeing and leading people.
Motivation, leadership, decision making.

Controlling
Laying

standards, comparing actuals and correcting


deviation-achieve objectives according to plans.

Co-ordination
Synchronizing and unifying the actions of a group of

people.
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86

FUNCTIONS OF MANAGEMENT
Managers task to design an internal as

well
as
external
environment
performance with in an organization.

for

Understanding of & are responsive to the

many elements of external environment


economic, technological, social, political
and ethical factors.

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87

MANAGEMENT AS AN ESSENTIAL FOR


ANY ORGANIZATION
Responsibility of managers to make

individuals contribute the best to achieve


the group objective.
Applies to small & large organizations, to

profit and not-for-profit enterprises.


Enterprise Businesses, Government

agencies, hospitals, universities etc,.


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88

APPROACHES TO MANAGEMENT
Empirical or case approach
Managerial roles approach
Contingency or situational approach
Mathematical or management Science approach
Decision theory approach
Reengineering approach
Systems approach
Sociotechnical systems approach
Cooperative social systems approach
Group behaviour approach
Interpersonal behaviour approach
McKinseys 7-S framework
TQM approach
Management Process or operational approach
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89

EMPIRICAL OR CASE APPROACH


Characteristics/Contributions:
Studies experience through cases.
Identifies successes and failures.
Limitations:
Situations are all different.
No attempt to identify principles.
Limited value for developing management theory.

Unit-I: OVERVIEW OF MANAGEMENT

90

Empirical or case approach


Case
situation

Success

Failure

Why?

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91

MANAGERIAL ROLES APPROACH


Characteristics/Contributions:
Original study consisted of observations of 5 chief executives.
On the basis of this study, 10 managerial roles were identified3 interpersonal, 3 informational, 4 decision roles.
Limitations:
Original sample - small.
Some activities - not managerial.
Some managerial activities are left out. (appraising)

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93

Contingency or situational approach


Characteristics/Contributions:
Depends on circumstances.
Recognizes the influence of given solutions on
organizational behaviour patterns.
Limitations:
Managers realized - no one best way to do things.
Difficult to determine all relevant contingency
factors.
Complex.
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94

Cause

Effect

Situation

Depends
on

Contingency

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95

Mathematical or Management Science


Approach
Characteristics/Contributions:
Sees managing as mathematical processes, concepts, symbols
& models.
Looks at management- purely logical process, expressed in
mathematical symbols & relationships
Limitations:
Preoccupation with mathematical models.
Many aspects in managing can not be modeled.
Is a useful tool but hardly an approach to management.

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96

E = F(Xi1
Yi1)

YES

NO

Unit-I: OVERVIEW OF MANAGEMENT

97

Decision Theory Approach


Characteristics/Contributions:
Focuses on the making of decisions, persons or groups making
decisions and decision making process.
Some theorist use decision making to study all enterprise
activities.
Limitations:
There is more to managing than making decisions.
The focus is at the same time, too narrow and too wide.

Unit-I: OVERVIEW OF MANAGEMENT

98

Process of
decision making

Individual
decision making

Values of
decision making

Entire area of
business activity

DECISION
THEORY

Nature of
organization
structure

Group decision
making

Information for
decision
Unit-I: OVERVIEW OF MANAGEMENT

99

Reengineering Approach
Characteristics/Contributions:
Concerned with fundamental rethinking, process analysis,
redesign and dramatic results.
Limitations:
Neglects external environment.
Possibly it knows customers needs.
Neglects human needs.
Ignores total management systems.

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100

Systems Approach
Characteristics/Contributions:
Systems concept have broad applicability.
Systems have boundaries, but they also interact with the
external environment i.e, organizations are open systems.
Limitation:
Can hardly be considered a new approach to management.

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101

Socio-technical Systems Approach


Characteristics/Contributions:
Technical system has a great effect on social system (personal
attitudes, group behaviour)
Focuses on production, office operation & other areas with
close relationship between the technical systems & people.
Limitations:
Emphasizes only blue color and lower level officer.
Ignores much of other managerial knowledge.

Unit-I: OVERVIEW OF MANAGEMENT

102

Cooperative Social Systems Approach


Characteristics/Contributions:
Concerned with both interpersonal and group behavioral
aspects leading to a system of cooperation.
Expanded concept includes any cooperative group with the
clear purpose.
Limitations:
Too broad a field for the study of management
It overlooks many managerial concepts, principles &
techniques.

Unit-I: OVERVIEW OF MANAGEMENT

103

Types of Business Organizations


1. Sole Proprietorships
The vast majority of small business starts out as sole
proprietorships- very dangerous.
These firms are owned by one person, usually the
individual who has day-to-day responsibility for
running the business.
Sole proprietors own all the assets of the business and
the profits generated by it. They also assume
"complete personal" responsibility for all of its
liabilities or debts.
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104

Advantages of Sole Proprietorship


Easiest and least expensive form of ownership to organize.
Sole proprietors are in complete control, within the law, to

make all decisions.


