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Class 12 Business Studies Principles of Management
Principles of Management
These are the statements of fundamental truth, they serve as a guide to thought and actions for managerial decision actions and their execution
(Principle It refers to a statement which reflects the fundamental truth about some phenomenon based on cause and effect relationship.)
Types Principles of Management
Significance of Principles of Management
✔ Providing managers with useful insight in to reality
✔ Optimum utilisation of the resources
✔ Scientific decisions
✔ Help to meet the changing requirements.
✔ Meeting changing environment requirements
✔ Fulfilling social responsibility
✔ Management training, education and research
Features of Principles of Management
✔ Universal Applicability: The principles of management are deemed to apply to all types and sizes of organizations.
✔ General Guidelines: The principles are guidelines to action but do not provide readymade, straitjacket solutions to all managerial problems as the real business situations are very complex and dynamic and are a result of many factors.
✔ Formed by practice and experimentation: The principles of management are formulated by the management experts through observation and tested through repeated experimentation.
✔ Flexible: The principles of management are not rigid prescriptions, which have to be followed absolutely. They are flexible and can be modified by the manager in the light of given situation so as to achieve the desired goals.
✔ Mainly Behavioural: The principles of management aim at influencing behaviour of human beings in a desired manner.
✔ Cause and effect relationships: The principles of management seek to establish relationship between cause and effect so that they can be used in similar situations in a large number of cases.
✔ Contingent: The application of principles of management is contingent or dependent upon the prevailing situation at a particular point of time.
Nature of Principles of Management
1. Universal Applicability The principles of management are universal in nature that means they can be applied to all types of organisations irrespective of their size and nature.
2. General Guidelines Management principle give guidelines to solve the problems, these principles do not provide readymade solution for all the problems.
3. Formed by Practice and Experiments The management principles are developed only after deep and through research work.
4. Flexibility These are not set of rigid statements. These can be modified by the managers who are using them.
5. Mainly Behavioural Management principles are formed to guide and influence the behaviour of employees.
6. Cause and Effect Relationship Management principles are based on cause and effect that means these principles tell us if a particular principle is applied in a situation, what might be the effect.
7. Contingent Management principles are contingent or dependent upon the situation prevailing in organisation.
Principles of Management Developed by Henry Fayol
✔ Henri Fayol was born on July 29, 1841 in Istanbul, Turkey and died on November 19, 1925 in Paris, France. Together with Frederick Winslow Taylor, he is considered the father of modern management.
✔ He began his career as an mining engineer and ended up as a director. As the first recognized the five major functions of management – forecasting, organizing, commanding, coordinating and controlling. He further focused on the theory of workers’ organization.
✔ In 1916 he published his book “Administration industrielle et générale” (in English “General and Industrial Administration”), which was founded on personal experience with the job of manager.
Henri Fayol in his book defined 14 key principles of management (administration) that are still valid today, as follows:
• Division of work – Specialization encourages workers to improve skills and working methods
• Authority – The right to give orders and the power to require obedience
• Discipline – There shall be no loosening or softening of the rules
• Unity of command – Each employee has a clearly designated supervisor
• Unity of direction – Only one leader creates a unified plan, in which each worker plays his role
• Subordination of individual interests to the general interest – only interests of the collective must be monitored in the workplace
• Remuneration – Employees must receive adequate remuneration
• Centralization – Decision are made from above
• Scalar chain – Command line runs from the top to bottom, as in the army
• Order – All staff and all the material has a specified place and have to stay there
• Equity – With all employees must be treated as equal
• Stability of tenure of personnel – Minimum personnel replacement is desirable
• Initiative – Personnel involved in planning must develop high effort
• Esprit de corps (team spirit) – Between workers prevails coherence and harmony
Explanation of all these points :
1. Division of work: The whole organisation work, both managerial and technical, should be divided into smaller jobs and the task involved in doing each such job should be determined. It leads to specialization, speed, efficiency and accuracy of work.
2. Discipline: It refers to the obedience to organizational rules and the employment agreement. It is necessary for the systematic working of the organisation. It requires good superiors at all levels, clear and fair agreements and judicious application of penalties.
3. Authority and Responsibility: There should always be a balance between the authority given and responsibility entrusted to an employee. This is because if authority is more than responsibility, the employees are likely to misuse it whereas if authority is less than responsibility, he/she will be unable to do the desired work.
4. Unity of command: There should be one and only one boss for every individual employee from whom he should receive orders and be responsible to. Dual subordination should be avoided.
5. Unity of Direction: All the units of an organisation should be moving towards the same objectives through coordinated and focused efforts. Each group of activities having the same objective must have one head and one plan.
6. Subordination of Individual Interest to General Interest: In all the situations, the interests of an organisation should take priority over the interests of any one individual employee .
7. Remuneration of Employees: The overall pay and compensation should be fair to both employees and the organization. The employees should be paid fair wages, which should give them at least a reasonable standard of living. At the same time it should be within the paying capacity of the company i.e. remuneration should be just and equitable.
8. Centralisation and Decentralisation: The concentration of decision-making authority is called centralisation whereas its dispersal among more than one person is known as decentralization. Large organizations have more decentralization than small organizations.
9. Scalar Chain: The formal lines of authority along which the communication flows from highest to lowest ranks are known as scalar chain. Gang Plank is a shorter route that has been provided so that communication is not delayed during emergencies. However, the superior has to be informed later on.
10. Order: The people and materials must be in suitable places at appropriate time for maximum efficiency i.e. ‘a place for everything (everyone) and everything in its place/
11. Equity: It emphasizes kindliness and justice in the behaviour of managers towards workers. No discrimination should be made by them on the basis of caste, creed, gender or otherwise caste, creed.
12. Stability of Personnel: The employee turnover should be minimized to maintain organizational efficiency. Personnel should be selected and appointed after due and rigorous procedure. After placement, they should be kept at their post for a minimum fixed tenure so that they get time to show results. Any aphorism in this regard will create instability/insecurity among employees. They would tend to leave the organisation.
13. Initiative: Initiative means taking the first step with self-motivation. The workers should be encouraged to develop and carry out their plans for improvement. Suggestion system should be adopted in the organization.
14. Espirit De Corps: The management should promote a team spirit of unity and harmony among employees. A manager should replace T with ‘We’ in all his conversations with workers.
Unity of Command
✔ One subordinate should receive order from and should be responsible to only one superior.
✔ It prevents Dual subordination.
✔ It affects an individual employee.
Unity of Direction
✔ Each group of activities having same objective must have one head and one plan.
✔ It prevents overlapping of activity.
✔ It affects the entire organisation.
✔ Frederick Winslow Taylor (March 20, 1856 – March 21, 1915) was an American mechanical engineer who sought to improve industrial efficiency. He was one of the first management consultants.
✔ Taylor summed up his efficiency techniques in his 1911 book The Principles of Scientific Management, which in 2001 Fellows of the Academy of Management voted the most influential management book of the twentieth century.
Planning Department Operational Department
■ Route clerk ■ Gang boss & Speed boss
■ Instruction card clerk ■ Eepair boss
■ Time and cost clerk ■ Inspector
• Standardisation and Simplification of Work: Standardisation output possible if standard is maintained right from selection of tools, equipment and machine to use. Simplification emphasises on elimination of unnecessary diversity of product, size and type.
• Functional foremanship is an extension of the principle of division of work and specialisation to the shop floor. Each worker is supposed to take orders from eight foremen in the related process or function of production namely
✔ Instruction Card Clerk: He assigns work to all the employees.
✔ Route Clerk: He decides how work will progress regarding total productions. So that production is on time.
✔ Time and Cost Clerk: He determines what will be the total cost and how much time each job takes.
✔ Disciplinarian: He sees that there is discipline at work place.
✔ Speed boss: He ensures that the work is moving at a suitable pace.
✔ Gang Boss: He ensures sufficient availability of raw material, tools etc.
✔ Repair Boss: He sees that whenever some repair is involved in any work, the work is done properly.
✔ Inspector: He sees that whether the quality of output is good or not.
• Fatigue Study This technique of scientific management is conducted to find out
✔ The frequency of rest intervals
✔ The duration of rest intervals
✔ The number of rest intervals
• Method Study This technique find out the one best method or way of performing the job.
✔ Time Study is the technique to determine the standard time taken by a worker of average skill and knowledge to complete a standard task
The objectives of time study are:
✔ The standard time required to perform a job.
✔ Setting up the standard target of the workers.
✔ Determining the number of workers required to perform a job.
✔ Categorising the workers into efficient and inefficient employees.
• Motion Study refers to the study of movements of limbs which are undertaken while doing a typical job. This helps to eliminate unnecessary movements so that it takes less time to complete the job efficiently.
• Differential Piece Wage System This technique emphasis on paying different rate of wage for efficient and inefficient employees.
• Mental Revolution The objectives of mental revolution are
✔ Co-operation between workers and management.
✔ Change in mental attitudes of workers and management towards each other.
Principles Scientific of Management
1. Science not Rule of Thumb
✔ Taylor believed that there was only one best method to maximise efficiency which can be developed through study and analysis and should substitute ‘Rule of Thumb’ or hit and trial method throughout the organisation.
2. Harmony, Not Discord
✔ Taylor emphasised that there should be complete harmony between the management and workers instead of a kind of class-conflict, the managers versus workers.
✔ To achieve this state, Taylor called for complete mental revolution on the part of both management and workers.
3. Cooperation, Not Individualism
✔ This principle is an extension of principle of ‘Harmony Not Discord’
✔ There should be complete cooperation between the labour and the management instead of individualism.
✔ Competition should be replaced by cooperation and there should be an almost equal division of work and responsibility between workers and management.
✔ Also, management should reward workers for their suggestions which results in substantial reduction in costs.
4. Development of Each and Every Person to His or Her Greatest Efficiency and Prosperity
✔ Taylor was of the view that the concern for efficiency could be built in right from the process of employee selection.
✔ Each person should be scientifically selected and the work assigned should suit her/his physical, mental and intellectual capabilities.
✔ To increase efficiency, they should be given the required training.
✔ Efficient employees would produce more and earn more. This will ensure their greatest efficiency and prosperity for both company and workers.
Case Study Principles of Management Class 12 Business Studies
Question. Explain ‘unity of command’ and ‘equity’ as principles of general management.
Ans. Unity of command: According to Fayol, there should be one and only one boss for every individual employee. Dual subordination should be avoided. Fayol felt that if this principle is violated “authority is undermined, discipline is in jeopardy, order disturbed and stability threatened”. Equity: According to Fayol, “Good sense and experience are needed to ensure fairness to all employees, who should be treated as fairly as possible.” This principle emphasizes on kindliness and justice in the behaviour of managers towards workers. The managers should not discriminate against anyone on account of gender, religion, language, caste, belief or nationality etc.
Question. Explain briefly ‘discipline’ and ‘scalar chain’ as principles of general management.
Ans. Discipline: Discipline refers to the obedience to organisational rules and employment
agreement which are necessary for the working of the organisation. According to Fayol, discipline requires good superiors at all levels, clear and fair agreements and judicious application of penalties. .Scalar chain: According to Fayol the formal lines of authority from highest to lowest ranks are known as scalar chain. He suggests that the,”Organisations should have a chain of authority and communication that runs from top to bottom and should be followed by managers and the subordinates.” However in order to ensure speedy communication during emergencies, Gang Plank is a shorter route that has been provided . However, the superior has to be informed later on.
For example in the following case there is one head ‘A’ who has two lines of authority under her/ him. One line consists of B-C-D- E-F. Another line of authority under ‘A’ is L-M-N-O-P. If ‘E’ has to communicate with ‘O’ who is at the same level of authority then she/he has to traverse the route E-D-C-B-A-L-M-N-O. This is due to the principle of scalar chain being followed in this situation. However, if there is an emergency then ‘E’ can directly contact ‘O’ through ‘Gang Plank’ as shown in the diagram. But they should inform their superiors about it later on.
Question. Explain ‘order’ and ‘initiative’ as principles of general management.
Ans. Order: According to Fayol, “People and materials must be in suitable places at appropriate time for maximum efficiency.” The principle of order states that ‘A place for everything (everyone) and everything (everyone) in its (her/his) place’. A sense of orderliness will lead to increased productivity and efficiency in the organization. Initiative: Initiative means taking the first step with self-motivation. The workers should be encouraged to develop and carry out their plans for improvement. Suggestion system should be adopted in the organization.
Question. Explain briefly ‘Unity of Direction’ and ‘Order’ as principles of general mangement.
Ans. Unity of direction: According to Fayol, each group of activities having same objective must have one head and one plan. It prevents overlapping of activities. For example if a company is manufacturing handmade carpets as well as machine made carpets there is likely to be a lot of overlapping of activities. Therefore, there should be two separate divisions for both of them wherein each division should have its own in charge, plans and execution resources.
Order: According to Fayol, “People and materials must be in suitable places at appropriate time for maximum efficiency.” The principle of order states that ‘A place for everything (everyone) and everything (everyone) in its (her/his) place’. A sense of orderliness will lead to increased productivity and efficiency in the organization.
Question. Explain briefly ‘Initiative’ and ‘Esprit de Corps’ as principles of general management.
Ans. Initiative: Initiative means taking the first step with self-motivation. The workers should’ be encouraged to develop and carry out their plans for improvement. Suggestion system should be adopted in the organization. Espirit de corps: According to Fayol, ‘Management should promote a team spirit of unity and harmony among employees.” A manager should replace T with ‘We’ in all his conversations with workers to promote teamwork. This approach is will give rise to a spirit of mutual trust and belongingness among team members. It will also reduce the need for using penalties.
Question. What did Taylor want to communicate through mental revolution?
Ans. Through the concept of mental revolution Taylor emphasized that there should be complete transformation in the outlook of the management and workers towards each other. Managers should share surplus with workers and the workers should work with full devotion instead of indulging in any form of class conflicts.
Question. Nutan Tiffin Box service was started in Mumbai by the Mumbai Dabbawalas. The Dabbawalas who are the soul of entire Mumbai aim to provide prompt and efficient services by providing tasty homemade tiffin to all office goers at the right time and place. The service is uninterrupted even on the days of bad weather, political unrest and social disturbances. Recently, they have started online booking system through their website ‘mydabbawala.com’. Owing to their tremendous popularity amongst the happy and satisfied customers and members, the Dabbawalas were invited as guest lecturer by top business schools. The Dabbawalas operate in a group of 25-30 people alongwith a group leader. Each group teams up with other groups in order to deliver the tiffins on time. They are not transferred on frequent basis as they have to remember the addresses of their customers. They follow certain rules while doing trade—no alcohol during working hours; no leaves without permission; wearing white caps and carrying ID cards during business hours. Recently, on the suggestion of a few self-motivated fellow men, the dabbawalas thought out and executed a plan of providing food left in tiffins by customers to slum children. They have instructed their customers to place red sticker if food is left in the tiffin, to be fed to poor children later. State any one principle of management given by Fayol and one characteristic of management mentioned in the above case. Give any two values which the Dabbawalas want to communicate to society.
Ans. The relevant principle of management given by Fayol is: Stability of Personnel: The employee turnover should be minimized to maintain organizational efficiency. Personnel should be selected and appointed after due and rigorous procedure. After placement, they should be kept at their post for a minimum fixed tenure so that they get time to show results. Any adhocism in this regard will create instability/insecurity among employees. They would tend to leave the organisation. Management is goal oriented as it seeks to integrate the efforts of different individuals towards the accomplishment of both organizational and individual goals.
The two values that Dabbawalas want to communicate to society are:
✔ Concern for poor/ Humanity
Question. Pawan is working as a Production Manager in CFL Ltd. which manufactures CFL bulbs. There is no class-conflict between the management and workers. The working conditions are very good. The company is earning huge profits. As a policy, the management shares the profits earned with the workers because they believe in the prosperity of the employees.
State the principle of management described in the above paragraph.
Identify any two values which the company wants to communicate to society.
Ans. • The principle of management described in the above paragraph is ‘Harmony, not Discord’. Taylor emphasised that there should be complete harmony between the management and workers instead of a kind of class-conflict, the manager versus workers. To achieve this state, Taylor called for complete mental revolution on the part of both management and workers. The prosperity for the employer cannot exist for a long time unless it is accompanied by prosperity for the employees and vice versa. He advocated paternalistic style of management should be in practice.
• The two values that the company wants to communicate to the society are: