Managements and Principles

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Management Principle & Business Ethics

Unit 1
Introduction to Management
Groups of people working in an organization to develop or appraise or attain the common
goal of the organization by utilizing the available resources are called Management. In simple
terms it means managing the work done by the people. Just as the mind coordinates and regulates
the various activities of the person, the management coordinates and regulates the activities of
various members of an organization.
Definition of Management
The definitions by some of leading management thinkers and practitioners are as follows:
(i) “Management is the art of getting things done through the people.” - Mary Park
Flott
(ii) “To manage is to forecast and to plan, to organize to command to coordinate and to
control.” - Henry Fayol
(iii) “Management is the art of knowing what you want to do and then seeing that it is
done in the best and the cheapest way.” – F.W.Taylor.
(iv) Management is the creation and maintenance of an internal environment in an
enterprise where individuals working in groups goals, efficiently and effectively
towards the attainment of group goals . It is a art of getting the work done through
and with people in formally organized groups – Koontz and O Donnel
(v) Management is a social and technical process which utilized resources influences
human action and facilitates changes in order to accomplish organizational goals --
Theo Haiman and William G Scott.
Nature of Management :
1. It is an Universal Activity: Management is relevant in every sphere of activity. it is
relevant in army , government , private household work etc. the work can be done in a
more systematic manner with the application of the techniques of management . the
material and human resources can be effectively handled and the foal can be attained with
maximum efficiently. Ex a student study at random ands systematic manner. Later is best
one.
2. It is goal oriented : Management focuses attention on the attainment of specific
objectives. For Ex a business may aim for a particular level of sales. This can be achieved
by proper forecast of sales by planning production by fixing the targets.
3. It is an Intellectual activity: The practice of management requires application of mind
and intelligence . every work needs to be properly planned and execute work has to be
assigned to different Individuals and responsible have to be fixed on them. Ex in an
manufacturing unit production finance and marketing are the important activities
Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

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performed . it has to work in proper co-ordination with the other departments. Then only
objectives of the firm can be achieved.
4. It is a process: It is process consisting of various stages/ functions . Planning is the
starting point of management and control is its last stage.
5. Management is both Art and Science: The practice of science needs knowledge of
theory and formulae. But the practice of art requires skill management is social science.
It focuses attention on the behavior of individuals and groups . the theoretical knowledge
may not help always that time they require skill ex if the workers in a factory demand
more pay and threaten to go on strike if their demand is not considered . here the skill of
the manager will help to avert the strike then its theoretical.
6. It is a Social Process: Management deals with the behavior of individuals and groups . In
a work place individuals work as a team. The behavior of an individual is bound to be
different while he is part of a group ex: an individual worker may be forced to join a
strike program because of the union.
7. It is an on going Activity : It is a continuous process planning , organizing etc have
unlimited use. Management will exist as long as there are human activities.
8. It is Intangible : It is invisible cannot be seen , but it can be felt.
Management is a Profession: Like medical, law and engineering, management has also
come to be recognized as a profession
Need for Management

As the organization grows it faces a lot of problems like shortage of raw material, labour
problem, and misunderstanding among various groups etc. So there is a need to have a central
body or point to a) coordinate the work and b) remove such hurdles both internally and
externally. This center point is called Management.
Usage of Management
Management is very vital
1) To achieve the common goal.
2) To develop overall activity.
3) To motivate the people.
4) To work efficiency.
5) To control the overall operation.
6) To take up overall planning.
7) To maintain mutual relationship among various levels of management.
8) To increase the profit or gain.
9) To reduce the complexity, difficulties and obstacles.

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Functions of Management (“POSD CORB”)

1) Planning: Planning means forecasting or predicting the future activity in a specific
manner or structure. It is the basic function and essential for all the organization.
2) Organizing: It is collection or joining of all the resources available within the
organizational and outside, in order to achieve the organizational goal with efficiency.
3) Staffing: It involves appointing the right man for the right job at the right time. The
management is to analyze the human resource, see if he is suitable for the job and
accordingly allocate the work in the organization.
4) Directing: It is showing the correct path or correct way to achieve the organizational goal
within the stipulated time.
5) Controlling: Controlling as a function involves regulating the person or examining the
person whether he is working in the right way or not. In order to achieve the common
goal as efficient as possible.
6) Coordinating: It is a type of support function. It involves accumulating the work to
achieve the task.
7) Budgeting: It means allocation of the resources. It involves financial planning for the
future activities.
8) Reporting: It is a statement showing the various activities to the top management. It
shows the status of the work done.
Levels of Management
The various levels of management are,
Levels of Management
As authority goes up the level of management, responsibility comes down. It means that
the higher officials are more authority, while major responsibility are given to middle and lower
level.

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A) Top Level Management: The top level management derives its powers and authority
directly from the owners of the enterprise. They are Board of Directors, Chairman,
Managing Directors, COO, CEO etc.
The functions:
1. They are setting out the fundamental objectives of the enterprises.
2. They frame major policies for the business.
3. They design the strategies for the attainment of organizational objectives.
4. They appoint key managerial personnel for the middle management.
5. Development master plans in areas of finance, human resource, technology,
marketing and other functions of organizational.
6. To represent the business outside, particularly in discussing business problems
with the Government trade association and so on.
B) Middle Level Management: They are departmental managers (Head of Department) like
Production managers, Marketing managers, Personnel managers, Finance manager,
Regional manager and other managers.
The functions:
1. They plan the role of a linking in between top level management and the lower
level management.
2. It explains the objectives, strategies, policies laid down by the top level
management to the low level management.
3. Communicates the problems, suggestions and view points of the lower
management to the top management.
4. It prepares the departmental plans.
5. It submits reports on the performance at various departments to the top
management.
6. It offers suggestions and recommendations to the top management for the
betterment of overall management of the enterprise.
C) Lower Level of Management: It is called as operating level management or supervisory

level. This is the level where actual operational work for the enterprise in the areas of
production, finance, marketing, personnel, etc is performed by workers. This level of
management consists of manager like supervisors, the foreman, the sales officers the
accountants the sectional officers etc.
The Functions:
1. It does day to day operational planning in view of the instructions given by the
middle level management.

