Principles of Management (POM)

Dr. Rishiraj Sarkar

Unit 1: Introduction to Management
 Characteristics of Management
Management is a Goal oriented process
• Different organisations have different goals
• Goals should be simple and clearly stated
• Unites the efforts of all individuals in achieving the goals
Management is all pervasive
• Common to all organisation types – economic / social / political
• Common to all departments within the organisation
Management is multi-dimensional
• Management of work – quantum of work translated in to goals to be achieved
and assigns means to achieve the same
• Management of people – employees as individuals / individuals as group of
people; making their strengths effective and their weaknesses irrelevant
• Management of operations – production process – flow of raw materials –
production technology – desired output for consumption – interlinked with work
and people
Management is a continuous process
• Continuous, composite separate functions like planning organising, staffing,
directing & controlling
Management is a group activity
• Collection of diverse individuals with different needs
• Coordination of individual efforts into achieving common organisational goal
Management is a dynamic process
• A dynamic function – has to adapt itself to changing environment
• External environment – social, economic and political factors
Management is an intangible force
• Cannot be seen but its presence can be felt
• Effect can be seen – where targets are met, employees are happy, orderliness
everywhere instead of chaos
 Definition of Management:

 Traditional Definition:

Henri Fayol stated: “to manage is to forecast and to plan, to organise, to command, to coordinate and to
control.”
Mary Parker Follet stated: “Management is the art of getting things done through people.”

 Modern Definition:

Harold Koontz & Weirich stated: “Management is the creation and maintenance of an internal
environment in an enterprise where individuals, working in groups, can perform efficiently and effectively
towards the attainment of group goals.”
Effectiveness Vs Efficiency:
 Two sides of a coin
 Achieving goals (Completion of task on time) = effectiveness
 With minimum resources (Completion of task with minimum cost) = efficiency
 High efficiency + high effectiveness = aim of all managers
 Inefficiency + ineffectiveness = poor management
Significance of Management:

 Achieving Group Goals: Management encourages collaboration and coordination amongst workers. A

general control must be provided to the organizational and personal objectives in order to favourably
accomplish the aims.

 Increases Efficiency: Management improves productivity by managing resources in a reliable conceivable

way in order to decrease cost upscale potency.

 Creates Dynamic organization: Management undertakes the conditions by assuring that these variations are
well accepted privately and that objection to change is controlled.

 Achieving personal objectives: Management promotes leadership and furnishes motivation to the

employees to operate effectively in order to accomplish their personal aims while working towards the
organizational goals.

 Development of Society: Management helps in the enhancement of community by manufacturing reliable

quality commodities, establishing employment chances and fostering innovative technologies.
 Is Management a Science or an art or both?
Management as Science:
SCIENCE
Systematised body of knowledge –
based on cause and effect relationship
Principles based on Experimentation
Universal validity and application
Hence it can be concluded that Management is an
“Inexact” Science
MANAGEMENT
• Has its own theory and principles which have
been developed over a period of time
• Draws principles from other disciplines like
economics, sociology, psychology etc
• Principles have evolved after repeated
experimentation and observation in different
type of organisation
• Can be called “Inexact “ science because it deals
with human beings which cannot be predicted
or replicated
• Since management is inexact science, their
application is not universal. They have to be
modified according to the situation.
• But these principles provide basic standardised
techniques which can be used by all for training
and development purpose.
 Is Management a Science or an art or both?

Management as Art:
ART MANAGEMENT

Existence of theoretical • Existence of theoretical knowledge

knowledge • Lots of literature available based on study,
observations and experience
• A good manager practices the art of management
based on the materials available in various areas
Personalized application • A good manager works through a combination of
practice , creativity, imagination, initiative and
innovation

Based on practice and • One can achieve perfection after long practice and
creativity based on his own creativity
• Involvement in the activities of the organisation,
study of critical situation and formulation of theories
unique to the situation in concern

All management practices are based on the same set of principles. Distinguishing
factor between a successful and less successful manager is the
level of application and the art of applying these principles.
 Is Management a Science or an art or both?

Management as Profession:
PROFESSION MANAGEMENT
Well defined body of Management has a systematic body of knowledge
knowledge comprising well defined principles

Restricted entry There is no restriction. Anyone can become a

manager irrespective of his educational qualification

Professional association AIMA – All India Management Association but no

compulsion for managers to become members of such
association

Ethical code of conduct There is no specified ethical code of conduct

Service motive In modern parlance, along with profit maximisation,

an organisation also has to serve the society where it
is located – providing basic amenities, education, etc.

