MODULE

MANA2013 – PRINCIPLES OF MANAGEMENT AND ORGANIZATION

LESSON 1. MANAGEMENT SCIENCE: THEORY AND PRACTICE

I. OBJECTIVES

This lesson is intended to introduce the students and management about fundamental of
management and evolution of management thought. After studying this lesson you will be able
to:

1. explain the meaning and characteristics of management.

2. describe scope of management.
3. know the nature of management, i.e., is it a science or an art.
4. describe management as a profession.
5. understand evolution of management thought.

II. INTRODUCTION

Management is a vital aspect of the economic life of man, which is an organized group
activity. A central directing and controlling agency is indispensable for a business concern. The
productive resources – material, labor, capital etc. are entrusted to the organizing skill,
administrative ability and enterprising initiative of the management. Thus, management provides
leadership to a business enterprise. Without able managers and effective managerial leadership
the resources of production remain merely resources and never become production. Under
competitive economy and ever-changing environment the quality and performance of managers
determine both the survival as well as success of any business enterprise. Management occupies
such an important place in the modern world that the welfare of the people and the destiny of the
country are very much influenced by it.

DEFINITION OF MANAGEMENT

1. Management may be defined in many different ways. Many eminent authors on the
subject have defined the term "management", some of these definitions are reproduced
below:
2. According to Lawrence A Appley - "Management is the development of people and not
the direction of things".
3. According to Joseph Massie - "Management is defined as the process by which a co-
operative group directs action towards common goals".
4. In the words of George R Terry - "Management is a distinct process consisting of planning,
organising, actuating and controlling performed to determine and accomplish the
objectives by the use of people and resources".
 5. According to James L Lundy - "Management is principally the task of planning,
coordinating, motivating and controlling the efforts of others towards a specific objective".
6. In the words of Henry Fayol - "To manage is to forecast and to plan, to organize, to
command, to co-ordinate and to control".
7. According to Peter F Drucker - "Management is a multi-purpose organ that manages a
business and manages managers and manages worker and work".

CHARACTERISTICS OF MANAGEMENT

An analysis of the various definitions of management indicates that management has

certain characteristics. The following are the salient characteristics of management.

a) Management aims at reaping rich results in economic terms: Manager's primary task is
to secure the productive performance through planning, direction and control. It is expected
of the management to bring into being the desired results. Rational utilization of available
resources to maximize the profit is the economic function of a manager. Professional
manager can prove his administrative talent only by economizing the resources and
enhancing profit. According to Kimball - "management is the art of applying the economic
principles that underlie the control of men and materials in the enterprise under
consideration".
b) Management also implies skill and experience in getting things done through people:
Management involves doing the job through people. The economic function of earning
profitable return cannot be performed without enlisting co-operation and securing positive
response from "people". Getting the suitable type of people to execute the operations is the
significant aspect of management. In the words of Koontz and O'Donnell - "Management is
the art of getting things done through people in formally organized groups".
c) Management is a process: Management is a process, function or activity. This process
continues till the objectives set by administration are actually achieved. "Management is a
social process involving co-ordination of human and material resources through the
functions of planning, organizing, staffing, leading and controlling in order to accomplish
stated objectives".
d) Management is a universal activity: Management is not applicable to business
undertakings only. It is applicable to political, social, religious and educational institutions
also. Management is necessary when group effort is required.
e) Management is a Science as well as an Art: Management is an art because there are
definite principles of management. It is also a science because by the application of these
principles predetermined objectives can be achieved.
f) Management is a Profession: Management is gradually becoming a profession because
there are established principles of management which are being applied in practice, and it
involves specialized training and is governed by ethical code arising out of its social
obligations.
g) Management is an endeavor to achieve pre-determined objectives: Management is
concerned with directing and controlling of the various activities of the organization to attain
the pre-determined objectives. Every managerial activity has certain objectives. In fact,
management deals particularly with the actual directing of human efforts.
h) Management is a group activity: Management comes into existence only when there is
an group activity towards a common objective. Management is always concerned with group
efforts and not individual efforts. To achieve the goals of an organization management plans,
organizes, co-ordinates, directs and controls the group effort.
i) Management is a system of authority: Authority means power to make others act in a
predetermined manner. Management formalizes a standard set of rules and procedure to
be followed by the subordinates and ensures their compliance with the rules and regulations.
Since management is a process of directing men to perform a task, authority to extract the
work from others is implied in the very concept of management.

j) Management involves decision-making: Management implies making decisions

regarding the organization and operation of business in its different dimensions. The success
or failure of an organization can be judged by the quality of decisions taken by the managers.
Therefore, decisions are the key to the performance of a manager.
k) Management implies good leadership: A manager must have the ability to lead and get
the desired course of action from the subordinates. According to R. C. Davis - "management
is the function of executive leadership everywhere". Management of the high order implies
the capacity of managers to influence the behaviour of their subordinates.
l) Management is dynamic and not static: The principles of management are dynamic and
not static. It has to adopt itself according to social changes.
m) Management draws ideas and concepts from various disciplines: Management is an
interdisciplinary study. It draws ideas and concepts from various disciplines like economics,
statistics, mathematics, psychology, sociology, anthropology etc.
n) Management is Goal Oriented: Management is a purposeful activity. It is concerned with
the achievement of pre-determined objectives of an organization.
o) Different Levels of Management: Management is needed at different levels of an
organization namely top level, middle level and lower level.
p) Need of organization: There is the need of an organization for the success of management.
Management uses the organization for achieving pre-determined objectives.
q) Management need not be owners: It is not necessary that managers are owners of the
enterprise. In joint stock companies, management and owners (capital) are different entities.
r) Management is intangible: It cannot be seen with the eyes. It is evidenced only by the
quality of the organization and the results i.e., profits, increased productivity etc.

SCOPE OF MANAGEMENT

It is very difficult to precisely state the scope of management. However, management

includes the following aspects:

1. Subject-matter of Management
Management is considered as a continuing activity made up of basic management functions like
planning, organizing, staffing, directing and controlling. These components form the subject-
matter of management.

2. Functional Areas of Management

Management covers the following functional areas:-

Financial Management: Financial management includes forecasting, cost control,

management accounting, budgetary control, statistical control, financial planning etc.
Human Resource Management: Personnel / Human Resource Management covers the
various aspects relating to the employees of the organization such as recruitment, training,
transfers, promotions, retirement, terminations, remuneration, labor welfare and social
security, industrial relations etc.
Marketing Management: Marketing management deals with marketing of goods, sales
promotion, advertisement and publicity, channels of distribution, market research etc.

Production Management: Production Management includes production planning,

quality control and inspection, production techniques etc.
Material Management: Material management includes purchase of materials, issue
of materials, storage of materials, maintenance of records, materials control etc.
Purchasing Management: Purchasing management includes inviting tenders for
raw materials, placing orders, entering into contracts etc.
Maintenance Management: Maintenance Management relates to the proper care
and maintenance of the buildings, plant and machinery etc.
Office Management: Office management is concerned with office layout, office
staffing and equipment of the office.

3. Management is an Inter-Disciplinary Approach

Though management is regarded as a separate discipline, for the correct application of
the management principles, study of commerce, economics, sociology, psychology, and
mathematics is very essential. The science of management draws ideas and concepts from a
number of disciplines making it a multi-disciplinary subject.

4. Principles of Management
The principles of management are of universal application. These principles are
applicable to any group activity undertaken for the achievement of some common goals.

5. Management is an Agent of Change

The techniques of management can be improved by proper research and development.

6. The Essentials of Management

The essentials of management include scientific method, human relations and quantitative
techniques.
Is Management a Science or an Art?

A question often arises whether management is a science or art. It is said that

"management is the oldest of arts and the youngest of sciences". This explains the changing
nature of management but does not exactly answer what management is? To have an exact
answer to the question it is necessary to know the meanings of the terms "Science" and "Art".

1. What is "Science"?
Science may be described- "as a systematic body of knowledge pertaining to an area of
study and contains some general truths explaining past events or phenomena".

The above definition contains three important characteristics of science. They are

It is a systematized body of knowledge and uses scientific methods for observation

Its principles are evolved on the basis of continued observation and experiment and

Its principles are exact and have universal applicability without any limitation. Judging from
the above characteristics of science, it may be observed that-

Management is a systematized body of knowledge and its principles have evolved on the
basis of observation.

The kind of experimentation (as in natural sciences) cannot be accompanied in the area of
management since management deals with the human element.

In management, it is not possible to define, analyze and measure phenomena by repeating

the same conditions over and over again to obtain a proof.

The above observation puts a limitation on management as a science. Management like

other social sciences can be called as "inexact science".

What is "Art"?
'Art' refers to "the way of doing specific things; it indicates how an objective is to be
achieved." Management like any other operational activity has to be an art. Most of the managerial
acts have to be cultivated as arts of attaining mastery to secure action and results.

The above definition contains three important characteristics of art. They are-

Art is the application of science. It is putting principle into practice.

After knowing a particular art, practice is needed to reach the level of perfection.

It is undertaken for accomplishing an end through deliberate efforts.

Management is both a Science as well as an Art
Management is both a science as well as an art. The science of management provides
certain general principles which can guide the managers in their professional effort. The art of
management consists in tackling every situation in an effective manner. As a matter of fact,
neither science should be over-emphasized nor art should be discounted; the science and the
art of management go together and are both mutually interdependent and complimentary.
Management is thus a science as well as an art. It can be said that-"the art of
management is as old as human history, but the science of management is an event of the recent
past."

PROFESSIONALIZATION OF MANAGEMENT
There has been a growing trend towards professionalization of management. Professionalization
imparts a certain social responsibility and dignity to management. A professional cannot be
controlled or directed by the client. He has professional knowledge and judgment which he uses
to make his decision. Thus, professionalization makes business more efficient, dynamic and
socially responsible. The growth of management education in India has contributed to
professionalization in the business field.
The company form of business organization which has split ownership from management and
the gaining popularity of the company form of business organization have increased the need for
professional managers.

Is management a profession? To answer this question, first of all we should understand what a
profession is. Many authorities on the subject have attempted to define a profession. According
to Abraham Flexner, A profession is -

A body of specialized knowledge and recognized educational process of acquiring it.

A standard of qualifications governing admission to the profession.

A standard of conduct governing the relationship of the practitioners with clients,

colleagues and the public.

An acceptance of the social responsibility inherent in an occupation and the public interest.

An association or society devoted to the advancement of the social obligations as distinct

from the economic interests of the group.

According to Lewis Allen, " a professional manager is one who specializes in the work of
planning, organizing, leading and controlling the efforts of others and does so through a
systematic use of classified knowledge, a common vocabulary and principles, who subscribes to
the standards of practice and code of ethics established by a recognized body".

According to Peter Drucker, "Professional management is a function, a discipline, a task

to be done; and managers are the professionals who practice this discipline, carry out the
functions and discharge these tasks. It is no longer relevant whether the manager is also an
owner; if he is it is incidental to his main function, which is to be a manager.”

The World Council of Management has recommended the following criteria for
professionalization. They are -

Members of a profession subordinate self-interest to the client interest and the

official interest.

A profession is based on a systematic body of knowledge that is held to common

and lends to application.

Membership of a profession should depend on the observance of certain rules of

conduct or behavior.

A critical evaluation of the above definitions show that professionalization of business

management shows that -

There exists a systematic body of knowledge on management. A professional

should have formally acquired the specialized knowledge and skill for management.
Management is taught as a discipline in various educational institutes, throughout the world.

Membership of a profession should depend on the observance of certain rules of

conduct and behavior. The decisions and actions of a professional are guided by certain
ethical considerations.

A profession is based on a systematic body of knowledge that is held in common

and lends itself to application. Thus, a profession should have no ideological bias in the
discharge of his functions.
SELF ASSESSMENT
I. ANSWER THE FOLLOWING

1. He defined management “"Management is the development of people and not the

direction of things".
a. Lawrence A. Appley b. George R. Terry c. Peter F. Drucker d. Henry Fayol

2. He defined management "To manage is to forecast and to plan, to organize, to

command, to co-ordinate and to control".
a. Lawrence A. Appley b. George R. Terry c. Peter F. Drucker d. Henry Fayol

3. He defined management "Management is a multi-purpose organ that manages a

business and manages managers and manages worker and work".
a. Lawrence A. Appley b. George R. Terry c. Peter F. Drucker d. Henry Fayol

4. He defined management "Management is a distinct process consisting of planning,

organising, actuating and controlling performed to determine and accomplish the
objectives by the use of people and resources".
a. Lawrence A. Appley b. George R. Terry c. Peter F. Drucker d. Henry Fayol

5. ________________ is a systematized body of knowledge and its principles have evolved

on the basis of observation
6. ________________includes forecasting, cost control, management accounting,
budgetary control, statistical control, financial planning etc.

7. ________________deals with marketing of goods, sales promotion, advertisement and

publicity, channels of distribution, market research etc.

8. ________________includes production planning, quality control and inspection,

production techniques etc.

9. ____________is concerned with office layout, office staffing and equipment of the office.

10. ____________ Material management includes purchase of materials, issue of materials,

storage of materials, maintenance of records, materials control etc.

II. ESSAY
Define Management?

Explain the characteristic features of management.

What is the scope of management?

Why is management considered a science as well as an art?

What do you mean by Professionalization of management?

EVOLUTION OF MANAGEMENT THOUGHT

The origin of management can be traced back to the days when man started living in groups.
History reveals that strong men organized the masses into groups according to their intelligence,
physical and mental capabilities. Evidence of the use of the well-recognized principles of
management is to be found in the organization of public life in ancient Greece, the organization
of the Roman Catholic Church and the organization of military forces. Thus management in some
form or the other has been practiced in the various parts of the world since the dawn of civilization.
With the on set of Industrial Revolution, however, the position underwent a radical change. The
structure of industry became extremely complex. At this stage, the development of a formal theory
of management became absolutely necessary. It was against this background that the pioneers
of modern management thought laid the foundations of modern management theory and practice.

Evolution of management thought may be divided into four stages

Pre-scientific management period.

Classical Theory

Scientific Management of Taylor

Administrative Management of Fayol

Bureaucratic Model of Max Weber

Neo-classical Theory or Behaviour Approach

Modern Theory or Systems Approach

 Professor Charles Babbage (UK 1729 -1871): He was a Professor of Mathematics at
Cambridge University. Prof Babbage found that manufacturers made little use of science and
mathematics, and that they (manufacturers) relied upon opinions instead of investigations and
accurate knowledge. He felt that the mf science and mathematics could be applied to the solution
of methods in the place of guess work for the solution of business problems. He advocated the
use of accurate observations, measurement and precise knowledge for taking business decisions.
He urged the management of an enterprise, on the basis of accurate data obtained through rigid
investigation, the desirability of finding out the number of times each operation is repeated each
hour, the dividing of work into mental and physical efforts, the determining of the precise cost for
every process and the paying of a bonus to the workers in proportion to his own efficiency and
the success of enterprise.

Robert Owens (UK 1771 - 1858): Robert Owens, the promoter of co-operative and trade
union movement in England, emphasized the recognition of human element in industry. He firmly
believed that workers' performance in industry was influenced by the working conditions and
treatment of workers. He introduced new ideas of human relations - shorter working hours,
housing facilities, training of workers in hygiene, education of their children, provision of canteen
etc. Robert Owen, managed a group of textile mills in Lanark, Scotland, where he used his ideas
of human relations. Though his approach was paternalistic, he came to be regarded as the father
of Personnel Management.
Henry Robinson Towne (USA 1844 -1924): H.R Towne was the president of the famous
lock manufacturing company "Yale and Town". He urged the combination of engineers and
economists as industrial managers. This combination of qualities, together with at least some skill
as an accountant, is essential to the successful management of industrial workers. He favoured
organized exchange of experience among managers and pleaded for an organized effort to pool
the great fund of accumulated knowledge in the art of workshop management.
Seebohm Rowntree (UK 1871- 1954): Rowntree created a public opinion on the need of
labour welfare scheme and improvement in industrial relations. The Industrial Welfare Society,
The Management Research Groups and the Oxford Lecture Conferences in the U.K owed their
origin and progress to the interest and zeal of Rowntree.
Classical Theory
Prof. Charles Babbage, James Watt Junior and Mathew Robinson Boulton, Robert Owen,
Henry Robinson Towne and Rowntree were, no doubt, pioneers of management thought. But,
the impact of their contributions on the industry as a whole was meagre. The real beginning of
the science of management did not occur until the last decade of the 19th century. During this
period, stalwarts like F.W. Taylor, H.L. Gantt, Emerson, Frank and Lillian Gilberth etc., laid the
foundation of management, which in due course, came to be known as scientific management.
This epoch in the history of management will be remembered as an era in which traditional ways
of managing were challenged, past management experience was scientifically systematized and
principles of management were distilled and propagated. The contributions of the pioneers of this
age have had a profound impact in furthering the management know-how and enriching the store
of management principles.

F.W. Taylor and Henry Fayol are generally regarded as the founders of scientific
management and administrative management and both provided the bases for science and art
of management.
Features of Management in the Classical Period:
It was closely associated with the industrial revolution and the rise of large-scale enterprise.
Classical organization and management theory is based on contributions from a number of
sources. They are scientific management, Administrative management theory, bureaucratic
model, and micro-economics and public administration.
Management thought focused on job content division of labor, standardization, simplification
and specialization and scientific approach towards organization.
Taylor's Scientific Management: Started as an apprentice machinist in
Philadelphia, USA. He rose to be the chief engineer at the Midvale Engineering Works
and later on served with the Bethlehem Works where he experimented with his ideas
and made the contribution to the management theory for which he is so well known.
Frederick Winslow Taylor well-known as the founder of scientific management was the
first to recognize and emphasis the need for adopting a scientific approach to the task
of managing an enterprise. He tried to diagnose the causes of low efficiency in industry
and came to the conclusion that much of waste and inefficiency is due to the lack of
order and system in the methods of management. He found that the management was
usually ignorant of the amount of work that could be done by a worker in a day as also
the best method of doing the job. As a result, it remained largely at the mercy of the
workers who deliberately shirked work. He therefore, suggested that those responsible
for management should adopt a scientific approach in their work, and make use of
"scientific method" for achieving higher efficiency. The scientific method consists
essentially of
Observation
Measurement
Experimentation and
Inference.
He advocated a thorough planning of the job by the management and emphasized the
necessity of perfect understanding and co-operation between the management and the workers
both for the enlargement of profits and the use of scientific investigation and knowledge in
industrial work. He summed up his approach in these words:
Science, not rule of thumb
Harmony, not discord
Co-operation, not individualism
Maximum output, in place of restricted output
The development of each man to his greatest efficiency and prosperity.
Elements of Scientific Management: The techniques which Taylor regarded as its
essential elements or features may be classified as under:
Scientific Task and Rate-setting, work improvement, etc.
Planning the Task.
Vocational Selection and Training
Standardization (of working conditions, material equipment etc.)
 Specialization
Mental Revolution.
Scientific Task and Rate-Setting (work study): Work study may be defined as the
systematic, objective and critical examination of all the factors governing the operational efficiency
of any specified activity in order to effect improvement. Work study includes

Methods Study: The management should try to ensure that the plant is laid out in the
best manner and is equipped with the best tools and machinery. The possibilities of
eliminating or combining certain operations may be studied.
Motion Study: It is a study of the movement, of an operator (or even of a machine) in
performing an operation with the purpose of eliminating useless motions.
Time Study (work measurement): The basic purpose of time study is to determine
the proper time for performing the operation. Such study may be conducted after the
motion study.
Both time study and motion study help in determining the best method of doing a job
and the standard time allowed for it.
Fatigue Study: If, a standard task is set without providing for measures to eliminate
fatigue, it may either be beyond the workers or the workers may over strain themselves
to attain it. It is necessary, therefore, to regulate the working hours and provide for rest
pauses at scientifically determined intervals.
Rate-setting: Taylor recommended the differential piece wage system, under which
workers performing the standard task within prescribed time are paid a much higher
rate per unit than inefficient workers who are not able to come up to the standard set.
Planning the Task: Having set the task which an average worker must strive to perform
to get wages at the higher piece-rate, necessary steps have to be taken to plan the
production thoroughly so that there is no bottlenecks and the work goes on systematically.
Selection and Training: Scientific Management requires a radical change in the methods
and procedures of selecting workers. It is therefore necessary to entrust the task of
selection to a central personnel department. The procedure of selection will also have to
be systematised. Proper attention has also to be devoted to the training of the workers in
the correct methods of work.
Standardization: Standardization may be introduced in respect of the following.
Tools and equipment: By standardization is meant the process of bringing about
uniformity. The management must select and store standard tools and implements
which will be nearly the best or the best of their kind.
Speed: There is usually an optimum speed for every machine. If it is exceeded, it is
likely to result in damage to machinery.
Conditions of Work: To attain standard performance, the maintenance of standard
conditions of ventilation, heating, cooling, humidity, floor space, safety etc., is very
essential.
Materials: The efficiency of a worker depends on the quality of materials and the
method of handling materials.
 Specialization: Scientific management will not be complete without the introduction of
specialization. Under this plan, the two functions of 'planning' and 'doing' are separated in
the organization of the plant. The `functional foremen' are specialists who join their heads
to give thought to the planning of the performance of operations in the workshop. Taylor
suggested eight functional foremen under his scheme of functional foremanship.
The Route Clerk: To lay down the sequence of operations and instruct the workers
concerned about it.

The Instruction Card Clerk: To prepare detailed instructions regarding different

aspects of work.
The Time and Cost Clerk: To send all information relating to their pay to the workers
and to secure proper returns of work from them.
The Shop Disciplinarian: To deal with cases of breach of discipline and
absenteeism.
The Gang Boss: To assemble and set up tools and machines and to teach the
workers to make all their personal motions in the quickest and best way.
The Speed Boss: To ensure that machines are run at their best speeds and proper
tools are used by the workers.
The Repair Boss: To ensure that each worker keeps his machine in good order and
maintains cleanliness around him and his machines.
The Inspector: To show to the worker how to do the work.
Mental Revolution: At present, industry is divided into two groups – management and labor.
The major problem between these two groups is the division of surplus. The management
wants the maximum possible share of the surplus as profit; the workers want, as large share
in the form of wages. Taylor has in mind the enormous gain that arises from higher
productivity. Such gains can be shared both by the management and workers in the form of
increased profits and increased wages.
Benefits of Scientific Management: Taylor's ideas, research and recommendations brought
into focus technological, human and organizational issues in industrial management. Benefits of
Taylor's scientific management included wider scope for specialization, accurate planning, timely
delivery, standardized methods, better quality, lesser costs, minimum wastage of materials, time
and energy and cordial relations between management and workers. According to Gilbreths, the
main benefits of scientific management are "conservation and savings, making an adequate use
of every one's energy of any type that is expended". The benefits of scientific management are:-
Replacement of traditional rule of thumb method by scientific techniques.
Proper selection and training of workers.
Incentive wages to the workers for higher production.
Elimination of wastes and rationalization of system of control.
Standardization of tools, equipment, materials and work methods.
Detailed instructions and constant guidance of the workers.
Establishment of harmonious relationship between the workers.
 Better utilization of various resources.
Satisfaction of the needs of the customers by providing higher quality products at lower
prices.

Henry Fayol (France, 1841 - 1925): Henry Fayol was born in 1941 at Constantinople in
France. He graduated as a mining engineer in 1860 from the National School of Mining. After his
graduation, he joined a French Coal Mining Company as an Engineer. After a couple of years, he
was promoted as manager. He was appointed as General Manager of his company in 1888. At
that time, the company suffered heavy losses and was nearly bankrupt. Henry Fayol succeeded
in converting his company from near bankruptcy to a strong financial position and a record of
profits and dividends over a long period.
Concept of Management: Henry Fayol is considered the father of modern theory of
general and industrial management. He divided general and industrial management into six
groups:
Technical activities - Production, manufacture, adaptation.
Commercial activities - buying, selling and exchange.
Financial activities - search for and optimum use of capital.
Security activities - protection of property and persons.
Accounting activities - stock-taking, balance sheet, cost, and statistics.
Managerial activities - planning, organization, command, co- ordination and control.
These six functions had to be performed to operate successfully any kind of business. He,
however, pointed out that the last function i.e., ability to manage, was the most important for upper
levels of managers.
The process of management as an ongoing managerial cycle involving planning, organizing,
directing, co-ordination, and controlling, is actually based on the analysis of general management
by Fayol. Hence, it is said that Fayol established the pattern of management thought and practice.
Even today, management process has general recognition.
Fayol's Principles of Management: The principles of management are given below:
Division of work: Division of work or specialization alone can give maximum
productivity and efficiency. Both technical and managerial activities can be performed in the
best manner only through division of labour and specialization.
Authority and Responsibility: The right to give order is called authority. The
obligation to accomplish is called responsibility. Authority and Responsibility are the two
sides of the management coin. They exist together. They are complementary and mutually
interdependent.
Discipline: The objectives, rules and regulations, the policies and procedures
must be honored by each member of an organization. There must be clear and fair
agreement on the rules and objectives, on the policies and procedures. There must be
penalties (punishment) for non-obedience or indiscipline. No organization can work smoothly
without discipline - preferably voluntary discipline.
 Unity of Command: In order to avoid any possible confusion and conflict, each
member of an organization must received orders and instructions only from one superior
(boss).
Unity of Direction: All members of an organization must work together to
accomplish common objectives.
Emphasis on Subordination of Personal Interest to General or Common
Interest: This is also called principle of co-operation. Each shall work for all and all for each.
General or common interest must be supreme in any joint enterprise.
Remuneration: Fair pay with non-financial rewards can act as the best incentive
or motivator for good performance. Exploitation of employees in any manner must be
eliminated. Sound scheme of remuneration includes adequate financial and non-financial
incentives.
Centralization: There must be a good balance between centralization and
decentralization of authority and power. Extreme centralization and decentralization must be
avoided.

Scalar Chain: The unity of command brings about a chain or hierarchy of

command linking all members of the organization from the top to the bottom. Scalar denotes
steps.
Order: Fayol suggested that there is a place for everything. Order or system alone
can create a sound organization and efficient management.
Equity: An organization consists of a group of people involved in joint effort.
Hence, equity (i.e., justice) must be there. Without equity, we cannot have sustained and
adequate joint collaboration.
Stability of Tenure: A person needs time to adjust himself with the new work and
demonstrate efficiency in due course. Hence, employees and managers must have job
security. Security of income and employment is a pre-requisite of sound organization and
management.
Esprit of Co-operation: Esprit de corps is the foundation of a sound organization.
Union is strength. But unity demands co-operation. Pride, loyalty and sense of belonging
are responsible for good performance.
Initiative: Creative thinking and capacity to take initiative can give us sound
managerial planning and execution of predetermined plans.
Bureaucratic Model: Max Weber, a German Sociologist developed the bureaucratic
model. His model of bureaucracy include
Hierarchy of authority.
Division of labour based upon functional specialization.
A system of rules.
Impersonality of interpersonal relationships.
A system of work procedures.
Placement of employees based upon technical competence.
 Legal authority and power.
Bureaucracy provides a rigid model of an organization. It does not account for important
human elements. The features of Bureaucracy are:-
Rigidity, impersonality and higher cost of controls.
Anxiety due to pressure of conformity to rules and procedure.
Dependence on superior.
Tendency to forget ultimate goals of the organization.
Bureaucratic Model is preferred where change is not anticipated or where rate of change
can be predicated. It is followed in government departments and in large business organizations.
SELF ASSESSMENT
I. MULTIPLE CHOICE
1. He created a public opinion on the need of labour welfare scheme and improvement in
industrial relations.
a. Charles Babbage b. Robert Owens c. Henry Robinson Towne d. Seebohm Rowntree
2. He urged the combination of engineers and economists as industrial managers. This
combination of qualities, together with at least some skill as an accountant, is essential to
the successful management of industrial workers.
a. Charles Babbage b. Robert Owens c. Henry Robinson Towne d. Seebohm Rowntree
3. He is the promoter of co-operative and trade union movement in England, emphasized the
recognition of human element in industry.
a. Charles Babbage b. Robert Owens c. Henry Robinson Towne d. Seebohm Rowntree
4. He was a Professor of Mathematics at Cambridge University. Prof Babbage found that
manufacturers made little use of science and mathematics, and that they (manufacturers)
relied upon opinions instead of investigations and accurate knowledge.
a. Charles Babbage b. Robert Owens c. Henry Robinson Towne d. Seebohm Rowntree
5. The management should try to ensure that the plant is laid out in the best manner and is
equipped with the best tools and machinery.
a. Time Study b. Motion Study c. Methods Study d. Fatigue Study
6. It is a study of the movement, of an operator (or even of a machine) in performing an
operation with the purpose of eliminating useless motions.
a. Time Study b. Motion Study c. Methods Study d. Fatigue Study
7. The basic purpose of time study is to determine the proper time for performing the
operation. Such study may be conducted after the motion study.
a. Time Study b. Motion Study c. Methods Study d. Fatigue Study

8. If, a standard task is set without providing for measures to eliminate fatigue, it may either be
beyond the workers or the workers may over strain themselves to attain it.
a. Time Study b. Motion Study c. Methods Study d. Fatigue Study
9. The efficiency of a worker depends on the quality of materials and the method of handling
materials.
a. Materials b. Condition of Work c. Speed d. Tools and Equipment
10. By standardization is meant the process of bringing about uniformity. The management
must select and store standard tools and implements which will be nearly the best or the
best of their kind.
a. Materials b. Condition of Work c. Speed d. Tools and Equipment

II. ESSAY

 Define management and explain its scope.

 "Management is the art of getting things done through and with people in formally
organized groups." Explain.
 Management is regarded as an art by some, a science and inexact science by others. The
truth seems to be somewhere in between. In the light of this statement, explain the nature
of management.
REFERENCES:

Author: P G Aquinas, Management Principle and Practices and Organizational Behavior, Bharathiar
University, Copyright © 2007,

https://www.dphu.org/uploads/attachements/books/books_5284_0.pdf

http://docshare.tips/principles-of-management-and-organisation-behavious-bharathiar-university-
distance-education-paper-1_58b38b71b6d87fc34f8b48ea.html

https://www.wisdomjobs.com/e-university

https://www.businessmanagementideas.com/management/principles/14-main-principles-of-management-
by-h-fayol/4431
 MODULE
MANA2013 – PRINCIPLES OF MANAGEMENT AND ORGANIZATION

LESSON 2. MANAGEMENT and SOCIETY

I. OBJECTIVES

In this lesson we will study the social responsibility of business and business ethics. After
studying this lesson you will be able to:

1) describe social responsibility and obligations of business.

2) know meaning and types of business ethics.
3) understand issues and global business management.

II. INTRODUCTION

Every individual living in the society has obligations towards society. Business men
therefore have an obligation to run the business on those lines which make the business desirable
from the point of view of society. Therefore, their decisions must be influenced by their obligations
towards society. Traditionally, however the term business commonly referred to commercial
activities aimed at making a profit for the owners. Therefore, the fundamental assumption was
that profit maximization was the basic objective of every firm. Therefore some people argue that
a business is an economic unit and therefore it does not have any responsibility towards society.
However, this is not a right approach because it would be difficult to segregate the economic
aspect from other aspects. Today, businessmen have reaffirmed their belief in the concept of
"Social Responsibilities of Business". David and Blomstorm have observed that business is "a
social institution, performing a social mission and having a broad influence on the way people live
and work together".

SOCIAL RESPONSIBILITY OF BUSINESS

One of the most revolutionary changes in capitalism over the last 50 years is the
development of a `conscience'. Private business which is the hard core of this economic system
has realized and has been made to realize by several social, economic and political forces that it
has social obligations to fulfil besides ensuring its own existence through profitable activity. Every
individual living in the society has social obligations towards it. Viewed in this prospective,
businessmen who are merely custodians of factors of production belonging to the society, have
also an obligation to pursue those policies, to make those decisions and to follow those lines of
action which are desirable in terms of the objectives and values of the society. Business managers
are also a part of the society. So their decisions must be influenced by their obligations towards
the society.
There is no denying the fact that part of this realization is not genuine and takes the form
of lip service which is necessary to ensure the survival of private enterprises. But it cannot be
denied also that private business does partly realize and recognize the hard reality that a privately
owned firm cannot meet the challenge of socialism and allied doctrines unless it sets its house in
order, changes its outlook and is prepared to play its legitimate role as an organ of society.
A careful study of the concept of social responsibility reveals that it has two different
facets:
1. Businessmen recognize that since they are managing an economic unit in the
society, they have a broad obligation to the society with regard to matters affecting
employment, availability of goods and inflation.
2. Social responsibility refers to both socio-economic and socio-human obligations of
the business. It indicates a businessman's obligation to nurture and develop
human values such as motivation, morale, co-operation and self-realization in
work.

It may be argued by some people that business is wholly an economic unit and therefore,
its responsibilities are limited only to economic aspect of general public and it must be judged by
its economic performance. If this reasoning is accepted, the businessmen might be concerned
with the economic costs of unemployment, but not with the loss of human dignity and social
disorganization that accompany it. However, this is not right approach for it is very difficult to
separate economic aspects of life from its other values. They are intermixed with each other.
Social responsibility of business is not a new concept. Leading businessmen of the world have
reaffirmed their belief in this concept. It affects their decisions and actions. They recognize that
since they are managing an economic unit in the society, they have an obligation to the society
with regard to their decisions and actions affecting social welfare.
It will be useful here to go into some of the forces and factors which have formed and
persuaded businessmen to consider their responsibilities and the conditions which were
favourable to the development of businessmen's concern with social responsibilities. Some of the
more important among them are:-
The threat of public regulation or public ownership.
The pressure of the labour movement.
The development of moral values and social standards applicable to businessmen.
The development of business education and contact with government and its
problems.
Recognition of human factors contributing to the long run interests of the business
people.
The development of a professional managerial class with a different motivation and
point of view due to the separation of ownership from management in the corporate
enterprise.
The increased complexity of the decision-making processes in which various points
of view and devise interests are expressed.
The change in public opinion about the role of business in modern society.
These and a number of other social, ethical and economic forces have combined together
to make business a socio-economic activity. Business is no longer a mere occupation; it is an
economic institution operating in social environment – an institution that has to reconcile its short-
term and long-range economic interests with the demands of the society in which it functions.
Essentially, it is this which gives rise to the general and specific social responsibilities of business.
ARGUMENTS IN FAVOUR OF SOCIAL RESPONSIBILITY OF BUSINESS
1. Business is a creation of society and therefore it should respond to the demands of the
society
Business managers are obliged to use its resources for the common good of society because the
business uses resources which belong to the society. It is therefore necessary that every business enterprise
should fulfil its obligations to society.

2. The self-interest of business is best served by meeting the aspirations of society

The long-term self-interests of the business are best served when business assumes social
responsibilities. People who have good environment, education and opportunity make better employees,
and customers for the business. Hence there is a growing realization on the part of the enlightened business
managers that it is in their self-interest to fulfil the aspirations of the society.

3. To improve the public image of business

The business will retain the needed credibility with the public if it performs its social obligations.
Good relations with workers, consumers and suppliers will lead to success of business.

4. It is the moral thing to do

The social responsibilities of business managers must be proportionate to their social power. If the
business managers do not assume social responsibility, their social power will be taken away by the society
through government control and regulations and other measures.

ARGUMENTS AGAINST SOCIAL RESPONSIBILITY OF BUSINESS

1. Responsibility of Government
Welfare schemes are the sole responsibility of the government. Business should not have any
relationship with welfare schemes. It is for the Government to adopt schemes and measures for the
upliftment of the weaker sections of the society.

2. Conflicting considerations of private market mechanism and social responsibility

Private market mechanism and social responsibilities are opposite to each other and therefore a
businessman will have to be guided by any one of the two considerations.

3. Disregard of Market Mechanism

Market mechanism is the appropriate way to allocate scarce resources to alternative use. The
doctrine of social responsibility interferes with the market mechanism and results in an inappropriate way
to allocate scarce resources.

4. Arbitrary Power to Businessmen

Businessmen will get arbitrary powers in the matter of allocation of resources in the welfare of
society. They should have no right to interfere with governmental responsibility.
SELF ASSESSMENT

 What do you mean by social responsibility of business?

 Give your arguments in favour of social responsibility of business.
 What are the arguments against social responsibility of business?
OBLIGATIONS OF BUSINESS TOWARDS DIFFERENT SEGMENTS OF
THE SOCIETY
1. Obligations towards owners or shareholders
In the case of sole trader ship and partnership concerns, the owners can look after their
interest themselves. Whereas in the case of the company, the directors have the following
responsibilities towards the shareholders:

Reasonable Dividend: shareholders are a source of funds for the company. They
expect a high rate of dividend on the money invested by them and also the maximization of
the value of their investment in the company.
Protection of assets: The assets of the company are purchased with
shareholders funds. Therefore the company is responsible to safeguard these assets.
Information: It is the responsibility of the management to keep the shareholders
informed about the financial position as well as the progress of the company.

2. Obligations towards Customers

Customer's satisfaction is the ultimate aim of all economic activity. Therefore, it is, the
duty of management
To make goods of the right quality available to the right people at the right time and place
and at reasonable prices.
The business should not indulge into unfair practices such as black marketing, hoarding,
adulteration etc.
To provide prompt and courteous service to customers.
To handle customers grievances carefully.
To distribute the goods and services properly so that the customers do not face any
difficulty in purchasing them.
To produce goods which meet the needs of the customer who belong to different classes,
tastes and with different purchasing power.

3. Obligations towards Employees

Employees should be treated as human beings and their co-operation must be achieved
for the realization of organizational goals. The business should fulfil the following obligations
towards their employees.
Fair wages: Business should pay reasonable salaries so that their employee's
may lead a good life and satisfy their needs.
Adequate benefits: Employees should be provided benefits like housing,
insurance cover, medical facilities and retirement benefits.
Good Working Conditions: Good working conditions are necessary to maintain
the health of the workers. Therefore they must be provided with good working conditions.
 Opportunity for Growth: Business should give their employees opportunity to
develop their capabilities through training and education.
Recognition of Worker's Rights: The business should recognize the worker's
right to fair wages, to form trade unions, to collective bargaining etc.
Co-operation: The business must win the co-operation of the workers by creating
the conditions in which workers are willing to put forward their best efforts towards the
common goals of the business.

4. Responsibility towards Suppliers

The business must create healthy relations with the supplier. Management should deal
with them judiciously. They should be provided with fair terms and conditions regarding price,
quality, delivery of goods and payment.

5. Obligations towards Government

It is the duty of every business enterprise to manage its affairs according to the laws
affecting it. It should pay taxes and other dues honestly. It should not encourage corruption, black
marketing and other social evils. It should discourage the tendencies of concentration of economic
power and monopoly and should encourage fair trade practices.

6. Obligation towards Society

Every business owes an obligation to the society at large. The following are the important
obligations of business towards society.
Socio-Economic Objectives: A business should not indulge in any practice which is not fair
from social point of view. The business should use the factors of production effectively and
efficiently for the satisfaction of the needs of the society.

Employment Opportunities: It is the responsibility of management to help increase direct and

indirect employment in the area where it is functioning.

Efficient use of Resources: The resources at the command of business belongs to the society.
Therefore, the business should make the best possible use of the resources at its disposal
for the well being of the society.

Business Morality: The business should not indulge into anti-social and unfair trade practices
such as adulteration, hoarding and black marketing.

Improving local environment: Business should take preventive measures against water and
air pollution. It can develop the surrounding area for the well being of the employees and the
general public. A business can also contribute to the advancement of local amenities.
SELF ASSESSMENT

 State the obligations of business towards shareholders.

 Do business have an obligation towards its employees? State your reasons.
 What are the obligations business have towards its customers?
BUSINESS ETHICS

Business is an integral part of the social system; and it influences other elements of
society. The organization of the business, the way the business functions innovations, new ideas
etc., may affect society. Business activities have greatly influenced social attitudes, values,
outlooks, customs traits etc. Thus, it is true that business influences society. It is also true that
society influences business. The type of products to be manufactured and marketed, the
marketing strategies to be employed, and the way the business should be organized are all
influenced by the society. Hence, a business has to adapt to these uncontrollable external
environments.

Business, in general, refers to the totality of all enterprises in a country, engaged in

manufacturing, industry, trade, finance, banking etc. In modern societies, business occupies a
dominating place affecting the life of citizens in different ways. Traditionally, the term business
commonly referred to commercial activities aimed at making a profit. The economic theory made
a fundamental assumption that profit maximization was the basic objective of every firm. According
to Milton Friedman, "there is only one social responsibility of business – to use its resources and
engage in activities designed to increase its profits". The old concept of business, confining it to
commerce and private profit, has undergone a radical change. Today, business is regarded as a
social institution forming an integral part of the social system. Therefore, business has to
contribute to man's happiness, his freedom and his mental, moral and spiritual growth.

According to Prof. Harold, "In a time when bribes, illegal pay-off, price conspiracies and
accusations of irresponsibility continue to tarnish the image of American business, the problem
of ethics in the free enterprise system remains a valid and difficult one".
Calkins is of the view that - "It is now recognized that the direction of business is important
to the public welfare, that businessmen perform a social function".
David and Blomstorm remarks that business is "a social institution, performing a social
mission and having a broad influence on the way people live and work together."
Thus the term business refers to the development and processing of economic values in
society. As Rabbi Hillel put it - "If I am not for myself, then who is for me? And if I am not for
others then who am I? Thus, the relations between the individual and his actions in the society
demands that the need of the individual require that he be for others as well as for himself.
According to Davis and Blomstorm, "Our modern view of society is an ecological one. Ecology is
concerned with the mutual relations of human populations or systems with their environment. It
is necessary to take this broad view because the influence and involvement of business are
extensive. Business cannot isolate itself from the rest of society. Today the whole society is a
business's environment".

TYPES OF BUSINESS ETHICS

1. Personal Responsibility
It refers to a man's personal code of ethics. If a man behaves in honesty, he will behave
in a very honest and straight forward manner. According to Walton, "A morally responsible
executive is one who knows the various kinds of value systems that may be employed in a
particular situation and has a rather clear idea of what values hold ascendancy (precedence or
priority) over others in a conflict". This definition of Walton is rather an over-simplification. A
businessman may think he is acting ethically but others may not consider his behaviour as ethical.

2. Representative or Official Responsibility

A manager's action often represents the position he holds or the office he occupies rather
than his personal beliefs. This is so because the manager represents the business. He has to
follow the rules and regulations of the business, e.g. a manager may want to do something but
the regulations may forbid him from doing it and therefore his hands are tied and he may not do
it.

3. Personal Loyalties

Sometimes personal loyalties are so strong that ethical standards may not be applied
when acting towards a particular individual. Personal loyalties include the loyalties of a
subordinate to his superior and superior's loyalty towards his subordinate.

Loyalties of a subordinate to his superior: If a subordinate has strong personal loyalty

towards their superior, they turn a blind eye towards the blunders committed by their superiors
and attempt to defend their omissions and commissions. For example, if the branch manager of
a bank is sanctioning loan without any security and this act on his part may bring disastrous
financial troubles to the organization, his subordinates who were men of high moral character and
who had close connections with the head office did not inform them of the financial irregularities
because of strong personal loyalty towards their branch manager.

Superior's loyalty towards his subordinate: If a superior has strong personal loyalty
towards their subordinates, they turn a blind eye towards the mistakes committed by their
subordinates. This is done because the superior does not want to hurt the feeling of his
subordinates because of their close personal contact. For example, if the subordinates who are
close to the manager do not do their work properly, the manager may not reprimand (rebuke or
scold) them for their poor performance. He may rather defend their poor quality work with his
superiors because of his personal attachment towards his subordinates.

Corporate Responsibilities: Every individual living in society has a moral obligation

towards it. Corporations are entities which are "artificial persons", therefore they too have moral
responsibilities towards the society. There moral responsibilities are not necessarily identical with
the personal moral codes of the executives who run them. Every corporation must have moral
codes which help it in deciding matters connected with shareholders, employees, creditors,
customers, government and society.

Organizational Loyalties: Some employees have a deep sense of loyalty to the

organization. Their loyalties to their organization are so strong that they even neglect their own
self interest for the sake of the organization.

Economic Responsibility: According to Milton Friedman, "there is one and only one
social responsibility of business – to use its resources efficiently and engage in activities designed
to increase profits without deception or fraud". Therefore, every business must contribute to the
general welfare of the society by making efficient and economical use of resource at their
command. This type of morality guides individual action towards economy in the use of resources
put at his disposal.

Technical Morality: In any country, the state of technology plays an important role in
determining what products and services will be produced. Technological environment influences
organizations in terms of investment in technology, consistent application of technology and the
effects of technology. A manager having technical morality will refuse to compromise with quality.
Every organization which is actively engaged in technological advancement will create more
challenging situations for the organizations because they are not prepared to accept lower
standards.

Legal Responsibility: Legal environment provides the framework within which the
business is to function. The viability of business depends upon the ability with which a business
can meet the challenges arising out of the legal framework. However, it must be observed here
that legal responsibility is more than an intention to conform to laws, orders etc. It is a belief in
the need for effective co-operation and justice in organized life. It is morality that transcends
conformity to law.

SELF ASSESSMENT

1. What do you mean by business ethics?

2. List out the types of business ethics.

3. What is meant by social responsibility of business? How can a modern business discharge
its social responsibility?

4. What is meant by business ethics? Why should a business make ethical decisions?

5. What are the responsibilities that business owes to the consumers, society and
Government?

6. Explain the different types of business ethics.

REFERENCES:

Author: P G Aquinas, Management Principle and Practices and Organizational Behavior, Bharathiar
University, Copyright © 2007,

https://www.dphu.org/uploads/attachements/books/books_5284_0.pdf

http://docshare.tips/principles-of-management-and-organisation-behavious-bharathiar-university-
distance-education-paper-1_58b38b71b6d87fc34f8b48ea.html

https://www.wisdomjobs.com/e-university

https://www.businessmanagementideas.com/management/principles/14-main-principles-of-management-
by-h-fayol/4431