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2. It provides necessary instructions to operators for the best performance of their

assigned jobs.
3. It supervisors the work of operators to ensure that their performance is in
accordance with the standards laid down in plans.
4. It submits reports on the performance of operating staffs to the middle
management.
5. It operates as a channel of communication between the middle management and
the operators.
6. The problems, suggestions and recommendations of operators are performed by it
to the middle management.
Administration vs Management
Meaning
Administration as a function is concerned with determination of corporate policies,
coordination of the various departments (production, finance, distribution etc.) of the
organization under the control of the executives.
Management is concerned with execution of the policy within the limits setup by
administration and employment of the organization for the particular objective before it. In other
words Management is the doing process and administration is the thinking process.
Administration Management
1) All the policies are made by the 1) Management has a main function of
Administration. implementing the decisions made by the
Administration.
2) They are the owners / proprietors of the 2) They are the managers of the company.
company.
3) Conceptual, human skills are necessary. 3) Technical and human skills are more
important here.
4) The main functions are planning and 4) The main functions are directing and
controlling. organizing.
5) Level of authority:
Administration mainly comprise of Top Management mainly carried on by Middle
level management. and lower level management.
6) Administration is thus more permanent 6) While management may change during
in nature. the course of running the organization.
7) Objective:
They are mainly interested in They actually work for remuneration, thus
 Profitability they direct their efforts towards the
 Sales volume attainment of goal.
8) They don’t take part in the day to day 8) Managers take part in the day to day

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activity of the organization. activity.

9) Administration is the thinking process. 9) While the management are the doing
process.
Who is a Good Managers?

Introduction
Managers is a person who has the ability or strength to coordinate, motivate and guide all
the personnel working under him so as to make sure they attain the organizational goal in the
most efficient manner possible.
Qualities of a Good manager
1) Good Education
2) Technical Knowledge
3) Personality
4) Communication skills
5) Honesty
6) Positive thinking
7) Control Management
8) Motivation
9) Guide
10) Leadership qualities
11) Coordinate
12) Decision making (planning, forecasting)
13) Innovative
14) Good analysis
15) Risk taking
Roles of a Manager:
Mintzberg has identified ten roles of a manager which are grouped into three categories.
1. Interpersonal Roles:
a) Figure head – Manager performs symbolic duties required by the status of his
office making speeches, bestowing honors, welcoming official visitors, distributing gifts to
retiring employees are examples of such ceremonial and social duties
b) Leader – The manager relationship with his own subordinates . the manager sets an
example legitimizes the power of subordinates and brings their needs in accord with those of
his organization.
c) Liaison : It describes a manager’s relationship with the outsiders ex. Govt, industry
groups.
2. Information Roles:
a) Monitor role :Seeks and collects information to obtain thorough understanding
of organization and environment E.g. Reading periodicals.

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b) Disseminator role: Transmits information received from outsiders or insiders to other

organization members Eg. forwarding mail.
c) Spokes person role :Transmits information to outsiders on organization plans,
Policies, actions Eg. board meetings , handling mail.
3. Decisional roles:
a) Entrepreneurial role : An initiate change adapting to the environment and
supervises Design of organization. Improvement projects as opportunities arise. Prepare
strategies
b) Disturbance handler role: Responsible for corrective action when organization
faces unexpected crisis.
c) Resources allocate role :Responsible for allocation of human monetary and materials
resources .Eg. scheduling , requests
d) Negioation
EVOLUTION OF MANAGEMENT THOUGHT
Management practice is as old as human civilization when people started living together in
groups. For, every human group requires management and the history of human beings is full of
organisational activities.
TAYLOR AND SCIENTIFIC MANAGEMENT

Taylor has defined scientific management as follows:
“Scientific management is concerned with knowing exactly what you want your men to do and
then see in that they do it in the best and cheapest way.”
On the basis of his experiments, he published many papers and books and all his contributions
were compiled in his book ‘Scientific Management’. Taylor’s contributions can be described in
two parts: Elements and tools of scientific management and principles of scientific management.
ELEMENTS AND TOOLS OF SCIENTIFIC MANAGEMENT
Taylor conducted various experiments at his work places to find out how human beings
could be made efficient by standardizing the work and better method of doing the work. These
experiments have provided the following features of scientific management.
1. SEPERATION OF PLANNING AND DOING: Worker was put under the supervision of a
supervisor commonly known as gang boss. Thus, supervisor’s job was merely to see how the
workers were performing. This was creating a lot of problems, and Taylor emphasized that
planning should be left to the supervisor and the worker should emphasize only operational
work.

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2. FUNCTIONAL FOREMANSHIP: Separation of planning from doing resulted into

development of supervision system which could take planning work adequately besides keeping
supervision on workers.
For this purpose, Taylor evolved the concept of functional foremanship based on specialization
of functions.
Workshop manager
Planning in charge Production incharge
Route Instructi Time discipli Speed inspect Mainten Gang

clerk on card and cost narian boss or ance boss
clerk clerk foreman
worker
3. JOB ANALYSIS: Job analysis is undertaken to find out the one best way of doing the thing.
The best way of doing a job is one which enquires the least movements, consequently less time
and cost.
(i) Time study involves the determination of time a movement takes to complete. The movement
which takes the minimum time is the best one. This helps in fixing the fair work for a period.
(ii) Motion study involves the study of movements in parts which are involved in doing a job
and thereby eliminating the wasteful movements and performing only necessary movements.
This reduces the time taken in performing a work and also the fatigue of workers.
(iii) Fatigue study shows the amount and frequency of rest required in completing the work.
After a certain period of time, workers feel fatigue and cannot work with full capacity.
Therefore, they require rest in between.
4. STANDARDISATION: As far as possible, standardization should be maintained in respect
of instruments and tools, period of work, amount of work, working conditions, cost of
production, etc. These things should be fixed in advance on the basis of job analysis and various
elements of costs that go in performing a work.
5. SCIENTIFIC SELECTION AND TRAINING OF WORKERS: A worker should be given
work for which he is physically and technically most suitable LIKE : education, work
experience, aptitude, physical strength, etc

