UNIT-I

BASICS OF MANAGEMENT

1.1. Introduction to Management

The managers achieve organizational objectives by getting work from others and not performing in the
tasks themselves.

Management is an art and science of getting work done through people. It is the process of
giving direction and controlling the various activities of the people to achieve the objectives of an
organization.

1.2. Definition of Management

There are numerous definitions of management. Different experts have defined different points
of view.
According to Mary Parker Follett, “Management is the art of getting
things done through people”

Harold Koontz defined as, “Management is the art of getting things

done through and with people in formally organized groups. It is the art
of creating an environment in which people can perform and individuals
could cooperate towards attaining of group goals”.

In view of Joseph Massie, “Management is defined as the process by

which a cooperative group directs actions towards common goals”.

George.R.Terry’s point of view, “Management is a distinct process,

consisting of planning, organizing, actuating and controlling, performed
to determine and accomplish stated goals by the use of human beings
and other resources”.
According to this definition, management is a process a systematic way of doing things. The four
management functions included in this process are planning, organizing, directing and controlling.
Planning refers manager’s think of their actions in advance. Their actions are
usually based on some method, plan or logic, rather than on a hunch.

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 Organizing refers manager’s coordinate the human and material resources of the
organization.
Actuating refers managers motivate and direct subordinates
Controlling refers attempts to ensure that there is no deviation from the plan or
norms.

This definition also indicates that managers use people and other resources such as finance, equipment’s
etc… in attaining their goals.
Finally, the definition states that the management involves the act of achieving the organization’s
objectives. These objectives will, of course, vary with each organization.

The following chart clearly presents this definition of management.

Basic Resources (6M) Fundamental Functions Desired Objectives

Planning Organizing
Men
Material
Machine
Methods Stated
Money Goals
Market Directing Controlling

Input Process of Management Output (End Result)

1.3. Nature/Characteristics of Management

Following are the nature and characteristics of Management
1. Management is an activity
It is a process of organized activity concerned with efficient utilization of resources of
production like men, material, machine, money etc…
2. Management is a purposeful activity
It is concerned with the achievement of an objective through its functions. Objectives may be
explicit on implicit.

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3. Management concerned with the efforts of a group
Management is concerned with management of people and not the direction of things. It
motivates the workers to contribute their best.
4. Management is getting things done
A manager does not do any operating work himself but gets it done through others.
5. Management applies economic principles
Management is the art of applying the economic principles that underlie a control of men &
materials in the enterprise under consideration.
6. Management involves decision-making
It is a decision-making process and the decisions are involved in all the functions of
management.
7. Management coordinates all activities and resources
It is concerned with coordination of all activities and resources to attain the specific objectives.
8. Management is a universal activity
The techniques and tools of management are universally applicable.
9. Management is an integrating process
It integrates the men, materials and machines for achieving stated objectives.
10. Management is concerned with Direction and Control
It is concerned with direction and control of human efforts to attain the specific
objectives.
11. Management is Intangible
It is abstract and cannot be seen. It is evidenced by the quality of organization and through its
results.
12. Management is both science and an Art
Management has certain universally applicable principles, laws etc…. Hence, it is a science. It is
also an art, because it is concerned with application of knowledge for the solution of organizational
problems.
13. Management is a profession
It is becoming a profession because there is established principles of management which being
applied in practice.
14. Management is an inter- disciplinary approach
Management as a body of discipline takes the help or other social science like psychology,
sociology, engineering, economics, Mathematics etc…

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15. Management is dynamic and not static
Management adopts itself to the social changes and also introduces innovation in methodology.

1.4. Scope of Management

The scope of management is very wide. The functional areas of management may be classified
into the following categories.
 Production Management
 Marketing Management
 Financial Management
 Personnel Management

i) Production Management
Production function so as to produces the right goods in right quantity at the right time and at
the right cost. It consists of the following activities.
 Designing the product
 Location & Layout of plant and building
 Operations of purchase & storage of materials
 Planning & control of factory operations
 Repairs & maintenance
 Inventory control and quality control
 Research and development etc…

ii) Marketing Management

It refers to the identification of consumer’s needs and supplying them the goods and services,
which can satisfy those, wants. The activities are as follows:
 Marketing Research to determine the needs and expectations of consumers
 Planning and developing suitable products
 Setting appropriate prices
 Selecting the right channels of distribution
 Promotional activities like advertising and salesmanship to communicate with
the customers.

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iii) Financial Management
Financial management seeks to ensure the right amount and type of funds to business at the
right time and at reasonable cost. The activities are as follows:
 Estimate the volume of funds requires for long term and short term needs of
business
 Selecting the appropriate sources of funds
 Raising the required funds at the right time
 Ensuring proper utilization and allocation of raised funds
 Administration of earnings.
iv) Personnel Management
It involves planning, organizing, directing & controlling the procurement, development,
compensation, maintenance etc… of the human resources in an enterprise. It consists of the following
activities:
 Manpower planning
 Recruitment
 Selection
 Training & Development
 Performance Appraisal
 Compensation & promotion
 Employee services & benefits
 Maintaining personnel records etc…
1.5. Functions of Management
Different authors offering different names for the same functions of management
Henri Fayol identifies five functions of management viz, planning, organizing, commanding,
coordinating and controlling.
Koontz & O’Donnell, divides the management functions into planning, organizing, staffing,
directing and controlling.
Warren Haynes and Joseph Massie classifies management functions into decision-making,
planning, organizing, staffing, directing, controlling, and communicating.

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 Luther Gulick, states seven such functions under the catch word “POSDCORB”
Which stand for
P – Planning
O – Organizing
S – Staffing
D – Directing
Co – Coordinating
R – Reporting
B - Budgeting
As per managers are concerned, the following five functions are essential. They are Planning,
Organizing, Staffing, Directing, and Controlling. In addition to above five functions, the two functions
such as Innovations and representation are also necessary for managers

1.6. Management Process

There is enough disagreement among management writers on the classification of managerial
functions. Some classify these functions into four types, some into six or seven. The terminology is
also not always alike, different authors offering different names for the same functions of management.
For managerial purpose, the following five functions are very essential for managers. They are
planning, organizing, staffing, directing and controlling.

i) Planning
Planning is the function that determines in advance what should be done. It is looking ahead
and preparing for the future. It is a process of deciding the business objectives and charting out the
methods of attaining those objectives. In other words, it is the determination of what is to be done,
how and where it is to be done, who is to do it and how results are to be evaluated. This is done not
only for the organization as a whole but for every division or department or sub-unit of the organization.
It is a function, which is performed by managers at all levels, like top, middle and supervisory levels of
management. Plans made by top management of the organizations whole may cover periods as long as
five or ten years. Also, plans made by middle or first line managers, cover such shorter periods. Such
plans may be for the next days or weeks, or months, etc… for example, for a two-hour meeting to take
place in a week.

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 Following are the sub functions of planning: forecasting, Decision - making, strategic
formulation, policy-making, programming, scheduling, budgeting, problem solving, innovation and
research activities.

ii) Organizing
It refers to coordinate human resources with other resources such as material, machine,
money etc… Once managers have established objectives and developed plans to achieve them, they
must design and develop a human organization that will be able to carry out those plans successfully.
According to Allen, this organization refers to the “structure which results from identifying and grouping
work, defining and delegating responsibility and authority, and establishing relationships.” According to
Amitai Etzioni “An organization is a social unit or human grouping, deliberately structured for the
purpose of attaining specific goals”.

The process of organizing involves the followings:

 Identifying the activities necessary to achieve the objectives.
 Grouping activities into various departments
 Assigning duties or tasks to appropriate individuals
 Delegating necessary authority to individuals and fixing responsibilities for results.
 Defining authority and responsibility relationship among individuals.
Sub-functions of organizing functions are as follows: Functionalisation, divisionalisation,
departmentation, delegation, decentralization, activity analysis,task allocation.

iii) Staffing
Staffing may also be considered an important function involved in building the human
organization. In staffing, the manager attempts to find the right person for each job. Staffing fixes a
manager’s responsibility to recruit and to make certain that there is enough manpower available to
fill the various positions needed in the organization. Staffing involves the selection and training of
future managers and a suitable system of compensation. Staffing obviously cannot be done once and
for all, since people are continually leaving, getting fired, retiring and dying. Often too, the changes in
the organization create new positions, and these must be filled.
According to Koontz and O’Donnell, “The managerial function of staffing involves manning the
organizational structure through proper and effective selection, appraisal and development of personnel
to fill the roles designed into the structure”.

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 Staffing function has the following sub functions. They are manpower planning, recruitment,
selection, training & development, placement, compensation, promotion, appraisal etc…
iv) Directing
After plans have been made and the organization has been established and staffed, the next step
is to move towards its defined objectives. This function can be called by various names: ‘Leading’,
‘Directing’, ‘Motivating’, ‘Actuating’, and so on. But whatever the name used to identify it, in carrying
out this function the manager explains to his people what they have to do and helps them do it to the
best of their ability.
Directing thus involves three sub-functions. They are as follows
 Communication,
 Leadership and
 Motivation.
 Communication is the process of passing information and understanding from one
person to another.
 Leadership is the process by which a manager guides and influences the work of his
subordinates.
 Motivation means arousing desire in the minds of workers to give their best to the
enterprise. It is the act of stimulating or inspiring workers. If the workers of an
enterprise are properly motivated they will pull their weight effectively, give their loyalty
to the enterprise, and carry out their task effectively.
Two broad categories of motivation are financial and non-financial. Financial motivation takes the
form of salary, bonus, profit sharing, etc., while non-financial motivation takes the form of job security,
opportunity of advancement, recognition, praise, etc.
v) Controlling
The manager must ensure that everything occurs in conformity with the plans adopted, the
instructions issued and the principles established.
Three elements are involved in the controlling function.
 Establishing standards of performance.
 Measuring current performance and comparing it against the established standards.
 Taking action to correct any performance that does not meet those standards. In the
absence of sound control, there is no guarantee that the objectives, which have been set,
will be realized. The management may go on committing mistakes without knowing
them. Control compels events to conform to plans.

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 Controlling function has the following sub functions. They are
 Fixation of standards,
 Recording,
 Measurement,
 Reporting,
 Corrective action.
1.7. Levels of Management
In every company, there is a managerial hierarchy or chain of command, which consists of several
levels of authority. The number of management levels may differ from company to company. In a big
company the management levels may be classified into three categories viz.
 Top management
 Middle management
 Supervisory or Operating management
In a very large enterprise the middle management levels may be subdivided into upper middle
management and lower middle management
i) Top Management
Top management consists of the board of Directors and the chief executives. Chief executives may
be an individual, for example, Managing Director, General Manager etc… or a group of chairman
and functional executive Directors. Board of directors is accountable to the shareholders in the annual
general meetings of the company. The chief executive is concerned with the overall management of the
company’s operations. He maintains coordination among different departments/sections of the
company. He also keeps the organizations in harmony with its external environment.
Functions
 To analyse and interpret changes in the external environment of the company.
 To establish long term corporate plans (goals, policies & strategies) of the company.
 To formulate and approve the master budget and departmental budgets
 To design board organization structure
 To appoint departmental heads and key executives
 To provide overall direction and leadership to the company
 To represent the company to the outside world
 To decide the distribution of profits

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ii) Middle Management
a) Intermediate Management
Intermediate / upper middle management comprises departmental or divisional heads. For
example, Marketing Manager, Production Manager, etc… It is also known as departmental or
functional Management. Each divisional or departmental heads are the overall incharge of their
respective division/department. He performs the usual managerial functions of planning, organizing,
staffing, directing, and controlling in relation to one department.
b) Lower middle Management
Lower middle management levels consist of sectional heads. For example, plant manager,
sales manager, branch manager etc… These executives serve as a link between intermediate or top
management and the operating management.
Functions of Middle Management
 To interpret and explain the plans and policies formulated by top management
 To monitor and control the operating performance.
 To train, motivate and develop supervisory personnel
 To lay down rules and regulations to be followed by supervisory personnel

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 Board of
Directors

Top
Management

Managing
Director

Intermediate
Management/Upper-
Marketing Production Finance Personnel
Middle Management
Manager Manager Manager Manager

Lower-Middle
Branch Plant Chief Office Management
Managers Superintendent Account Manager

Operating
Management/
Sales officer Foremen or Accounts or Personnel Supervisory
Management
Supervisors finance officer officer

Rank and file

work force
Salesmen Workers Clerks Clerks

Levels of Management
iii) Supervisory/Operating Management
This is the lowest or first level of management in an organization. It consists of supervisors,
foremen, sales officers, accounts officer, purchase officer etc… They maintain close contacts with the
ranks and white colour workers and supervise day – to – day operations. They serve as the channel of
communication between management and the workforce. They are concerned with the mechanics of
jobs.
Functions
 To plan day – to – day production within goals laid down by higher officials
 To assign jobs to workers and to make arrangements for their training and
development
 To issue orders and instructions

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  To supervise and control workers operations and to maintain personal contact with
them
 To arrange materials and tools and to maintain machinery
 To advise and assist workers by explaining work procedures, solving their problems
 To maintain discipline and good human relations among workers
 To report feedback information and workers problems to the higher authorities.

1.8. Skills of Managers

By managerial skills, we mean the skills or qualities desired in managers, the possession of
which would enable to act as practicing managers. Following three broad types of managerial skills are
very essential for managers.
 Technical skills
 Human skill or Behavioral skills
 Conceptual skills
i) Technical Skills
Technical skills refer to the skill and knowledge, which is required for performing an
operational activity, in the best manner. i.e., technical skill might be termed as technical expertise.
Technical skill is an imperative skill for managers at the lower level of management; because it
is actually these people who guide and supervise work operators under their subordination. For
example, mechanics work with tools, and their supervisors should have the ability to teach them how to
use these tools. Similarly, the teacher, who, before, imparting teaching to pupils in a particular
discipline, must be an expert in that discipline.
Technical skill is also required in managers at upper and middle levels of management.
Managers at these levels do the fundamental planning for operational work leaving the detailed day
– to – day operational plans to be made by the supervisory level.
ii) Human Skills
The basic responsibility of every manager is to get things done by others. In this process,
managers need human skills. Human skills refer to those abilities, which are needed by the manager to
effectively deal with subordinates. To manage, he has to understand their needs, interests and values.
He interacts with them, guides, directs, leads, and motivates them. In this regard, he is expected to
know general tendencies of human behaviour and factors influencing it. By using human skills, he may
establish good rapport, warmth relationships and conductive interpersonal relations with his

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subordinates. It is needed for providing dynamic and effective leadership and building a team spirit
among employees.
Since, managers at all levels in the enterprise are supposed to deal with human beings in a
subordinate position; all managers from the top to the lowest levels in the management hierarchy
equally need human skill.
iii) Conceptual skills
Conceptual skill comprise the ability to see the whole organization and the inter relationships
between its parts. These skills refer to the ability to visualize the entire picture or to consider a
situation in its totality. Such skills help the manager to conceptualize the environment, to analyse the
forces working in a situation and to take a broad and farsighted view of the organization. Conceptual
skills also include the competence to understand a problem in all its aspects to use original thinking in
solving the problem. Such competence is necessary for rational decision-making.
Conceptual skill is imperative for top management level, necessary for the middle
management and desirable for the lower level of management.
Thus, Technical skills deal with jobs, Human skill with persons and Conceptual skills with ideas.
These types of skills are interrelated. The relative importance of these skills may differ at various levels
in the organization hierarchy. Following figure is clearly explained the importance of skills required at
various levels of management.

Top
Management
Conceptual Skill

Human Skill

Middle
Management
Technical Skill
Operating
Management

MANAGERIAL SKILLS AT VARAIOUS LEVELS OF MANAGEMENT

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1.9. Role of Managers
The job of a modern manager is very complex and multi-dimensional. Mintzberg has identified ten
roles of a manager which are grouped into three categories viz.,
Interpersonal Roles
 Figure head
 Leader
 Liaison
Informational Roles
 Monitor
 Disseminator
 Spokesman
Decisional Roles
 Entrepreneur
 Disturbance handler
 Resource allocator
 Negotiator
1. Figure head
In this role a manager performs symbolic duties required by the status of his office. Making
speeches, bestowing honours, welcoming official visitors, distributing gifts to retiring employees are
examples of such ceremonial and social duties.

2. Leader
This role defines the manager relationship with his own subordinates. The manager sets an
example, legitimizes the power of subordinates and brings their needs in accord with those of his
organization.
3. Liaison
It describes a manager’s relationship with the outsiders. A manager maintain mutually
beneficial relation with other organizations, governments, industry groups, etc…
4. Monitor
It implies seeking and receiving information about his organization and external events. An
example is picking up rumors about his organization.

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5. Disseminator
It involves transmitting information and judgments to the members of the organization. The
information relates to internal operations and the external environment. A manager calling a staff
meeting after a business trip is an example of such a role.
6. Spokesman
In this role, a manager speaks for his organization. He lobbies and defends his enterprise. A
manager addressing the trade union is an example.
7. Entrepreneur
It involves initiating change or acting as a change agent. For example, a manager decides to
launch a feasibility study for setting up a new plant.
8. Disturbance Handler
This refers to taking charge when the organization faces a problem or crisis. For example, a
strike, a feud between subordinates loss of an important customer. A manager handles conflicts,
complaints and competitive actions.
9. Resource allocator
In this role a manager approves budgets and schedules, sets priorities and distributes
resources.
10. Negotiator
As a negotiator, a manager bargain with suppliers, dealers, trade union, agents, etc…For
example, the manager may negotiate with the union leaders regarding strike issues.

1.10. Evolution of Management Thought

To get proper and balanced perspective of theory and practice of management all developments
taking place since the beginning of the 20 th century may be placed under three main categories. They are
as follows:
 Classical or traditional Management approach
 Behavioral or neo-classical approach
 Modern approach to management

1.10.1. Classical or traditional Management approach

The classical approach to management is one of the oldest and most popular, known as the
traditional or universal process. It is based on the assumption that the objective of an organization may
vary from one to another but the management of all organizations requires similar management process.

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It has its roots in the basic concepts of division of labour and specialization. This approach consists
mainly of scientific management developed by F.W.Taylor, administrative theory of management by
Henry Fayol and bureaucratic organization by Max Weber.

1.10.1.1. Theory of Scientific Management

Though scientific management theory is based on the contributions of many scholars and
practitioners like Fredrick Winslow Taylor, Henry Gantt, Frank Gilbrith, Emerson and Carl Berth, etc.
But F.W.Taylor has given a concrete shape to the theory of scientific management.
Tailor’s Theory of Scientific Management
F.W.Taylor (1856 – 1915) is known as the “father of Scientific Management”. He joined as a
mechanic at midvale steel company in U.S.A at 1878. He became chief engineer in the year 1884 in the
same company. During his career spanning a period of 26 years, he conducted a series of experiments in
three companies: Midvale Steel, Simonds Rolling Machine and Bethlehem steel companies. While
serving as a Chief Engineer of Midvale Steel Company, Taylor made several important contributions,
which are classified under scientific management.
Taylor’s approach aims at increasing the operational efficiency of workers by solving their work
related problems, reducing in efficiency and wastage, improving their relation with management, and
developing a best way of doing things. Taylor expressed the basic philosophy of scientific management
in the following terms:
 Science, not rule of thumb: For solving problems and making decisions, the
manager should adopt scientific attitude and use scientific thinking and methods.
The ‘rule of thumb’ or ‘Hit or miss’ approach should be replaced.
 Harmony, not discord: All the departments and workers are a part of an
organization. There should be complete harmony or coordination in their
functioning and any kind of clash or conflict should not be allowed to crop in and, if
it arises, should be reduced to a minimum.
 Cooperation, not individualism: Instead of fostering individualism, importance of
cooperative group efforts should be recognised. Because, organizational objectives
depends upon the group efforts not for individuals.
 Maximum, not restricted output: Production should be carried out up to the
maximum capacity available in a unit.

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  Development of each man to his greater efficiency and prosperity: For the
prosperity of individual workers as well as the organization, the efficiency level of
workers should be increased by providing scientific training and developing their
potential abilities to the maximum.
Taylor based on his experience at the shop floor, developed guidelines to the practice of
management as under.
1) Scientific study and planning of work
Taylor has suggested that the work to be assigned to and performed by workers should be studied,
analyzed and planned as to determine the day’s fair work (standard of work) for each worker. In relation
to work, following studies should be conducted to the workers on what is to be done and how it can be
done, efficiently.
i) Work study
The object of work-study is to improve efficiency. Efficiency could be improved and increased
by expending fewer resources and reaping greater returns.
ii) Motion study
The object of motion study is to identify and eliminate unnecessary, avoidable and wasteful
movements and motions of men and machines. These movements and motions are closely watched and
recorded. On the basis of this study it can be determined whether the movements and motions are
productive or incidental or unproductive.
iii) Time study
It is popularly known as work measurement. It is basically concerned with productivity. The
exact time required to perform a job is accurately estimated. On the basis of this estimate the required
number of employees is determined, suitable wage incentive schemes are devices and actual labour costs
are worked out. The procedure followed in time study is to split the job into a number of component
parts the time taken to perform each part of the job is ascertained and standard timings for different parts
of a job are determined.
2) Scientific selection, placement and training
To build up a team of efficient workers, Taylor realized that using scientific methods, instead of
relying on intuition and judgement of the foremen should make selection. It implies selection of workers
for the job by tallying job requirements with abilities and skills. Workers should be given placement on
the basis of capability and aptitude. And, for developing the existing level of knowledge and potential
scientific training should be imparted to workers on a regular basis.

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3) Standardization
By minutely studying metal-cutting operations, Taylor suggested that the scheme of
standardization should be adopted in respect of trade tools and equipments, raw material used by
workers and physical working conditions provided to them. Any difference in the quality of raw
material, tools and equipments may directly affect level of efficiency of workers.
4) Division of responsibility between management and workers
Taylor advocated that two aspects of planning, thinking and doing should be separated. Planning
of work that is thinking process should be a responsibility of managers. They should design work
standards by conducting various studies, devise incentive scheme for workers, discipline them and
assign work to them. Whereas role of workers should be confined to implementation of these plans. In
this way benefits of division of labour and specialization may be secured.
5) Functional foremanship
Taylor introduced and practiced the concept of functional foremanship. According to this concept
instead of having one foreman as an in-charge for production department. All activities should be
grouped into two groups namely planning forum and workshop forum. Each forum should have four
supervisors to command over the activities of workers. In doing so dual command emerges, because
each worker will get orders and instructions from eight supervisors dealing with different aspect of his
job.
6) Mental revolution
In order to get desired results of scientific management there should be complete mental
revolution on the part of workers as well as management. Mental revolution is a process of bringing
drastic changes in their attitude, outlook and behavioural pattern in respect of their duties toward work,
toward their fellow workers and employers. Similar kind of changes in outlook should also take place
among managers towards workers and their problems. To bring the change in the mental attitude of both
sides Taylor, suggested scheme of workers participation in management and sharing surplus as bonus.
7) Differential payment
F.W.Taylor firmly believed that man is motivated by economic considerations. He, therefore,
introduced a new payment plan called ‘the differential piece work’. He linked incentives with
production. Accordingly a worker will be paid in direct proportion to how much be produced. That is a
worker will receive low piece rate if he produces the standard number of pieces and high rates if he
surpasses the standard. In the latter case, the higher rate would be applied to all the pieces the worker
produced, including those which were produced according to the standard.

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1.10.1.2 Administrative Theory of Management
Though administrative theory of management is based on the contributions of many scholars and
practitioners like Henri Fayol, Max Weber, Sheldon, Mooney, Allen and urwick, etc. But major part of it
relates to Foyal’s work.

Henry Fayol’s Administrative Theory of Management

Henri Fayol (1841-1925) is considered the ‘Father of administrative management theory’ with
focus on the development of broad administrative principles applicable to general and higher managerial
levels. Foyal started his career as a junior engineer in a coal mining company in France in 1860 and
became its general manager in 1880. He wrote a monograph in French in 1916, entitled “General and
Industrial Administration” which was translated into English in 1929.
It is in four parts of which the first part deals with classification of business activities as
technical activities (manufacturing or production), commercial activities (buying, selling and
exchange), financial activities (raising and optimum use of capital), accounting activities (recording,
costing and statistics), security activities (protection of persons and property), and administrative or
managerial activities.
Second part contained basic functions of management performed by the managers in all types
of organizations. In this way he identified five elements or functions of management process:
Planning, organizing, commanding, coordinating and controlling.
Third part consists of 14 principles of management as general guides to the management
process and management practice. These are as under.
1) Division of Work
Division of work in the management process produces more and better work with the same
effort. Various functions of management like planning, organizing, directing and controlling cannot be
performed efficiently by a single proprietor or by a group of directors. They must be entrusted to
specialists in related fields.
2) Authority and Responsibility
As the management consists of getting the work done through others, it implies that the manager
should have the right to give orders and power to exact obedience. A manager may exercise formal
authority and also personal power. Formal authority is derived from his official position, while personal
power is the result of intelligence, experience, moral worth, ability to lead, past service, etc.
Responsibility is closely related to authority and it arises wherever authority is exercised. An individual,

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who is willing to exercise authority, must also be prepared to bear responsibility to perform the work in
the manner desired. However, responsibility is feared as much as authority is sought after.
3) Discipline
Discipline is absolutely essential for the smooth running of business. By discipline we mean, the
obedience to authority, observance of the rules of service and norms of performance, respect for
agreements, sincere efforts for completing the given job, respect for superiors, etc.
4) Unit of Command
This principle requires that each employee should receive instructions about a particular work
from one superior only. Foyal believed that if an employee was to report to more than one superior, he
would be confused due to conflict in instructions and also it would be difficult to pinpoint responsibility
to him.
5) Unity of Direction
It means that there should be complete identity between individual and organizational goals on
the one hand and between departmental goals inter se on the other. The should not pull in different
directions.
6) Subordination of Individual Interest to General Interest
In a business concern, an individual is always interested in maximizing his own satisfaction
through more money, recognition, status, etc. This is very often against the general interest, which lies
in maximizing production. Hence the need to subordinate the individual interest to general interest.
7) Remuneration
The remuneration paid to the personnel of the firm should be fair. It should be based on general
business conditions, cost of living, and productivity of the concerned employees and the capacity of the
firm to pay. Fair remuneration increases workers’ efficiency and morale and fosters good relations
between them and the management.
8) Centralization
If subordinates are given more role and importance in the management and organization of the
firm, it is decentralization but if they are given less role and importance, it is centralization. The
management must decide the degree of centralization or decentralization of authority on the basis of the
nature of the circumstances, size of the undertaking, and the type of activities and the nature of
organizational structure. The objective to pursue should be the optimum utilization of all faculties of the
personnel.

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9) Scalar Chain
Scalar chain means the hierarchy of authority from the highest executive to the lowest one for the
purpose of communication. It states superior subordinate relationship and the authority of superiors in
relation to subordinate at various levels. As per this principle, the orders or communications should pass
through the proper channels of authority along the scalar chain. But in case there is need for swift
action, the proper channels of authority may be short-circuited by making direct contact (called gang
plank) with the concerned authority.
10) Order
To put things in an order needs effort. Disorder does not need any effort. It evolves by itself.
Management should obtain orderliness in work through suitable organization of men and materials. The
management should observe the principles of “right place for everything and for every man”.
11) Equity
Equity means equality of fair treatment. Equity results from a combination of kindness and
justice. Employees expect management to be equally just to everybody. It requires managers to be free
from all prejudices, personal likes or dislikes. Equity ensures healthy industrial relations between
management and labour which is essential for the successful working of the enterprise.
12) Stability of Tenure of Personnel
In order to motivate workers to do more and better work, it is necessary that they should he
assured security of job by the management. If they have fear of insecurity of job, their morale will be
low and they cannot give more and better work. Further, they will not have any sense of attachment to
the firm and they will always be on the lookout for a job elsewhere.
13) Initiative
Initiative means freedom to think out and execute a plan. The zeal and energy of employees are
augmented by initiative. Innovation, which is the hallmark of technological progress, is possible only
where the employees are encouraged to take initiative. According to Fayol, initiative is one of the
keenest satisfactions for an intelligent man to experience, and hence, he advises managers to give their
employees sufficient scope to show their initiative. Employees should be encouraged to make all kinds
of suggestions to conceive and carry out their plans, even when some mistakes result.
14) Esprit De-Corps
This means team spirit. Since “Union is strength”, the management should create team spirit
among the employees. Only when all the personnel pull together as a team, there is scope for realizing
the objectives of the concern. Harmony and unity among the staff are a great source of strength to the

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undertaking. To achieve this, Fayol suggested two things. One, the motto of divide and rule should be
avoided, and two, verbal communication should be used for removing misunderstandings
Fourth part of monograph deals with managerial qualities and skills, which should be
possessed by the managers. These are as: Physical qualities (health, vigour, personality), Mental
ability (abilities to understand and learn, to make decisions and creativity, etc.), Moral education
(Loyalty, dignity, ethical values, etc…), General education, Special knowledge and experience
(knowledge arising out of practice).

1.10. 2. Behavioral or neo-classical approach

Behavioural approach was evolved gradually over many years. This is based on strong conviction
that successful management depends on the ability of managers to understand the work, and
background, needs, values, perceptions and personality of people. This approach will be studied on the
following two phases, namely, Human Relation movement and Behavioural science approach.
a) Human Relation Movement
Under this approach Elton Mayo, Mary Parker, Follet, and Douglas McGregor have been the
main contributors to this approach. Among the above contributors Elton Mayo’s Hawthorne studies is
very popular.
b) Behavioural Science Approach
In view of certain inadequacies and drawbacks associated with human relation approach, many
other social and behavioural scientists for undertaking and analyzing human behaviour methodically
made concerted efforts. The term behavioural approach may be defined as systematic and scientific
analysis of human behaviour with a view to determine causes of working behaviour of an individual.
This approach is also known as “Organizational behaviour Approach”. It includes an interdisciplinary
approach of studying human behaviour consisting of psychology, sociology, physical and biological and
cultural variables of individuals. For this approach, different views were developed by various
behavioural scientists such as Douglas, McGregor, Abraham Maslow, Chester Bernard, Renis Likert and
Herbert Simon.

1.10.2.1. Elton Mayo’s theory of Hawthorne experiment

George Elton Mayo (1880 – 1949) was regarded as the “Founder and father of Modern
sociological and psychological Industrial research”.

Elton mayo was born in 1880 in Adelaide in Australia. He got a basic degree from Adelaide
University. He worked as a teacher initially. Then, he was advised to study psychology. He had become
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a lecturer at the university of Queensland after completion of Master degree in psychology. Elton Mayo
went to the United States of America in 1922, and joined as a researcher at the Wharton Business School
of Pennsylvania University. Later on he was selected in the Graduate school of Business at Harvard
University in 1926. He was a professor of Industrial Research at Harvard University. He retired in 1947
and died in 1949. During his career he has published many books and papers.

Hawthorne experiments were conducted at the Hawthorne plant of the Western Electric
Company in Chicago from 1924 – 1932. Hawthorne plant was manufacturing telephone systems and its
parts. Nearly 30,000 employees worked during this experiment period. The company provides all
facilities to employees upto their satisfaction level. But the productivity of the employees was not to the
expectations of management. So, in 1924, the management requested National Academy of Sciences to
investigate the reasons for dissatisfaction of employees and decrease in productivity. On this basis,
Prof.Elton Mayo and his team conducted research. The objective of the experiment was to find out the
behaviour and attitude of employees under better working conditions. The results of these
experiments have been published into six volumes. They are the Human problems of Industrial
civilization, The social problem of an industrial civilization, The industrial worker, Leadership in a free
society, Management and worker and Management and morale.
Based on the problems, Prof.Elton Mayo and his team conducted researches in four phases. They
are:
 Illumination experiments (1924 – 1927)
 Relay Assembly Test room experiment (1927 – 1928)
 Mass interviewing programme (1928 – 1930)
 Bank wiring observation room experiments (1931 – 1932).

1. Illumination experiments
This research was conducted to determine the effects of changes in lighting on productivity. The
basic assumption of this research was that high lighting leads to productivity. This experiment was
conducted for two and a half years. Under this experiment, two groups were formed namely,
experimental group and control group. In the case of experimental group, variations in lighting were
made periodically and the results were observed and recorded. In the case of control group, there is no
change in the lighting and the researchers were requested to work under constant lighting system upto
the end of the experiment. It was observed that the output of both groups increased steadily. The
production decreased in two groups whenever the lighting falls below the normal level. This experiment
revealed that there is no relationship between lighting and productivity. It means that the improved

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working conditions do not result in the increased productivity. As per this experiment, it is known that
informal social relations among the group members are the reason for increased productivity.

2. Relay assembly test room experiments

Relay assembly test room experiments were conducted to determine the effect of changes in
working conditions, length of working days, rest pauses, frequency of rest and duration and physical
conditions on productivity. A group of six women workers, who were friendly to each other selected for
this experiment. These women workers were told about the experiment and were made to work in a very
informal atmosphere with a supervisor – researcher in a separate room. The supervisor – researcher
acted as their friend, philosopher and guide. During the study several variations were made in the
working conditions to find which combinations was most ideal for production. Surprisingly, the
researchers found that the production of the group had no relation with working conditions. It went on
increasing and stabilized at a high level even when all the improvements were taken away and the poor
pre – test conditions were reintroduced. How this phenomenon came about nobody knew. The workers
were also not able to explain this phenomenon. They were neither closely supervised, nor motivated by
extra reward. Obviously, something else was happening in the test room, which was responsible for this.
Researchers then attributed this phenomenon to the following factors:
 Feeling of importance among the women as a result of their participation in
the research and the attention they got.
 Warm informality in the small group and tension – free interpersonal and
social relations as a result of the relative freedom from strict supervision and
rules.
 High group cohesion among the women.
Elton mayo concluded that the work satisfaction depends to a large extent on the informal
social pattern of the work group.
3. Mass Interviewing Programme

The knowledge about the informal group processes, which was accidentally acquired in the
second phase made researchers design the third phase. This interview programme was conducted to
determine employees attitudes towards company, supervision, insurance plans, promotion and wages.
For this purpose they interviewed more than 20,000 workers. At first, direct questions were asked
relating to the type of supervision, working conditions living conditions and so on. But since the replies
were guarded, the technique was changed to non –directive type of interviewing, in which workers were
free to talk about their favourite topics related to their work environment. This study revealed that the

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worker’s social relations inside the organization had an unmistakable influence on their attitudes and
behaviours. The study brought to light the all – pervasive nature of informal groups which had their own
culture and production norms which their members were forced to obey.

Mayo concluded that the workers were activated by logic of sentiment but the management is
concerned with logic of cost and efficiency. Thus, a conflict between the workers and the management
becomes inevitable.
4. Bank wiring Observation room Experiment
This experiment was conducted between 1931 and 1932. A group has been formed to conduct
this experiment. This group consisted of fourteen male workers. Out of these fourteen workers, nine
were wiremen, three were soldier men and two were inspectors.
The main aim of this experiment was to analyze how a group could influence a worker to restrict
his output even in the face of attractive incentive schemes for larger output. Hourly rate of wages was
fixed on the basis of average output of each worker and a group bonus scheme was announced. Group
bonus was to be determined on the basis of average group output. It was assumed that workers would
produce more and more in order to get maximum group bonus. Besides, the workers could help each
other to produce more. The company had not improved the working conditions for this experiment and
the company was not ready to analyse cause – effect relationships. But, a general observation was made
to know about an individual behaviour and the impact of group behaviour on the individual behaviour.
Under this experiment, workers have decided their target by themselves. The company target was
more than the target fixed by the workers. However, the workers have failed to achieve the target due to
the following reasons.

 Unemployment problem
 Unduly high standard
 Protection of slow workers
 Satisfaction of management
This experiments helped to arrive at the following conclusion:
 An informal relationship is responsible for deciding the human behaviour.
 The counseling was helpful in resolving management – employee conflicts.
 The existence of informal organization is quite common in all organization.
 The group had fixed standard output of their own only because of social pressure.
1.10. 3. Modern approach to management

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 Modern approach represents latest developments, which took place after 1950. This
approach can be studied in the following four phases namely, Quantitative approach, System
approach, Contingent approach and Attributes of excellence.

1.10.3.1. Quantitative Approach

This approach also known as ‘management science approach’, has been developed during 1950.
It is based on the approach of scientific management. It offers systematic and scientific analysis and
solution to the problems faced by managers. The quantitative approach aims at achieving high degree of
precision, perfection and objectivity by encouraging the use of mathematical and statistical tools for
solving complex problems. These quantitative decision making tools are known as ‘Operations
Research’ like LPP, Simulation, queuing theory and game theory etc… It also implies use of computer-
aided technology in various fields like production, finance, costing, transporting and storage etc… In
simple terms, operations research may be regarded as application of scientific methods for solving
problems and scientific methods for solving problems and scientific methods consist of the following
stages.
 Dividing problems into small and simple components
 Gathering required information on each component
 Analysis of data so collected
 Finding out solution to problem in hand.

The quantitative approach which involves use of knowledge and skills of several other disciplines such
as statistics, engineering and accounting etc… has contributed significantly to management theory and
behaviour. This approach has very limited application that too only in respect of problem solving and
decision-making.
1.10.3.2. Systems Approach
Systems approach of management represents new thinking and latest developments related to
organization and management. It was developed after 1950 emphasing interdependence and
interrelationship among various activities of organization. Basically this approach aims at identifying the
nature of relationship among various components of the organization, which is considered as larger
system. The term system may be defined as a set of interrelated and interacting components assembled
in a particular sequence as to produce some results. These components may also viewed as sub-systems
of larger system. It is only through this sub–systems the larger system operates, thus larger system can
be viewed as a whole entity or totality. The various sub-systems which are involved in the functioning of

26
larger one are closely related to each other and to a system as a whole. Similarly, these sub-systems
interact with each other by getting influenced and influencing others. Every system has sub-system and
every sub-system may be considered as a system because, it may have a sub-systems.

The system approach defines an organization as a complex whole consisting of mutually interdependent
and interacting parts, which are viewed as sub-system. Therefore the approach is said to be holistic in
nature assuming that whole is greater than the sum of its parts.

The system may be broadly classified into four categories. They are as follows
 Physical system
 Mechanical system
 Biological system
 Social systems.
Physical systems are the part and parcel of the nature or sub-system, of it totally governed and
regulated by the nature. For example, solar system, seasons and rivers, etc…
Mechanical systems refer to those devices, which are based on technology. These systems have
been innovated by human beings for their betterment but are totally closed systems in nature, as they do
not interact with external environment such as machines, motorcars, electronic appliances and consumer
durables etc…
Biological systems are those systems, which regulate and control existence and survival of all
living species, human and plants are good examples of biological systems.
Social systems may be defined as systems, which have been developed by human being to
facilitate co-operative working to overcome the problem of isolation and desolation. All kinds of small
and big formal and informal and economic and non economic organizations are examples of social
systems.
1.10.3.3. Contingency Approach
Contingency approach, though related to system approach, represents comparatively new line of
thinking among management scientists. This approach basically aims at attempting to take a step away
from universal application of managerial principles a recommending that the application of these
principles is subject to appropriateness of the situation. It is a systematic attempt to determine package
of management technique, approaches and practices which are appropriate in specific situation.
The contingency approach offers following guidelines for the managers.

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  Contingency approach is situation oriented urging upon the managers to study, analyse and
diagnose the situation. It is to be done in terms of components variables of the situation and
external factors affecting the situation.
 Subsequently, after the analysis of the situation, the managers are expected to prepare inventories
of management theory, principle, techniques and concepts.
 In order to tackle the situation efficiently the validity and applicability of management tools and
techniques is to be examined and finally package of these tools and techniques is prepared which is
appropriate for that specific situation. The different situation requires different managerial
response.
1.10.3.4. Attributes of Excellence
This approach has been developed by Thomas J.Peter and Robert H.Waterman, management
consultants of USA in 1982. They published a book popularly known as “In Search of Excellence”
which was considered as remedy for solving productivity-related problems faced by American
companies. In view of its wide acceptance this approach deserves mention in the historical development
of management thoughts. After having surveyed and interviewed thirty six excellent’ companies out of
sixty –two best managed companies USA in terms of innovation and profitability they isolated eight
attributes of excellence described below.

S.No. Attribute of Key indicators

excellence
1 A base for action Small scale, easily managed experiments to build knowledge,
interest, and commitment. Management stay visible and
personally involved in all areas through active informal
communication and spontaneous management by wondering
around (MBWA).
2 Close to the customer Customer satisfaction is practically an obsession. Input from
customers is sought throughout the design, production
marketing cycles.
3 Autonomy and Risk taking is encouraged; failure is tolerated in projects to see
entrepreneurship them through competition. Flexible structure permits the
formation of ‘Skunk works’ (small team of zealous innovators
working on special projects) Lot of creative swings are
encouraged to ensure some home runs (Successful products)

4 Productivity through Individuals are treated with respect and dignity. Enthusiasm,

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 people trust and family feeling are fostered. People are encouraged to
have fun while getting something meaningful accomplished.
Work units are kept small and humane.
5 Hands-on value driven A clear, company’s philosophy is disseminated and followed.
Personal values are discussed openly not buried. The
organizations belief system is reinforced through frequently
shares stories, myths, and legends. Leaders are positive role-
model not do as I say not-as-I-do, authority figure.
6 Stick to the knitting Management sticks to the business it knows best emphasis is on
internal growth not merger.
7 Simple form lean staff Authority is decentralized as much as possible. Headquarters’
staffs are kept small; talent is pushed out of field.
8 Simultaneous loose- Tight overall strategic and financial control is counter-balanced
tight properties by decentralized authority, autonomy and opportunities for
creativity.
(Source: Peter and Watermain’s eight attributes of excellence from In Search of Excellence.)

1.11. Difference between Management and Administration

Sl.No Point of Distinction Administration Management

1 Management means
Administration means overall
essentially an executive
determination of policies, settings
function, the active direction
of major objectives, the laying out
of human efforts getting
of broad programmes, major
things done.
Definition projects and so forth.
(i.e., Management is
(ie., Administration means
considered as an operative
determination of goals,
function of carrying out
formulation of plans and policies
plans and policies for
of the organization.)
achieving objectives.)
2 Executive or doing
Nature Deterministic or thinking function
function

It is concerned with the

It is concerned with the
3 Scope determination of major objectives
implementation of policies
and policies

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 It is largely a middle and
4 Level It is a mainly a top-level function
lower- level function

Managerial decisions are

Influence Administrative decisions are
influenced mainly by
5 influenced mainly by public
objectives and policies of
opinion and other outside forces.
the organization

It is actively concerned
Direction of human It is not directly concerned with with the direction of human
6
efforts the direction of human efforts efforts in the execution of
plans

Directing and organizing

Planning and control are the main
7 Main function are the main functions
functions involved in it
involved in it.

8 Skills required Conceptual & human skills Technical and human skills

Used largely in government and Used mainly in business

9 Usage
public sector organizations

Managing Director,
Minister, Commander,
General Manager, Sales
10 Examples Commissioner, Registrar, vice-
Manager, Branch Manager
Chancellor, Governor etc…
etc…

1.12. Management as a Science or an art

1.12.1. Management as a Science
Science is not only using the test tube or the lab coat, but also they are implicit in the method of
inquiry used by a discipline for gathering data. We can call it as a discipline, as it is a scientific on the
following grounds:
1. Methods of inquiry are systematic and empirical;
2. Information can be gathered, recorded and analysed; and
3. Results are cumulative and communicable.
Systematic means the recorded and analyzed data or being ordered and unbiased. All scientific
information collected as raw data and finally ordered and analysed with the help of statistical tools. It
thus becomes communicable and intellectual. Communication of results also permits repetition of the
study, if need, by the investigator or others. When the study is repeated and the second try provides
results similar to the first one, which derives much more confidence in those results.

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 On the basis of the above definition of science we may perceive the management is also a science.
The word ‘science’ is used to denote two types of systematic knowledge: natural or exact and
behavioral or inexact. Some more explanation of the scientific nature of management is needed.
Management is not like the exact or natural sciences such as physics, chemistry, etc. Management is a
behavioural/social science. It is possible for us to study the effects of any one of the factors affecting a
phenomenon individually by making the other factors in operative for the time being. For example, in
physics it is possible for anyone to study in a laboratory, the effects of, say, only heat on the density of
air by holding other factors (such as humidity, etc) constant for the duration of the experiment. But the
same thing is not possible in management where we have to study man and a multiplicity of factors
affecting him. It is not possible to study the effect of, say, only monetary incentives on a worker’s
productivity because this effect will always be found to be mixed with and inseparable from other
factors such as the leadership style of the worker’s supervisor, worker’s need hierarchy, the pressure of
his co-workers, etc. At best, we can get only a rough idea of the relationship between the two. In other
words, our findings are not going to be as accurate and dependable as those of the physical sciences. We
may tell about tendencies and probabilities of management. We may, therefore, place management in the
category of a behavioural science.

1.12.2. Management as an Art:

Art is concerned with the understanding of how a particular work can be accomplished.
Management in this sense is an art. It is the art of getting things done through others in dynamic and
mostly non-repetitive situations. Whether it is a factory or a firm the resources like men, machine and
money have to be coordinated against several constraints to achieve given objectives in the most
efficient manner. The manager has to constantly analyse the existing situation, determine the
objectives, seek alternatives, implement, coordinate, control and evaluate information and make
decisions.

Knowledge of management theory and principles is indeed a valuable aid and kit of the manager
but it cannot replace his other managerial skills and qualities. This knowledge has to be applied and
practiced by the manager just as the medical or legal practitioners practice their respective sciences. In
this sense, management is an art. It is like the art of a musician or the art of a painter who seeks to
achieve the desired effect with colour or instruments, but mainly with his own skill.

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 We may thus conclude that management involves both elements those of a science and an art.
While certain aspects of management make it a science, certain others, which involve application of
skill, make it an art.

1.13. Difference between Managers and Entrepreneurs.

An entrepreneur
An entrepreneur is the person (or group of persons) at the top of any business concern who
undertake financial and legal responsibility for the success or failure of the concern.
Decision-making by the entrepreneur is the mainly with regard to the following
 Goals and objectives of the enterprise and broadly how these are to be accomplished.
 The kind of image the enterprise is to project of itself and how it is to conduct it self in general.
 The kind of products to be manufactured whether top quality and useful products, or low quality
and not so useful products.
 The concern’s attitude towards its employees, the government, society and so on.

Manager
A manager is an employee of the entrepreneur. His job is to work for the accomplishment of the
goals and objectives set by the entrepreneur.
There may be cases where a person is both an entrepreneur and a manager at the same time as,
for example, in the case of the sole proprietor or the managing partner of a firm. Even so the managerial
functions performed by him in this capacity are the same as those of any non-owner manager.
Difference between entrepreneur and manager
The main difference between an entrepreneur and a manager is with regard to the degree of
freedom enjoyed in his work. Being the owner of the undertaking, the entrepreneur is free to determine
the objectives based on his own assessment, beliefs and values. Limitations imposed by the external
environment and, to a certain extent, availability of resources will also influence him in this regard.
However, the manager is only concerned with the direction and coordination of the resources to
accomplish the objectives in the determination of which he may, or may not have had any role. In any
case, his own values and beliefs have necessarily to take a back seat because the nature of his work
requires him to act rationally and thoughtfully toward the accomplishment of organizational objectives.

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1.14. Distinguish between the manager and the leader

Manager Leader
He drives and orders He coaches and advises
He depends on his authority He depends on his confidence and goodwill.
He engenders fear He inspires enthusiasm
He fixes blames and finds faults He solves problems
He knows all the answers He consults and seeks advice
He makes the work drudgery He makes the work a game.
He believes in “I” He believes in “We” and “Your”.

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