PRINCIPLES AND PRACTICE OF

MANAGEMENT

UNIT – I

MANAGEMENT
NATURE AND CONCEPT
 UNIT-I
MANAGEMENT:
NATURE AND CONCEPT
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“Management involves coordinating and overseeing the work activities of others so
that their activities are completed efficiently and effectively.” — Stephen P. Robbins
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1.0 INTRODUCTION
A basic knowledge of management principles is very crucial as subsequent
management courses rest on an understanding of the core concepts. Students of
management, therefore, need to learn the basic concepts of management for
developing application-based knowledge of the subject.

One of the most important human activities is managing. Ever since people began
forming groups to accomplish aims they could not achieve as individuals, managing
has been essential to ensure the coordination of individual efforts. As society has
come to rely increasingly on group effort, and as many organized groups have become
very large, the tasks of managers have been gaining importance. The purpose of this
unit is to promote awareness about the fundamentals of management among the
students, aspiring managers, and other professionals.

1.1 CONCEPT OF MANAGEMENT

Though the term management encompasses the physical as well as human resource
management of a firm, it is primarily concerned with the latter. Indeed, management
is all about managing people effectively and dealing with people-centred problems
professionally. Managers need to lead, inspire, direct and decide on matters relating
to employees in a way that facilitates the accomplishment of organizational goals. In
brief, management involves, “getting things done by other people.” In this context, we
shall now see a few definitions of management.
Definitions of Management

“Management is the process of planning, organizing, leading and controlling the work
of organization members and of using all available organization resources to reach
stated organizational goals.” — James A. Stoner, et al.
“Management involves coordinating and overseeing the work activities of others so
that their activities are completed efficiently and effectively.” — Stephen P. Robbins

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“Management is the process of designing and maintaining an environment in which
individuals working together in groups efficiently accomplish selected aims.” — Harold
Koontz and Heinz Weihrich

In simple terms, we may define management as a process concerned with the

effective utilization of human and physical resources for attaining organizational and
individual goals through a facilitating environment.

1.2 NATURE OF MANAGEMENT

Based on the definitions given in the preceding section, we may list out the nature and
characteristics of management as follows:
 Management is a process involving a series of activities. It involves
performance of certain functions and activities, such as planning, organizing
and directing, by the managers.
 It is a goal-directed activity as the accomplishment of goals is the primary
consideration in determining the activities of the managers. Thus, all the
managerial activities are decided and guided by the definite goals and
objectives of the firm.
 Management is principally a decision-making activity as it often involves the
evaluation of available alternatives to deal with specific problems and the
selection of the best alternatives to resolve them.
 Management involves the effective integration and utilization of both
physical and human resources towards goal accomplishment. However, the
thrust of management is on efficient management of human resources.
 Management is an extensive activity practised at different levels of an
organization. Management is usually classified as top, middle and lower (first
line) levels.
 It is universal in character as every form, size and nature of an organization
requires management to manage its affairs. As such, management is applicable
to organizations performing business, charity, military, sport, cultural and
political activities.
 Management is a dynamic activity performed continuously in organizations.
It shapes and reshapes itself depending upon the trends and developments in
its environment.
 Management is a group-based activity. The presence of a group with at least
two people is a prerequisite for management because the basic task of
managers is getting work done through others.

1.3 SCOPE OF MANAGEMENT

Clearly defined responsibilities, concepts, theories and principles related to
managerial functions define the scope of management. Let’s look at the various
aspects of this.

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  Financial Management: Every enterprise prioritizes financial management
because finances can get extremely tricky if not managed properly. Effective
financial management ensures there are fair returns to stakeholders, proper
estimation of capital requirements and laying down optimal capital. It includes
preparation and examination of financial statements, creating proper dividend
policies and negotiations with external stakeholders.
 Marketing Management: The scope of management in marketing extends to
planning, organizing, directing and controlling activities in the marketing
department. Identifying customer requirements is crucial for providing business
solutions. When a manager is fully aware of the benefits of the products and/or
services the organization provides, they achieve better results. Marketing
management ensures that available resources are properly utilized and the best
possible outcomes are achieved.
 Personnel Management: Personnel management, as the name suggests,
deals with personnel or individuals in a business environment. It includes the
recruitment, transfer, termination, welfare and social security of employees.
This aspect of management is extremely important as employees form teams
and teams drive an organization’s goals. Individual productivity also contributes
to overall efficiency. Without attending to employee needs and wants, an
organization is likely to struggle.
 Production Management: This type of management refers to the process of
creating utilities. When you convert raw materials to finished products and
oversee the planning and regulation, you’re engaging in production
management. Without production, there isn’t any finished good or service and
without it, organizations can’t generate profits. The final product must fulfil
customer requirements. The process includes quality control, research and
development, plan layout and simplification.
 Office Management: This includes controlling and coordinating all office
activities to achieve an organization’s goals and targets. For example, an
administration’s efficiency impacts a business significantly. The more organized
the departments and responsibilities are, the more effective an organization is.

1.4 SIGNIFICANCE OF MANAGEMENT

Management is an integral part of an organization without management everything
will be at the chaos. A business rises because of its management and if fails it will be
because of management. The importance of management can be understood from
the following.
1. Management helps in achieving goals: An organization have certain goals
that it expects to be achieved, management helps to achieve these goals
through the employees of the organization.
2. Management increases efficiency: Management helps to increase the
efficiency of the organization by reducing cost and improving productivity, it
does so through better planning, organizing, directing, staffing and controlling
the activities.

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 3. Management creates a dynamic organization: A business runs in an
environment that is ever-changing. People resist change and it’s the duty of the
management to help people by introducing them to the benefits of these
changes so that the organization is able to maintain its competitive edge.
4. Management helps in achieving personal objectives: A manager motivates
and leads his team in such a manner that individuals are able to achieve
personal goals while contributing to the organizational objectives.
5. Management helps in the development of society: An organization has
various goals which it needs to fulfil. In the process of fulfilling all its goal
organization helps in the development of society.
 Provides good quality products at reasonable price.
 Creates employment opportunities.
 Introduce new technology for greater good of the society.

1.5 FUNCTIONS OF MANAGEMENT

Different experts have classified functions of management. According to George &
Jerry, “There are four fundamental functions of management i.e. planning, organizing,
actuating and controlling”.
According to Henry Fayol, “To manage is to forecast and plan, to organize, to
command, & to control”. Fayol has grouped the elements into five managerial
functions: planning, organizing, commanding, coordinating, and controlling.
Whereas Luther Gullick has given a keyword ’POSDCORB’ where P stands for
Planning, O for Organizing, S for Staffing, D for Directing, Co for Co-ordination, R for
reporting & B for Budgeting. But the most widely accepted are functions of
management as given by Herald Koontz and O’Donnell are:
Planning, Organizing, Staffing, Directing and Controlling.

For theoretical purposes, it may be convenient to separate the function of

management but practically these functions are overlapping in nature i.e. they are
highly inseparable. Each function blends into the other & each affects the performance
of others.

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Planning: It is the basic function of management. It deals with chalking out a future
course of action & deciding in advance the most appropriate course of actions for
achievement of pre-determined goals. According to Koontz, “Planning is deciding in
advance - what to do, when to do & how to do. It bridges the gap from where we are
& where we want to be”. Thus, planning is a systematic thinking about ways & means
for accomplishment of pre-determined goals. Planning is necessary to ensure proper
utilization of human & non-human resources. It is all pervasive, it is an intellectual
activity and it also helps in avoiding confusion, uncertainties, risks, wastages etc.

Organizing: It is the process of bringing together physical, financial and human

resources and developing productive relationship amongst them for achievement of
organizational goals. 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”. To organize a business involves determining & providing human and
non-human resources to the organizational structure. Organizing as a process
involves:
 Identification of activities.
 Classification of grouping of activities.
 Assignment of duties.
 Delegation of authority and creation of responsibility.
 Coordinating authority and responsibility relationships.

Staffing: It is the function of manning the organization structure and keeping it

manned. Staffing has assumed greater importance in the recent years due to
advancement of technology, increase in size of business, complexity of human
behaviour etc. The main purpose o staffing is to put right man on right job. Staffing
involves:
 Manpower Planning (estimating man power in terms of searching,
choose the person and giving the right place).
 Recruitment, Selection & Placement.
 Training & Development.
 Remuneration.
 Performance Appraisal.
 Promotions & Transfer.

