Unit-I - Principles Practice of Management - KKM - 01.02.2023 PDF

PRINCIPLES & PRACTICE OF
MANAGEMENT (PPM)
(HRMG1011)
Kolla Krishna Madhavi, B.SC., M.B.A.

GITAM School of Business,
GITAM (Deemed to be university), Hyderabad
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PPM: UNIT -I
Management: Nature, Concept, Scope and Significance; Functions; Management: Art
or Science or Profession, Organization Vs. Administration Vs. Management, Schools of
Management: Contributions of F.W. Taylor, Henry Fayol, Elton Mayo; Roles of
Managers; Social Responsibility and Business Ethics.
Kolla Krishna Madhavi UNIT - I: MANAGEMENT

I. Management: Science, Theory & Practice
● Definition of Management: Its Nature and Purpose
● Managing: Science or Art
● The Evolution of Management Thought
● History of Innovation and Fads
● Patterns of Management Analysis: A Management Theory Jungle
● The Systems Approach to the Management Process
● The Functions of Managers
● The Systems Model of Management
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External Elements/Factors that Affect Operation:
● Economic
● Technological
● Social
● Ecological
● Political
● Ethical
Points of Note:
● All managers (executives, administrators, and supervisors) carry out managerial functions
but the time spent on them may differ based on their level at work (top vs. middle vs. lower
management).
● The FIVE-FOLD managerial functions are planning, organizing, staffing, leading, and
controlling.
● Situation, scope of authority, department, & types of problems may vary from organization
to organization.
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Four Skills required for Administrators:
● Robert L. Katz identified 3 kinds of skills for administrators, ie. Technical, Human &
Conceptual.
● Fourth skill: Ability to Design Solutions/Design Skills.
● Relative importance of skills may vary at various levels in the organization.
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Definition of Management: Its Nature and Purpose
● Management is the process of designing and maintaining an environment in which
individuals, working together in groups, efficiently accomplish selected aims.
Looking closer:
● As Managers, people generally carry out FIVE-FOLD managerial functions, ie. planning,
organizing, staffing, leading, and controlling.
● Management applies to any organization.
● It applies to managers at all organizational levels.
● The aim of all managers is the same: to create a SURPLUS (eg. Production, HRM,
Marketing, etc)
● Managing is concerned with productivity that implies effectiveness and efficiency.
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A few familiar Management Leaders:
● Steve Jobs (Apple Computers)
● Ratan Tata (Tata group)
● Richard Branson (Virgin group)
● Bill Ford, Jr. & his successor, Alan Mulally (Ford Motor Company)
● Jack Welch & his successor, Jeff Immelt (General Electric)
● John Chambers (Cisco)
● Bill Gates & his successor, Steve Ballmer (Microsoft)
● Narendra Modi, PM, India
● Barack Obama, President, USA
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Definition of Organization:
● An Organization is a group of people working together to create a SURPLUS.
Looking closer:
● In Business organizations, this SURPLUS is profit.
● In Non-profit or Charitable organizations, this SURPLUS is satisfaction of needs.
● In Universities, this SURPLUS is knowledge dissemination.
Definition of Enterprise:
● It refers to a business, government agency, hospital, university, and any other type of
organization.
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Other Points of Note:
● A non-Manager is used in reference to persons who have no subordinates. This term may
include professionals who have a high status in organizations.
Eg. IC (Independent Consultant) Vs. Team Leader role in Google.
● Management is essential for any organization.
Eg. Profitable or non-profitable, small or large, manufacturing or service organizations.
● Managers are charged with the responsibility of taking actions that will enable individuals
to make their best contributions to group objectives.
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Goals of All Managers:
● The aim of all managers should be to create a SURPLUS by establishing an environment in
which people can accomplish group goals with the least amount of time, money, materials,
and personal dissatisfaction.
● PROFIT is only a measure of the SURPLUS (i.e. surplus of sales receipts over expenses).
● For many businesses, an important goal is the long-term increase in the value of their common stock.
● Michael Porter (Harvard) is critical about the emphasis of shareholder value and how it has
destroyed many enterprises. “We lose sight of profitability as the goal and substitute
shareholder value measured by stock price.”
● Managers must establish an environment (whether profitable or non-profitable) in which people can
accomplish GROUP GOALS with the least amount of time, money, materials, and personal
dissatisfaction or in which they can achieve as much as possible of a desired goal with available
resources.
Recapping (Managerial Functions):
● Planning
● Organizing
● Staffing
● Leading
● Controlling
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Characteristics of Excellent and Most Admired Companies:
● PROFITABILITY is an important measure of a company’s excellence.
● Other 8 criteria (connected to financial performance) of excellent enterprises that have been identified
by Thomas Peters and Robert Waterman in their book “In Search of Excellence” (in a study of 43
companies):
➔ Orientation towards action
➔ Knowledgeable about the needs of their customers
➔ Promoted managerial autonomy and entrepreneurship
➔ Achieved productivity by paying close attention to the needs of their people
➔ Driven by a company philosophy often based on the value of their leaders
➔ Focused on the business they knew best
➔ Had a simple organization structure with a lean staff
➔ Centralised as well as decentralised, depending on appropriateness
Point of Note:
● Organizational structure may only be transitory. It demands continuing hard work to adapt to the
changes in the environment.
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Advances in Technologies, Trends in Globalization, & Focus Entrepreneurship for
Adapting to changes in the 21st Century:
● Technology (IT, WWW, Internet, eCommerce, mcommerce, wireless devices - B2B,
B2C)
● Globalization (World Trade Organization/WTO in 1995 - govern international trade -
multinational organizations)
● Entrepreneurship (employment, prosperity - government; innovation, new market
expansion - enterprises) Eg. Silicon Valley, T-Hub, etc.
● Productivity, Effectiveness & Efficiency (decline in 1960s, Japan as a role model)
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Point of Note (Productivity):
● PRODUCTIVITY = OUTPUTS / INPUTS (within a time period, quality
considered)
Productivity can be increased by
● Increasing outputs with the same inputs
● Decreasing inputs but maintaining the same outputs
● Increasing outputs and decreasing inputs to change the ratio favourably
*Inputs (labor, materials, capital)
TOTAL-FACTOR PRODUCTIVITY = combine of various inputs to arrive at a
COMPOSITE INPUT
Productivity was earlier aimed at the worker level.
Peter F. Drucker - “The greatest opportunity for increasing productivity is surely to be

found in knowledge work itself, and especially in management.”
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Point of Note (Effectiveness & Efficiency):
● Productivity implies effectiveness and efficiency in individual and organizational
performance.
● Effectiveness is the Achievement of Objectives.
● Efficiency is the Achievement of the ends with the least amount of resources.
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RECAP & FORWARD
20.02.2023 16
Management
What is Management?
Management involves coordinating and overseeing the work activities of others so that
activities are completed efficiently and effectively.
Louis Allen - “Management means what managers does.”
Who is A Manager?
● The individual responsible for achieving organizational Objectives through efficient
and effective utilization of resources.
● A Manager is someone whose primary activities are a part of the management
process.
● A manager is someone who coordinates and oversees the work of other people so
that organizational goals can be accomplished.
Management Definitions
● Mary Parker Follet - “Art of getting things done through the people.”
● Koontz and O'Donnell - “Management is the art of getting things done through and with
people in formally organized groups.”
● Koontz and Weihrich - “Management is the process of designing and maintaining an

environment in which individuals , working together in group, efficiently accomplish
selected goals.”
● Henry L. Sisk - “Management is the coordination of all resources through the process of
planning, organizing, directing and controlling in order to attain stated goals.”
Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…
Management Definitions
● Management is a knowledge consisting of concepts, principles, functions, and
processes. The knowledge is used for achieving organisational objectives by
effective utilisation of resources and coordinated human efforts.
Finally , the term ‘Management’ can be defined as:

“Management is a process of planning ,organizing, staffing, directing, and controlling
human efforts to achieve organizational objectives effectively.”

Nature of Management
● Management is universal
● Management is goal oriented
● Continuous process
● Group activity
● Multi-dimensional
● An executive function

Scope of Management
Broad functions covered under Management:
1. Planning
2. Organizing
3. Staffing
4. Directing
5. Controlling
Some branches of Management:
1. Financial Management
2. Marketing Management
3. Human Resource Management
4. Production Management

Management: Art, Science, or Profession?
I. Management as an Art
What is Art?
An art is application of personal skills and knowledge to achieve results effectively and
efficiently.
Features/Characteristics of Art:
i. It denotes skills & Knowledge
ii. Element of creativity
iii. Need of practice
iv. Result orientation

II. Management as Science
What is Science?
A Science is a fact-based and critically tested systematized body of knowledge pertaining to a
specific field. The knowledge is accumulated through study ,experience, and experimentation.
The scientific knowledge produces impersonal results, and it can be empirically tested and
universally applied.
Features / Characteristics of Science:
i. Systematized body of Knowledge
ii. Scientific enquiry and investigation
iii. Impersonal results
iv. Universal applicability

Management is both science and an art. A manager must have sufficient knowledge of
management fundamentals (i.e. science). To use scientific knowledge, one requires skills and
and practical know-how and in what way should knowledge be applied to get optimum results
(i.e., art).
Acquiring knowledge is not enough, one also needs to know how to use it. Finally, we can say
that management is an artful science – a science with an art – because management theory,
concepts, principle and functions indicates a science and skills to use management theory in
practice indicates an art.

III. Management as a Profession
What is Profession?
Profession means an occupation in some branch of advanced learning. It is based on some
specialized knowledge, skills, and training. The use of such knowledge for a larger interest of
society and success of which cannot be measured by money alone.
Features/ Characteristics of Profession:
i. Existence of specialised knowledge
ii. Need for formal education and training
iii. Professional association
iv. Ethical code of conduct
v. Service motive

Analysis:
Management, as we all know, does not possess all the above characteristics of a profession.
Unlike medicine or law, management does not have any fixed norms of managerial behaviour.
No minimum qualifications have been prescribed for managerial personnel. Further, the entry to
managerial jobs is not restricted to individuals with a special academic degree only. No
management association has the authority to grant certificates to regulate entry into
management careers.

Conclusion:
Some conditions of profession are fully satisfied by management, some are partially satisfied,
and some are not satisfied at all. Hence, we can conclude that:
1.Management is not a pure profession; it is an emerging profession.
2.Management in India is moving towards professional management .It has yet to achieve the
professional status.
3. Management as a profession, particularly in India, is still in its infancy.

Management Functions
1
5 2
3
4

Planning
Planning is bridging the gap between the present and the future. It begins with the
determination of the objectives of organization. It includes objectives, strategies, policies,
procedures and programmes. Planning is basically involves forecasting and decision making.
Organizing
Organizing includes blending together different resources like men , machinery, material and
money to achieve organizational goals and objectives. Departmentation, decentralization and
delegation are the essential sub functions of organizing.

Staffing
Staffing provides proper personnel who are competent , qualified and with the essential skills
to perform the job efficiently. This needs manpower planning and manpower management.
Scientific selection and training of personnel, proper remuneration and performance appraisal
are the important tasks of the staffing.

Directing ( Leading/Motivating)
The Directing function takes up the responsibility of guiding and supervising the activities and
operations in an organization. It is also involving proper leading and motivation of personnel
in the organization.
Directing involves the following sub-functions:

1. Communication
2. Leadership
3. Motivation
4. Supervision

Controlling
Controlling Refers to the evaluation and correction of the performance. It involves measuring
and correcting individual and organizational performance to ensure that events that events
conform to plans.
Controlling involves following steps:

1. Establishing standards
2. Measuring the performance
3. Comparing with established standards
4. Taking corrective course of action

Financial Management
Financial Management means planning, organizing, directing and controlling the financial
activities such as procurement and utilization of funds of the enterprise. It means applying
general management principles to financial resources of the enterprise.
Subject matter of Financial Management:

1. Financing decision
2. Investment decision
3. Dividend decision
4. Working capital decision

Marketing Management
● Marketing Management performs all Managerial functions in the field of Marketing.
● Marketing Management is a process involving analysis, planning, implementing and
control of all marketing activities.
Subject matter of Marketing Management:

1. Consumer’s needs and wants
2. Consumer behaviour
3. Product planning and development
4. Pricing policies
5. Distribution channels
6. Promotional activities

Production / Operation Management
● Production Management means planning, organising, directing and controlling
of production function / activities.
● Production Management’s responsibilities are summarized by the “five M’s” -
i.e. men, machines, methods, materials, and money.
Intellectual Capital (‘Mind’) can be considered as the ‘6th M’.

Human Resource Management
● The field of HRM involves planning, organization, directing and controlling functions of
procuring, developing, maintaining and utilizing a labour force.
Subject matter of HRM:
1. Human Resource Planning (HRP)
2. Job analysis
3. Recruitment and selection
4. Training and development
5. Performance appraisal
6. Career development
7. Employee compensation
8. Employee welfare
9. Industrial relation
10. Organisational development
11. Labour relations
Levels of Management

Levels of Management

Levels of Managers
Levels of Managers

Top Level Management Functions
● To formulate basic policies
● To formulate corporate goals and objectives
● To design structure of the organization
● To exercise overall managerial control

Middle Level Management Functions
● To evaluate the performance of junior managers
● To send progress report to the top management
● Motivating the personnel to achieve higher productivity
● To coordinate with other departments
● Assigning the duties and responsibilities to staff

Lower Levels Management Functions
● To plan day today operations of the business
● To issue necessary orders and instructions to the workers
● To guide, assist and help the workers
● To motivate and maintain a team spirit among the workers

Roles of Managers
1.Interpersonal Role
a. Figurehead
b. Leader
c. Liaison
2.Informational Role
a. Monitor
b. Disseminator
c. Spokesman
3.Decisional Role
a. Entrepreneur
b. Disturbance handler
c. Negotiator
Kolla Krishna Madhavi UNIT - I: MANAGEMENT 25.02.2023
I. Interpersonal Role
a. Figurehead: In this role manager has to perform some duties of a ceremonial nature.
For ex: Greeting the touring dignitaries
Attending the wedding of an employee
Taking an important customer to lunch
b. Leader: As a leader every manager must motivate and encourage his employees. He
must reconcile their individual needs with the goals of the organization.
c. Liaison: In this role of liaison, every manager must cultivate contacts outside
parties and to collect information useful for the organization.

II. Informational Role
a. Monitor: As a monitor, the manager has to perpetually scan his environment for
information, interrogate his liaison contacts and his subordinates and taking the
decisions.
b. Disseminator: In the role of disseminator, the manager passes some of his privileged
information directly to his key subordinates who would otherwise have no access.
c. Spokesman: A manager to spend a part of his time in representing his organization

before various outside groups, which have some stake in organization. The manager
must win their support by effectively managing the social impact of his organization.

III. Decisional Role
a. Entrepreneur: In this role, the manager proactively looks out for innovation to
improve his organization.
b. Disturbance handler: In this role, the manager has to work reactively like a
firefighter. He must seek solutions of various unanticipated problems.
Ex: Strikes, renewals of contracts with suppliers, Problems from customers side.
c. Negotiator: The manager at all levels has to spend considerable time in negotiations
between employer and employees and other parties.

Managerial Skills
1.Technical Skills
2.Human Skills
3.Conceptual Skills
4.Diagnostic Skills

Administration Vs Management
Three different views are explained
1.Administration is different from Management
2.Administration is a part of Management
3.Administration and Management are one

Administration Vs. Management
1. Administration is different from Management
According to this viewpoint
Administration is a determinative function while management is an executive function
Administration is the function in industry concerned with
a.Corporate policy
b.Coordination of Finance
c. Production and distribution
d. Settlement of the structure of the Organization.
Management is the function in industry concerned with
a. Execution of policy set by administration
b. Employment of the Organization
“Administration Defines the Goal, Management Strives towards it.”
2.Administration is a part of Management
According to European School of thought - “Management is a wider term including
administration and organization.”
According to Brech - “Management is the generic term for the total process of executive
control involving responsibility for effective planning and guidance of operations of an
enterprise. Administration is the part of management which is concerned with the installation
and carrying out of the procedures by which the programme is laid down.”
According to Kimball - “Administration is only an implementing agency while management

is determinative.”

3. Administration and Management are one
According to Fayol - “In actual practice, the two terms are used interchangeably. Both
management and Administration are based upon the same set of principles and functions.”
According to Newman - Management or Administration is “The guidance, leadership and

control of individuals towards some common goals.”
Many writers like Fayol, Bernard, George Terry, etc. make no distinction between
Management and Administration.

Conclusion:
In order to avoid this controversy, we can classify management in to:
a. Administrative Management
b. Operative Management
Administrative management is primarily concerned with laying down policies and

determining goals; whereas
Operative management is concerned with implementation of the policies to the achievement
of the goals.
According to Spriegel - “At the higher levels, the managerial authority is concerned with
administrative Management and less with operations.”

Evolution of Management Thought
(Schools of Management Thought)
The schools of management thoughts are theoretical frameworks for the study of
Management. Each of the schools of management thought are based on somewhat different
assumptions about human beings and the organizations for which they work.
Kolla Krishna Madhavi UNIT - I: MANAGEMENT 27.02.2023

Schools of Management Thought
Management theories can be classified into four main schools of thought:
1.Pre-Scientific Management Era
2.Classical / Traditional Approach
3. Behavioral / Neo-classical Approach
4. Modern Management Approach

1. Pre-Scientific Management Era
1. Charles Babbage (1792-1871)
2. Robert Owens (1771-1858)
3. Henry Robinson Towne (1884-1924)
4. Charles Dupin (1784-1873)
5. James Watt (1796-1848)

Charles Babbage (1792-1871)

To increase managerial efficiency and industrial productivity he emphasized on
● Work Specialization
● Work measurement
● Cost determination
● Bonus Plans
● Profit Sharing etc.
Robert Owens (1771-1858)

(Father of Personnel Management)
Emphasized on Development of personnel

● Shorter working hours
● Training of workers
● Provision of canteen facilities
● Housing facilities to workers
● Education of children
Henry Robinson Towne (1844-1924)

He suggested
● Organised exchange of experience among managers
● Workshop management

Charles Dupin (1784-1873)

He suggested for organisational output
● Broader Management Skills
● Management Education

James Watt (1796-1848)

Developed following Management Techniques
● Market Research and Forecasting
● Production planning
● Elaborate Statistical records
● The provision of employee welfare schemes

2. Classical / Traditional Management Approach
A. Scientific Management
B. Administrative Management
C. Bureaucratic Management

A. Scientific Management

A. Scientific Management Principles
1. Replacing the Rule of thumb with Science
2. Obtaining harmony in the group action, rather than discord
3. Achieving cooperation of human beings, rather than chaotic individualism
4. Maximum output, rather than restricted output
5. Developing all workers possible for their own and their company’s highest prosperity

1. Replacing the Rule of thumb with Science
● Taylor advised replacing rule of thumb(i.e., belief, guess or estimations) with scientific
precision.
It becomes possible by
● Cause and effect relationship
● Scientific enquiry
● Observe and analyze each activity

2. Obtaining harmony in the group action, rather than discord
There should be mutual give and take situation based on proper understanding. Harmony in
group action can maximize contribution.
● Both the management and workers should realize the importance of each other
● Complete change in the attitude and outlook of workers and management towards
individual and organizational goals.
● Sharing the profits to employees
● Discipline and sincerity

3. Achieving cooperation of human beings, rather than chaotic individualism
Cooperation between management and workers should be developed. Mutual confidence,
cooperation and goodwill can make them friends.
● Workers to allowed to take part in decision making process
● Welcome suggestions from workers
● Encourage to workers with rewards
● Workers should also resist from going to strikes and unnecessary demands
● There should be proper decision of work and responsibility between workers and
management

4. Maximum output, rather than restricted output
Taylor strongly recommended that workers and management concentrate their attention on
continuous increase in production and productivity.
● Utilize the all resources with optimum level
● Scientific methods introduce in production
● Proper estimation of manpower planning
Benefits:
● Survive, growth and development of organization
● Increases the profits of the organization
● Workers enjoy an incremental wages
● Consumers get qualitative products with fair prices
5. Developing all workers possible for their own and their company’s highest prosperity
All workers should be developed to the fullest extent , for both their benefits and company’s
prosperity. Scientific selection and training are necessary for this purpose.
● Proper training to the workers
● Employees should be scientifically selected
● Work assigned to workers should suit their physical, mental and intellectual capabilities

A. Scientific Management Techniques
i. Time Study
ii. Method Study
iii. Motion Study
iv. Fatigue Study
v. Differential Piece Rate System
vi. Standardization and Simplification of Work
vii. Functional Foremanship
Kolla Krishna Madhavi UNIT - I: MANAGEMENT 01.03.2023 …contd…

A. Scientific Management Techniques
i. Time Study
Time study is the technique of observing and recording the time required by a workman to
completion of a piece of job.
Saving in time leads to

● Cost reduction
● Increased efficiency

2. Scientific Management Techniques
ii. Method Study
Method study is essentially concerned with finding better ways of doing things. It adds value
and increases the efficiency by eliminating unnecessary operations, avoidable delays and other
forms of waste.
Steps in Method Study:
● Select
● Record
● Examine
● Develop
● Evaluate
● Install
● Maintain
Method Study may help in
● Reducing the distance travelled by materials
● Improvement in material handling, transportation and storage

iii. Motion Study
Motion Study is a technique which involves close observations of the movement of an
operator and/ or a machine to eliminate useless motions and find out the best method of
doing a particular job.
It helps
● To find and eliminate wasteful motions of an worker and a machine
● To design the best methods of doing various operations.

iv. Fatigue Study
The main objective of Fatigue study is to determine the amount and frequency of the break
time or rest intervals in order to complete a task or job.
Causes for fatigue:

● Long working hours without rest intervals
● Repetitive operations
● Poor working conditions
It helps
● Improve and boost the efficiency level of workers

v. Differential Piece Rate System
In this system, two different wage rates are used; one is the high wage rate, and the other is the
low wage rate. Those workers who can produce the standard number of units within a fixed
duration are paid as per the high wage rate, and those workers who are not able to produce the
standard number of units within the same time are paid as per the lower wage rate.
It helps
● Less efficient workers will be motivated to work more and
● Efficient workers will be motivated to maintain their efficiency

vi. Standardization and simplification of work
Standardization is the process of creating standards to guide the creation of a good or service
based on the consensus of all the relevant parties in the industry.
Standardisation means setting standards for different factors such as
● Standard output from worker
● Standard time for production
● Standard Material
● Standard Machinery and Tools
● Standard working conditions
It helps
● Increase the efficiency of employees
● Qualitative products will be produced
Simplification means putting an end to the unnecessary types, qualities, sizes/weights, etc.
vi. Standardization and simplification of work
Functional Foremanship is a form of organization which involves supervision of a worker
by several specialist foremen. In other words, work is divided into many small parts and
each part is assigned to an expert.
Functional Foremanship
Planning Dept. Production Dept.

a. Route Clerk a. Gang Boss
b. Instruction Card Clerk b. Speed Boss
c. Time and Cost Clerk c. Repair Boss
d. Discipline Officer d. Inspector

Planning Dept
a. Route Clerk
This clerk ensures the sequence of completing a particular work.
b. Instruction Card Clerk
This clerk prepares the instruction cards for the workers.
● Nature of the work
● Procedure of doing it
● Material to be used and
● Details about machinery
c. Time and Cost Clerk
This clerk decides as to when a particular work is to be started and finished.
d. Discipline Officer
The discipline officer ensures that every work is being performed in a disciplined manner.

Production Dept
a. Gang Boss
The workers are divided into various groups from the of view of control. A group leader is
selected who is known as the gang boss.
b. Speed Boss
The main function of the speed boss is to ensure that all the workers are performing their job at
the required or expected speed.
c. Repair Boss
The main function of the repair boss is to keep the machines and tools in working condition.
d. Inspector
He inspects the things produced and compares their quality with the standard prescribed for them
and tries to find out the difference. In case of unfavourable result he initiates corrective action.
Administrative Management – Henri Fayol

Henri Fayol Contributions

A. Activities of Business
( Technical, Commercial, Financial, Security, Accounting)
B. Functions of Management
(Planning, Organizing, Commanding, Coordinating, Controlling)
C. Abilities of Managers
( Physical, Mental, Moral, General Education, Special Knowledge, Experience)
D. Principles of Management
( Fourteen Principles of Management)

Henry Fayol’s 14 Principles of Management

Henri Fayol’s 14 Principles of Management
1. Division of work
Work is divided into small tasks/ jobs. A trained specialist who is competent is required
to perform each job. Thus, division of work leads to specialization.
2. Authority and Responsibility
Authority is the power to give orders and get it obeyed or in other words it is the power
to take decisions.
Responsibility
means state of being accountable or answerable for any obligation, trust, debt or
something.
Authority and responsibility are closely related and this principle states that Authority
should be commensurate with responsibility.
3. Discipline
Discipline is the obedience to organizational rules, norms,customs and employment
agreement which are necessary for the working of the organization.
Here discipline when applied would mean that the workers and management both
honour their commitments without any prejudice towards one another.
4. Unity of Command
The principle of unity of command states that each employee in a formal organization
should receive orders from and be responsible to only one superior.
5. Unity of Direction
Each group of activities having the same objective must have one head and one plan.
This ensures unity of action and coordination.
6. Subordination of Individual Interest to General Interest
The interests of an organization should take priority over the interests of any one
individual employee. In every work setting, each employee should sacrifice and
subordinate his personal interest and goal for achieving the goals of the organization.
7. Remuneration
The employees should be paid fair wages, which should give them at least a reasonable
standard of living. At the same time, it should be within the paying capacity of the
company. It means the overall pay and compensation should be fair to both employees
and the organization.

8. Centralization
The concentration of decision-making authority is called centralization, whereas its
dispersal among more than one person is known as decentralization.
There should be maintain a balance between centralization and decentralization in the
organization.
9.Scalar Chain
An organization consists of superiors and subordinates. The formal lines of authority
from highest to lowest ranks are known as scalar chain.
According to Fayol, “Organizations should have a chain of authority and
communication that runs from top to bottom and should be followed by managers and
the subordinates.”
10. Order
According to Fayol, “People and materials must be in suitable places at appropriate
time for maximum efficiency.
It means right person on the right job and everything in the proper place.
11. Equity
This principle emphasizes kindliness and justice in the behaviour of managers towards
workers. This will ensure loyalty and devotion among employees.

12. Stability of tenure of personnel
The management policies should provide a sense of reasonable job security. Stability of
tenure helps to develop loyalty and attachment on the part of employees.
According to Fayol - “Personnel should be selected and appointed after due and
rigorous procedure. But once selected they should be kept at their post/position for a
minimum fixed tenure. They should have stability of tenure. They should be given
reasonable time to show results.”
“Employee turnover should be minimised to maintain organizational efficiency.”

13. Initiative:
Workers should be encouraged to develop and carry out their plans for improvements.
Management must create an environment which encourages their employees to take
initiative and responsibility
14. Esprit De Corps
Management should promote teamwork and team spirit for unity and harmony among
employees. It is an organizational activity that number of people work together in close
cooperation for the achievement of common goals.
According to Fayol - Management should promote teamwork especially in large
organizations because otherwise objectives would be difficult to realize.

Bureaucratic Management - Max Weber
Focuses on the ideal form of organization. Selection and promotion of employees based
on ability rather than either because of his loyalty to the leader or because the position
has been traditionally held by members of his family.
Important Features of Bureaucratic Management

● Division of labour
● Standard rules
● Scalar chain
● Official records
● Impersonality

Criticisms of Bureaucracy
● The overemphasis on rules and procedures
● Officials may develop a dependence upon bureaucratic status
● Lack of flexibility or adoption to changing circumstances

3. Behavioural / Neo Classical Approach
A. Human Relations Approach
B. Behavioural Science Approach

The neo-classical approach reflects a slight modification over the classical approach. It
identifies the importance of physiological and social aspects of workers as an individual and
their relationships within and among the group of the organization.
Elton Mayo and Roethlisberger pioneered human relations movement around 1930 and go
Maslow McGregor and others launched behavioural sciences movement around 1940, i.e.,
Refinement of human relations movement.
Neo-classical theory deals with the human factor. Elton Mayo pioneered the human relations
to improve levels of productivity and satisfaction. This approach was first highlighted by the
improvements known as ‘Hawthorne Experiments’ conducted at Illinois plant of Western
Electric Company between 1927 and 1932. Elton Mayo and Mary Parker Follett are the main
contributors of human relations approach. Neo-classical approach also causes ‘Behavioural
Science Management’ which is a further refinement of human relations approach.

Elton Mayo (Hawthorne Experiments)

Human relations approach deals with the factors which encourage higher performance on the
part of workers. The improvement of working conditions, lowering of hours of work,
improvement of social relations of workers, besides monetary gains help in increasing
productivity.
Mayo is known for his work on the project which is commonly referred to as the Hawthorne
studies. An extensive investigation was started in 1927 at the Hawthorne plant, near Chicago,
of the Western Electric Company. These studies were conducted to determine the effect of
better physical facilities on workers’ output. A number of experiments were conducted on the
workers to find out the impact of different situations on their efficiency.

● Conducted by Prof. Elton Mayo, F.J. Roethlisberger and other colleagues at the
Hawthorne plant, General Electric Company in Chicago, during 1924-1932.
● The Hawthorne effects led to the development of the human relations movement.
● It was the first intensive and systematic attempt of its kind to analyse human element at
work.

Phases in Hawthorne Experiment

● Phase I: Illumination Experiment
● Phase II: Relay Assembly Test Room Experiments
● Phase III: Mass Interviewing Programme
● Phase IV: Bank Wiring Observation Room Experiment

Phase I: Illumination Experiments
● Illumination experiments were undertaken to find out how varying levels of illumination
(amount of light at the workplace, a physical factor) affected the productivity.
● The hypothesis was that with higher illumination, productivity will increase.
● In the first series of experiments, a group of workers was chosen and placed in two separate
groups.
● The group was subjected to experimental changes, it was termed as experimental group.
Another group, called as control group, continued to work under constant intensities of
illumination.

Phase I: Illumination Experiments
Findings
● The researchers found that as they increased the illumination in the experimental group, both
groups increased production. When the intensity of illumination decreased, the production
continued to increase in both the groups.
● The production in the experimental group decreased only when the illumination was
decreased to the level of moonlight. The decrease was due to light falling much below the
normal level.
● Thus, it was concluded that illumination did not have any effect on productivity but
something else was interfering with the productivity.
Conclusion
● Researchers were failed to establish relationship between degree of illumination and
productivity. They concluded thus it was not the level of illumination, but some other factor
affected on productivity. Therefore, another phase of experiments was undertaken.

Phase II: Relay Assembly Test Room Experiments
Relay assembly test room experiments were designed to determine the effect of changes in
various job conditions on group productivity. For this purpose, the researchers set up a relay
assembly test room two girls were chosen.
These girls were asked to choose for more girls as co-workers. The work related to the assembly
of telephone relays. Each relay consisted of a number of parts which girls assembled into finished
products.
Output depended on the speed and continuity with which girls worked. The experiments started
with introducing numerous changes in sequence with duration of each change ranging from four
to twelve weeks.

● An observer was associated with girls to supervise their work. Before each change was
introduced, the girls were consulted. They were given opportunity to express their
viewpoints and concerns to the supervisor.
Following were the changes and resultant outcomes
1. The new incentive system was introduced in which each girl’s extra pay was based on the
output of five girls. The productivity is increased.
2. Introduced two five- minute rests, one in the morning session and other in evening session.
Then the two five minutes rests were increased to ten minutes each. In this case also
productivity increased.

4. The rest period was reduced to five minutes but frequency was increased (instead of two rests
of ten minutes each, four rests of five minutes each were introduced). The productivity decreased
slightly and the girls complained that frequent rest intervals affected the rhythm of the work.
5. The number of rest was reduced to two of ten minutes of each, but in addition the girls were
served coffee or soup with sandwich in the morning and snack was offered in the evening. The
productivity increased.
6. Changes in working hours and workdays were introduced, such as cutting an hour off the end
of the day and eliminating Saturday work. The girls were permitted to leave to at 4.30 p.m.
instead of usual 5.00 p.m. and later at 4.00 p.m. productivity increased.

Observation
● As each change was introduced, absenteeism decreased, morale increased, and less
supervision was required. It was assumed that these positive factors were there because of
the various factors being adjusted and making them more positive. At this time, the
researchers decided to revert back to original position, that is, no rest and other benefits.
Surprisingly, productivity increased further instead of going down.

Conclusion
● It was concluded that positive impact on productivity was not due to positive change in
physical factors, but due to girl’s changed attitude towards work, work group and
supervisor.
● Due to freedom to work, freedom to express their views, etc., they developed a sense of
responsibility, self discipline, feeling of stability, and a sense of belongingness. Particularly
close and friendly supervision played an important role in changing the attitude of the girls.
Note: Any how the results were not much conclusive, there was still something missing that
needed to be identified.

Phase III: Mass Interviewing Programme
During experiments, about 20,000 interviews were conducted between 1928 and 1930 to
determine employees’ attitudes towards the following:
● Company
● Supervision
● Insurance plans
● Promotion
● Wages
relating to their job.

Direct interviewing
● Initially, these interviews were conducted by means of direct questioning such as
● “Do you like your supervisor?”
● “Is he in your opinion fair or does he have favorites?” etc.
This method has disadvantage of ‘yes’ or ‘no’ responses which could not get to the root of the
problem.
Non-Directive Interviewing
● The method was changed to non-directive interviewing where interviewer was asked to
listen to instead of talking, arguing or advising.
This interview programme gave valuable insights about the human behaviour in the company.

Observation & Conclusion
During interviews, it was observed that workers’ behaviour was being influenced by group
behaviour. In most cases they behaved as a unit or part of group rather than an individual. But
researchers were not satisfied with such conclusions. In order to get more insight into group
dynamics ,they decided to conduct another phase of experiments that would analyze the
functioning of a small group and its impact on the individual behaviour.

Phase IV: Bank Wiring Observation Room Experiment
● To analyse the functioning of a small group and its impact on individual behaviour, another
series of experiments was conducted between 1931-1932.
● In this experiment, a group of 14 male workers were formed into a small work group. The
men were engaged in the assembly of terminal banks for the use in telephone exchanges.

● The work involved attaching wire with switches for certain equipment used in telephone
exchanges. Hourly wage for each worker was fixed based on average output of each worker.
Bonus as also payable based on group effort.
● It was expected that highly efficient workers would bring pressure on less efficient workers
to increase output and take advantage of group incentive plan.
● The researchers determined clearly, employees were capable to produce as per management
norms, but certain reasons, they deliberately restricted the output.

Unlike former experiments, productivity was reduced, output was restricted.
The reasons are
● Fear of being laid - off
● Fear of raising standard
● Protecting slow workers

Important issues in Hawthorne experiments
● Experiment setting can improve productivity
● Behaviour of people
● Impact of supervision
● Communication
● Cooperation

B. Behavioural Sciences Approach
● Behavioural science movement is regarded as a further refinement of human relations
movement.
● It covered wider aspects in interpersonal roles and responsibilities.
● It laid emphasis on the application of the methods and findings of general and social
psychology and sociology for understanding the organisational behaviour.

The modern management theory is a managerial approach that guides organizational practices
and processes. This approach is an improvement upon both the classical and neo-classical
approach to management and was developed around the year 1950.

A. Quantitative Approach
B. Systems Approach
C. Contingency Approach
D. Operational Approach

A. Quantitative Approach:
● The quantitative approach was propounded by C. W Churchman and his colleagues around
1950.
● The classical approach lays stress upon the physical resources while the neo-classical
approach gives importance to human resources. Both these approaches do not address some
of the most serious problems usually faced by the managers. However, the quantitative
approach to management facilitates managers to solve their problems with the help of the
mathematical and statistical formulas.
● Some special formulas have been prepared to solve managerial problems.
Advantage and Disadvantage:

The chief advantage of the approach is to solve complex problems quickly. But the chief
disadvantage is that this approach only offers an alternative to decision and cannot take decision.

A. Quantitative Approach - Techniques:
A computer is usually used in the below mentioned techniques. They are:
1. Theory of Probability
2. Sampling Analysis
3. Correlation / Regression Analysis
4. Time Series Analysis
5. Ratio Analysis
6. Variance Analysis
7. Statistical Quality Control
8. Linear Programming
9. Game Theory
10. Network Analysis
11. Break-Even Analysis
12. Waiting Line or Queuing Theory
13. Cash-Benefit Analysis, etc.
B. Systems Approach:
● This approach came existence in 1960.
● It was developed by Chester I. Bernard, Herbert A. Simon and their colleagues.
● The system approach means a group of small interrelated units.
● An organization comprises a unified singular system made up of these subsystems. While
the small units or subsystems are themselves independent, they are still connected with the
related system.
● All the subsystems influence one another. For example, a scooter is a system which has
many sub-systems in the form of engine, shaft, gear, wheels body, etc. Similarly, an
organization consists of several subsystems that work in unison to achieve the objective of
an organization. Therefore, when manager taken some decision regarding a particular
subsystem, they should also take into consideration its effect on the other subsystems.
● All these subsystems work in cohesion simultaneously towards a common purpose. If one of
them fails, the whole system stops working.
● The success of a system depends on the cooperation and efficiency of the subsystems.
1. Subsystems:
● Every system happens to be a combination of many subsystems that are interrelated.
● Whenever we take a decision regarding a particular subsystem, we should always consider
the possible effect of the decision on the other subsystems.
● In a company, all its departments (e.g. purchase, sale, finance, production, personnel,
research and development) are its subsystems.
● All these are created by the major system, i.e. the company itself.
● A company is itself a sub-system of industry that is a subsystem of a national economy.
Similarly, the national economy is a subsystem of the world system. Therefore, it is clear
that various subsystems constitute a major system.

2. Holism:
● A major characteristic of the System Approach is that it is looked upon as a whole. It clearly
means that a decision taken with regard to a particular subsystem does influence or affect the
other subsystems. Therefore, every decision is taken keeping in view the entire organisation,
i.e. all the subsystems are kept in context while taking a decision. If not, the major system is
likely to be damaged and it cannot work as expected.
For example, if the sales department is aiming at doubling its sales, it shall have to consider
whether the purchase department would be in a position to purchase the requisite amount of
raw material and the production department can produce the relevant goods or services.
Also, whether the personnel department and the finance department will be able to provide
the required manpower and financial support respectively.
● No decision is possible in respect of any particular subsystem alone, which indicates why the
system approach is called holistic.
3. Synergy:
● It means that the whole is greater than the sum of its parts. For example, there are five
persons in a group. Everybody has a capacity to carry a load of five quintal each. When they
are told to lift a load of one quintal, everybody will be able to lift only one quintal of load.
But if that are told to lift the weight collectively, they would certainly be able to lift a load in
excess of five quintal.
● If a job is performed collectively, it is certainly well-performed with better results. This is
indicative of coordination.

4. Closed and Open System: A system can be of two types:

i. Closed System:
● This system remains unaffected by environmental factors.
● Traditional management experts consider an organisation as a closed system. They believed
that an organisation worked without being influenced by the outside factors, e.g., a watch is
not influenced by the outside factors and it works continuously without getting interrupted.
ii. Open System:
● This system remains constantly in touch with its environment and is influenced by it.
● Modern management experts consider an organisation as an open system.
● Environment is a combination of many factors like raw material, power, finance, machine,
man-power, technique, market, new products, government policies, etc. that enter an
organisation as inputs. Here, they are converted into products through various processes or
activities and sent outside the organisation as outputs (goods, services, or satisfaction).
5. System Boundary:
● This entails a certain dividing line which separates a system from its environment.
● The dividing line in a closed system is rigid while in an open system, it is more flexible. Eg.
a dividing line can easily be drawn between two pieces of land. It is, however, difficult to do
so for a social system and an organisation is a social system.
● System boundary makes it clear as to which factors are related to the system and which
factors are related to the environment. Consequently, it makes control easier.
Conclusion:
Overall, there have been revolutionary changes in the process of decision-making because of the
systems approach. However, some critics feel it is difficult to study the relations between
subsystems of a particular system. Therefore, this concept is not considered practical.

C. Contingency Approach:
● This is an important modem approach that originated in around 1970.

● Managers should take decisions not according to principles but according to the situations. It
means that there cannot be any single principle / formula / managerial activity which can be
suitable in all situations due to the constantly changing nature of environment. Here,
environment means the sum total of all the factors which influence an organization.
● These factors are both internal and external. Some of the internal factors include objectives,
policies, organization structure, management information system, etc. while the external
factors include customers, suppliers, competitors, government policies, political set-up, legal
system, etc.
● All these environmental factors are subject to change, which makes an organization’s
environment dynamic.

● Where the system approach failed to establish a relationship between the organization and
environment, the contingency approach made an attempt to address this issue.
● Managers need to analyse the environment and take decision accordingly.
● No single method can be suitable for doing all kinds of work. Its suitability depends on the
situation.
For example, a single leadership style cannot be applied to all the situations. Similarly, there
are different methods of motivation and control of employees.
Features of Contingency Approach: Some of the main features are:

1. The managerial action influences the environment.
2. The managerial action changes according to situations.
3. There is essentially coordination and close inter-linkage between an organization and its
environment.
Limitations of Contingency Approach: Some of the main limitations are:

1. It is not sufficient to say that the managerial action depends on the situation. It is essential to
say what action should be taken in a particular situation.
2. A situation can be influenced by many factors. It is difficult to analyse all these factors.
Conclusion:
This approach advises managers to be alert to the environment and suggests that the approach and
system of work should be suitably changed per the situations confronting them.

D. Operational Approach:
● Operations management (OM) is the administration of business practices to create the

highest level of efficiency possible within an organization. It is concerned with converting
materials and labor into goods and services as efficiently as possible to maximize the profit
of an organization.
● It is also known as Operational Research or Operational Analysis.
● Operation Research advocates a system approach and is concerned with optimization. To
operate efficiently, firms should use the least amount of resources needed and strive to
meet the customer's requirements to the highest possible standard.
● It aims at achieving a high degree of precision, perfection, and objectivity in solving a
managerial problem.
● This approach uses mathematical and statistical tools, along with computer-aided
technology, to solve complex problems in production, finance, storage, transportation, etc.

Social Responsibility and Business Ethics
● According to Howard R. Brown - “Social responsibility of business refers to the obligation
to pursue those policies, to make those decisions or to follow those lines of action , which
are desirable in terms of the objectives and values of the society.”
● According to European Union - “Corporate social responsibility as a concept that an

enterprise is accountable for its impact on all relevant stakeholders. It is the continuing
commitment by business to behave fairly and responsibly and contribute to economic
development while improving the quality of life of the work force and their families as well
as the local community and society at large.”
Kolla Krishna Madhavi UNIT - I: MANAGEMENT …10.03.2023… …contd…

Social Responsibility towards stakeholders

1. Responsibilities towards Shareholders
● A fair return on investment
● Safety of investment
● Regular and full information about working
● To tell accurate progress of the firm
2. Responsibilities towards Customers
● Providing quality goods with reasonable price
● Ensure regular and adequate supply of goods
● Prompt and redressal of customers grievances
● True and fair information through advertisements
● Provide for after- sale servicing
● Avoid unfair and unethical practices

3. Responsibilities towards Suppliers
● Provide accurate information regarding the firm
● Make prompt settlement of transaction
● Fairness in transactions.
4. Responsibilities towards Employees
● Fair wages and salaries
● Provide safe working conditions
● Opportunities for education, training, and promotion
● Workers participation in decision-making
● Adequate service benefits, such as housing, medical facilities, insurance cover,
retirement benefits, etc.

5. Responsibilities towards Government
● To abide by the laws of the land
● To fallow fair trade policies and practices
● To pay taxes honestly
6. Responsibilities towards Community
● To make the best possible use of the society's resources
● To keep the atmosphere free from all types of pollution
● To contribute to the upliftment of the weaker sections in the society.
● To provide maximum employment opportunities
● To refrain from anti- social practices

Business Ethics:
Ethics: Ethics can be termed as the science of character of a person expressed as right or wrong.
It is governed by set of principles or code of conduct. It is generally determined by socially
accepted norms.
According to Webster - Ethics as “the discipline dealing with that which is good and bad and
moral duty and obligation”.
According to Hurley - “Ethics as a system of moral principle.”
Business Ethics: Business Ethics refers to the application of ethics to business. To be more
specific, business ethics is the study of good and bad, right and wrong and just and unjust
actions of Businessmen.

Business Ethics:
Need for Business Ethics

● Image and Market Share
● Achieve the customer’s needs
● Open window policy in Business operations
● Buildup the confidence in employees
● Indirectly enhance the sales and profits

End of Unit-I
134

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PRINCIPLES & PRACTICE OF

Kolla Krishna Madhavi, B.SC., M.B.A.

Kolla Krishna Madhavi UNIT - I: MANAGEMENT

Peter F. Drucker - “The greatest opportunity for increasing productivity is surely to be

● Koontz and Weihrich - “Management is the process of designing and maintaining an

Finally , the term ‘Management’ can be defined as:

Kolla Krishna Madhavi UNIT - I: MANAGEMENT

Kolla Krishna Madhavi UNIT - I: MANAGEMENT

Kolla Krishna Madhavi UNIT - I: MANAGEMENT

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Kolla Krishna Madhavi UNIT - I: MANAGEMENT

Kolla Krishna Madhavi UNIT - I: MANAGEMENT

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Directing involves the following sub-functions:

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Controlling involves following steps:

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Subject matter of Financial Management:

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Subject matter of Marketing Management:

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Kolla Krishna Madhavi UNIT - I: MANAGEMENT

● To formulate basic policies

● To formulate corporate goals and objectives

● To design structure of the organization

● To exercise overall managerial control

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

● To evaluate the performance of junior managers

● To send progress report to the top management

● Motivating the personnel to achieve higher productivity

● To coordinate with other departments

● Assigning the duties and responsibilities to staff

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

● To plan day today operations of the business

● To issue necessary orders and instructions to the workers

● To guide, assist and help the workers

● To motivate and maintain a team spirit among the workers

Kolla Krishna Madhavi UNIT - I: MANAGEMENT

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

c. Spokesman: A manager to spend a part of his time in representing his organization

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Kolla Krishna Madhavi UNIT - I: MANAGEMENT

Three different views are explained

1.Administration is different from Management

2.Administration is a part of Management

3.Administration and Management are one

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

According to Kimball - “Administration is only an implementing agency while management

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

According to Newman - Management or Administration is “The guidance, leadership and

Kolla Krishna Madhavi UNIT - I: MANAGEMENT …contd…

Administrative management is primarily concerned with laying down policies and

Kolla Krishna Madhavi UNIT - I: MANAGEMENT