Sole proprietors receive all income generated by the
business to keep or reinvest.
Profits from the business flow-through directly to the
owner's personal tax return.
The business is easy to dissolve, if desired.

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105

Disadvantages of Sole Proprietorship


Unlimited liability and are legally responsible for all debts

against the business.


Their business and personal assets are 100% at risk.
Has almost been ability to raise investment funds.
Are limited to using funds from personal savings or consumer
loans.
Have a hard time attracting high-caliber employees, or those
that are motivated by the opportunity to own a part of the
business.
Employee benefits such as owner's medical insurance
premiums are not directly deductible from business income
(partially deductible as an adjustment to income).
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106

Types of Business Organizations...


2. Partnerships
In a Partnership, two or more people share ownership of a

single business.
The Partners should have a legal agreement that sets forth
how decisions will be made, profits will be shared, disputes
will be resolved, how future partners will be admitted to the
partnership, how partners can be bought out, or what steps
will be taken to dissolve the partnership when needed.
They also must decide up front how much time and capital
each will contribute, etc.

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107

Advantages of a Partnership
Partnerships are relatively easy to establish; however

time should be invested in developing the partnership


agreement.
With more than one owner, the ability to raise funds
may be increased.
The profits from the business flow directly through to
the partners' personal taxes.
Prospective employees may be attracted to the
business if given the incentive to become a partner.
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108

Disadvantages of a Partnership
Partners are jointly and individually liable for the actions

of the other partners.


Profits must be shared with others.
Since decisions are shared, disagreements can occur.
Some employee benefits are not deductible from business
income on tax returns.
The partnerships have a limited life; it may end upon a
partner withdrawal or death.

Unit-I: OVERVIEW OF MANAGEMENT

109

Types of Business Organizations


A. Types of Partnerships that should be considered:
General Partnership

Partners divide responsibility for management and liability, as well


as the shares of profit or loss according to their internal agreement.
Equal shares are assumed unless there is a written agreement that
states differently.
Limited Partnership and Partnership with limited liability
"Limited" means that most of the partners have limited liability (to
the extent of their investment) as well as limited input regarding
management decisions, which generally encourages investors for
investing in capital assets. This form of ownership is not often used
for operating retail or service businesses. Forming a limited
partnership is more complex and formal than that of a general
partnership.
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110

Types of Business Organizations


Joint Venture
Acts like a general partnership, but is clearly for a limited
period of time or a single project. If the partners in a joint
venture repeat the activity, they will be recognized as an
ongoing partnership and will have to file as such, and distribute
accumulated partnership assets upon dissolution of the entity.

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111

Types of Business Organizations


3. Corporations

A corporation, chartered by the state in which it is


headquartered, is considered by law to be a unique
"entity", separate and apart from those who own it. A
corporation can be taxed; it can be sued; it can enter into
contractual agreements. The owners of a corporation are
its shareholders. The shareholders elect a board of
directors to oversee the major policies and decisions.
The corporation has a life of its own and does not
dissolve when ownership changes.
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112

Advantages of a Corporation
Shareholders have limited liability for the corporation's debts or

judgments against the corporations.


Generally, shareholders can only be held accountable for their
investment in stock of the company.
Corporations can raise additional funds through the sale of stock.
A corporation may deduct the cost of benefits it provides to officers
and employees.
Can elect S corporation status if certain requirements are met. This
election enables company to be taxed similar to a partnership.

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113

Disadvantages of a Corporation
The process of incorporation requires more time and money

than other forms of organization.


Corporations are monitored by federal, state and some local
agencies, and as a result may have more paperwork to comply
with regulations.
Incorporating may result in higher overall taxes. Dividends
paid to shareholders are not deductible from business income,
thus this income can be taxed twice.

Unit-I: OVERVIEW OF MANAGEMENT

114

Types of Business Organizations


A. Subchapter S Corporations
A tax election only; this election enables the shareholder to treat the

earnings and profits as distributions, and have them pass thru


directly to their personal tax return.
The catch here is that the shareholder, if working for the company,
and if there is a profit, must pay herself wages, and it must meet
standards of "reasonable compensation".
This can vary by geographical region as well as occupation, but the
basic rule is to pay yourself what you would have to pay someone
to do your job, as long as there is enough profit.

Unit-I: OVERVIEW OF MANAGEMENT

115

Types of Business Organizations


Limited Liability Company (LLC)
The LLC is a relatively new type of hybrid business structure that is now
permissible in most states. It is designed to provide the limited liability
features of a corporation and the tax efficiencies and operational flexibility
of a partnership.
The owners are members, and the duration of the LLC is usually
determined when the organization papers are filed. The time limit can be
continued if desired by a vote of the members at the time of expiration.
LLC's must not have more than two of the four characteristics that define
corporations:
Limited liability to the extent of assets;
continuity of life;
centralization of management;
free transferability of ownership interests.
Unit-I: OVERVIEW OF MANAGEMENT

116