Directing: It is that part of managerial function which motivates the organizational

methods to work efficiently for achievement of organizational purposes. It is
considered life-spark of the enterprise which sets it in motion the action of people
because planning, organizing and staffing are the mere preparations for doing the
work. Direction deals directly with influencing, guiding, supervising, motivating sub-
ordinate for the achievement of organizational goals. Direction has following elements:

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  Supervision – implies overseeing the work of subordinates by their superiors. It
is the act of watching & directing work & workers.
 Motivation – means inspiring, stimulating or encouraging the sub-ordinates with
zeal to work. Positive, negative, monetary, non-monetary incentives may be
used for this purpose.
 Leadership – may be defined as a process by which manager guides and
influences the work of subordinates in desired direction.
 Communications – is the process of passing information, experience, opinion
etc from one person to another. It is a bridge of understanding.

Controlling: It implies measurement of accomplishment against the standards and

correction of deviation if any to ensure achievement of organizational goals. The
purpose of controlling is to ensure that everything occurs in conformities with the
standards. An efficient system of control helps to predict deviations before they
actually occur. According to Koontz & O’Donnell “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”.
Therefore controlling has following steps:
 Establishment of standard performance.
 Measurement of actual performance.
 Comparison of actual performance with the standards and finding out deviation
if any.
 Corrective action.

1.6 MANAGEMENT: ART OR SCIENCE OR PROFESSION

To decide whether management is science, art or profession, one has to comprehend
the characteristics and definitions of science, art and profession and associate them
with management definition and traits.
Management as a Science
The basic characteristics of pure science, such as physics or chemistry are as follows:
 Science must have a body of knowledge, which is logical, reasonable and
rational.
 Scientific theory and inferences must be falsifiable. This means that these
theories are capable of being tested and verified.
 Scientific experiments must be repeatable under similar circumstances. This
means that the results of the study should be the same under identical
conditions.

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  Science assumes that the laws of nature are universal. This means that
scientific principles, laws and observation are applicable in all circumstances
without any limitations.
 Science requires constant efforts at objectivity.
With these characteristics in the background, we shall now see the arguments for and
against management as a science.
Arguments for management as a science — Over a period of time, management
has developed its own theory in the form of scientific principles and rules. Early
management experts like Taylor, Max Weber and Henry Fayol have significantly
contributed to the development of management theory. These principles and rules
aimed at achieving required efficiency in productivity in normal circumstances on a
continuous basis. At a later stage, efforts were made toward establishing management
as a system science. As a result of these and other related works, managers are now
able to utilize a systematized body of knowledge to tackle management problems and
issues. They are now able to adopt scientific methods to solve recurring managerial
problems, thereby making management eligible to be called a science.
Arguments against management as a science — Management discipline has
equally strong reasons to reject claims that management is a science. For instance,
unlike scientific theory, management theory cannot show up the same results every
time it is used or tested. This is primarily because management has to deal with human
behaviour, which is highly unpredictable. Thus, management cannot guarantee
continuous success in its application, especially in social and economic organizations.
Moreover, managers often use their personal intuitions, past experiences and
incidents in the decision-making process and this clearly contravenes the rules of
science. Finally, management principles are bound to change continuously even on a
day to day basis due to frequent changes in human behaviour.
Management as an Art
If organized knowledge is called a science, then practising such knowledge in the real
world to achieve the desired result is an art. Management experts like Mary Parker
Follet and Harold Koontz describe management as the art of getting things done.
Management as an art involves application of managerial rules and principles as well
as managers’ abilities, experiences, wisdom and expertise in decision-making
activities. Since managers often use their instinct, experiences and individual insight
in making decisions, it may be apt to describe management as an art. Moreover, the
success of managerial decisions is often determined by managers’ efficiency in human
relations, conceptual and time management skills.
Management is both science and Art
The unpredictable nature of the human elements involved in the decision- making
process makes management more of an art rather than a science. This is because the
mere possession of textbook knowledge may not be of much help to managers in
handling different situations especially when the cooperation of subordinates and
colleagues is critical in goal achievement. However, it is not possible to improve the

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practices of any discipline without any improvement in its theory. This is equally
applicable for management too.
In the absence of any organized knowledge for guidance, managers may be
compelled to adopt a trial-and-error method for every managerial decision. Thus,
science and art need not be mutually exclusive in making up management; instead,
they should be complementary. The core elements of science and art; namely,
education and experience are equally important for managers to achieve success in
management.
Understandably, many management experts now firmly believe that management is
partly science and partly art. They compare science and art to management as
just two sides of the same coin.
Management as a Profession
To recognize any job as a profession, it should fulfil certain criteria. McFarland gives
the following characteristics of a profession:
1. Existence of an organised and systematic knowledge
2. Formalised methods of acquiring training and experience
3. Existence of an association with professionalisation as its goal
4. Existence of an ethical code to regulate the behaviour of the members of the
profession
5. Charging of fees based on service, but with due regard for the priority of service
over the desire for monetary reward
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. There is no uniform code of conduct or licensing of managers.
Further, the entry to managerial jobs is not restricted to individuals with a special
academic degree only. In the light of this analysis we can conclude that management
cannot be fully called a profession.
Surely, management has a well-developed and highly specialized knowledge base.
Similarly, modern and resourceful statistical tools are also available to assist
managers in the decision-making process. Further, managers acquire skills and
knowledge through formal education and training processes. All these factors move
management much closer to be called a profession.

1.7 ADMINISTRATION VS MANAGEMENT

Management is defined as an act of managing people and their work, for achieving a
common goal by using the organization’s resources. Planning, organizing, leading,
motivating, controlling, coordination and decision making are the major activities
performed by the management. It is a result oriented activity, which focuses on
achieving the desired output. The main function of administration is the formation of
plans, policies, and procedures, setting up of goals and objectives, enforcing rules and

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regulations, etc. Administration lays down the fundamental framework of an
organization, within which the management of the organization functions.

BASIS FOR MANAGEMENT ADMINISTRATION

COMPARISON

Meaning An organized way of managing The process of administering an

people and things of a business organization by a group of
organization is called the people is known as the
Management. Administration.
Authority Middle and Lower Level Top level
Role Executive Decisive
Concerned with Policy Implementation Policy Formulation
Area of It works under administration. It has full control over the
operation activities of the organization.
Applicable to Profit making organizations, i.e. Government offices, military,
business organizations. clubs, business enterprises,
hospitals, religious and
educational organizations.
Decides Who will do the work? And How What should be done? And
will it be done? When is should be done?
Work Putting plans and policies into Formulation of plans, framing
actions. policies and setting objectives
Focus on Managing work Making best possible allocation
of limited resources.
Key person Manager Administrator
Represents Employees, who work for Owners, who get a return on the
remuneration capital invested by them.
Function Executive and Governing Legislative and Determinative

1.8 SCHOOLS OF MANAGEMENT: CONTRIBUTIONS OF F.W.

TAYLOR, HENRY FAYOL, ELTON MAYO
Even though the practice of management is ancient, management as a formal study
is comparatively a recent phenomenon. The late 19th and early 20th centuries have
witnessed some important developments in the field of management. For instance,
renowned management theories such as the scientific management theory and the
general administrative theory were introduced during this period only. Since then,

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several other approaches to management have also been developed by management
writers and practitioners.
F.W. TAYLOR’S SCIENTIFIC MANAGEMENT
The earliest attempt to study, understand and perform management in a scientific and
systematic manner was made by Frederick Winslow Taylor (1856−1915). He has been
acknowledged as the father of scientific management for replacing informal rule of
thumb and intuition with scientific management principles and techniques. Taylor
insists that there is “one right way” available for performing the job in the most efficient
manner. Taylor also employed scientific analysis and experiments to develop that “one
right way” in task accomplishment.
The scientific management principles recommended by Taylor are:
1. Replacement of the rule of thumb with true science in management —
undertaking a scientific study of tasks to determine the best methods for
performing each element of a job.
2. Replacement of self-training with scientific training — scientific selection,
training, teaching and development of each worker.
3. Hearty cooperation between the employer and employees — ensuring
complete cooperation of workers so that all work is carried out in conformity
with the scientific principles developed.
4. Equal distribution of work and responsibility — dividing the work and
responsibility nearly equally between the management and workers instead of
assigning all the work and a greater part of responsibility to the workers. For
instance, the management can do the work (such as planning the tasks) for
which it is better-suited and the workers can execute those tasks.
In order to ensure that such objectives are achieved, Taylor suggested two important
managerial practices: the piece-rate incentive system and time and motion study.
The piece-rate incentive system rewards the worker who produces maximum output.
This system requires workers to perform at some pre-decided standard rate to earn
their base wages. Standards are decided using time and motion study. If workers are
able to produce more, then in addition to their base rate they get incentives on the
number of excess units produced over and above the standard units. This serves the
interest of workers as well as management — workers feel motivated to maximize their
earnings, while management gets the benefit of increased productivity.
Time and motion study, as already pointed out, facilitates the determination of the
standard time required for performing a job. Motion study, on the other hand, involves
study of movements in doing a job in parts. It eliminates wasteful movements and
retains only the necessary ones. Thus, it makes a job simple, easier, and better.
Some of the drawbacks of scientific management are:
 The basic principles of scientific management revolve around operations
problems and do not focus on managerial issues, essential for managing an

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 organization. That is why it is often said that it is more focused on engineering
than on management.
 The assumptions of this theory about people in general are that they are rational
and primarily driven by their desire to fulfil material gains. Only the economic
and physical needs of people are emphasized, to the exclusion of their social
needs.
 This theory also ignores the human desire for job satisfaction.

HENRY FAYOL’S ADMINISTRATIVE THEORY

The French industrialist Fayol, through his pioneering work General and Industrial
Management published in English in 1949, explained that satisfactory results can be
achieved with scientific forecasting and proper methods of management. At the outset,
Fayol classified the business operations of an organization into six activities and then
outlined 14 principles of management. The six activities are:
1. Technical: It is concerned with production and manufacturing.
2. Commercial: It includes all activities related to buying, selling, and exchange.
3. Financial: It ensures optimal use of capital.
4. Security: It ensures the protection of employees and property.
5. Accounting: It is concerned with costs, profi ts and liabilities, maintaining
balance sheets, and compiling statistics.
6. Managerial: It is a functional approach to management and is concerned with
planning, organizing, commanding, coordinating, and controlling.
After detailing all these activities, Fayol primarily focused on the managerial activities
and outlined 14 principles to achieve efficiency. These 14 principles are as follows:
1. Division of labour: This refers to the splitting up of the productive process into
different components or parts. Division of labour leads to specialization as each
worker performs the same tasks with increased frequency. This specialization,
in turn, helps them in achieving higher output with the same efforts.
2. Authority: It is the right to give orders. Authority is essential for managers to
get the work done through workers. However, the managers’ authority must be
accompanied by the corresponding responsibility.
3. Discipline: It is the workers’ observance of rules and regulations of the
organization and also their agreements made with the management. In this
regard, Fayol insisted on fair and clear agreements, well-judged punishments
and presence of good supervisors at all levels.
4. Unity of command: It refers to employees receiving instructions from only one
supervisor while executing their tasks. In the event of an employee receiving
orders from multiple supervisors or managerial authority, employee discipline
and organizational stability may be affected.

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5. Unity of direction: It refers to the presence of one head (leader) and one plan
to guide all the organizational or group activities that have the same purpose
and common goal. This should avoid any possible confusion and inconsistency
in the messages and instructions given to the employees.
6. Subordination of individual interest to general interest: It means that the
interest of an individual employee should not take precedence over the overall
organizational interest. If there is any conflict between the interest of an
individual employee and that of the organization, employees should sacrifice
their own interest for the sake of the well-being of the organization as a whole.
7. Remuneration: It refers to the fixation of remuneration in such a way that it
satisfies not only the employees but also their employers. While compensating
the employees for their work, the business conditions of the organization, value
of employees and mode of payment should be given adequate consideration.
8. Centralization: It is the degree to which employees are involved in decision
making. Each organization has a certain degree of centralization depending on
its size and the skill levels of its managers. The degree of centralization
increases when the subordinates are less involved in decision making. In
contrast, the degree of decentralization increases when employees are more
involved in such decisions.
9. Scalar chain: It refers to the line of authority that flows from the top
management to the lowest ranks in the organizational structure. In normal
circumstances, all messages and orders must pass through a scalar chain. Yet,
when quick communication is required, a direct link (called gang plank) may be
established by sidestepping the scalar chain.
10. Order: It refers to the arrangement of people and material in the organization.
Order may be classified into human order and material order. A proper place
for everyone and everyone in his/her place is the meaning of human order. A
proper place for everything and everything in its place is the meaning of material
order.
11. Equity: It refers to the warmth, justice, kindness and friendliness in the
relationship between the employee and employer. In this regard, managers
must treat all employees equally and impartially to inspire their confidence and
faith.
12. Stability of tenure of employees: It refers to the time to be allowed to
employees to become familiar with their jobs and to be efficient in performing
them. Organizational plans and policies must allow sufficient time for
employees to settle in their jobs.
13. Initiative: It refers to the capability of the employees to design, develop and act
on the plans successfully. Management must encourage employees to take
initiatives within the limits of their authority to invent new ideas, try new
experiments and develop better techniques of job performance.

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 14. Esprit de corps: It refers to team spirit, harmony and unity among employees.
Management must believe in the principle, “Union is strength,” and develop a
sense of belonging and oneness among the employees.

Limitations of Administrative Theory

 One can find an equally plausible and acceptable contradictory principle.
 These principles are based on few case studies only and have not been tested
empirically.
 Formation of mechanistic organization structures which are insensitive to
employees’ social and psychological needs.
 These principles are based on the assumption that organizations are closed
systems, whereas organizations are open systems.

ELTON MAYO’S HUMAN RELATIONS MOVEMENT

The human relations movement emerged in part because managers found that
Taylor’s scientific management and Fayol’s administrative management did not
achieve complete production efficiency and work place harmony. There was an
increased interest in helping managers deal more effectively with the “people side” of
their organizations. The real inspiration for the human relations movement, however,
came from the Hawthorne experiments undertaken by Elton Mayo (1880−1949), a
Harvard Business School professor, and his team.
Contributions of Human Relations Movement
 A business organization is techno-economic as well as social system.
 There is no correlation between improved working conditions and high
production.
 A worker not only work for money but also for non-financial rewards that
significantly affect his behaviour and the effect of economic incentive plan.
 Employee-centred, democratic and participative style of leadership is more
effective than task-centred leadership.
 The informal group and not the individual is the dominant unit of analysis in
organizations.
Limitations of Human Relations Movement
 The human relations writers saw only the human variable as critical and ignored
other variables.
 It is always possible to find a solution which satisfies everybody is not correct.
 Over-emphasizes the importance of symbolic rewards and underplays the role
of material rewards.
 Provides an unrealistic picture about informal groups by describing them as a
major source of satisfaction for workers.
 Makes an unrealistic demand on the superior to give up his desire for power.

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1.9 ROLES OF MANAGERS
A senior manager who occupies different positions in different situations plays different
roles because people in each situation have different expectations of him concerning
his functions. According to Mintzberg, a senior manager should be regarded as playing
the following ten different roles.
Interpersonal Roles
 Figurehead: In this role, every manager has to perform some duties of a
ceremonial nature, such as greeting the touring dignitaries, attending the
wedding of an employee, taking an important customer to lunch and so on.
 Leader: As a leader, every manager must motivate and encourage his
employees. He must also try to reconcile their individual needs with the goals
of the organisation.
 Liaison: In this role of liaison, every manager must cultivate contacts outside
his vertical chain of command to collect information useful for his organisation.
Informational Roles
 Monitor: As monitor, the manager has to perpetually scan his environment for
information, interrogate his liaison contacts and his subordinates, and receive
unsolicited information, much of it as a result of the network of personal contacts
he has developed.
 Disseminator: In the role of a disseminator, the manager passes some of his
privileged information directly to his key subordinates who would otherwise
have no access to it.
 Spokesman: A manager is also required nowadays, to spend a part of his time
in representing his organisation before various outside groups, which have
some stake in the organisation. These stakeholders can be government
officials, labour unions, financial institutions, suppliers, customers, etc. They
wield influence over the organisation. The manager must win their support by
effectively managing the social impact of his organisation.
Decisional Roles
 Entrepreneur: In this role, the manager does not merely adapt to his
surrounding situation but proactively looks out for innovation to make things
happen. Thus, when demand for his product falls off the manager does not cut
back his production but seeks new outlets or new products in order to maintain
production.
 Disturbance Handler: In this role, the manager has to work reactively like a fire
fighter. He must seek solutions of various unanticipated problems — a strike
may loom large, a major customer may go bankrupt, a supplier may renege on
his contract, and so on.
 Resource Allocator: In this role, the manager must divide work and delegate
authority among his subordinates. He must decide who will get what.

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  Negotiator: The manager at all levels has to spend considerable time in
negotiations. Thus, the president of a company may negotiate with the union
leaders a new strike issue, the foreman may negotiate with the workers a
grievance problem, and so on.

1.10 SOCIAL RESPONSIBILITY

Apart from profit-making, organizations perform numerous social functions since they
are a part of the society. The obligation of any business to protect and serve public
interests is known as social responsibility of business.
Social responsibility requires an organization to take care of the stakeholders who are
instrumental to the existence of the organization. Social responsibility, therefore,
implies that an organization must not harm the society at large while it does its
business activities.
“Social responsibility can be defined as a business intention beyond its legal and
economic obligations to do the right things and act in ways that are good for society.”
— R. A. Bucchoiz
“Corporate social responsibility is the organization’s obligation to maximize its positive
impact and minimize its negative effects in being a contributing member to society,
with concern for society’s long-term needs and wants.” — G. P. Lantos
Importance of Social Responsibility for Business
 It creates goodwill for the business among the public.
 It creates a positive public image.
 It helps in long-term survival and growth of business.
 It provides satisfaction to employees and this factor is directly related to
productivity.
 Consumers become more conscious about their rights.
Need for Social Responsibility of Business
Organizations need to demonstrate their social responsibilities to various stakeholders
by complying with the following aspects:
 Ensuring reasonable returns on investment to investors/shareholders
 Prompt repayment of loans to financial institutions
 Paying salaries and ensuring social security to employees
 Providing care and comforts to employees at the workplace and meeting
statutory requirements like holidays, maternity leave, sick leave, and overtime
payment
 Payment of taxes to the government

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Arguments for Social Involvement of Business
1. Public needs have changed, leading to changed expectations. Business, it is
suggested, received its charter from society and consequently has to respond
to the needs of society.
2. The creation of a better social environment benefits both society and business.
Society gains through better neighbourhoods and employment opportunities;
business benefits from a better community, since the community is the source
of its workforce and the consumer of its products and services.
3. Social involvement discourages government regulation and intervention. The
result is greater freedom and more flexibility in decision-making for business.
4. Business has a great deal of power that, it is reasoned, should be accompanied
by an equal amount of responsibility.
5. Modern society is an interdependent system, and the internal activities of the
enterprise have an impact on the external environment.
6. Social involvement may be in the interests of stockholders.
7. Problems can become profits. Items that may once have been considered
waste (e.g., empty soft-drink cans) can be profitably used again.
8. Social involvement creates a favorable public image. As a result, the firm may
attract customers, employees, and investors.
9. Business should try to solve the problems that other institutions have not been
able to solve. After all, business has a history of coming up with novel ideas.
10. Business has the resources. Specifically, business should use the talents of its
managers and specialists, as well as its capital resources, to solve some of
society’s problems.
Arguments against Social Involvement of Business
1. The primary task of business is to maximize profit by focusing strictly on
economic activities. Social involvement could reduce economic efficiency.
2. In the final analysis, society must pay for the social involvement of business
through higher prices. Social involvement would create excessive costs for
business, which cannot commit its resources to social action.
3. The cost of social programs, the reasoning goes, would have to be added to
the price of the product. Thus, socially involved companies selling in
international markets would be at a disadvantage when competing with
companies from other countries that do not have these social costs to bear.
4. Business has enough power, and additional social involvement would further
increase its power and influence.

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5. Businesspeople lack the social skills to deal with the problems of society. Their
training and experience are with economic matters, and their skills may not be
pertinent to social problems.
6. There is a lack of accountability of business to society. Unless accountability
can be established, business should not get involved.
7. There is not full support for involvement in social actions. Consequently,
disagreements among groups with different viewpoints will cause friction.

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