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6. FINANCIAL IINCENTIVES: Financial incentives can motivate workers to put in their

maximum efforts. If provisions exist to earn higher wages by putting in extra effort, workers will
be motivated to earn more.
7. ECONOMY:. The economy and profit can be achieved by making the resources more
productive as well as by eliminating the wastages.
8. MENTAL REVOLUTION: Scientific management depends on the mutual co-operation
between management and workers. For this co-operation, there should be mental change in both
parties from conflict to co-operation
PRINCIPLES OF SCIENTIFIC MANAGEMENT
Taylor has given certain basic principles of scientific management. The fundamental
principles are :
1. REPLACING RULE OF THUMB WITH SCIENCE: Taylor has emphasized that in

scientific management, organized knowledge should be applied which will replace rule of thumb.
While the use of scientific method denotes precision in determining any aspect of work, rule of
thumb emphasizes estimation.
2. HARMONY IN GROUP ACTION: . Group harmony suggests that there should be mutual
give and take situation and proper understanding so that group as a whole contributes to the
maximum.
3. CO-OPERATION: Scientific management involves achieving co-operation rather than

chaotic individualism.
4. MAXIMUM OUTPUT: Scientific management involves continuous increase in production
and productivity instead of restricted production either by management or by worker.
5. DEVELOPMENT OF WORKERS: In scientific management, all workers should be
developed to the fullest extent possible for their own and for the company’s highest prosperity.
FAYOL’S ADMINISTRATIVE MANAGEMENT

Perhaps the real father of modern operational management theory is the French industrialist
Henry Fayol. His contributions are generally termed as operational management or
administrative management.
“To manage is to forecast and to plan, to organize, to coordinate and to control.”

He found that activities of an industrial organization could be divided into six groups:
1. Technical (relating to production);
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2. Commercial (buying, selling and exchange);

3. Financial (search for capital and its optimum use);
4. Security (protection of property and person);
5. Accounting (including statistics) and
6. Managerial (planning, organization, command, coordination, and control).
He has divided his approach of studying management into three parts: (i) managerial qualities
and training, (ii) general principles of management, and (iii) elements of management.
MANAGERIAL QUALITIES AND TRAINING

Fayol was the first person to identify the qualities required in a manager. According to him, there
are six types of qualities that a manager requires. These are as follows:
1. Physical (health, vigour, and address);
2. Mental (ability to understand and learn, judgement, mental vigour, and capability);
3. Moral (energy, firmness, initiative, loyality, tact, and dignity);
4. Educational (general acquaintance with matters not belonging exclusively to the function
performed);
5. Technical (peculiar to the function being performed); and
6. Experience (arising from the work).
GENERAL PRINCIPLES OF MANAGEMENT

Fayol has given fourteen principles of management. He has made distinction between
management principles and management elements.
1. DIVISION OF WORK : According to him,” specialization belongs to natural order. The

workers always work on the same part, the managers concerned always with the same matters,
acquire an ability, sureness, and accuracy which increase their output.
2. AUTHORITY AND RESPONSIBILITY: The authority and responsibility are related, with
the latter the corollary of the former and arising from it. Fayol finds authority as a continuation
of official and personal factors.
3. DISCIPLINE: Discipline is obedience, application, energy, behavior, and outward mark of

respect shown by employees.
4. UNITY OF COMMAND: Unity of command means that a person should get orders and
instructions from only one superior..

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5. UNITY OF DIRECTION: Unity of direction is different from unity of command in the sense
that the former is concerned with functioning of the organization in respect of its grouping of
activities or planning Unity of direction provides better coordination among various activities to
be undertaken by an organization.
6. SUBORDINATION OF INDIVIDUAL TO GENERAL INTEREST: Common interest is

above the individual interest. Individual interest must be subordinate to general interest when
there is conflict between the two.
7. REMUNERATION OF PERSONNEL: Remuneration of employees should be fair and

provide maximum possible satisfaction to employees and employers.
8. CENTRALISATION: In small firms, centralization is the natural order, but in large firms, a
series of intermediaries is required. Since both absolute and relative values of the managers and
employees are constantly changing, it is desirable that the degree of centralization or
decentralization may itself vary constantly.
9. SCALAR CHAIN: There should be a scalar chain of authority and of communication ranging
from the highest to the lowest. It suggests that each communication going up or coming down
must flow through each position in the line of authority . Fayol has suggested ‘gang plank’ which
is used to prevent the scalar chain from bogging down action.
10. ORDER: This is a principle relating to the arrangement of things and people. In material
order, there should be a place for everything and every thing should be in its place.
11. EQUITY: Equity is the combination of justice and kindness. Equity in treatment and
behavior is liked by everyone and it brings loyalty in the organization
12. STABILITY OF TENURE: No employee should be removed within short time. There
should be reasonable security of jobs.
13. INITIATIVE: Within the limits of authority and discipline, managers should encourage
their employees for taking initiative. Initiative is concerned with thinking out and execution of a
plan.
14. ESPIRIT DE CORPS: This is the principle of ‘union is strength’ and extension of unity of
command for establishing team work..
CONTRIBUTIONS OF TAYLOR AND FAYOL : A COMPARISON

Similarity:
1. Both have attempted to overcome managerial problems in systematic way.
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2. Both have developed some principles which can be applied in solving managerial
problems.
3. Both have emphasized that management actions can be effective if these are based on
sound principles.
4. Both of them have emphasized that managerial qualities are acquirable and can be
acquired through training. Therefore, organizations should make attempts to develop
these.
5. Both have emphasized harmonious relationships between management and workers for te
achievement of organizational objectives.
Dissimilarity:
There is more dissimilarity between the approaches of Taylor and Fayol as compared to
similarity. This is because of the fact that Taylor has concentrated on the shop floor efficiency
while Fayol has concentrated on higher managerial levels.
Basis of difference Taylor Fayol
1.Perspective Shop floor level Higher management level
2.Focus Efficiency through work Overall efficiency by

simplification and observing certain principles.
standarisation.
3.Orientation Production and engineering Managerial functions
4.Results Scientific observation and Personal experiences
measurement translated into universal truths.
Systematic theory of
5.Overall contributions Basis for accomplishment on management.
the production line
DEPARTMENTATION:

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Departmentation is the process of dividing and grouping the activites and employees f an
enterprise into the departments. The total work of an enterprise is divided into functions and sub-
functions. Later, these are grouped together to form different departments.
In manufacture concern, the total work may be divided into the following functions:
i. Purchase
ii. Production
iii. Marketing
iv. Personnel and
v. Finance
Each of these functions will be entrusted to different departments. For example, the
production department will look after production and related maters; the marketing department
will look after marketing and other related matters and soon.
The activities normally performed by the different departments in a businedd enterprise may
be stated as follows:
1. Purchase Department–
i. Purchase of raw materials.

ii. Maintenance of necessary records pertaining to materials.
iii. Stores control, etc.
2. Production Department –
i. Manufacture.
ii. Quality control.
iii. Plant maintenance, etc.
3. Marketing Department –
i. Departmention of sales targets.

ii. Appointment of dealers and distributors.
iii. Advertisement and sales promotion.
iv. Monitoring the performance of salesman, etc.
4. Personnel Department–
i. Recruitment and selection of employees.

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ii. Training
iii. Wage administration, etc.
5. Finance Department–
i. Provision of working capital and also

ii. Fixed capital for all other departments.
The concept of departmentation may be explained by means of a chart:
Concept of departmentation
BASIS OF DEPARTMENTATION
Dividing and grouping of activities and employees may be done by following any of the patterns
given below:
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1. Departmentation by functions
2. Departmentation by products
3. Departmentation by Territory
4. Departmentation by Customers
5. Departmentation by Numbers and Time
Departmentation by function:
The most popular basis of departmentation is the one, done according to the major
functions of an enterprise. As mentioned earlier, in a manufacturing concern, production,
marketing, finance and personnel are the major functions. In a trading concern, buying,
assembling and selling are the important functions. Separate departments will be established to
perform these functions. Each major function may be divided into sub-functions. Marketing, for
example, may be further divided into advertising, sales promotion, packing, market research,
monitoring sales personnel and so on.
Functional departmentation by a concern selling cars may be shown by means of a chart:

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Advantages of departmentations by functions:
The following are some of the merits of functional departmentation:
1. It is the most natural approach to divide the activities and employees of an enterprise.
2. It recognizes the importance of the basic activities of a concern.
3. It provides sample scope for specialization.
4. As there are separate departments to look after all key activities of an enterprise,
duplication of work is avoided.
5. It makes assessment of the performance of subordinate easier.
Drawbacks
The following are some of the limitation of functional departmentation:

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1. It increases the responsibilities of the departmentation heads.

2. It gives too much importance to specialization. Even within a department, each employee
may specialize only in a particular job.
3. Functional departmentation increases the need for inner-dependence among different
departments. This may, sometimes, result in conflicts between departments.
4. The autonomy enjoyed by each department may give the departmental head undue
authority. This may be used against the interests of the subordinates.
5. It may also be difficult to secure proper co-ordination between the different departments..
Departmentation by products
This approach is suitable for those concerns that market different lines of products. There
may be separate divisions to look after the production, finance, personnel and marketing needs of
each product line of the enterprise. For example, Godrej Ltd., is manufacturing different lines of
products-soaps, locks, refrigerators, furniture, etc. There separate divisions to look after each
product line of the company.
The idea of product departmentation by Godrej Ltd., may be presented by means of a

simple chart:

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Advantages of product departmentations:
The following are the merits of product departmentation:
1. Each division focuses attention on the production and marketing of a specific product
line.
2. It fixes responsibility on individual departments or divisions for the promotion of specific
product lines.
3. It helps to reduce the problem of co-ordination as each division looks after all activities
concerning a product.
4. It is also possible to evaluate the performance of each division am dthe contribution it
makes to the growth of the entire business enterprise.
5. Departmentation by product is the most suitable approach in the cash of an enterprise
undertaking diversification of activities.
Drawbacks
The following are the disadvantages of product departmentation:

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1. Each division must have all the necessary facilities in order to be self-sufficient. This
increases the cost of operations.
2. The top management may find it difficult to exercise control over the various divisions
and their activities.
3. There may also be duplication of certain activities.
Departmentation by Territory
This approach is suitable for such organization as bank, insurance companies, transport
companies etc., whose activities are spread over the different parts of the state or country. Under
territorial departmentation, division of activities is done region-wise or branch-wise.The idea of
territorial departmentation may be explained by means of chart:
Merits of territorial departmentation:
The merits of territorial departmentation may be stated as follows:
1. It enables the organization to cater to the needs of the customers in different places.
2. Obviously, this approach provides scope for geographical expansion of business.
3. It is possible for the business to gain intimate knowledge of the customers in each place.
Limitations
Territorial departmentation, however, suffers from the following limitations:
1. It makes it difficult for the head office to exercise effective control over the zonal or
branch offices.
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2. It becomes necessary to employ more managerial and subordinate staff to manage the
regional offices.
3. It is also important that the staff who are posted to the various regional offices are
familiar with the regional language, customs and habits of the people living there.
Departmentation by Customers
In the case of departmentation by customers, the division of activities is done based on

the needs of the customers. The depositors of a commercial bank are segregated on the basis of
the nature of their deposit account, i.e., fixed deposit account, recurring deposit account, savings
bank deposit account etc. this has been explained by means of a chart below:
Merits
The advantages of departmentation by customers are given below:
1. The business is able to fulfill the specific needs of the customers.

2. It offers scope for specialization as well.
3. It also makes it possible for the business to maintain good rapport with different classes
of customers.
Disadvantages

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Some of the drawbacks of departmentation by customer are as follows:
1. Certain departments may not be active at all due to lack of clients.