Management cannot be fully regarded as a profession but has some features of profession.
 Levels of Management:
The term “Levels of Management’ refers to a line of demarcation between various managerial positions in
an organization. The number of levels in management increases when the size of the business and work
force increases and vice versa. The level of management determines a chain of command, the amount of
authority & status enjoyed by any managerial position.
The levels of management can be classified in three broad categories:
 Top level / Administrative level
 Middle level / Executory
 Low level / Supervisory / Operative / First-line managers
• Coordinating the activities of different departments
• Welfare & survival of the organisation
• Overall goals and strategies for the organisation
• Framing policies
• Responsible for the activities of the business

• Interpret the policies framed by the organisation

• Ensure that their department has required personnel
• Assign necessary duties and responsibilities
• Motivate them for higher productivity to achieve
desired objectives
• Cooperate with other departments for smooth
functioning of the organisation

• Interact with the actual workforce and communicate the

instructions of the middle management
• directly oversee the work of the personnel
• Quality maintenance, minimised wastage of material
etc.,
• Maintains discipline and communicate workers
grievances
• Maintains the work area and working conditions

Functions of Each level

 Managerial Skills:
The term ‘managerial skill’ means the personal ability put to use by a manager for the accomplishment of
organisational goals. The job of a manager has become very complex. He requires different types of skills
to manage a large organisation in the fast changing environment. The managerial skills required as such
can be broadly divided into three basic types:
 Technical skills: proficiency related with specific kind of activity particularly the ones involving methods,
processes, procedures and techniques.
 Human/People skills: ability to work effectively as a group member and to build cooperative effort within
the team.
 Conceptual skills: ability to see organisation as a whole and recognise various functions and their
independence on each other within the organisation as well as analyse and administer various activities
based on insight gaining capabilities, improving overall effectiveness of the organisation.
 Management and Administration:
 Administration:

According to Theo Haimann, “Administration means overall determination of policies, setting of major
objectives, the identification of general purposes and laying down of broad programmes and projects”.
It refers to the activities of higher level. It lays down basic principles of the enterprise.
According to Newman, “Administration means guidance, leadership & control of the efforts of the groups
towards some common goals”.
 Management:
 Management involves conceiving, initiating and bringing together the various elements; coordinating,
actuating, integrating the diverse organizational components while sustaining the viability of the
organization towards some pre-determined goals.
 It is an art of getting things done through & with the people in formally organized groups.
 Practically, there is no difference between management & administration. Every manager is concerned
with both - administrative management function and operative management function as shown in the
figure. However, the managers who are higher up in the hierarchy denote more time on administrative
function & the lower level denote more time on directing and controlling worker’s performance i.e.
management.
 The Figure below clearly shows the degree of administration and management performed by the different
levels of management:
 Functions of Management:

 According to Henry Fayol, “To manage is to forecast and plan, to organize, to command, & to control”.
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 given by KOONTZ and O’DONNEL i.e. 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.
 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”.
 A plan is a future course of actions. It is an exercise in problem solving & decision making. Planning is
determination of courses of action to achieve desired goals.
 Overall, 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:
1. Identification of activities.
2. Classification of grouping of activities.
3. Assignment of duties.
4. Delegation of authority and creation of responsibility.
5. 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 behavior etc.
 The main purpose o staffing is to put right man on right job i.e. square pegs in square holes and round pegs in
round holes.
 According to Kootz & O’Donell, “Managerial function of staffing involves manning the organization structure
through proper and effective selection, appraisal & development of personnel to fill the roles designed un the
structure”.
 Staffing involves:

1. Manpower planning (estimating man power in terms of searching, choose the person and giving the right place).

2. Recruitment, Selection & Placement

3. Training and Development

4. Remuneration

5. Performance Appraisal

6. Promotions & Transfer

 Directing:
 It is that part of managerial function which actuates 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 is that inert-personnel aspect of management which deals directly with influencing, guiding,
supervising, motivating sub-ordinate for the achievement of organizational goals.
 Direction has following elements:

1. Supervision
2. Motivation
3. Leadership
4. Communication
 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 Theo Haimann, “Controlling is the process of checking whether or not proper progress is
being made towards the objectives and goals and acting if necessary, to correct any deviation”.
 According to Koontz & O’Donell “Controlling is the measurement & correction of performance activities
of subordinates in order to make sure that the enterprise objectives and plans desired to obtain them as
being accomplished”.
 Therefore controlling has following steps:

1. Establishment of standard performance.

2. Measurement of actual performance.

3. Comparison of actual performance with the standards and finding out deviation if any.

4. Corrective action.
 Coordination:
 Co-ordination is the unification, integration, synchronization of the efforts of group members so as to
provide unity of action in the pursuit of common goals.
 It is a hidden force which binds all the other functions of management.
 According to Mooney and Reelay, “Co-ordination is orderly arrangement of group efforts to provide unity
of action in the pursuit of common goals”.
 According to Charles Worth, “Co-ordination is the integration of several parts into an orderly hole to
achieve the purpose of understanding”.
 Management seeks to achieve co-ordination through its basic functions of planning, organizing, staffing,
directing and controlling. That is why, co-ordination is not a separate function of management because
achieving of harmony between individuals efforts towards achievement of group goals is a key to success of
management.
 Co-ordination is the essence of management and is implicit and inherent in all functions of management.
 Coordination and Cooperation:
 Co-ordination is an orderly arrangement of efforts to provide unity of action in the fulfillment of common
objective whereas co-operation denotes collective efforts of persons working in an enterprise voluntarily for
the achievement of a particular purpose. It is the willingness of individuals to help each other.
 Co-ordination is an effort to integrate effectively energies of different groups whereas co-operation is sort to
achieve general objectives of business.
 Though these two are synonymous but they are different.
 Types of Business Organizations:

 The basic forms of Business Organizations are:

1. Sole Proprietorship

2. Partnership (Limited and Unlimited liability)

3. Corporation/Company/Joint Stock Company

4. Cooperatives

5. Joint Hindu Family/ Hindu Undivided Family

 Sole Proprietorship:
 The simplest and most common form of business ownership.
 Sole provider of capital.
 Sole bearer of risk.
 Unlimited liability.
 Total flexibility.

 Partnership:
 Governed by Partnership Act 1932.
 Formation/Partnership Agreement: A partnership firm is not a separate legal entity. But according to the act,
a firm must be formed via a legal agreement between all the partners. So a contract must be entered into to
form a partnership firm. Its business activity must be lawful, and the motive should be one of profit.
 Unlimited Liability: In a unique feature, all partners have unlimited liability in the business. The partners are
all individually and jointly liable for the firm and the payment of all debts.
 Continuity: A partnership cannot carry out in perpetuity. The death or retirement or bankruptcy or insolvency
or insanity of a partner will dissolve the firm.
 Number of Members: Minimum of two members required. However, the maximum number will vary
according to a few conditions. For a banking business, the number of partners must not exceed 10. For a
business of any other nature, the maximum number is 20.
 Mutual Agency: In this type of organisation, the business must be carried out by all the partners together.
Or alternatively, it can be carried out by any of the partners (one or several) acting for all of them or on
behalf of all of them. So this means every partner is an agent as well as the principal of the partnership.
Note: There can be general partnership with general partners, limited partnerships (or limited liability
partnership) etc. which operates like a company. Moreover, there can be different types of partners like
dormant/silent, nominal, secret, active and partner by estoppel (conduct/behavior).

 Company/ Joint Stock Company:

 Governed by Companies Act 1956 and Companies Act 2013
 Artificial Legal Person: A company is a legal entity that has been created by the statues of Law. However,
not all laws/rights/duties apply to a company. It exists only in the law and not in any physical form. So we
call it an artificial legal person.
 Separate Legal Entity: Unlike a proprietorship or partnership, the legal identity of a company and its
members are separate.
 Incorporation: To be recognized as a separate legal entity and for it to come into existence, it has to be
incorporated. Not registering a joint stock company is not an option.
 Perpetual Succession: The joint stock company is born out of the law, so the only way for the company to
end is by the functioning of law.
 Limited Liability: The liability of the shareholders of a company is limited. The personal assets of a
member cannot be liquidated to repay the debts of a company. A shareholders liability is limited to the
amount of unpaid share capital.
 Common Seal: A common seal is engraved seal with the company’s name on it. So no document is legally
binding on the company until and unless it has a common seal along with the signatures of the directors.
 Transferability of Shares: In case of a public company the shares can be transferred freely, there are
almost no restrictions. And in a private company, there are some restrictions, but the transfer cannot be
prohibited.
 Private Vs. Public Company: Certificate of commencement of business also required along with
Certificate of Incorporation in case of Public Company registration.
 Cooperatives:
 As it is a voluntary association, the membership is also voluntary. A person is free to join a cooperative
society, and can also leave anytime as per his desire. Membership is open to all.
 It is compulsory for the co-operative society to get registration under Societies Act.
 It does not get affected by the entry or exit of its members.
 There is limited liability of the members of co-operative society.
 An elected managing committee has the powers to take decisions. Members have the right to vote, by
which they elect the members who will constitute the managing committee.
 The cooperative society works on the principle of mutual help & welfare. Surplus distributed among
members.
 One man one vote system.

 Joint Hindu Family/ Hindu Undivided Family (HUF) Business:

 It is governed and dictated by the Hindu Law.
 2 Schools of Hindu Law: Mitakshara and Dayabhaga.
 Any person born into the family (boy or girl) up to the next coming three generations is a part of the HUF.
These members are the co-parceners. The head of such a Joint Family Business is the eldest member of the
family, the “Karta”. He is the main person responsible for the business and the finances.
 Formation: The formation of a HUF does not require any documentation and admission of new members is
by birth.
 Liability: The liability of all the various co-parceners is only up to their share of the property or business.
So they have limited liability. But the Karta being the head of the HUF has unlimited liability.
 Control: The entire control of the entity lies with the Karta. He may choose to confer with the co-parceners
about various decisions, but his decision can be independent. is actions will be final and also legally
binding.
 Continuity: The HUF can be continued perpetually. At the death of the Karta, the next eldest member will
become the Karta. However, keep in mind a Hindu Undivided Family can be dissolved if all members
mutually agree.
 Minority: Even minor members will be a part of the HUF. But they will enjoy only the benefits of the
organization.

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