KLS, Gogte Institute of Technology, Udyambag, Belgaum

DEPARTMENT OF MBA
Internal Assessment Test First Semester
Subject: Principles of Management Sub Code: 15MBA11
Maximum Marks: 25 Duration: 1Hour
Date: 19/10/2015 Time: 9.30 a.m. to 10.30 a.m.

Part A Answer any 5 out of 6 Questions 5 question x 1 mark = 5 marks

1. Define management.
2. Distinguish between management and administration.
3. What do you mean by scalar chain?
4. List the levels of management.
5. Who developed Bureaucracy theory of management?
6. What do you mean by contingency theory?

Part B Answer any 2 out of 3 Questions 2 question x 5 mark = 10 marks

7. Explain Henry Fayol’s principles of management.

8. Write a note on Hawthorne experiment and System theory.
9. Explain characteristics of Management.

Part C Answer any 1 out of 2 Questions 1 question x 10 mark = 10 marks

3M – Fostering an Innovative Spirit

Minnesota Mining and Manufacturing Company, popularly known as 3M, was founded in 1902 by five businessmen
at Lake Superior town of Two Harbours, Minnesota, USA. The company was initially in the business of mining
corundum1. Later the company shut down its corundum mine and started producing sandpaper. In 1911, the
company introduced its first breakthrough product, Three-M-ite2 cloth, which proved to be a successful and
profitable product. 3M’s organizational structure took a new shape in the 1920s when Carlton, Okie and Richard G.
Drew joined the company. According to many analysts, the trio set the tone for innovation at 3M, and this prevailed
for a long time. In a bid to foster innovation in the organization, 3M started recruiting people with diverse
backgrounds. It was during this period that the famous 15 percent rule came into force. According to this rule, the
company allowed the employees to spend 15 percent of their working hours on independent projects. As a result of
this initiative, the company introduced breakthrough products like waterproof sandpaper and Scotch masking tape.
Ever since, the company has introduced many innovative products into the market.
In 1951, the company expanded its overseas operations and during the 1960s, it established manufacturing plants in
Austria, Columbia, Denmark, Hong Kong, and Norway. Later during the 1970s and 1980s, 3M expanded its
businesses to medical products, pharmaceuticals, radiology, energy control, the office market, etc. During the 1990s,
3M came up with successful products like Post it Notes, metered asthma dose inhaler, etc. In 1999, the company
further segmented its businesses into Industrial, Transportation, Graphics and Safety, Health Care, Consumer and
Office, Electro and Communications and Specialty Material. By 2002, 3M’s product portfolio consisted of more
than 55,000 products and was sold in over 200 countries. 3M recruited people who were creative and had a broad
range of interests. The company believed that people with a broad range of interests were more willing to learn and
explore new ideas. The recruiters were provided with a brochure containing a set of guidelines. The company
codified six traits of ‘innovative people’ in the brochure. They were – creativity, broad interests, self-motivated,
resourceful, hard working and problem solvers. 3M recruited only those people who had these six traits. In addition,
the company also took measures to retain them in the organization. The company believed that an organization
needed to retain resourceful employees by encouraging their innovative skills. When the company extended
operations into various product divisions, it noticed a slowdown in innovation. Thus, the company realized that
innovation was decreasing as the divisions increased. So the company decided to spin off new businesses to ensure
steady innovation of products. As a result, there was increasing competition among various businesses of 3M. The
product divisions were compelled to come up with new products to sustain themselves. 3M also encouraged
employees to work on problems that challenged their intellect.
In the early 1980s, 3M formed a 16-member innovation task force to examine the innovative spirit in the
organization. The main objective of the task force was to encourage a spirit of innovation in technical as well as
non-technical employees at all levels. The company also hired a management consultant and conducted an
innovation audit. The audit concentrated on factors like freedom, support, and encouragement, which motivate
innovative people. The company initiated The Genesis program in 1984 and the Alpha Grants in 1986 respectively
to optimize the innovative spirit among employees. These programs granted financial support to employees to
encourage entrepreneurship for projects in the research stage. While the Genesis Program provided support to
technical people, the Alpha program catered to non-technical employees like those in administration, marketing, and
other non- technical areas. 3M’s organizational structure encouraged the employees to share knowledge, to
communicate across departments extensively, and to share ideas. The company also fostered the tradition of story
telling, as it believed that success stories would fire the imagination of the employees and result in generation of
innovative ideas. 3M also set up a Technical Forum in 1951 to encourage its technical staff to share ideas. The
company wanted to develop the habit of discussing and inquiring about new ideas and technologies. It also invited
Nobel Prize winners to forum meetings to discuss their research findings.
According to 3M, it was important to reward the employees appropriately in order to encourage the spirit of
innovation among them. Accordingly, the company came up with a ‘dual ladder career path’, which created two
career ladders namely, technical and management. This approach allowed even a technical person to be promoted to
the vice-president level without taking on managerial and administrative responsibilities. 3M provided the
employees with both monetary and non-monetary incentives. Non-monetary incentives included instituting awards
such as The Technical Circle of Excellence and Innovation, and Path Finder Programs, which honored employees’
contribution to the company. However, by the late 1990s, the company’s growth rate started slowing down and
analysts felt that 3M was unable to respond to market conditions. Following this, James McNerney (McNerney) of
General Electric was appointed CEO of 3M in December 2000. For the first time in the history of 3M, an outsider
was appointed as CEO. McNerney immediately took control and introduced cost cutting measures at 3M. He cut
down research projects from 1500 to 700. McNerney also announced that 6500 employees would be laid off.
However, he gave the assurance that the company would continue to invest 7% of annual sales in Research &
Development.
McNerney stressed on employees’ leadership qualities. To foster this, he set a leadership development institute that
offered a three-week development program. This program exposed employees to real life experiences. McNerney
also made changes in the company’s pay structure. Earlier, the company had a seniority-based pay structure i.e.
employees with more number of service years were paid more. But the new pay structure graded the employees
based on their performance. The same criterion was followed for promoting an employee. In addition, all employees
had to come up with individual development plans, outlining the steps they would take to improve their
performance. But analysts were skeptical and expressed the apprehension that such measures might dampen the
spirit of innovation at 3M.

Questions for Discussion:

1. Explain the planning and organizing concepts explained in the case.
2. Describe the leading and controlling functions explained in the case