CLASS_12_BUSINESS STUDIES_CHAPTER_2_PRINCIPLES OF MANAGEMENT

CHAPTER_2_ PRINCIPLES OF MANAGEMENT 

Meaning: Principles refers to a statement which reflects the fundamental truth about some phenomenon. Management principles are derived on the basis of observation and analysis of events which managers have to face in actual practice. 

Definition : As defined by H.G Hicks, “Principles of management are the guiding rules or laws for managerial action.” 

Principles of management are broad and general guidelines for decision making and behaviour of managers.

Nature of Management Principles: 

1. Universal Applicability: Principles of management are universal in nature. They have universal application in all types of organizations and in all places like business organizations, police force, sports clubs, family etc. 

2. General Guidelines : Management principles are derived from experience and analysis and they are in the form of mere statements. These statements are guidelines for action but not provide solution to all managerial problems. 

3. Formed by practice and experimentation : Principles of management are the results of problems faced by the professional people and solution found by them through careful research.

4. Flexible - Management principles never remain static. They are dynamic in nature. With change in business situations and problems, management principles also change. 

5. Mainly behavioral: Human behavior is unpredictable and it is often situational. This complex human behavior needs a sense of direction and guidance. Management Principles attempt to provide such guidance in human action. For instance Team work as a principle is good for attainment of organization goals, but it is a personalized intellectual task like painting a picture, individual contribution is more valid than team work. 

6. Cause and effect relationship: Cause and effect relationship is indicated by management principles. For example, the principle “Unity of Command” states that presence of a single boss avoids confusion. Here the presence of Unity of Command is the cause and avoidance of confusion is the effect. 

7. Contingent : This means management principles are to be applied in accordance with the situation and organizational requirements, then only it will be successful. 

Significance of Principles of Management 

1. Providing Managers with useful insights into reality: Adherence to the principles of management will add to their knowledge, ability and understanding of managerial situations. 

2. Optimum Utilization of Resources: Principles of Management point out how time, money, materials and human efforts can be used economically to improve productivity. This fact can be seen in the principles of division of work, delegation of authority etc. 

3. Scientific Decisions: With the help of Management Principles, managers can take appropriate decisions in right time. 

4. Meeting changing environment requirements : Management principles are highly flexible and therefore can be modified to meet changing requirements of environment. 

5. Fulfilling social responsibility : Good quality products to the customers, care for environment, opportunities for employment, education for the children of employees etc. are some of the examples for social responsibilities. 

6. Management training, education and research : A well organized and systematic body of knowledge (management principles) is essential for imparting training and education to managers for functioning efficiently. 

Henry Fayol (1841-1925) 

– French Engineer in a mining company, became the Managing Director of the company 

– Author of “General and Industrial Management” 

– Father of Modern Management. 

Henri Fayol’s Principles of Management (Acronym: DADEE SURCOSISU)

1. Division of Work – This principle states that a complex work should be divided into small tasks, and each task should be assigned to a particular employee. This makes each task simpler and easier to perform and results in efficiency because by doing a small part of work repeatedly, the employee acquires speed and perfection. This principle is applicable to both technical and managerial activities. 

2. Authority and Responsibility – Authority is the right to give orders to the subordinates. Responsibility means obligation to perform the work in the manner desired and directed by authority. If authority is given to a person, he should also be made responsible. 

3. Discipline – It means obedience, respect for authority and observation of established rules. It ensures the smooth running of the organization and applicable for workers and management. 

4. Unity of Command – This principle states that each employee should receive orders from one superior only. More than one superior at a time leads to confusion. 

5. Unity of Direction – This principle states that the activities, which have a common objective must be grouped together and under one head. In other words, all the operations and departments in the organization should be directed towards the common goal. 

6. Subordination of Individual Interest to General Interest – The business enterprise is superior to individuals. The interest of the business must prevail over personal interests of the individuals. 

7. Remuneration of Employees- The remuneration for work done must be fair and reasonable. It must inspire the employees to work hard so that the organization earns more profit. 

8. Centralization and Decentralization - Centralization refers to concentration of authority at one place or one level in the organization i.e., top management. Decentralization means dispersal of authority to lower levels. There should be a balance between centralization and decentralization based on the nature of the job. Anyhow utmost centralization or decentralization is not good. 

9. Scalar Chain – Scalar chain refers to the line of authority or the chain of superiors starting from the highest and moving towards the lowest rank. It is a must that communication should pass through this chain of command. But in case of urgency the established chains can be violated and Gang Plank (direct contact) between two concerned authorities may be established. 

Gang Plank means short-circuiting the chain of command where emergency decisions are to be taken. 

                       

10.Order – This principle is based on the general saying, “Have a place for everything and keep everything in its place”. All materials are to be kept in proper place (Material Order) and the right man is to be assigned the right job (Social Order). 

11.Equity – (Equality) This principle says that superiors should be impartial while dealing with their subordinates. 

12.Stability of Personnel – Fayol says that managers and workers should not be shifted from their positions frequently. A person needs time to adjust himself to new work environment.

13.Initiative – It implies the creativity in an individual which must be utilized for the development of the organization. 

14.Esprit de Corps (Union is Strength) – The contribution of a team is more significant than that of an individual. Team spirit helps in developing an atmosphere of mutual trust and understanding. 

 

Taylor’s Scientific Management (F.W. Taylor_1856 – 1915)

–   Father of Scientific Management 

–   American Mechanical Engineer in Midvale Steel Company 

–   He was keen analyst and critical of management for poor performance of their organization

–  He conducted a series of experiments for more than two decades and finally launched the movement in 1910 which is known as “Scientific Management”. His writings cover ‘The Principles of Scientific Management’ series of articles published in ‘The American Magazine’ during March-May 1911, later published in book form. 

Meaning : Scientific Management refers to the application of science in management practices. He advocated a detailed scientific study of each job to determine the best way of doing it. 

Definition : According to F.W.Taylor, “Scientific Management means knowing exactly what you want men to do and seeing that they do it in the best and cheapest way” 

Aims and objectives 

1. Increasing production – by the use of standardized tools, methods and devices. 

2. Improved quality – by using quality control and research. 

3. Reducing cost – by using scientific techniques of production. 

4. Selection of right person for right work – by scientific selection and training to workers. 

5. Reduction of wastage – by proper handling of resources. 

6. Provision of incentive wages – by applying differential piece wage system. 

Principles of Scientific Management 

1. Science, not rule of thumb – Rule of thumb means application of traditional methods or the methods decided by the managers based on their past experience. All these methods are often untested and unscientific; they do not guarantee success. In other words, the rule of thumb can be seen as ‘the dictatorship of the manager’ which should be avoided. Taylor suggested ‘thinking before doing’, i.e “Trial and Error Method’ should be avoided and a scientific study must be done before solving any problem or doing a work. 

2. Harmony, not discord (conflict) – This principle states that there should be complete harmony between management and the workers. This can be achieved through a change in the attitude of workers and the management. Taylor calls it as “Mental Revolution”. Management should share the gains with workers and the workers should work hard and accept changes for achievement of goals. 

3. Co-operation, not individualism – This principle is an extension of “Harmony, not discord”. This principle states that there should be complete cooperation between management and workers instead of individualism. Management should take workers into confidence and give them participation in decision making. Workers should not indulge in unnecessary strikes and raise unreasonable demands. Taylor suggested that there should be equal division of work and responsibility between the workers and the management. 

4. Development of each and every person to their greatest efficiency and prosperity – This principle states that the efficiency of all workers is a must for which they have to be provided with maximum prosperity. For this, Taylor advocated scientific methods for selection, training and development of workers. If workers put in their best efforts, it ensures maximum prosperity not only to workers but also to the organization. 

Techniques of Scientific Management 

1. Standardization and simplification of work – It refers to the process of setting standards for every business activity. 

2. Method Study – It is conducted to know the best method of doing a job. 

3. Motion Study – It helps to eliminate unnecessary movements of men and material while doing a job.

4. Time Study – Through time study, the minimum time required for each element of work is determined. It helps in fixing a standard time for the job which will save cost, time and effort. 

5. Fatigue Study – It seeks to determine the amount and frequency of rest intervals in doing a job. Intervals should be scientifically determined. This would help to recoup the energy lost in continuous work.

6. Differential piece wage system – It refers to a wage system in which dual wage rates are fixed to differentiate between efficient and inefficient workers. 

For example., Suppose, Standard output per day 30 units and  two wage rates are Rs.10 and Rs.8 per unit. 

Suppose,worker Mr. A produces 30 units a day and gets Rs.300. Whereas worker Mr. B produces only 28 units and he earns Rs. 224. Here Mr. B loses Rs.76 just for a shortfall of 2 units. 

Taylor recommended that this system will be enough to motivate the inefficient worker to perform well or otherwise he will leave the organisation.

7. Functional Foreman ship – Taylor said that, specialization must be introduced in the organization. Functional foreman ship is a form of organization which involves supervision of a worker by several specialist foremen. 

a. Instruction Card Clerk:To lay down the exact method of doing a work, use of tools and equipment etc

b. Route Clerk - To lay down the sequence of operation and direct the workers to follow the same. 

c. Time and Cost Clerk – To lay down the time table for doing various jobs and maintain the records of the cost of work. 

d. Disciplinarian – To enforce rules and regulations and maintain discipline among workers. 

e. Speed Boss – Ensures that machines are run at their optimum speed. 

f. Gang Boss – To assemble and set up various equipments and tools to enable the workers begin their work immediately after entering the shop. 

g. Repair Boss – Ensures regular cleaning, servicing and repair of machines to keep them in efficient working order. 

h. Inspector – To ensure that the workers do their work to the desired quality and that the jobs are executed as per specifications.