2. There is also a possibility of under-utilisation of men, machines and other resources in
certain departments due to a fall in demand.
3. There is also scope for duplication of activities.
Departmentation by number and time
In the case of departmentation by numbers, grouping of activities is done based on the

number of persons engaged for the purpose. In the army, for example, the fighting troops are
classified into battalions, brigades, etc., based on the number of person prescribed for each unit.
Departmentation by time is relevant in the case of those concern that work 24 hours a day
and as a result may require additional sifts to cope with the volume of work. There may be
separate departmentation to look after each shift.
CENTRALISATION:
MEANING:
Centralization refers to systematic and consistent retention or concentration of

authority for decision making at higher levels of management.
CONCEPT:
Centralization of authority is that philosophy of top management of an enterprise;

under which maximum authority for management of the enterprise is kept by top management
with itself; and minimum authority for management is pushed down the management hierarchy
i.e. is managers at middle and lower levels.
MERITS OF CENTRALISATION:
1. CONSISTENCY IN DECISION MAKING:

Centralization leads to consistency in decision-making; because decisions
are taken by a small group of managers at upper levels of management. Accordingly, there are
lesser problems of co-ordination.
2. STRONG TOP MANGEMENT:
Centralization of authority strengthens top management; and it is a position
to provide out-standing leadership to the whole enterprise by virtue of its vast authority.
3. LOWER COST OF ADMINISTRATION:
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In a centralized set up of the organisation, cost of administration is lesser;

because the enterprises can operate with a limited number of managers. This is a good advantage
pf centralization, in the present-day-times characterized by highly inflationary conditions.
4. BROAD APPROACH TO MANAGING:
In centralization, the top management has a broad outlook to managing; as it
takes decisions from the system’s perspective – viewing the functioning of the organization as a
whole.
5. DISCOURAGING INTER-DEPARTMENTAL CONFLICTS:
Centralization discourages inter-departmental conflicts; because major
decisions of departments are taken at upper levels of management with an orientation towards
departmental co-operation.
6. NATURE DECISION-MAKING:
In centralization, upper management, because of its experience, wisdom and
broad outlook, is more mature in decision-making. Such decisions carry the chance of being
least risky.
7. RETENTION BY TOP MANAGEMENT.
In centralization, top management retains tight control over the whole
organization, because of its vast powers.
8. OPTIMUN UTILISATION OF RESOURCES:
Under centralization, there is an optimum utilization of organisational
resources, because of rational allocation of scarce resources among different uses.
9. EFFICIENT HANDLING OF EMERGENCIES:
In centralization, there is an efficient handling of emergency by top
management; and it can overcome organisational crises in an intelligent and planned manner.
10. SUITABLE IN THE PRESENT-DAY ENVIRONMENTAL SCENARIO:
Centralization is highly suitable for tackling present-day environmental
scenario; which is highly volatile and turbulent. Under these circumstances, top management can
take sound decisions in consultation with specialists, from various fields.
DEMERITS:
1. HEAVY BURDEN ON TOP MANAGEMENT:

There is heavy burden of management work on top management; as it has to do
strategic planning, policy formulation and controlling over the whole organization.
2. ORGANISATIONAL GROWTH RETARDED:
Centralization retards the growth of organization. Strategies of diversification,
expansion programmes cannot be practical for organization; as top management, already over-
burdened with normal management work, can hardly find time to think in these directions.
3. LOWER STATUS OF LOWER LEVEL MANAGERS:

23 | P a g e
Centralization decreases the status of over level managers. As such, they have
less motivation to work, because of the non-fulfillment of their ego needs.
4. AUTOCRATIC MANAGEMENT:
Centralization may lead to autocratic management, in the organization. Top
management with unrestricted powers may not hesitate to impose its autocratic policies and
leadership styles on the whole organization i.e. it may misuse its powers.
5. INITIATIVE DISCOURAGED:
Centralization discourages the exercise of initiative on the part of lower level
managers. Their creativity and innovative skills have no scope, in the organization.
6. DELAYED DECISION MAKING:
In centralization, there is delayed decision making; because of top management is
burdened with many organisational issues and cannot pay timely attention to decision-making.
7. INFERIOR DECION MAKING:

There is inferior decision making by top management. This may seem
paradoxical; but it is true in the sense that top rank managers are much remote to the situational
factors, in the context of which decisions have to be made.
8. MANAGERIAL DEVELOPMENT RETARDED:
Centralization retards managerial training and developmental process. Under this
philosophy, lower rank managers have little chance of development; because their roles in
organizational life are routinised and they have nor or little freedom to exercise initiative and
take bold decisions, in an unrestricted manner.
9. MANAGEMENT BY EXCEPTION RETARDED:
Centralization retards the policy of management by exception; under which top
management must concentrate its attention only on strategic issues. However, under
centralization, this policy is not possible; as top management has to attend to all aspects of
managing, because of reservation of substantial decision making with itself.
10. EGOISTIC PLANNING:
As a matter of great men psychology, top management, sometimes, may indulge in
egoistic planning for ambitious purposes: without caring for the attainment of enterprise
objectives.
DECENTRALISATION
MEANING:

24 | P a g e
Decentralization means systematic dispersal of authority in all departments and at all

levels of management.
CONCEPT OF DECENTRALIZATION:
Decentralization of authority is that philosophy of management of an enterprise; under

which maximum authority of the management of the enterprise is dispersed (or distributed)
among managers of middle and specially, lower levels, and minimum authority is kept by the top
management, in reserve, to be exercised by it itself.
DEMERITS:
1. LACK OF CONSISTENCY IN DECISION MAKING:

There is a lack of consistency in decision-making; because a large number of
managers at lower levels may decide the same issue in diverse manners – despite operating
within the organizational policy framework. Accordingly, problems of co-ordination are
accentuated.
2. WEAK TOP MANAGEMENT:
Top management is rather weak; as most of its powers to given away among lower
levels of management. It is not in a position to provide outstanding leadership to the
organization; because of its reduced.
3. HIGHER COST OF ADMINISTRATION:
The cost of administration is higher; because to operate the decentralized units, a
large number of managers are necessitated.
4. NARROW APPROACH TO MANAGING:

The managers of decentralized units have, usually, a narrow outlook to managing.
For them, their own departmental interests are supreme-as against the overall interests of the
whole organization.
5. ENCOURAGING INTER-DEPARTMENTAL CONFLICTS:
Decentralization encourages inter departmental conflicts; because different
departmental managers take decisions in their own unique manners and style, by virtue of, their
vast powers and hell care for departmental co-ordination and co-operation.
6. RISKY DECISION-MAKING:
Lower level managers, because of its experience, wisdom and narrow are less mature
in decision making. Sometimes, under decentralization such risky decisions might be taken as
might endanger the very survival of the business enterprise.
7. LOSS OF CONTROL BY TOP MANAGEMENT:
Top management’s control over the organization is loosened; as its substantial powers
are passed on to the lower levels of management.
8. OPTIMUM UTILISATION OF RESOURCES:

25 | P a g e
There may be, at times, less than optimum utilization of resources; because the same
set of activities may be duplicated in various decentralized units-leading to wastage of precious
organizational resources.
9. INEFFICIENT HANDLING OF EMERGENCIES:

Lower level management may be frightened by emergencies and run the seek the
shelter and guidance of top management for handling emergency situations. Failure to
effectively deal with emergencies by lower level management, may tell upon the survival and
prosperity of the whole enterprise.
10. UNSUITABLE IN THE PRESENT-DAY ENVIRONMENT SCENARIO:
Present-day environment scenario makes decentralization impractical. For taking sound
decisions under these circumstances, top management cannot provide specialists to every Tom,
Dick and Harry managers at lower levels in the organizations; because of financial implications.
MERITS:
1. LIGHT BURDEN ON TOP MANAGEMET:

There is light burden on top management; as much of the management work is passed
on to lower levels of management.
2. ORGANISATIONAL GROWTH FACILITATED:

Decentralization facilitates organizational growth. Dynamic and talented managers at
lower levels coupled with power, can easily conceive of and implement growth strategies, of
course, in consultation with top management..
3. HIGHER STATUS OF LOWER LEVEL MANAGERS:

Decentralization adds to the status of lower level managers
4. DEMOCRATIC MANAGEMENT:
Decentralization leads to democratic features in organizational functioning. In fact,
under decentralization, management decision making power gets divided among a large number
of lower rank managers. This phenomenon puts restraints over the dictatorial use of powers by
the top management.
5. INITIATIVE ENCOURAGED:
Decentralization encourages the exercise of initiative on the part of lower level
managers. They can think out and execute their innovative plans, for the overall betterment of

26 | P a g e
organizational life. Their creativity and innovative skills have full scope in the organization.
That is why, many decentralized enterprises have progressed a lot, in some cases.
6. QUICK DECISION MAKING:
There is quick decision making. For one thing, lower level managers have comparatively
limited managerial work, as they have to attend to only their own departmental problems. And
for another, they need not seek approval of upper management for decision making on issues, for
which authority has been decentralized to them.
7. SUPERIOR DECISION MAKING:
Decision making is superior, in the sense that lower level managers are close to other
situational factors, in the context of which decisions have to be made. In fact, they practically
deal with situational factors and develop a better sense of their appreciation and tackling.
8. MANAGERIAL DEVELOPMENT FACILITATED:

Decentralization is a systematic way of training and developing managers for higher
management positions. This philosophy more or less does away with the problem of managerial
succession.
9. MANAGEMENT BY EXCEPTION FACILITATED:
Decentralization facilitates the policy of management by exception. By retaining authority
for strategic decision making with itself, top management can decentralize substantial authority
for operational management purposes to lower levels managers.
10. RATIONAL PLANNING:
Rational planning is done by lower level managers. They have comparatively little
ambition and ego and care more for attainment of their departmental objectives through
designing and implementing rational plants.
Span of Management :
It refers to the number of subordinates a manager can effectively manage. It is also known as
span of control
What if too many subordinates are placed under a manager?

Loss of control
Communication can be affected
Frustration can take place
Conflicts may arise very often between managers and subordinates.
What if the number of subordinates is too low?

The mangers potential cannot be fully utilized
The goal of the organization cannot be effectively accomplished

27 | P a g e
Factors influencing Span of Supervision

Ability of the manager
Capabilities of the subordinates
Nature of work
Facilities available
Extend of Delegation
Quality of plans
MBO (MANAGEMENT BY OBJECTIVE)
MEANING:
MBO is a management system in which each member of organization effectively

participates and involves himself. This system gives full scope and to the individual strength and
responsibility.
DEFINITION:
George S. Ordiorne
“The system of management by objectives can be described as a process whereby the
superior and subordinate managers of an organization jointly identify its common goals, define
each individual’s major areas of responsibility in terms of results expected of him, and use these
measures as guides for operating the unit and assessing the contribution of each of its members”.
Koontz and weihrich

“MBO is a comprehensive managerial system that integrates many key managerial
activities in a systematic manner and that is consciously directed toward the effective and
efficient achievement of organizational and individual objectives”.
FEATURES OF MBO:
1. IT IS NOT ONLY A TECHNIQUE BUT ALSO A PHILOSOPHY:

The philosophy of MBO and its concepts guides and influences every aspect of
management. MBO is an approach which includes of management.
28 | P a g e
2. SETTING OBJECTIVES:
The assumption of MBO is that employee participation and involvement in goal
setting which leads too better commitment and motivation towards the achievement of
organizational objectives. It lay emphasis on participate decision making.
3. PROVIDES EVALUATION AND MECHANISM:

MBO is a systematic approach to managing an organization where in all key
personnel are expected to contribute to achieve the overall goals. It attempts to blend and
balance the goals of all key personnel. It provides evaluation mechanism through which the
contribution of each individual is measured.
4. CREATES LINKAGE BETWEEN ORGANIZATIONAL GOALS AND INDIVIDUALS

GOALS:
MBO creates linkage between organizational goals and individuals goals. The
performance targets are derived from the overall objectives of the organization.
5. REWARDS ARE GOVERNED BY THE RESULTS ACHIEVED:

The performances of employees are periodically evaluated in the light of
predetermined targets. MBO emphasis on improving future performance. Rewards are governed
by the results achieved.
6. CONTINUOUS PROCESS:
MBO is a continuous process or a never ending process. The continuous nature of
MBO process not only ensures sustained concentration of efforts towards organizational goals, it
also helps in modifying the goals to suit the changing conditions.
SIGNIFICANCE AND ADVANTAGES OF MBO:
1. TARGETED PLANNING:
MBO results in verifiable goals which can easily be translated into action plans. The
objective setting process of MBO leads to an integrated hierarchy of objectives throughout the
organization.
2. PARTICIPATION AND COLLABORATION:

Under MBO objectives of each department are consistent with the overall objectives
of the organization. Managers at all levels understand fully their role in total organization. There
is active participation and collaboration among the various levels of the organization.
3. MOTIVATION:

29 | P a g e
Managers at all levels are involved in goal setting. As a result they are more
committed to the goals of the organization. Rewards are linked with performance. Employees
are allowed considerable discretion in setting individual targets which provides them
psychological satisfaction.
4. EFFICIENT COMMUNICATION:
There is frequent interaction between superiors and subordinate which leads to mutual
faith and understanding among them. It improves the work climate in the organization and leads
to better communication.
5. TRAINING AND DEVELOPMENT:
MBO provides opportunity to subordinate executives to participate in decision making
process. This helps in developing their conceptual and human skills. MBO enables an
organization to fully utilize the ability of its members. MBO helps in identifying the areas in
which employees need further training.
6. PERFORMANCE APPRAISAL:
MBO provides objective yardsticks for systematic evaluation of performance. The
performance of subordinates in monitored more effectively due to periodic review of progress.
The greatest advantage of MBO is perhaps that it makes it possible for a manager to control his
own performance.
LIMITATIONS OF MBO
1. DIFFICULTY IN TEACHING MBO PHILOSOPHY:

When managers are clear about this concept only then they can explain to subordinates how it
works, why it is being done, what will be the expected results, how it will benefit participants,
etc. this philosophy is based on self direction and self control and aims to make managers
professionals.
2. FAILURE TO PROVIDE GUIDELINES TO GOAL SETTERS:
The managers who will guide in goal setting should themselves understand the major policies of
the company and the role to be played by their activity. Failure to understand these vital aspects
will prove fatal for this system.
3. DIFFCULTY IN SETTING GOALS:
The main emphasis in MBO technique is on setting objectives. The setting of
objectives is not a simple thing. It requires lot of information for arriving at the conclusions.
4. EMPHASIS ON SHORT TERM OBJECTIVES:
. There may be possibility that short term and long term objectives may be
incompatible because of specific problems. So proper emphasis should be given to both short
term and long term objectives.
5. DANGER OF INFLEXIBILTY:
It will also be foolish to strive for goals which have become due to revised corporate objectives.
30 | P a g e
MBE (MANAGEMENT BY EXCEPTION)
MEANING:
Management by exception is a system of identification and communication that signals to the manager when
his attention is needed and implies the use of management by exception particularly in controlling aspect. Thus it can
be stated that MBE is a controlling technique.
ADVANTAGES:
 Executives are left with more time to tackle bigger and tougher issues, as the details of small
problems are left to the subordinates.
 There is better utilization of management talent across the organization as even the subordinates
get to implement their own decisions and solve problems in their own way, however small they
may be.
 It increases the span of management and delegation of authority is improved.
 It provides greater opportunities and thus increases confidence and motivation.
 It uses the latest knowledge on trends, history and business data.
 It forces every manager to be thorough and precise and also up-to-date with all relevant
information.
 It helps to identify problems before they become big.
 It also prevents last minute run and panic.
 Qualitative and quantitative yardsticks can be established judging the situation and people.
 It increases chances of better performance appraisal and hence improves motivation.
 Communication is improved between different segments of an organization.
 This focus on results causes it identify any problem in any part of the organization.
 Better organizational cohesiveness and achievement of objectives.
LIMITATIONS:
 Newly established organizations and organizational with a dynamic environment cannot

adopt the techniques easily.
 Establishing standards i.e., both qualitative and quantitative takes a lot of time and involves
lot of effort and precision (accuracy).
 Proper and knowledgeable subordinates need to be found, which is a difficult process.
 Subordinates act out of over-confidence and think they can handle bigger problems too. Thus
often tougher problems go unreported and by the time it comes to the superior. It is too late
and hence very difficult to set things.
PROCESS OF MBE

31 | P a g e
 Measurement
 Projection
 Selection
 Observation
 Comparison
 Decision making
Measurement:
By assigning values to past and present performances, exceptional areas can be identified.
Projection:
All the values that are meaningful too the organizational objectives are to be extended to see future
requirements.
Selection:
This involves the criteria and method which management will use to follow the progress path towards
organizational objectives.
Observation:
Current performances are observed and measured so that managers are aware of the current state of
affairs in the organization.
Comparison:
It involves the evaluation of the actual performance against planned performance, identifying the
exceptions that require attention and reporting the variations to the management.
Decision making:
This involves prescribing the action that must be taken in order to bring performance back into control or
to adjust expectations to reflect changing conditions within and outside the organization or to exploit
opportunity.
ORGANISATION
MEANING

32 | P a g e
The word organization has come from the word organism which means a structure of
interrelated and interdependent parts.
The part or components of organization consist of men, machines, materials, methods,
money, functions, authority and responsibility.
The task of organization is to unite or integrate these components effectivelt for the
purpose of attaining the common goal.
DEFINITIONS
According to Allen, “Organization is the process of identifying and grouping the work to
be performed, defining and delegating responsibility and authority, and establishing relationships
for the purpose of enabling people to work most effectively together in accomplishing
objectives.”
According to Wheeler, “Organization is the structural framework of duties and

responsibilities required of personnel in performing various futions within the company”.
According to Haney, “Organization is a harmonious adjustment of specialized parts for

the accomplishment of some common purpose or purposes”.
PRINCIPLES OF ORGANISATION:
A sound organization structure should adhere to the following principles:
Objective- The various activities performed in an organization should help to attain the goal of
the enterprise. The goal of each individual and department must synchronise with that of the
concern.
Division of work-The total work of the enterprise should be divided into identifiable functions
like productions, purchases, marketing, finance, etc., for better performance and control. This
leads to specialization.

33 | P a g e
Authority and responsibility:-authority is the official right of a manager. Responsibility is the

duty of a subordinate, to whom some work has been assigned, to report to the superior on the
work done.
Delegation-It means transfer of authority by a superior to his subordinate. A subordinate to

whom some work has been given must also be given the necessary authority to carry out the task.
Delegation results in a vertical flow of authority from the top level to the organization structure.
Balance- Authority and responsibility must always be equal. If responsibility exceeds authority,
the subordinate will not be able to perform the task. On the other hand, if authority exceeds
responsibility, there will be misuse of authority.
Responsibility is absolute- responsibility is never delegated. For the performance of his

subordinates, a superior is accountable to his own superior.
Unity of command-It means that subordinate should get orders from one superior only and is
accountable o him alone. Dual subordination results in confusion and leads to indiscipline.
Distinction between line and staff functions-Line functions are concerned with the
performance of the basic activities of the business. Production and sales are the line functions of
a manufacturer. Staff functions are of a supportive nature. Purchases, Personnel, etc., are staff
functions. The staff managers can only advise on certain matters. They cannot take the final
decision.
Simplicity-The organization structure must not be a complicated one. It should have only few
levels of authority so that there is free flow of communication between persons.
Flexibility-The organization structure should not be rigid. It should be capable of being adjusted
according to the required change in future.

34 | P a g e
ORGANISATION STRUCTURE:
An organization structure explains the position and official relationships between the
various individuals working in an organization. It helps to understand an organization better. It
provides answer to the following questions:
 Who is the top-most official in an organization?
 Who are the department heads? What are their functions?
 Who are the subordinate staff in each department? Etc.
ORGANIZATION CHART:
Diagrammatic presentation of the organization structure is what is known as an
'organization chart'. It may show the names, designations and functions of the personnel in an
organization. A specimen of an organization chart is given below:

35 | P a g e
General Manager
Production manager Marketing manager
Foreman 1 Foreman 2 Asst.marketin Asst.marketing

g manager1 manager2
Worker1 Worker2 Worker1 Worker2
Salesman1 Salesman2 Salesman1 Salesman2
Merits of an organization chart:
The merits of an organization chart may be stated as follows:
1. It shows the official positions of each individual in an organization.

2. From the organization chart, it is possible to make out who the superiors and subordinates
are.
3. It gives identity to the personnel in an establishment.

36 | P a g e
4. It helps an outsider to understand the different designations in an organization.
Drawbacks of an organization chart:
The limitations or drawbacks of an organization chart are given below:
1. An organization chart can only show the formal or official relationships in an

organization. It cannot depict the informal or personal relationships between the
individuals.
2. It may, sometimes, promote ill-feelings among the personnel in an organization. An
individual, who has been indicated in the chart as a subordinate, may not be able to take it
in the true spirit.
3. Often, the organization chart is not updated in accordance with the changes in position
taking place in the organization from time to time.

37 | P a g e

Managements and Principles

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Management Principle & Business Ethics

Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

Need for Management

Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

Functions of Management (“POSD CORB”)

Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

C) Lower Level of Management: It is called as operating level management or supervisory

Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

2. It provides necessary instructions to operators for the best performance of their

Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

activity of the organization. activity.

Who is a Good Managers?

Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

b) Disseminator role: Transmits information received from outsiders or insiders to other

TAYLOR AND SCIENTIFIC MANAGEMENT

ELEMENTS AND TOOLS OF SCIENTIFIC MANAGEMENT

Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

2. FUNCTIONAL FOREMANSHIP: Separation of planning from doing resulted into

Planning in charge Production incharge

Route Instructi Time discipli Speed inspect Mainten Gang

Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

6. FINANCIAL IINCENTIVES: Financial incentives can motivate workers to put in their

PRINCIPLES OF SCIENTIFIC MANAGEMENT

1. REPLACING RULE OF THUMB WITH SCIENCE: Taylor has emphasized that in

3. CO-OPERATION: Scientific management involves achieving co-operation rather than

FAYOL’S ADMINISTRATIVE MANAGEMENT

“To manage is to forecast and to plan, to organize, to coordinate and to control.”

2. Commercial (buying, selling and exchange);

MANAGERIAL QUALITIES AND TRAINING

GENERAL PRINCIPLES OF MANAGEMENT

1. DIVISION OF WORK : According to him,” specialization belongs to natural order. The

3. DISCIPLINE: Discipline is obedience, application, energy, behavior, and outward mark of

Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

6. SUBORDINATION OF INDIVIDUAL TO GENERAL INTEREST: Common interest is

7. REMUNERATION OF PERSONNEL: Remuneration of employees should be fair and

CONTRIBUTIONS OF TAYLOR AND FAYOL : A COMPARISON

1.Perspective Shop floor level Higher management level

2.Focus Efficiency through work Overall efficiency by

3.Orientation Production and engineering Managerial functions

4.Results Scientific observation and Personal experiences

measurement translated into universal truths.

Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

i. Purchase of raw materials.

i. Departmention of sales targets.

i. Recruitment and selection of employees.

i. Provision of working capital and also

The concept of departmentation may be explained by means of a chart:

Functional departmentation by a concern selling cars may be shown by means of a chart:

Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

Advantages of departmentations by functions:

The following are some of the merits of functional departmentation:

The following are some of the limitation of functional departmentation:

Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

1. It increases the responsibilities of the departmentation heads.

The idea of product departmentation by Godrej Ltd., may be presented by means of a

Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

Advantages of product departmentations:

The following are the merits of product departmentation:

Daniel Rathinaraj.S/Management Principle & Business Ethics/Sathyabama University

Merits of territorial departmentation:

The merits of territorial departmentation may be stated as follows: