Business management & Economics FBM-355

Unit (1-5)

Definitions, management principles, scientific principles, administrative principles;

Maslow’s Hierarchy of needs theory; Functions of management: Planning, organizing,
staffing, directing, controlling;

1) What is Management?
Management is essential for organized life and necessary to run all types of
management. Good management is the backbone of successful organizations. Managing life
means getting things done to achieve life‘s objectives and managing an organization means
getting things done with and through other people to achieve its objectives.
Management is a set of principles relating to the functions of planning,
organizing, directing and controlling, and the application of these principles in harnessing
physical, financial, human and informational resources efficiently and effectively to achieve
organizational goals

2) Definition of Management
Many management thinkers have defined management in their own ways.
1. For example, Van Fleet and Peterson define management, as a set of activities directed at
the efficient and effective utilization of resources in the pursuit of one or more goals.‘
2. Megginson, Mosley and Pietri define management as ‗working with human, financial and
physical resources to achieve organizational objectives by performing the planning,
organizing, leading and controlling functions‗.
3. Kreitner‘s definition of management:‗Management is a problem solving process of
effectively achieving organizational objectives through the efficient use of scarce
resources in a changing environment.‘
4. According to F.W. Taylor, ‗Management is an art of knowing what to do, when to do and
see that it is done in the best and cheapest way‗.
5. According to Harold Koontz, ‗Management is an art of getting things done through and
with the people in formally organized groups. It is an art of creating an environment in
which people can perform and individuals and can co-operate towards attainment of
group goals.‗

3) Management Principles

 14 Principles of Management of Henri Fayol

14 principles of Management are statements that are based on a fundamental

truth. These principles of management serve as a guideline for decision-making and
management actions. They are drawn up by means of observations and analyses of events
that managers encounter in practice. Henri Fayol was able to synthesize 14 principles of
management after years of study.
 FOOD AND BUSINESS MANAGEMENT

1. Division of Work
In practice, employees are specialized in different areas and they have different skills.
Different levels of expertise can be distinguished within the knowledge areas (from generalist
to specialist). Personal and professional developments support this. According to Henri Fayol
specialization promotes efficiency of the workforce and increases productivity. In addition,
the specialization of the workforce increases their accuracy and speed. This management
principle of the 14 principles of management is applicable to both technical and managerial
activities.

2. Authority and Responsibility

In order to get things done in an organization, management has the authority to give
orders to the employees. Of course with this authority comes responsibility. According to
Henri Fayol, the accompanying power or authority gives the management the right to give
orders to the subordinates. The responsibility can be traced back from performance and it is
therefore necessary to make agreements about this. In other words, authority and
responsibility go together and they are two sides of the same coin.

3. Discipline
This third principle of the 14 principles of management is about obedience. It is often
a part of the core values of a mission and vision in the form of good conduct and respectful
interactions. This management principle is essential and is seen as the oil to make the engine
of an organization run smoothly.

4. Unity of Command
The management principle ‗Unity of command‘ means that an individual employee
should receive orders from one manager and that the employee is answerable to that manager.
If tasks and related responsibilities are given to the employee by more than one manager, this
may lead to confusion which may lead to possible conflicts for employees. By using this
principle, the responsibility for mistakes can be established more easily.

5. Unity of Direction
This management principle of the 14 principles of management is all about focus and
unity. All employees deliver the same activities that can be linked to the same objectives. All
activities must be carried out by one group that forms a team. These activities must be
described in a plan of action. The manager is ultimately responsible for this plan and he
monitors the progress of the defined and planned activities. Focus areas are the efforts made
by the employees and coordination.
6. Subordination of Individual Interest
There are always all kinds of interests in an organization. In order to have an
organization function well, Henri Fayol indicated that personal interests are subordinate to
the interests of the organization (ethics). The primary focus is on the organizational
objectives and not on those of the individual. This applies to all levels of the entire
organization, including the managers.

7. Remuneration
Motivation and productivity are close to one another as far as the smooth running of
an organization is concerned. This management principle of the 14 principles of management
argues that the remuneration should be sufficient to keep employees motivated and
productive. There are two types of remuneration namely non-monetary (a compliment, more
responsibilities, credits) and monetary (compensation, bonus or other financial compensation).
Ultimately, it is about rewarding the efforts that have been made.

8. The Degree of Centralization

Management and authority for decision-making process must be properly balanced in
an organization. This depends on the volume and size of an organization including its
hierarchy.
Centralization implies the concentration of decision making authority at the top management
(executive board). Sharing of authorities for the decision-making process with lower levels
(middle and lower management), is referred to as decentralization by Henri Fayol. Henri
Fayol indicated that an organization should strive for a good balance in this.

9. Scalar Chain
Hierarchy presents itself in any given organization. This varies from senior
management (executive board) to the lowest levels in the organization. Henri Fayol ‘s
―hierarchy‖ management principle states that there should be a clear line in the area
of authority (from top to bottom and all managers at all levels). This can be seen as a type of
management structure. Each employee can contact a manager or a superior in an emergency
situation without challenging the hierarchy. Especially, when it concerns reports about
calamities to the immediate managers/superiors.

10. Order
According to this principle of the 14 principles of management, employees in an
organization must have the right resources at their disposal so that they can function properly
in an organization. In addition to social order (responsibility of the managers) the work
environment must be safe, clean and tidy.

11. Equity
The management principle of equity often occurs in the core values of an organization.
According to Henri Fayol, employees must be treated kindly and equally. Employees must be
in the right place in the organization to do things right. Managers should supervise and
monitor this process and they should treat employees fairly and impartially.

12. Stability of Tenure of Personnel

This management principle of the 14 principles of management represents deployment and
managing of personnel and this should be in balance with the service that is provided from
the organization. Management strives to minimize employee turnover and to have the right
staff in the right place. Focus areas such as frequent change of position and sufficient
development must be managed well.

13. Initiative
Henri Fayol argued that with this management principle employees should be allowed to
express new ideas. This encourages interest and involvement and creates added value for the
company. Employee initiatives are a source of strength for the organization according to
Henri Fayol. This encourages the employees to be involved and interested.

14. Esprit de Corps

The management principle ‗esprit de corps‘ of the 14 principles of management stands for
striving for the involvement and unity of the employees. Managers are responsible for the
development of morale in the workplace; individually and in the area of communication.
Esprit de corps contributes to the development of the culture and creates an atmosphere of
mutual trust and understanding.

 In conclusion on the 14 Principles of management

The 14 principles of management can be used to manage organizations and are useful tools
for forecasting, planning, process management, organization management, decision-making,
coordination and control.
Although they are obvious, many of these matters are still used based on common sense
in current management practices in organizations. It remains a practical list with focus areas
that are based on Henri Fayol ‘s research which still applies today due to a number of logical
principles.

 Taylor’s Five Principles of Scientific Management

1. Science, Not Rule of Thumb
Taylor strongly believed that one has to ascertain management with scientific
precision rather than sticking to the decision making of the management. He incorporated this
is his principles of scientific management.

For instance, in activities such as loading of raw material into the carts can also be arranged
to be done in an organized scientific way rather than relying on the judgment of the manager.
There should be a proper cause and effect relationship on which decisions should be made.
The principle says that decisions must rest on scientific analysis rather than trial and error.
The best way of doing a job must be selected and adopted.

2. Harmony, Not Discord

Taylor propagated the need for harmony among the employees. In case there are any
conflicts between the management and the employees, the organization will not be able to run
smoothly. There ought to be a realization of mutual importance between the management and
employees.
To achieve this, Taylor suggests that there should be a complete metamorphosis in the
outlook and thought process of both the sides. This will ensure harmony prevails among all
levels of management in the organization.

3. Mental Revolution
There needs to be a change in the attitude of the management and employees. The
concept of mental revolution expresses that the outlook of the management and employees
should change in respect of one another. They should both work with the collective aim of
raising the profits of the organization. And for this, both should work in unison.

4. Cooperation, Not Individualism

This is an extension of the harmony principle. While the former emphasizes the need
for harmony between the two, this principle takes it further and talks mutual cooperation. As
a part of an organization, it is imperative that the two sides find a ground for cooperation.
A sense of individualism in terms of an organization can lead to diversion from the unified
goals, ultimately affecting the growth of the entire organization. We must make attempts to
remove any competition to create cooperation. This cooperation must percolate to the lowest
levels. A categorical division of labour can help in enhancing cooperation and reducing
competition.

5. Development of Every Person to his Greatest Efficiency

When you develop and train your employees, you are creating a better workforce to
take your organization to better heights. To ensure that you are training the right minds, steps
should be taken right from the moment of selection, recruiting people based on a scientific
selection.

Links -1) Principle Of management and its topics

3) Administrative Management Theory

4)
4) Maslow’s Hierarchy of Needs Theory

Abraham Maslow is well renowned for proposing the Hierarchy of Needs Theory in 1943.
This theory is a classical depiction of human motivation. This theory is based on the
assumption that there is a hierarchy of five needs within each individual. The urgency of
these needs varies. These five needs are as follows-

1. Physiological needs- These are the basic needs of air, water, food, clothing and shelter. In
other words, physiological needs are the needs for basic amenities of life.
2. Safety needs- Safety needs include physical, environmental and emotional safety and
protection. For instance- Job security, financial security, protection from animals, family
security, health security, etc.
3. Social needs- Social needs include the need for love, affection, care, belongingness, and
friendship.
4. Esteem needs- Esteem needs are of two types: internal esteem needs (self- respect,
confidence, competence, achievement and freedom) and external esteem needs
(recognition, power, status, attention and admiration).
5. Self-actualization need- This include the urge to become what you are capable of
becoming / what you have the potential to become. It includes the need for growth and
self-contentment. It also includes desire for gaining more knowledge, social- service,
creativity and being aesthetic. The self- actualization needs are never fully satiable. As an
individual grows psychologically, opportunities keep cropping up to continue growing
According to Maslow, individuals are motivated by unsatisfied needs. As each of these needs
is significantly satisfied, it drives and forces the next need to emerge. Maslow grouped the
five needs into two categories - Higher-order needs and Lower-order needs. The
physiological and the safety needs constituted the lower-order needs. These lower-order
needs are mainly satisfied externally. The social, esteem, and self-actualization needs
constituted the higher-order needs. These higher-order needs are generally satisfied internally,
i.e., within an individual. Thus, we can conclude that during boom period, the employees
lower-order needs are significantly met.
  Implications of Maslow’s Hierarchy of Needs Theory for Managers
1. As far as the physiological needs are concerned, the managers should give employees
appropriate salaries to purchase the basic necessities of life. Breaks and eating
opportunities should be given to employees.
2. As far as the safety needs are concerned, the managers should provide the employees
job security, safe and hygienic work environment, and retirement benefits so as to retain
them.
3. As far as social needs are concerned, the management should encourage teamwork
and organize social events.
4. As far as esteem needs are concerned, the managers can appreciate and reward
employees on accomplishing and exceeding their targets. The management can give the
deserved employee higher job rank / position in the organization.
5. As far as self-actualization needs are concerned, the managers can give the employees
challenging jobs in which the employees‘ skills and competencies are fully utilized.
Moreover, growth opportunities can be given to them so that they can reach the peak.
The managers must identify the need level at which the employee is existing and then those
needs can be utilized as push for motivation.

 Limitations of Maslow’s Theory

1. It is essential to note that not all employees are governed by same set of needs. Different
individuals may be driven by different needs at same point of time. It is always the most
powerful unsatisfied need that motivates an individual.
2. The theory is not empirically supported.
3. The theory is not applicable in case of starving artist as even if the artist‘s basic needs are
not satisfied, he will still strive for recognition and achievement.

5) Functions of Management
Management in some form or another is an integral part of living and is essential
wherever human efforts are to be undertaken to achieve desired objectives. The basic
ingredients of management are always at play, whether we manage our lives or business.
Management is a set of principles relating to the functions of planning, organizing, directing,
and controlling, and the applications of these principles in harnessing physical, financial,
human and informational resources efficiently and effectively to achieve organizational goals.
Management is essential for organized life and necessary to run all types of organizations.
Managing life means getting things done to achieve life‘s objectives and managing an
organization means getting tings done with and through other people to achieve its objectives

There are basically five primary functions of management. These are:

1. Planning
2. Organizing
3. Staffing
4. Directing
5. Controlling
The controlling function comprises co-ordination, reporting and budgeting, and hence the
controlling function can be broken into these three separate functions. Based upon these
seven functions, Luther Guelick coined the word POSDCORB, which generally represents
the initials of these seven functions i.e. P stands for Planning, O for Organizing, S for
Staffing, D for Directing, Co for Co-ordination, R for reporting & B for Budgeting.
But, Planning, Organizing, Staffing, Directing and Controlling are widely recognized
functions of management.

1. Planning
Planning is future oriented and determines an organization‘s direction. It is a rational
and systematic way of making decisions today that will affect the future of the company. It is
a kind of organized foresight as well as corrective hindsight. It involves the predicting of the
future as well as attempting to control the events. It involves the ability to foresee the effects
of current actions in the long run in the future.

Peter Drucker has defined planning as follows: ―Planning is the continuous process of
making present entrepreneurial decisions systematically and with best possible knowledge of
their futurity, organizing systematically the efforts needed to carry out these decisions and
measuring the results of these decisions against the expectations through organized and
systematic feedback‖.

An effective planning program incorporates the effect of both external as well as

internal factors. The external factors are shortages of resources; both capital and material,
general economic trend as far as interest rates and inflation are concerned, dynamic
technological advancements, increased governmental regulation regarding community
interests, unstable international political environments, etc.
The internal factors that affect planning are limited growth opportunities due to saturation
requiring diversification, changing patterns of work force, more complex organizational
structures, decentralization etc

2. Organizing
Organizing requires a formal structure of authority and the direction and flow of such
authority through which work subdivisions are defined, arranged and co-ordinated so that
each part relates to the other part in a united and coherent manner so as to attain the
prescribed objectives.
According to Henry Fayol, ―To organize a business is to provide it with everything useful or
its functioning i.e. raw material, tools, capital and personnel‘s‖.
1. Thus the function of organizing involves the determination of activities that need to be
done in order to reach the company goals, assigning these activities to the proper
personnel, and delegating the necessary authority to carry out these activities in a co-
ordinated and cohesive manner. It follows, therefore, that the function of organizing is
concerned with:
2. Identifying the tasks that must be performed and grouping them whenever necessary
3. Assigning these tasks to the personnel while defining their authority and responsibility.
4. Delegating this authority to these employees
5. Establishing a relationship between authority and responsibility
6. Coordinating these activities

3. Staffing
Staffing is the function of hiring and retaining a suitable work-force for the enterprise
both at managerial as well as non-managerial levels. It involves the process of recruiting,
training, developing, compensating and evaluating employees, and maintaining this
workforce with proper incentives and motivations. Since the human element is the most vital
factor in the process of management, it is important to recruit the right personnel.
According to Kootz & O‘Donell, ―Managerial function of staffing involves manning
the organization structure through proper and effective selection, appraisal & development of
personnel to fill the roles designed in the structure‖.

This function is even more critically important since people differ in their intelligence,
knowledge, skills, experience, physical condition, age and attitudes, and this complicates the
function. Hence, management must understand, in addition to the technical and operational
competence, the sociological and psychological structure of the workforce.

4. Directing
The directing function is concerned with leadership, communication, motivation and
supervision so that the employees perform their activities in the most efficient manner
possible, in order to achieve the desired goals. The leadership element involves issuing of
instructions and guiding the subordinates about procedures and methods. The communication
must be open both ways so that the information can be passed on to the subordinates and the
feedback received from them. Motivation is very important, since highly motivated people
show excellent performance with less direction from superiors. Supervising subordinates
would lead to continuous progress reports as well as assure the superiors that the directions
are being properly carried out.

5. Controlling
The function of control consists of those activities that are undertaken to ensure that
the events do not deviate from the per-arranged plans. The activities consist of establishing
standards for work performance, measuring performance and comparing it to these set
standards and taking corrective actions as and when needed, to correct any deviations.

According to Koontz & O‘Donell, ―Controlling is the measurement & correction of

performance activities of subordinates in order to make sure that the enterprise objectives and
plans desired to obtain them as being accomplished‖.

The controlling function involves:

a. Establishment of standard performance.
b. Measurement of actual performance.
c. Measuring actual performance with the pre-determined standard and finding out the
deviations.
d. Taking corrective action.
All these five functions of management are closely interrelated. However, these functions are
highly indistinguishable and virtually unrecognizable on the job. It is necessary, though, to
put each function separately into focus and deal with it.