MANAGEMENT

PRINCIPLES
AND
APPLICATIONS

REVISION NOTES
Prepared by: Adab Mehta

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 Unit 1 Introduction
1.1 Concept, Nature and Scope of Management

MEANING OF MANAGEMENT
1. Management is the art of getting things done through people
2. Management is Concerned with Ideas, Things and People
3. Management is the Effective Utilisation of Human and Material Resources to Achieve the
Enterprise Objectives

CONCEPTS/CONTEXTS OF MANAGEMENT

1. Management as an economic resource

2. Management as a class or group
3. Management as a system of authority
4. Management as a separate discipline
5. Management as a process

CHARACTERISTICS OF MANAGEMENT
1. Management is a universal process
2. Management is purposeful
3. Management is creative
4. Management is an integrative force
5. Management is a group phenomenon
6. Management is a social process
7. Management is multidisciplinary
8. Management is a continuous process
9. Management is intangible
10. Management is both a science and an art (nature)
The practice of management is an art. The principles of management constitute the science.
Managers can work better if their practice (art) is based on the principles (science). Management
as an art and a science are therefore not mutually exclusive, but complement each other.

Management as an art Management as a science: Management as a profession:

1. Existence of theoretical 1. Systematised body of 1. Body of knowledge

knowledge knowledge 2. Restricted entry
2. Personalised application 2. Principles based on 3. Professional association
3. Based on practice and experimentation 4. Ethical code of conduct
creativity 3. Universal validity 5. Service motive
 MANAGEMENT VS ADMINISTRATION
3 POVs:
1. Administration is above management (American POV: McFarland, Sheldon)
Administration is a determinative function while management is an executive function
2. Administration is a part of management (British POV: Brech, Kimball and Kimball)
management is generic term; administration is part involving execution and control
3. Administration and management are the same (Henry Fayol, Koontz and O’Donnell)
All organisations have same functions, follow general principles, apply common science

Hence, Management and administration are based upon the same set of
principles and functions. We can make a theoretical distinction but not
in real practice.
We may classify management into:
(i) Administrative management (determining plan and objectives)
(ii) Operative management (executing plans to achieve objectives)
Every manager performs both functions, time spent may differ.

IMPORTANCE OF MANAGEMENT
1. Achieving group goals 5. Development of society
2. Optimum utilization of resources 6. Creates dynamic organisation
3. Brings coordination 7. Increases efficiency
4. Personal objectives
 NEED OF MANAGEMENT
1. Growing size and complexity of business.
2. Increasing specialisation of work.
3. Cut throat competition in the market.
4. Growing unionisation of labour.
5. Sophisticated and capital-intensive technology.
6. Increasing complexity of business decisions.
7. Growing regulation of business by the Government.
8. Need for research and development.
9. Turbulent environment of business.
10. Need for reconciling the interests of various groups (owners, workers, customers)
11. Need for optimum utilisation of scarce resources.

Q. Management makes all the difference in the quality of life between nations and is hence an essential
instrument of human progress and keystone of modern society. Comment on the given statement.
Ans.
o Management is equally important at the national level. It is an agent of change and economic growth. The prosperity,
power and prestige of a nation depends upon the competence and dedication of its managers and administrators.
o President Roosevelt of U.S.A. once said: "a government without good management is a house built on sand."
Management makes a significant social contribution by supplying goods and services, employment, tax revenue, etc.
Management is an important organ of an industrial society.
o A developing country like India cannot realise its twin objectives of economic growth and social justice without a
well-organised management system. The root cause of India's backwardness lies in the under-utilisation and
misutilisation of the country's resources.
o Management aims at the optimum utilisation of available resources to secure productive performance.
o Managers are true leaders of the economic machinery of a nation. Dedicated and professional managers can convert the
tremendous latent energy of people into wealth. Management is the key for unlocking forces of economic growth.
 CHAPTER 2
MANAGERIAL FUNCTIONS

INTER-RELATIONSHIP OF MANAGERIAL FUNCTIONS

§ Management process (sum total of managerial functions) is a
composite, circular, continuous process
§ Every function contains elements of other functions. Each function
blends into the other and provides input for the other functions.
{When a manager develops plans he is also involved in organising to carry
out the plans and methods of control. Planning provides standards for
control. Organising helps to determine who should take corrective
action (control). Directing sets the tone for the level of achievement, better
organising ensures better direction and control}
§ Every operative function (purchasing, finance, production,
marketing) requires planning, organising. staffing, directing and
controlling. Each manager is in charge of a functional area and
performs all managerial functions.
The relationship between various functions of management may be described as an analogy. If management is a
human body, planning constitutes its brain, organisation is its nervous system, direction makes up the
respiratory organ, and control stands for the eyes
MANAGERIAL FUNCTIONS AND MANAGERIAL LEVELS
The relative significance of different functions may not
be the same at all levels of management. The time
spent on various functions differ.
SKILLS OF A MANAGER
1. Technical skills- job related (specialised proficiency, ability
to use tools, equipment, techniques of specific tasks e.g.
operating a computer)
2. Human skills- persons related (work both individually and in
group, cooperation, motivate each other, understanding,
conflict resolution)
3. Conceptual skills- ideas related (ability to visualise
organisation as whole and the inter-relationships between its
parts, mental ability to coordinate and integrate organisation’s
interest, far sightedness, dynamic view of environment

ROLES OF A MANAGER (Henry Mintzberg)

 MANAGERIAL COMPETENCIES

Competence is what distinguishes a successful manager from an average one. Competencies may include
combination of personality traits, skills, knowledge. So competency is a broader concept than skill.

UK /Work -oriented/output Approach: Under this approach, competency is defined as a set of

behaviour patterns that help employees perform tasks effectively. Occupational standards are set as
benchmarks, used to train managers. But identification of work activities doesn’t indicate appropriate
benchmark attributes. It was faced criticism for its 'one size fits all' approach. And that it just increased
paperwork.

US /Worker-oriented/input Approach by David McClelland and Richard Boyatzis stated that

competence is an underlying characteristic causally related to superior performance.
Boyatzis identifies a number of competencies which were categorized into six clusters.
3 Threshold competencies (required for performing the job properly)
1 Expertise and experience
2. Knowledge (functional and metacognitive knowledge)
3. Basic cognitive competency (memory and deductive reasoning)
3 Distinguishing competencies that differentiate outstanding from average manager
4. Cognitive intelligence competencies (systems thinking and pattern recognition)
5. Emotional intelligence competencies (self-awareness and self-management)
6. Social intelligence competencies (empathy and teamwork)

Significance of Competencies Framework

§ Competency is a versatile tool to understand what make some managers more successful than others.
§ The emotional, social, and cognitive intelligence competencies help in linking personality to action
and job performance.
§ Competencies also help in performance appraisal and feedback.
§ Competencies help attaining high quality work and making the managers more effective.
§ In today's complex and dynamic environment, implementation of strategies is vital for the managers so
competencies can help in recruiting and training managers who are actually capable to deal this.
§ Modern enterprises adopt competencies models as a way to enhance their competitiveness
 CHAPTER 3
COORDINATION
Coordination is the process whereby an executive develops an orderly pattern of group efforts among his
subordinates and secures unity of action in the pursuit of common purpose -McFarland
Coordination is the orderly synchronising of efforts of subordinates to provide proper amount, timing and
quality of execution so that their united efforts lead to the stated objectives, namely, the common purpose
of the enterprise -Haimann
Nature/features:
§ Coordination is not a distinct function but the very essence of management.
§ Coordination integrates group efforts
§ Coordination ensures unity of action:
§ Coordination is a continuous process:
§ Coordination is an all pervasive function:
§ Coordination is the responsibility of all managers
§ Coordination is a deliberate function

Balancing, timing and integrating are the three elements of coordination.

Cooperation vs Coordination:
Meanings: Cooperation is collective voluntary efforts of people to achieve some objective i.e. willingness
to help. Coordination is much more inclusive as it is a conscious effort to bring unity of action. It requires
concurrence of purpose, harmony of effort and concerted action.
Main Difference: Cooperation has no time, quantity or direction elements but coordination has.
Interdependence: Cooperation provides the foundation for coordination by enlisting voluntarily efforts.
Cooperation facilitates coordination but by itself it cannot guarantee cooperation.
For example, 5 people willing to move a cupboard is cooperation. But they cannot do it unless
coordination is brought by someone who can ensure the right amount of effort in right place and at right
time.
Need:
1. Increasing size and complexity of business
2. Specialisation
Advantages:
3. Clash of interests
4. Different outlook
1. Synergic effect
5. Interdependence of units 2. Better human relations
6. Conflicts 3. Unity of direction
7. Empire building 4. Organisational effectiveness
8. Personal jealousies/rivalries 5. Quintessence of management
 Types
1. Internal and external
Internal: b/w different units in organisation, external: b/w organisation and external environment
2. Vertical and horizontal
Vertical: b/w different levels, horizontal: b/w different departments/units on same level
3. Procedural and substantive
Procedural: general description of relationships of members in organisation specifying line of
authority, substantive: content of activities in organisation e.g. in car manufacturing, org. chart is
procedural coordination while blue print of car engine block is substantive.

PRINCIPLES OF COORDINATION (Requisites for effective coordination)

1. Direct contact direct communication, face to face exchange of ideas
2. Early start mutual consultation, participation in early planning stages itself
3. Reciprocal relationship interdependent relationship in elements, avoids unilateral action
4. Continuity ongoing/never-ending, not based on fire-fighting i.e. solving conflicts as they arise but
preventing in advance their occurrence.

TECHNIQUES OR MECHANISMS OF COORDINATION

1. Sound planning 6. Chain of command
2. Simplified organisation 7. Indoctrination and incentives:
3. Effective communication: 8. Liaison departments:
4. Effective leadership and supervision 9. General staff
5. Standardisation: 10. Voluntary coordination

COORDINATION AS ESSENCE OF MANAGEMENT

Coordination is the result of the process of management. Every function of management
contributes to coordination. This relationship between managerial functions and management:
Coordination through planning: integrating the plans of different departments, mutual
consultation and participation of all people involved in the plans
Coordination through organising: Related activities should be grouped under one head,
understanding as to who is to do what, vertical and horizontal coordination by clear-cut authority
relationships.
Coordination through staffing: Keeping right number of personnel with the right type of
training working at the right jobs promotes voluntary cooperation and coordination.
Coordination through direction: Supervision, leadership, motivation and communication help to
influence behaviour of subordinates so as to develop unity of action and efforts.. Continuous
flow of communication creates mutual cooperation and coordination.
Coordination through control: Frequent evaluation of performance is helpful in synchronising
efforts of the subordinates. Corrective action brings about harmony between plans and
performance
 CHAPTER 4
EVOLUTION OF MANAGEMENT THOUGHT

CLASSICAL APPROACH
1. Management is a process consisting of interrelated functions performed to achieve the desired goals.
2. Principles or guidelines are derived from the experience of managers
3. These principles are basic truths which can be applied in different organizations to improve managerial
efficiency.
4. Managers can be developed through formal education and training.
5. People are motivated mainly by incentives and penalties. Therefore managers use control and rewards
6. Theoretical research into management helps to develop a body of knowledge which improves the art of
management.
7. There should be no conflict between individuals and the organisation. In case of conflict interests of the
organisation should prevail.
Uses
1. The observational method is helpful to draw common principles out of past experiences with some
relevance for future application.
2. it focuses attention on what mangers actually do.
3. it highlights the universal nature of management.
4. Provides a scientific basis for management practice.
5. Provides a starting point for researchers to verify the validity and improve the applicability of
management knowledge.
6. Provides a foundation on which the science of management can be built.
7. helps in framework for education and training of managers.
Limitations
1. Mechanistic framework, undermines the role of human factor.
2. Environmental dynamics and their effect on management have been discounted (ignored).
3. Danger in relying too much on past experiences because it may not fit a situation of the future.
4. Totality of the real situation can’t always be incorporated in a case study.
5. Based on over- simplified assumptions. Its principles are ambiguous and contradictory.

Classical approach is based on three main pillars - bureaucracy, scientific management and
administrative theory.
 Bureaucracy-Max Weber
Features:
1. Division of work: Tasks divided into specialized jobs
2. Rules and regulations: rigorous rules and regulations to govern the work behaviour, rights and duties,
brings discipline and control
3. Hierarchy of authority: clearly-defined hierarchy created by downward delegation of authority to give
commands
4. Technical competence: Qualifications are prescribed and training is given to provide knowledge
5. Record-keeping: Every decision and action is recorded as the memory of the organisation
6. Impersonal relations: Relations among the members of a bureaucratic organization
are impersonal and formal.

According to Weber there are three types of legitimate authority in organisations:

(i) Traditional authority: authority which a person acquires because he belongs to a particular class or
occupies a position e.g. member of a royal family.
(ii) Rational-legal authority: This type of authority is vested in a legally established position or rank within
the organisation's hierarchy, e.g. chief executive of a company.
(iii) Charismatic authority: People obey a person due to their belief that the person has some special power or
appeal.
(Weber considers rational legal authority as the most important. Traditional authority overlooks competence of
the leader whereas charismatic authority is very emotional and irrational)

Advantages of Bureaucracy
1. Specialisation: Every member is assigned a specific task which makes them specialised in it.
2. Structure: A structural form is created by specifying reporting relationships in a command hierarchy.
3. Rationality: By prescribing in advance the criteria for decision-making, better decisions are made
4. Predictability: The rules, regulations, specialization, structure and training impart predictability and
thereby ensure stability in the organization.
5. Democracy: guided by the prescribed rules, policies and not patronage or other privilege treatment.
Limitations of Bureaucracy
1. Rigidity: Rules and regulations are rigid and inflexible bringing resistance to change and discouraging
initiative and creativity
2. Impersonality: endorses a mechanical way of doing things. Organizational rules and regulations are given
priority over individual's needs and emotions.
3. Compartmentalization of activities: Jobs are divided into watertight categories, hamper co-operation and
coordination between various sub-units of the organization.
4. Paperwork: excessive paperwork leads to great wastage of time, stationery and space.
5. Empire building: People in a bureaucracy tend to use their positions for self-interest. Every superior tries
to increase the number of his subordinates as it becomes a symbol of more power and prestige.
6. Red Tape: bureaucratic procedures involve delays, frustration as there is buck passing.
 Scientific Management - F.W. Taylor
• FW Taylor is regarded as the "father of scientific management".
• According to F.W. Taylor, "Scientific management is the art of knowing exactly what want men to do
and seeing that they do it in the best and the cheapest way"
• He advocated scientific study of each job to determine the best way of doing it and convinced managers
to adopt scientific and systematic approach to managerial problems and not rule-of-thumb or trial-and-
error methods.
Principles of Scientific Management
1. Science, not rule of thumb: analysis of job elements to find the best way of doing job and replace
intuition, experience or hit-and-trial methods
2. Harmony, not discord: this involves eliminating any class-conflicts between managers and workers
through mental revolution
3. Cooperation not individualism: an open communication system should exist between managers and
workers. Workers should become part of management. Competition should be replaced by cooperation
4. Development of personnel to his/her greatest efficiency: workers should be scientifically selected and
given work as per their capabilities and interests. Concern for their efficiency will improve efficiency of
organisation in long run.
5. Equal division of work between managers and workers: management should work side by side with
workers, helping, encouraging and smoothing the way for them.
Note on Mental Revolution
Meaning: It refers to change in mindset and thinking attitude of workers and managers towards each other, from
competition to cooperation.
Application: Rather than quarrelling over the share in the resultant surplus, the workers and managers should work in
harmony to maximise the output rather than restricting it. Consequences: This would eliminate the need for any agitation.
This attitude will be good for both of them and also for the company.
Contributions:
Both: Both should realise that they need each another. Both should try to increase size of surplus
Worker: work with devotion and contribute their might so that the company makes profits.
Management: Share a part of surplus with workers.

Techniques of Scientific Management

1. Time study: to establish the standard time required to carry out a job.
2. Motion study: study of the movements to identify and eliminate unnecessary and wasteful movements.
3. Scientific task planning: It is the technique of forecasting, provides answers to questions like what work
is to be done, how it is to be done, where it is to be done, and when it is to be done.
4. Standardisation and simplification: predetermined standards are laid regarding the task, material,
methods, time, quality, cost, and working conditions which helps to simplify work, ensure uniformity and
facilitate comparison
5. Differential piece rate system: for scientific determination of remuneration for workers, Taylor suggested
that a direct link should be created between remuneration and productivity to motivate workers.
Under this system two piece rates are laid:
• one, low rate for those failing to achieve the standard output and
• second higher rate for those achieving or exceeding the standard
leading to significant difference in wages
6. Functional foremanship:

Critical Evaluation
1. Mechanistic approach: ignores the human element, It treats workers as factors of production and not as
human beings. Too much emphasis is placed on technical aspects of work
2. Unrealistic assumptions: focus on physical and economic needs and over-looked the social and ego
needs of people. Workers also want job satisfaction, participation and recognition.
3. Narrow view: focused attention completely on efficiency at the shop floor and theory of industrial
engineering and not management of total organization.
4. Impracticable: Many ideas of Taylor aren’t feasible in practice e.g. functional foremanship violates the
principle of unity of command.
5. Exploitation of labour: In the name of increasing efficiency, workers were forced to speed up affecting
their physical and mental health.

Administrative Theory - Henri Fayol

Fayol classified all business activities into six categories:
(i) Technical (manufacturing or production of products)
(ii) Commercial (buying, selling and exchange)
(iii) Financial (search for and optimum use of capital)
(iv) Accounting(recording including statistics)
(v) Security (protection of persons and property)
(vi) Managerial.
The first five categories are known as the operating activities of business.
According to Fayol, the last category (managerial) has been most neglected and, therefore, he concentrated on
the analysis of managerial activities.
Managerial Functions: functions or elements which constitute the management process are:
1. Planning 2. Organising 3. Commanding 4. Co-ordinating 5. Controlling
General principles of management by Fayol:
1. Division work: work should be divided into small tasks. It leads to specialisation.
2. Authority and responsibility: Wherever authority is exercised responsibility arises.balance should be
maintained between them.
3. Discipline: clear and fair agreements, good supervision and judicious application of penalties.
4. Unity of command: Every employee must receive orders and be accountable to only one boss.
5. Unity of direction: There should be one head and one plan for a group of activities having the same objective.
To ensure unity and coordination
(Unity of command is concerned with grouping of persons
whereas Unity of direction relates to grouping of activities)
6. Subordination of individual to general interests: When there is conflict between the two, the interests of the
organization should prevail over individual interests.
7. Remuneration of personnel: just and fair and should provide maximum possible satisfaction to both
8. Centralization: The degree of concentration of authority should be based upon optimum utilization of all
faculties of the personnel. It should be determined on the basis of individual circumstances in each case.
9. Scalar chain: chain of superiors ranging from the ultimate authority to the lowest level in the organization. if
it is essential to communicate immediately, a gang plank may be created
10. Order: arrangement of things and the placement of people.
• In material order, there should be a place for everything and everything should be in its proper place.
• In social order, there should be an appointed place for everyone and everyone should be in his or her
appointed place.
11. Equity: employees should be treated with justice and kindness, no partiality, helps in cordial relations between
management and workers
12. Stability of tenure of personnel: management must strive to minimize employee turnover.
13. Initiative: Employees should be given the opportunity to have freedom to think while doing work
14. Esprit de corps: unity of effort through harmony of interests
esprit de corps.
Fayol warned that these principles are flexible
guidelines and not hard and fast rules.

o Universality: Fayol was a supporter of the universality of managerial principles. i.e. applicable in all
organizations, valid in all situations (though management practices may differ)
o Managerial Skills: Fayol recognized need for following qualities of a manager:
(i) Physical (ii) Mental (iii) Moral (iv) General education (v) Special knowledge (vi) Experience
o Formal Education and Training: Fayol ridiculed the traditional idea that 'managers are born not made' and
focussed on management training.
 Relevance of Fayol's Principles Today
These are relevant even in today's business scenario. However, some modifications may be needed

Critical Evaluation:
1. Too formal
2. Vague: Some of the concepts have not been properly defined. For example, the principle of division of
work does not tell how the task should be divided.
3. Inconsistency: based on personal experience and limited observations and lack empirical evidence. For
example. the unity of command principle is incompatible with division of work.
4. Pro-management bias: Workers are treated as biological machines or inert instruments in the work
5. Historical value: Fayol's theory was relevant when environment was predictable and less dynamic
 Taylor and Fayol — A Comparison
Taylor concentrated in improving the management of jobs whereas Fayol's main concern was to
improve the management of the total organization. Therefore, Fayol's administrative theory has wider
application than Taylor's scientific management.

Similarities/Complementary Work – Taylor and Fayol

In the words of Urwick, "The work of Taylor and Fayol was essentially complementary”
SIMILARITIES:
• Both realized that solving managerial problems is the key to industrial success.
• Both applied scientific methods to this problem.
• Both aimed at improving efficiency through systematic approach to managerial problems.
• Both developed their theories based on practical experience in industry.
COMPLEMENTARY:
• Taylor worked primarily at the operative level, from the bottom of the industrial hierarchy upwards,
while Fayol concentrated on the managing director and worked downwards was merely a reflection of
their different careers.
According to Theo Haimann, "As long as we refer to Taylor as the 'father of scientific management', we
would do justice to Fayol and his work to call him the 'father of principles of management"
 NEO-CLASSICAL/ BEHAVIOURAL APPROACH
The classical approach failed to recognize the role of people in organisation. Resistance of workers towards
impersonal and formal treatment overlooking their social and psychological needs and need to secure willing
cooperation of workers led to development of neo-classical approach. This approach includes three parts:
1. Hawthorne Experiments 2. Human Relations Movement 3. Behavioural Sciences Thinking

Hawthorne Experiments (conducted by George Elton Mayo- father of neo-classical approach)

1. Illumination experiment: done to assess the effect of illumination on employees output, concluded that
lighting was a minor factor and there were other more important factors influencing the output.
2. Relay assembly test room studies: Productivity increased even when the improvements in working
conditions (shorter working hours, rest periods, hot lunch, friendly and informal supervisors, free
interaction) were withdrawn, concluding that socio-psychological factors, (special attention, recognition,
sense of belonging) have greater influence on productivity than working conditions.
3. Mass interview programme: workers interviewed to know their attitudes and opinions on factors
influencing productivity, found that opportunity to talk freely had positive impact on morale and
productivity.
4. Bank wiring observation room study: In this experiment a group of workers was put under close
observation and the pay was made dependant on the performance of the group as a whole. It was found that
the informal group had its own norms of performance and various forms of social pressure were exercised
to enforce these norms. Hence output didn’t increase despite a group incentive scheme

CONCLUSIONS
1. Work group is not just a techno economic unit but also a social system
2. Workers are not just economic beings motivated by money but also socio-psychological beings
3. More than working conditions it is socio-psychological factor which affect employee behaviour
4. Informal group have their own norms which have overriding influence on attitude, behaviour and
performance, so workers act not just as individuals but as member of group.
5. Workers respond to total work situation, affected by factors both inside and outside work place

CRITICISM:
1. Pro-management bias: that management isn’t always logical and workers emotions driven
2. Clinical bias: overstressed empirical observations so his work is called "radical empiricism"
3. Wider social context overlooked: ignored total social situation and relation to work behaviour
4. Discounted theory: over-emphasized observations and facts, underestimated theory framework
5. Unscientific: no systematic basis in the choice of work, worker and the environment.
6. Doubtful validity: cant generalize conclusions, small groups reaction not sufficient representation
7. True but irrelevant: main objective of a business is to make profits not to keep workers happy.
8. Too obvious: nothing new, known long ago, doesn’t deserve the credit
9. No mention of trade unions: no articulation on unions among the workers.

Despite this criticism, Hawthorne studies are regarded as "a milestone and a turning point" in the history of
man at work and in the development of management thought. These studies challenged some of the basic
postulates of the classical approach and focused attention on the human element
 Human Relations Approach
• A business enterprise is a social system in which group norms exercise significant influence on the
behaviour and performance of individuals.
• Workers cannot be motivated by economic rewards alone. They require social satisfaction at the workplace.
Therefore, managers should create such a climate in the organization that workers can feel happy.
• Employee counselling, participative decision-making, cordial supervision, job enrichment and other
techniques have been suggested to keep workers happy and satisfied.

The human relations school is based on the following ideas:

1. The individual: each person is unique, bringing certain attitudes, beliefs, values, skills, etc. to the job
situation. He is motivated by not only economic factors but by several social and psychological factors.
2. The work group: Work is a social experience. The norms of informal social groups determine influence
the attitudes and performance of workers. So, managers should maintain good inter- personal and inter-
group relations to maximize productivity.
3. The leader: As the leader of a work group, a supervisor/manager should provide a pleasant work climate
wherein employees are allowed to have a say in the decision- making process.
4. The work environment: A positive work environment enables employees to satisfy their needs as well as
to achieve organizational goals. (Positive work environment consists of clearly defined goals,
performance linked rewards, feedback on performance, participative decision-making, interesting and
growth oriented work, open communications, etc)
CONTRIBUTIONS
1) Moral justification of this approach- employees are humans entitled to be treated with respect and dignity.
2) Satisfying social and psychological needs help improve productivity and reduce costs.
3) Highlights the 'people’ side of organization, avoids the imbalance caused by over-emphasis on technical
and administrative aspects
4) A true concern for workers, (those vital machines) would yield rich dividends
5) Attention on inter-personal relations and dynamics of work groups.
6) Revolutionized management training by stressing people management skills and managerial styles.
CRITICISM
1. Unscientific: Hawthorne Experiments on which the approach is based suffer from a clinical bias as they
discounted theory. Experimental groups cannot be equated with the work groups
2. Anti-individualistic: replaces the control of the boss by the control of the group forcing the individual to
sacrifice his personal values to group norms. Autocrats may manipulate the groups for their own selfish goals.
3. Short-sighted: based on over-liberal assumptions about people. It neglects the real issues of the work
situation. stresses the social and psychological aspects at the cost of technical and economic aspects of work.
4. Over-concern with happiness: The assumption is that happy workers are productive workers. But research
has revealed no direct correlation between morale and productivity.
5. Negative view of conflict: conflict is not always bad. They failed to recognize conflict as a creative force.
 Behavioural Science/Human Resource Approach
Behavioural approach includes the issue of organizational behaviour. It is also known as human resource
approach because it stresses development of human beings for the benefit of both- individual and organisation.

The main propositions of behavioural science approach are as follows :

(i) An organisation is a socio-technical system.
(ii) Individuals differ in terms of their attitudes, perceptions and value systems. Therefore, they react
differently to the same situation.
(iii) People working in an organization have their needs and goals which may differ from the organization's
needs and goals. Management should achieve fusion between organizational goals and human needs.
(iv) A wide range of factors influence relations among people (inter-personal relations).
(v) People's behaviour as individuals may be different from their behaviour as members of a group.
(vi) Persons working together in an organization form their own informal groups. Such groups have their own
norms, culture and communication systems.
(vii) Informal groups exercise a significant influence on the attitudes, behaviour and performance of employees.

CONTRIBUTION:
Behavioural approach is an extension and improvement of human relations movement.
• It has made significant contributions towards the development of management thought particularly in
the fields of group dynamics, motivation, communication and leadership.
• It has served as the basis of organisational behaviour.
CRITICISM:
• This approach errs by identifying management with psychology.
• Discounted theory
• Stress on radical empiricism.
• Clinical bias
• Lack scientific validity.
• Human behaviour is unpredictable. The findings of behavioural science approach are not universally
applicable.
 SYSTEMS APPROACH
FEATURES:
(i) An organization is a unified system of several interconnected, interacting and interdependent parts called sub-systems
(ii) Different sub-systems are tied together and influence the other sub-systems and the system as a whole.
(iii) The position and function of each sub-system can be analysed and understood only in relations to the other subsystems
and to the organization as a whole. Similarly. the organization as a system can be analysed and understood only by
reference to its environment. The concept of holism is central to the systems approach.
(iv) Each sub-system derives its strength by its association and interaction with the other sub-systems. As a result the
collective contribution of the organization is greater than the aggregate of individual contributions of its sub-systems.
This is known as synergy.
(v) Every system has a boundary that separates it from its environment. The boundary determines which parts are internal
to the organization and which are external. For instance, employees are within the boundary whereas creditors and
customers are external to a business firm.
(vi) Systems are of two types:
• Open system continually interacts with its
environment (the forces lying outside it)
• Closed system is self-contained and isolated
from the environment.
(vii) A business enterprise is an open and dynamic social
system. It draws inputs (raw materials, machinery,
labour, finance information, etc.) from its social
environment. It converts these inputs into outputs
(products and services, etc.) with the help of conversion process. The conversion or transformation process consists of
production and marketing activities and it is also called throughput. It supplies them to the environment. Business is
an adaptive system. It is probabilistic not deterministic, several variables influence it.
(viii) The reaction or response of environment to the outputs is known as feedback. Itis useful in evaluating and
improving the functioning of the system. Therefore it is key to systems control.
(ix) As an open system, an organization has to adapt its structure and processes to environment changes which affect its
internal functioning. i.e. it has to be a steady state and in a state of dynamic equilibrium in relation to the external
environment.
(x) Some systems tend to disintegrate or dissipate their energy and to become inactive. This tendency is called entropy. On
the other hand, other systems have the tendency (called negative entropy) towards order, activity, perpetuation, etc.
These are able to generate the required energy and surplus to sustain themselves.
(x) Organizations operate on the principle of equi-finality, which means that they have several alternative ways of doing
the same thing or achieving the same goal. Different initial conditions and paths are permissible to reach a single final state.
Similarly, a given initial condition or state may be adopted to reach different final states.

CONTRIBUTIONS
i. Inter-relationship and inter-dependency between different subsystems to ensure efficiency and growth.
ii. This approach recognises the dynamic nature of environment
iii. Represents balanced thinking, helps manager avoid problem analysis in isolation and develop integrated/holistic
thinking instead of fragmented/piece-meal approach
iv. Provide clues to complex behaviour of people in organisation

LIMITATIONS
i. Lack of unified theory which can be applied to all organisations
ii. Limited application, doesn’t provide action framework for all types of organisations.
iii. Vague/abstract, fails to define precise relation between the subsystems
iv. Narrow/incomplete view of organisation-environment interface
 CONTINGENCY/SITUATIONAL APPROACH
The conceptual framework of contingency approach consists of three elements
1. Environment 2. managerial concepts, principles and techniques 3. Contingent relationship between them.

FEATURES:
(i) Situational: Management is entirely situational. The application and effectiveness of any technique is
contingent (dependent) on the conditions and complexity of the situation.
(ii) match/fit approach: There should be a match/fit between situational variables and management variables.
(iii) Need to cope/adapt: Since management's success depends on its ability to cope with its environment, it
should sharpen its diagnostic skills to anticipate, comprehend and respond as per the environmental changes.
(iv) Rejected Universality of concepts: management principles and techniques are not universal.
(v) No Best way: there is no one best way to manage. It depends on peculiarities of situation.

For example,
• The choice of the form of organization should be made according to the requirements of the enterprise.
• Choice of motivational technique should be based on the needs and expectations of the people
• An effective leader should change his/her style to match the given situation.

Contingency approach as 'if' and "then' approach:

o 'If' represents environment or situational variables which are
independent. '
o Then' represents management variables (concepts,
principles, and techniques) which are dependent on the
environment.
STEPS:
In order to operationalise the contingency approach, managers have to take four sequential steps:
(i) analyse and understand the situation,
(ii) study and examine the validity of various concepts, principles and techniques of the situation,
(iii) make the right choice by matching the technique to the situation
(iv) implement the choice.

CONTRIBUTIONS/ PRACTICAL UTILITY

1. Pragmatic/open minded: it avoids organic stand (pre-conceived principles having universal validity
ignoring situational differences) and suggests situation specific solutions, free from value judgements.
2. Wide horizon: Contingency approach has common sense value and wide-ranging practical utility,
promotes analytical, critical and multi-dimensional thinking
3. Integrates other approaches: doesn’t suggest that the findings of earlier approaches are useless. It
recognizes that managerial principles are useful but should be used with discretion to suit the situation.
4. Dynamic: The approach accepts that organizations and their environment are too dynamic to be always
effectively managed in the same manner. Managers must be capable of changing their approach and style
to adapt the changes in the environment
5. Eclectic: The contingency approach is more eclectic than the other approaches. It recognizes that
management thought has not advanced to the point at which definite prescription for the best way to
manage in every situation is made available
CRITICISM
• Adds confusion to the practice of management by stressing that, 'it all depends on the situation'.
• So many ideas which are humanly impossible to comprehend.
• Does not incorporate all aspects of the systems theory.
• Very complex and suffers from paucity of literature.
• It suggests a reactive strategy for coping with the environmental changes. A proactive approach is more
effective for managers.
• It is also said that there is nothing new in contingency theory because even classical theorists like Fayol
cautioned managers to use principles in the light of changing conditions.
• The contingency approach does not recognise the influence of management concepts and practices on
environment.
Some experts call contingency approach as mere common sense. (However, contingency approach si much
more than common sense. It requires the ability to correctly diagnose the situation and the skill of choosing
the managerial style that meets the requirements of the situation would be)

Contingency approach is an improvement over the systems approach:

Systems approach only examines the relationship between sub-systems of the organisation. But the contingency
approach also examines the relationship between the organisation and its environment. The contingency
approach appears to hold considerable promise for the future development of management theory and practice.
 CHAPTER 5
CONTEMPORARY MANAGEMENT THINKERS
Management By Objectives (Peter Drucker)
Process in which the superior and subordinate managers jointly identify its common goals, define each
individual's major areas of responsibility and use these measures as guides for operating the unit and assessing
the contribution of each of its members
Other names of MBO: "Management by Results, "Accountability Management, "Work Planning and
Review", "Goals Management", "Management by objectives and self-control", "Management by Motivation",
"Performance Results and Individual Development Evaluation (PRIDE)”

Features:
1. Goal orientation
2. Participative Decision Making
3. Key result/Priority areas
4. Optimum utilisation of physical and material resources:
5. Simplicity and dynamism (applies to all managers at any level in any organisation )
6. Multiple accountability (every member is accountable to discourage credit grabbing/buck passing)
7. Comprehensive/total approach (equal importance to economic and human dimensions)

Objectives of MBO
1. To measure and judge performance
2. To relate individual performance to organisational goals
3. To clarify both the job to be done and the expectations of accomplishment
4. To foster the increasing competence and growth of the subordinates:
5. To enhance communications between superior and subordinates:
6. To serve as a basis for judgments about salary and promotion
7. To stimulate the subordinates' motivation
8. To serve as a device for organisational control and integration.

Process of MBO
1. Goal-setting: in three stages as given below:
(a) Defining overall/general/long term objectives for the organisation as a whole
(b) Formulating department/unit objectives
(c) Establishing individual targets
2. Developing action Plans:
(a) to determine the activities required for the achievement of objectives
(b) to determine the resources required for these activities
(c) to identify relationships between various activities for proper coordination;
(d) to decide sequence of each activity along with the dates for its beginning and completion;
(e) to decide the priority between different tasks;
3. Implementing Plans: The action plans are put into operations
a) diagnosis
b) preparation
c) execution
4. Periodic Reviews
5. Performance appraisal (evaluation
ADVANTAGES: DISADVANTAGES:
1. better planning 1. problem of participation
2. better coordination 2. difficulty in goal setting
3. motivation/commitment 3. emphasis on short term goals
4. development of employees 4. inflexibility
5. development of organisation 5. time consuming
6. expensive
7. self-defeating
HOW TO MAKE MBO SUCCESSFUL
1. Clarity in purpose
2. Support from top management
3. Structural changes and systematic training
4. Participative management
5. Feedback/two way communication system
6. Linked compensation/reward-penalty system
7. Complete integration with organisation structure
 PORTER’S FIVE FORCES ANALYSIS
Model describing the forces which shape competition in an industry

1. Threats of entry: new entrants may gain existing market share, unless these barriers to entry are high:
a. Economies of scale (forcing aspirant to come on large scale or accept a cost disadvantage)
b. Product differentiation (as it creates customer loyalty and entrant will have to spend on advertisement
c. Capital requirement (entrant will need to invest huge financial resources in order to compete)
d. Cost disadvantages (learning/experience curve, access to best sources of raw material/location)
e. Access to distribution channels (enjoyed by established firms, not available to the new entrants)
f. Government policy (govt may restrict/ create entry barriers through controls over licensing, raw
material prices, pollution control, product safety regulations)
2. Bargaining power of customers : When customer group is powerful/ there maybe buyers’ market when
a. Standard/undifferentiated products
b. Price sensitive buyers
c. If they pose a problem of backward integration as in case of textiles and automobiles.
3. Bargaining power of suppliers: The supplier group is powerful/there may be seller’s market when:
a. The group consists of a few firms and is more concentrated than the industry it sells to.
b. The product is unique or differentiated.
c. It sells products having no substitutes.
d. It poses a threat of forward integration.
4. Substitute products: factors determining how strong is competitive pressure from substitute products:
(a) The substitute product is readily available and attractively priced.
(b) The buyer views/perceives the substitute product as being better in quality, performance
(c) The costs of end products to switch to substitutes
5. Rivalry between existing firms:
Who are the major competitors, What are the main strengths and weaknesses of the competitors, what is
the brand image of competitor’s products

Porter's model of competition highlights the fact that competition is more than just rivalry with existing
competitors, it provides framework to think how value is created and divided among existing and
potential participants in an industry. Five forces model enables a firm to carry out a deep analysis of
competition and industry. This is helpful in designing an effective competition strategy to improve
performance
 LEARNING ORGANISATION (PETER SENGE)
According to Senge, in the turbulent environment, the learning organisation alone will survive due to its ability to
create and use knowledge faster than its rivals. Therefore, people working in organisations should both
individually and collectively, nurture innovative thinking, enhance their capabilities and overcome their learning
disabilities.

1. System thinking (understand how company really works):

System’ approach/ based on system archetypes to help managers spot patterns leading to repetitive problems
2. Personal mastery (learn to be open with others):
enhancing spiritual growth along with skills/competencies to bridge gap between vision and current reality
3. Mental models (put aside their old ways of thinking):
construct mental models for driving forces behind the organisation's values and principles.
4. Shared vision (form a plan everyone can agree on):
This happens when the vision is no longer seen by the team members as separate from the self.
5. Team learning (work together to achieve the vision):
Involves dialogue (to widen possibilities) and discussion (to narrow down options to find best alternative)

TOOLS FOR LEARNING:

(a) System archetypes and causal loops:

Identifying typical organisational problems (the system archetypes), process-mapping tool
(b) Left- and right-hand columns:
By writing down in meetings what you really think (left-hand column) and what you actually said (right-hand
column), you can analyse and identify those personal prejudices that get in the way of really productive work.)
(c) The ladder of inference:
This provide a step model to analyse values, beliefs, and actions. Steps on ladder:
• I take ACTIONS based on my beliefs
• I adopt BELIEFS about the world
• I draw CONCLUSIONS
• I make ASSUMPTIONS based on the meanings added to my mental models
• I add MEANINGS
• I select DATA from what I observe
• I OBSERVE data and experiences
(d) The container:
This is a dialogue tool. People at a meeting are encouraged to imagine a container that holds everyone's hostile
thoughts and feelings. As everyone speaks out, putting their fears, prejudices, and anger on the table, the hostility
between different factions is neutralised, because it is exposed in a safe place for all to discuss.
(e) Learning labs and flight simulators:
The Fieldbook provides useful references to design effective simulations for training sessions.

CRITICISM:
Difficult to apply in actual practice. Breaking old habits and transforming an organisation into a learning
organisation requires managers to empower employees to make mistakes which is a not easy in a blame-oriented
culture and power hungry environment
 FORTUNE AT THE BOTTOM OF THE PYRAMID
(C.K. PRAHALAD)
Prahalad suggests top companies to focus on low income/Bottom of the Pyramid (BOP) markets. Companies can
build fortunes for themselves and the developing economies by producing and distributing products and services
for the aspiring poor. BOP markets consist of four billion people who constitute two-third of the world
population.

Characteristics of BOP Markets :

i. These are emerging markets v. Little/no formal education
ii. Low purchasing power vi. Under-tapped markets
iii. Live in sub-urban and rural areas vii. Low competition in market
iv. Do not own land/ other immovable assets viii. Ignored by most MNCs

What Companies should do to Serve the BOP Markets

1. Innovations in technology to develop products that suit their needs and purchasing power
2. Develop new business models
3. Redefine 'scale' from a 'bigger is better' ideal to the ideal of small scale operations with world-
scale capabilities.
4. Develop high level of capital efficiency and new ways of measuring financial success.
5. Engage consumers in the production and distribution of products and services to improve their
income and purchasing power.

Four A's of Anderson and Billou

• Acceptability: The product/service must be useful for unique needs of BOP consumers
• Availability: The product/service must be easily available
• Awareness: The BOP markets must be made widely aware of the product/service
• Affordability: The price of the product/service must be such that they can easily pay.

Examples of Success in BOP Markets

1. Hindustan Unilever Limited (HUL): Traditionally HUL focussed on those who could afford to buy
its products. After facing competition from Nirma Ltd. which launched low priced detergent for low
income consumers, In 1995 HUL launched low priced detergent (WHEEL). It contained low oil-water-
ratio as poor wash clothes in ponds/rivers. Company decentralized production and marketing. Small
outlets were set up in rural and semi-urban areas.
2. ITC: ITC launched e-choupal project to convert poor into consumers by educating
and training them and by engaging them in the distribution of its products and services.

BOP markets offer a huge potential to convert poverty into opportunity and prosperity both for companies and
countries. Innovations in technology and business models will create millions of new entrepreneurs at the grass
loot level. People at the bottom of the pyramid are under served, with less awareness and need simple solutions.
So, firms must develop simple, and easy-to-use,
cost-effective products
 REENGINEENING
(MICHAEL HAMMER AND JAMES CHAMPY)
Michael Hammer is father of Business Process Reengineering (BR). He and James Champy wrote a book
"Reengineering the Corporation". Definition of BPR:
"the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in
critical, contemporary measures of performance, such as cost, quality, service and speed".

Features:
* Fundamental rethinking: In BPR, organisation ask the most basic questions about its business and
how does it operate- Why does it does what it does and why does it does the way it does? Re-engineering
first determines what company must do, then how to do it. It ignores what is and concentrates on what
should be. At the heart of BPR lies the notion of discontinuous thinking identifying and abandoning the
outdated rules and fundamental assumptions that underlie the current business operations.
* Radical redesign: it means getting to the root of things, disregarding existing structures and inventing
completely new ways of doing work. Re-engineering is about business reinvention not business
improvement/modification/enhancement. This means companies and their employees must unlearn
existing principles, techniques which require more innovative and flexible organisation structures
*Dramatic improvements: The main purpose of BPR is to secure quantum leap in performance rather
than marginal improvements. Hence 3 types of companies undertake re-engineering:
o companies in deep trouble which must re-engineer in order to survive
o companies which foresee trouble ahead.
o companies in peak condition that are ambitious and aggressive.
*Key processes: Under division of work, managers focus on individual tasks (e.g. receiving the order
forms, picking up the goods from the warehouse, etc.) and lose sight of the larger objective, (e.g., to get
goods into the hands of the customer). A business process is a collection of activities that takes one or
more inputs and creates an output valuable to customer.
Re-engineering is different from organisational restructuring which means focusing on core
competencies and getting out of non-core areas

Main efforts involved in BPR:

(1) Process improvement:
Non-core business processes are improved
to achieve substantial reduction in costs
(2) Best-in-class: Parity is achieved with
the best in industry.
(3) Break-point BPR: Breakthroughs are
made to set new standards of competence.
When a company re-engineers its business processes, following changes take place:
(i) Work units change from functional departments to process teams.
(ii) Key processes are simplified and integrated
(iii) Jobs change from specialised tasks to multidimensional work. Process teams are
collectively responsible for process reports. Jobs become more challenging and
satisfying.
(iv) People are empowered and not merely controlled.
(v) Focus of appraisal and compensation shifts from activity to results.
(vi) Values change from protective to productive.
(vii) Managers act as coaches and mentors rather than superiors.
(viii) Checks and balances are reduced.

Objectives/Aims of BPR:
1. redesigning the key business processes for improvement in quality and reduction of
2. Flattening the organisation and encouraging teamwork
3. applying a holistic approach to principles and processes of businesses
4. improving information technology
5. identifying core competencies and managing environmental changes to develop
competitive strength with a clear focus on the goals to be achieved.
 INDIAN ETHOS FOR MANAGEMENT
• Management is behavioural science and it has to be culture specific.
• Indian Ethos for Management has as its basis, the cultural base of India and as a country
whose culture has its roots in religion - it does draw its lessons from the religions of the land.
• Their origin is ancient scriptures, teachings getting passed from generations to generations.
• it means the application of principles of management as revealed in our ancient wisdom from
sacred books like ‘Gita’, ’Upanishads’, ‘Bible’ and ‘Quran’.

“ethics” is a set of standards, or a code or value system, worked out from human reason and experience, by
which free human actions are determined as ultimately right or wrong, good or evil.

Hence, the body of knowledge which derives its solutions from the rich and huge Indian
system of ethics is known as Indian Ethos for Management

“Indian ethos” demands a subjective management system including

(a) Management Attitude: management with firm belief in value-oriented holistic management.
(b) Humanising the Organisation –three aspects of humane organisations
(interpersonal relations, man-machine equation where the man is the prime concern and
inner management through the mental and spiritual growth of individuals)
(c) Interiorising Management – Self management/management of consciousness. When the
soul manages the other four members of the human being (body, mind, intellect, heart) the
conflict these four have amongst them can be resolved.
(d) Self-introspection –self-study, self-analysis, and self-criticism, a self-examination of one’s
own thoughts, feelings, emotions, sensations and passions
(e) Brain-stilling – For rational decisions, a silent mind is a necessity to connect with the inner
mind or higher consciousness called “Chetana”.
(f) Stepping Back (for a while) – stepping back once before deciding/speaking/doing something
enables one to control and master a situation.
(g) Self-dynamising Meditation –Through meditation, in a silent and calm mind, one reaches
the highest level of consciousness which offers guidance
(h) Role of Intuition – Intuition is the act of coming to direct knowledge or certainty without
reasoning or inferring.
Features:
1. Each soul is a potential God :
Immense potential, energy, and talents for perfection as a human being have the spirit within his heart. A human
being has a soul, a spark of the divine. The Divine resides in the heart of a person. The Divine means perfection
of knowledge, wisdom, and power. Therefore a human being has the immense potential power or energy for self-
development. Thus, human efforts can achieve even an apparently an impossible goal and convert into a reality.
2. Holistic approach:
It indicates the unity between the Divine, individual self and the universe. The holistic approach of management
is based on the spiritual principle of unity, oneness, and non-dual concept. Under these principles of unity, the
Universe is an undivided whole where each and every particle is connected with every other particle. Hence,
entire humanity is one.
3. Equal importance to subjectivity/ objectivity:
Subtle, intangible subject and gross tangible objects are equally important. One must develop one’s Third Eye,
“Jnana Chaksu”, the Eye of Wisdom, Vision, Insight and Foresight. Inner resources are much more powerful than
outer resources. Divine virtues are inner resources. Capital, materials and plant &machinery are outer resources.
4. respect for authority:
5. social responsibility
6. non violence
7. spiritualism

Principles of Indian Ethos of Management

1. Karma Yoga: perform duties without getting attached to outcome. focus on efforts and
process, not the result
2. Seva: selfless service: put needs of others before your own i.e socially responsible
behaviour
3. Dharma: doing what is right, just and fair morally and ethically
4. Ahimsa (Non Violence) positive realtions, resolving conflicts peacefully
5. Athithi Devo Bhava: warmth and kindness, hospitality, customer satisfaction

• An understanding of our cultural milieu, norms, values, and beliefs should help us to
evolve styles and management systems suited to our requirements.
• The best form of management has to be holistic and value-driven, which is the objective of
Indian Management Ethos.
Role of Indian ethos
1. creates a strong relation
2. avoid unethical aspects
3. inward considerations
4. balanced values
5. improves performance
6. helps in problem solving
7. develops self reliability
Lessons from Bhagavat Gita
1. be clear about goals and stay focussed on them
2. be prepared to make sacrifices for greater good
3. identity, recognise and accept equality in life
4. be fearless in face of obstacles
5. don’t be attached to results
6. control your desires
7. change is inevitable whatever happens it is for the good, embrace change
8. surrender to divine and let go of your ego
9. lead by example

Lessons from Ramayana

1. have a clear vision
2. leadership (leading team of monkeys to lanka)
3. team work
4. delegation of responsibility
5. know your competitor
6. communication is vital (miscommunication between sugreeva and Bali)
7. fulfilling commitments
8. coordination (ram setu bridge as directed by nal and neel)
9. ready to take risks
10. importance of strategic planning
11. lead by example