PRINCIPLES OF MANAGEMENT

SUB CODE – DBA5101

Unit 1

UNIT I – HISTORICAL DEVELOPMENT

 INTRODUCTION
 DEFINITION OF MANAGEMENT
 FUNCTIONS OF MANAGEMENT
 MANAGEMENT ROLES
 MANAGERIAL SKILLS
 MANAGEMENT COMPETENCIES
 APPROACHES TO MANAGEMENT
 MANAGEMENT AND ADMINISTRATION
 MANAGEMENT SCIENCE OR AN ART
 MANAGEMENT – A PROFESSION
 EVOLUTION OF MANAGEMENT THOUGHT
 ETHICS AND SOCIAL RESPONSIBILITY
 TYPES OF BUSINESS ORGANISATION

I. INTRODUCTION
a) MEANING OF MANAGEMENT

“It is the process of getting things done, effectively and efficiently, through and
with other people”.
 Effectiveness: Doing the right thing; goal attainment
 Efficiency: Doing things correctly; refers to relationship between inputs and
outputs, seeks to minimize resource cost.
 Productivity: = Outputs/Inputs.
b) MANAGEMENT LEVELS

II. DEFINITION OF MANAGEMENT

 According to Koontz, “Management is the art of getting things done through

and with the people in formally organized groups”
 According to Henry Fayol, “To manage is to forecast, to plan, to organize, to
command, to co-ordinate and control”.

III. FUNCTIONS OF MANAGEMENT

IV. MANAGEMENT ROLES – MINTZBERG

V. MANAGERIAL SKILLS

- GENERAL SKILLS:
- SPECIFIC SKILLS:

 Controlling the organizations environment and its resources

 Organizing and coordinating
 Handling information
 Providing for growth and development
 Strategic problem solving

VI. MANAGEMENT COMPETENCIES

 What Is a Competency?
 A competency is a measurable characteristic of a person that is related to
effective performance in a specific job, organization, or culture.
 The Competency Clusters
 The Manager Competencies reflect the challenges that today’s manager
faces. This model contains 11 competencies, organized in four clusters. The four
clusters are—
MANAGING YOURSELF
 • Empathy
 • Self-Control
 • Self-Confidence
MANAGING YOUR TEAM
 • Developing Others
 • Holding People Accountable
 • Team Leadership
MANAGING THE WORK
 • Results Orientation
 • Initiative
 • Problem Solving
MANAGING COLLABORATIVELY
 • Influencing Others
 • Fostering Teamwork

VII. APPROACHES TO MANAGEMENT

 Empirical Approach or Case approach
 Interpersonal Behavior Approach
 Group behaviour approach
 Co-operative social systems approach
 Social Technical System Approach
 Decision Theory Approach
 Systems Approach
  Mathematical or “Management science approach”
 Contingency or Situational Approach
 Mintzberg Managerial Roles Approach
 McKinsey’s 7-s framework Approach
 Operational Approach

VIII. MANAGEMENT AND ADMINISTRATION

AUTHOR ADMINISTRATION MANAGEMENT

SHELDON, It involves thinking. It involves doing

It is a top-level function It is a lower level
SPRIEGAL &
function
MILWARD

E.F.L. BRECH & It is a branch of mgt.

OTHERS
It is upper level called
administrative mgt.
PETER It is governance of non-
DRUCKER business institutions.
It is secondary for an
administrator.
Successful administrator
fails as manager
IX. MANAGEMENT SCIENCE OR AN ART
It is a comprehensive
generic function
It is lower level called
operative mgt
It is governance of
business enterprise.
Economic consequences
places in every decision
& action.
Successful manager fails
as administrator.

MANAGEMENT AS A SCIENCE:
 Science is a systematized body of knowledge.
 Contains underlying principle and theories.
 Principles have universal applicability.
 Taught in class room and industry.

NATURE OF SCIENCE OF MANAGEMENT:

 Management is social science.
 Inexact science or soft science.
 Applied science.
 Interdisciplinary science.

MANAGEMENT AS AN ART:
 Art involves practical application of personnel skill and knowledge.
 Practical way of doing specific things.
 Personalized process.
 Continuous practice.

ELEMENTS OF AN ART:
 Personal skills.
 Practical know-how.
 Result-orientation.
 Creativity.
 Constant practice aimed at perfection.

X. MANAGEMENT – A PROFESSION

 A well-defined and organized body of knowledge.

 Learning and experience.
 Entry restricted by qualification.
 Recognized national body.
 Ethical code of conduct.
 Dominance of service motive.

XI. EVOLUTION OF MANAGEMENT THOUGHT

(a) SCIENTIFIC MANAGEMENT THEORY

I. ADAM SMITH (18TH CENTURY ECONOMIST)

JOB SPECIALIZATION AND DIVISION OF LABOUR:
 Observed that firms manufactured pins in one of two different ways:
Craft-style—each worker did all steps.
Production—each worker specialized in one step.
 Realized that job specialization resulted in much higher efficiency and
productivity
 Breaking down the total job allowed for the division of labor in which
workers became very skilled at their specific tasks.
II. F.W. TAYLOR AND SCIENTIFIC MANAGEMENT (1865-1915):

 SCIENTIFIC MANAGEMENT

The systematic study of the relationships between people and tasks for the
purpose of redesigning the work process for higher efficiency.
 Defined by Frederick Taylor in the late 1800’s
 Wanted to replace “rule of thumb”
  Sought to reduce the time a worker spent on each task by optimizing the
way the task was done

 CONTRIBUTIONS OF SCIENTIFIC MANAGEMENT

 Time and motion study

 Differential payment
 Drastic reorganization of supervision
 Scientific recruitment & training
 Intimate friendly co-operation between management & workers

 REFINEMENT OF TAYLOR PRINCIPLE & CONCEPTS

 Henry L.Gantt (1861-1919)

 Frank & Lillian Gilbreth (1868-1924 &1878-1972)

LIMITATIONS

 Economic incentives
 Not purely scientific
 Orders results in confusion
 Resentment

(b) ADMINISTRATIVE MANAGEMENT THEORY (OR) CLASSICAL ORG.

THEORY
Administrative Management
– The study of how to create an organizational structure that leads
to high efficiency and effectiveness.

I. HENRY FAYOL PRINCIPLES TO MANAGEMENT (1841-1925)

Division of Labor:
--Allows for job specialization.
– Jobs can have too much specialization leading to poor quality and worker
dissatisfaction.
 Authority and Responsibility
– Both formal and informal authority resulting from special expertise.
 Unity of Command
– Employees should have only one boss.
 Line of Authority
– A clear chain of command from top to bottom of the firm.
 Centralization
– The degree to which authority rests at the top of the organization.
 Unity of Direction
– A single plan of action to guide the organization.
 Equity - The provision of justice and the fair and impartial treatment of all
employees.
 Order - The arrangement of employees where they will be of the most value
to the organization and to provide career opportunities.
 Initiative - The fostering of creativity and innovation by encouraging
employees to act on their own.

 Discipline
– Obedient, applied, respectful employees are necessary for the organization to
function.
 Remuneration of Personnel
– An equitable uniform payment system that motivates contributes to
organizational success.
 Stability of Tenure of Personnel
– Long-term employment is important for the development of skills that
improve the organization’s performance.
 Subordination of Individual Interest to the Common Interest
– The interest of the organization takes precedence over that of the individual
employee.
 Esprit de corps
• Comradeship, shared enthusiasm foster devotion to the common cause
(organization).

 LIMITATIONS
• No care for the job.
• Dissatisfaction for worker.
• Increase in overhead cost.
• Simon criticism to principle of unity of command, specialization, division of
labour.
• Gullick, urwick and others criticism to principle of limited span of control.
• Burns and stalker criticism to authority and responsibility.
• ChrisArgyris criticism to principle of specialization, chain of command,
unity of direction and span of control.

II. MAX WEBER (1864-1920)

–He is a German sociologist, known as father of Bureaucracy. –Developed the
concept of bureaucracy as a formal system of organization and administration
designed to ensure efficiency and effectiveness.
  MAX WEBER DISTINGUISHED 3 TYPES OF ADMINISTRATION
 Leader oriented
 Tradition oriented
 Bureaucratic

 FEATURES OF BUREAUCRATIC ADMINISTRATION

 Insistence on following standard rules
 Systematic division of work
 Principle of hierarchy is followed
 Training in application of rules
 Administrative acts, decisions and rules are recorded in writing
 Rational personnel administration.
LIMITATIONS
 Over conformity to rules
 Buck-passing
 Categorization of queries
 Displacement of goals
 No real right of appeal
 Neglect of informal group
 Rigid structure
  Inability to satisfy the needs of mature individual

(C) BEHAVIORAL MANAGEMENT THEORY

Behavioral Management
– The study of how managers should behave to motivate employees and
encourage them to perform at high levels and be committed to the achievement of
organizational goals.
– Focuses on the way a manager should personally manage to motivate
employees.

I. MARY PARKER FOLLETT ( 1868-1933 )

 Concerned that Taylor ignored the human side of the organization

– Suggested workers help in analyzing their jobs
– If workers have relevant knowledge of the task, then they should control the
task
 Mary Parker Follett (1868–1933) was an American social worker, consultant,
and author of books on democracy, human relations, and management.

 She worked as a management and political theorist, introducing such phrases

as "conflict resolution," "authority and power," and "the task of leadership."

she published several books, including:

 The Speaker of the House of Representatives (1896)
 The New State (1918)
 Creative Experience (1924)
 Dynamic Administration (1941)
 Folletts “Holistic” model of control took into a/c not just individuals and
groups, but the effects of such environmental factors such as politics, economics and
biology.

II. NEO-CLASSICAL APPROACHES

HUMAN RELATION MOVEMENT:
 Behavioral or human relations management emerged in the 1920s and dealt with
the human aspects of organizations.
 It has been referred to as the neoclassical school because it was initially a reaction
to the shortcomings of the classical approaches to management.
 The human relations movement began with the Hawthorne Studies which were
conducted from 1924 to 1933 at the Hawthorne Plant of the Western Electric
Company in Cicero, Illinois.

III. HAWTHORNE STUDIES:

 Elton Mayo, known as the Father of the Hawthorne Studies, identified the
Hawthorne Effect or the bias that occurs when people know that they are being
studied. The Hawthorne Studies are significant because they demonstrated the
important influence of human factors on worker productivity.
 Studies of how characteristics of the work setting affected worker fatigue and
performance at the Hawthorne Works of the Western Electric Company from 1924-
1932.
 Worker productivity was measured at various levels of light illumination.
 Researchers found that regardless of whether the light levels were raised or
lowered, worker productivity increased.
 EXPERIMENT IN 4 PARTS
 Illumination Experiment
 Relay Assembly Test Room
 Interviewing Programme
 Bank-Wiring Observation Room
 -Rate Busters, Chisellers & Squealers

 CONTRIBUTIONS
 A business organization is not merely a techno-economic system but is a
social system
 No correlation between improved working condition and high production
 Workers production norm is set and enforced by his group and not by
time and motion study done by industrial engineer
 Worker does not work for money only. Non-financial rewards takes place
 Employee-centered, democratic and participative style of leadership is
effective than task-centered
 Informal group and not the individual is the dominant unit of analysis in
organization.

LIMITATIONS
 Focused only human variable
 Over-emphasis importance of symbolic reward and underplays material
rewards
 Unrealistic picture about informal groups as major source of satisfaction
for industrial workers
 It is production oriented and not employee oriented
 During emergency the leisurely process of decision making of this
approach does not work
 Makes unrealistic demand on superior to give up his desire for power
 Wrong assumption that satisfied workers are more productive workers.

IV. MCGREGOR’S THEORY X AND Y:

THEORY X: PEOPLE MUST BE COERCED, CONTROLLED, DIRECTED AND

THREATENED WITH PUNISHMENT TO GET THEM TO WORK TOWARDS
ORGANIZATIONAL GOALS
 THEORY X ASSUMPTIONS:
 People do not like work & try to avoid itl
 People do not like work, so managers have to control, direct, coerce, and
threaten employees to get them to work toward organizational goals
 People prefer to be directed, to avoid responsibility, to want security.
 They have little ambition.

THEORY Y: PEOPLE WILL EXERCISE SELF-DIRECTION TO REACH

GOALS TO WHICH THEY ARE COMMITTED COMMITMENT IS A
FUNCTION OF REWARDS.

THEORY Y ASSUMPTIONS:
 People do not naturally dislike work
 work is natural part of their lives
 People are internally motivated to reach objectives to which they are
committed
 Commitment depends on the degree that personal rewards are received when
objectives are reached
 People will seek and accept responsibility under favorable conditions
 People have the capacity to be innovative in solving organizational problems
 People are bright, but under most organizational conditions, their potentials
are under-utilized.

(D) MANAGEMENT SCIENCE THEORY

An approach to management that uses rigorous quantitative techniques

maximize the use of organization resources.
– Quantitative management — utilizes linear programming, modeling,
simulation systems and chaos theory.
– Operations management —techniques used to analyze all aspects of the
production system.
– Management Information Systems (MIS) — provides information
vital for effective decision making.
– Total Quality Management (TQM) —focuses on analyzing input, conversion,
and output activities to increase product quality.

I.SYSTEM APPROACH

EXTERNAL
ENVIRONMENT

INPUT: OUTPUT:
HUMAN TRANSFORMATION GOODS
TECHNOLOGY OR SERVICES
INFORMATION CONVERSION OTHERS
PROCESS

FEEDBACK

(E) ORGANISATIONAL ENVIRONMENT THEORY

Organizational Environment –
The set of forces and conditions that operate beyond an organization’s
boundaries but affect a manager’s ability to acquire and utilize resources
Open System
– A system that takes resources for its external environment and converts them
into goods and services that are then sent back to that environment for purchase by
customers.

(F) CONTIGENCY THEORY

 “There is no one best way to organize”

 The idea that the organizational structures and control systems manager
choose depend on—are contingent on—characteristics of the external environment
in which the organization operates.

Type of Structure
Mechanistic Structure
– Authority is centralized at the top. (Theory X)
– Employees are closely monitored and managed.
– Can be very efficient in a stable environment.

XII. ETHICS AND SOCIAL RESPONSIBILITY

ETHICS
 The study of rights and of who is or should be benefited or harmed by an
action.
 Ethics” refers to the moral values that govern the appropriate conduct of an
individual or group. “Ethics” speaks to how we ought to live, that is, how we ought
to treat others and how we ought to run or manage our own lives.

LEVELS OF ETHICAL QUESTIONS IN BUSINESS

LEVEL 4
THE INDIVIDUAL
 LEVEL 3
INTERNAL POLICY

LEVEL 2
STAKEHOLDERS

LEVEL 1
SOCIETY

TOOLS OF ETHICS
 Values
 Rights
 Duties
 Moral rules
 Human relationship
 Common morality

PRINCIPLES OF ETHICS
 Promise keeping
 Non malevolence
 Mutual aid
 Respect for persons
 Respect for property

ETHICAL MODELS
SOCIAL ETHICS:

LEGAL RULES,
CUSTOMS
 ORGANISATION
CODE OF
ETHICS

PROFESSIONAL
ETHICS: INDIVIDUAL
VALUES IN ETHICS:
WORKPLACE FAMILY
INFLUENCE

SOCIAL RESPONSIBILITY
 Social responsibility is an ethical or ideological theory that an entity whether
it is a government, corporation, organization or individual has a
responsibility to society. This responsibility can be "negative," in that it is a
responsibility to refrain from acting (resistance stance) or it can be
"positive," meaning there is a responsibility to act (proactive stance). While
primarily associated with business and governmental practices, activist
groups and local communities can also be associated with social
responsibility, not only business or governmental entities.
 Corporate social responsibility (CSR, also called corporate responsibility,
corporate citizenship, and responsible business) is a concept whereby
organizations consider the interests of society by taking responsibility for the
impact of their activities on customers, suppliers, employees, shareholders,
communities and other stakeholders, as well as the environment. This
obligation is seen to extend beyond the statutory obligation to comply with
legislation and sees organizations voluntarily taking further steps to improve
the quality of life for employees and their families as well as for the local
community and society at large.
XIII. TYPES OF BUSINESS ORGANISATION

SOLE TRADER:
Oldest form of business org. as the word “sole” indicates it is run by a single
individual, owned and controlled by the same person, one man show.

Features:
 Single ownership
 Unlimited liability
 No one else to share the profit and risks
 Personal contacts with customers
 Ownership and management together

Merits:
 Easy formation
 Quick decisions and early action
 Total business secrecy
 Direct and close contacts with the customers
 Personal involvement and interest in business

Demerits:
 Limited capital
 Limited managerial ability and skills]
 Unlimited liability
 Lack of continuity
 Limited supervision
PARTNERSHIP:
It is defined as “ the relationship between persons who have agreed to share the
profits of a business carried on by al or any of them acting for all”. It is called as
firms.

Kinds Of Partnership:
 Partnership at will
 Partnership for a specific period
 Partnership for specific purpose

Kinds Of Partners:
 Active partner
 Dormant or sleeping partner
 Nominal partner
 Minor partner

Merits Of Partnership:
 Easy formation
 More financial resources
 Improved business efficiency
 Flexibility
 Partners as specialists
 Enough consultation
 Protection for the minors.

Demerits Of Partnership:
 Secrecy
 Unlimited liability
 Restriction on the transfer
 Delayed decisions
 Mutual differences
JOINT STOCK COMPANY:
Company is a Latin word and it means “to make meal together”. It is derived
from the word “companis” where “com” means together and “panis” means
bread. I.e., taking bread together or the persons who take meal together. Those
who purchase he shares of the company are called shareholders.

Types Of Joint Stock Company:

 Private limited company
 Public limited company

Characteristics Of Joint Stock Company:

 Artificial person
 Limited liability
 Perpectual life
 Separate entity and legal existence
 Common seal
 Regulations
 Transfer of shares
 Management by board

Merits Of Joint Stock Company

 Huge capital
 Limited liability
 Better management
 Perpectual succession
 Economics of large scale and division of labour
 Concession in income tax
 Services of experts
 Free transferability of shares

Demerits Of Joint Stock Company:

 Difficulties of formation
 Delays in decision making and red tapism
 Lack of secrecy
 No personal devotion
 Excessive regulation and control of government
 Conflicting interest
 Frauds by management

OTHERS:
 Government Company
 Co-operative Enterprise
 Public sector Enterprise