Principles of Management (BBA Sem 1)

Unit 1: Noted

Concepts of Management: Introduction to Basic Managerial Concepts, Definition and Meaning of

Management, Management as a Science or Art, Functions and Responsibilities of Management,
Principles of Management, School & Thoughts of Management,
Forms of Business Organization.

The concept of management has acquired special significance in the present competitive and complex
business world. Efficient and purposeful management is absolutely essential for the survival of a business
unit. Management concept is comprehensive and covers all aspects of business. In simple words,
management means utilizing available resources in the best possible manner and also for achieving well
defined objectives. It is a distinct and dynamic process involving use of different resources for achieving
well defined objectives. The resources are: men, money, materials, machines, methods and markets.
These are the six basic inputs in management process (six M's of management) and the output is in the
form of achievement of objectives. It is the end result of inputs and is available through efficient
management process.

Management is the act of getting people together to accomplish desired goals and objectives using
available resources efficiently and effectively. Management comprises planning, organizing, staffing,
leading, coordinating and controlling an organization (a group of one or more people or entities) or effort
for the purpose of accomplishing a goal. Resourcing encompasses the development and manipulation of
human resources, financial resources, technological resources and natural resources. Management is
essential for the conduct of business activity in an orderly manner. It is a vital function concerned with all
aspects of working of an enterprise.

Definition

According to Harold Koontz, "Management is the art of getting things done through and with people in
formally organized groups".

According to Henry Fayol, "To manage is to forecast and to plan, to organize, to command, to coordinate
and to control".

According to Peter Drucker, "Management is a multi-purpose organ that manages business and manages
managers and manages workers and work".

Management is needed for planning business activities, for guiding employees in the right direction and
finally for coordinating their efforts for achieving best/most favorable results. Efficient management is
needed in order to achieve the objectives of business activity in an orderly and quick manner. Planning,
Organising, Coordinating and Controlling are the basic functions of management. Management is needed
as these functions are performed through the management process. Management is needed for
effective communication within and outside the Organisation. Management is needed for motivating
employees and also for coordinating their efforts so as to achieve business objectives quickly.
Efficient management is needed for success, stability and prosperity of a business enterprise. Modem
business is highly competitive and needs efficient and capable management for survival and growth.

Management is needed as it occupies a unique position in the smooth functioning of a business unit. This
suggests the need of efficient management of business enterprises. Profitable/successful business may not
be possible without efficient management. Survival of a business unit in the present competitive world is
possible only through efficient and competent management.

Significance & Nature of Management

Achieving Group Goals: Management encourages collaboration and coordination amongst workers. A general
control must be provided to the organizational and personal objectives in order to favorably accomplish the
aims.
Increases Efficiency: Management improves productivity by managing resources in a reliable conceivable way
in order to decrease cost upscale potency.
Creates Dynamic organization: Management undertakes the conditions by assuring that these variations are
well accepted privately and that objection to change is controlled.
Achieving personal objectives: Management promotes leadership and furnishes motivation to the employees
to operate effectively in order to accomplish their personal aims while working towards the organizational
goals.
Development of Society: Management helps in the enhancement of community by manufacturing reliable
quality commodities, establishing employment chances and fostering innovative technologies.

Features of Management
 Management is Goal-Oriented
 Management integrates Human, Physical and Financial Resources
 Management is Continuous
 Management is all Pervasive
 Management is a Group Activity

Management Functions

According to Henry Fayol, “To manage is to forecast and plan, to organize, to command, & to control”.
Whereas Luther Gullick has given a keyword ’POSDCORB’ where P stands for Planning, O for Organizing,
S for Staffing, D for Directing, Co for Co-ordination, R for reporting & B for Budgeting. But the most
widely accepted are functions of management given by KOONTZ and O’DONNEL
i.e. Planning, Organizing, Staffing, Directing and Controlling.
At the most fundamental level, management is a discipline that consists of a set of five general functions:
planning, organizing, staffing, leading and controlling. These five functions are part of a body of practices
and theories on how to be a successful manager.
 Understanding the functions will help managers focus efforts on activities that gain results. Summarizing the
five functions of great management (ICPM Management Content):

1. Planning: When you think of planning in a management role, think about it as the process of choosing
appropriate goals and actions to pursue and then determining what strategies to use, what actions to
take, and deciding what resources are needed to achieve the goals.

2. Organizing: This process of establishing worker relationships allows workers to work together to
achieve their organizational goals.

3. Staffing: Recruiting and selecting employees for positions within the company (within teams and
departments).

4. Directing: This function involves articulating a vision, energizing employees, inspiring and motivating
people using vision, influence, persuasion, and effective communication skills.

5. Controlling: Evaluate how well you are achieving your goals, improving performance, taking actions.
Put processes in place to help you establish standards, so you can measure, compare, and make
decisions.

Management as an Art:
Art is the experienced and personal utilisation of subsisting information to accomplish solicited outcomes. It
can be procured via education, research and practice. As art is involved with the personal utilisation of data
some kind of inventiveness and creativity is needed to follow the fundamental systems acquired. The essential
characteristics of art are as follows:

1.The presence of theoretical knowledge: Art assumes the presence of specific academic knowledge.
Specialists in their particular fields have obtained specific elementary postulates which are appropriate to a
specific sort of art. For instance, the literature on public speaking, acting or music, dancing is publicly
acknowledged.

2.Personalized application: The application of this primary information differs from person to person. Art,
hence, is a highly personalized notion.

3.Based on custom and creativity: Art is practical. Art includes the creative practice of subsisting intellectual
knowledge. We know that music is based on 7 notes. However, what makes the style of a musician different or
distinctive is his performance of these notes in an artistic way that is uniquely his own solution.

Management as a Science:
Science is an organised collection of knowledge that emphasises definite universal truths or the action of
comprehensive laws. The central characteristics of science are as follows:

 The organized body of knowledge: Science is a precise entity of knowledge. Its systems are based on a
purpose and consequence association.
 Universal validity: Scientific conventions have global genuineness and application.
 Systems based on experimentation: Scientific conventions are originally formed via research and then
tested via repeated trial and error under the regulated situations.

Henri Fayol’s principles of management

Henry Fayol, also known as the ‘father of modern management theory’ gave a new perception of the
concept of management. He introduced a general theory that can be applied to all levels of
management and every department. The Fayol theory is practiced by the managers to organize and
regulate the internal activities of an organization. He concentrated on accomplishing managerial
efficiency.

Fourteen Principles of Management By Henri Fayol

1. Division of Work-
Henri believed that segregating work in the workforce amongst the worker will enhance the quality of
the product. Similarly, he also concluded that the division of work improves the productivity, efficiency,
accuracy and speed of the workers. This principle is appropriate for both the managerial as well as a
technical work level.
2. Authority and Responsibility-

These are the two key aspects of management. Authority facilitates the management to work efficiently,
and responsibility makes them responsible for the work done under their guidance or leadership.
3. Discipline-
Without discipline, nothing can be accomplished. It is the core value for any project or any management.
Good performance and sensible interrelation make the management job easy and comprehensive.
Employees good behaviour also helps them smoothly build and progress in their professional careers.
4. Unity of Command-
This means an employee should have only one boss and follow his command. If an employee has to
follow more than one boss, there begins a conflict of interest and can create confusion.
5. Unity of Direction-
Whoever is engaged in the same activity should have a unified goal. This means all the person working in
a company should have one goal and motive which will make the work easier and achieve the set goal
easily.
6. Subordination of Individual Interest-
This indicates a company should work unitedly towards the interest of a company rather than personal
interest. Be subordinate to the purposes of an organization. This refers to the whole chain of command
in a company.
7. Remuneration-
This plays an important role in motivating the workers of a company. Remuneration can be monetary or
non-monetary. However, it should be according to an individual’s efforts they have made.
8. Centralization-
In any company, the management or any authority responsible for the decision-making process should
be neutral. However, this depends on the size of an organization. Henri Fayol stressed on the point that
there should be a balance between the hierarchy and division of power.
9. Scalar Chain-
Fayol on this principle highlights that the hierarchy steps should be from the top to the lowest. This is
necessary so that every employee knows their immediate senior also they should be able to contact any,
if needed.
10. Order-
A company should maintain a well-defined work order to have a favorable work culture. The positive
atmosphere in the workplace will boost more positive productivity.
11. Equity-
All employees should be treated equally and respectfully. It’s the responsibility of a manager that no
employees face discrimination.
12. Stability-
An employee delivers the best if they feel secure in their job. It is the duty of the management to offer
job security to their employees.
13. Initiative-
The management should support and encourage the employees to take initiatives in an organization. It
will help them to increase their interest and make then worth.
14. Esprit de Corps-
(Common high spirit of enthusiasm, devotion and dedication amongst all for the organization)

It is the responsibility of the management to motivate their employees and be supportive of each other
regularly. Developing trust and mutual understanding will lead to a positive outcome and work
environment.
 SCHOOLS OF MANAGEMENT THEORY

Many experts and specialists from different disciplines have given various approaches of management, also
called schools of management thought.
The various approaches to the study of management has propounded by specialist from different disciplines
have come to be called schools of management thought.
All these thoughts are basically different point of views or guidelines regarding management which enables
the managers to achieve their organizational goals easily and effectively.

The Major Schools of Management Theory are:

1. Management Process School

2. Empirical School

3. Human Behaviours or Human Relations School

4. Social School

5. Decisions Theory School

6. Mathematical or Quantitative Management School

7. Systems Management School

8. Contingency School

1. Management Process School or the Operational Approach

This school regards management as a process of getting things done with people operating in organized
groups. Henry Fayol is known as the father of this school. According to this, school management can best be
studied in terms of the process that it involves.

Those subscribing to this school are of the view that management principles are of universal application. This
approach is also designated as the traditional approach, the universal approach, or the classical approach. The
contributors and thinkers who belong to this school are William Newman, Summers, McFarland, Henry, J.D.
Mooney, A.C. Railey, Lyndell Urwick, and Harold Koontz.

2. The Empirical School or the Management by Customs School

This approach to management is taken by scholars who identify management as the study of experience,
followed by efforts to learn from the experience and then transfer the knowledge to practitioners and
students. Typically, this is done through a case study approach or through the study of decision-making.
This school of thought believes that by analyzing the experience of successful managers or the mistakes of
poor managers, we somehow can learn about applying the most effective management techniques. The main
contributors of this approach are Earnest Dale, Mooney and Raliey, Urwick, and many other management
practitioners and associations like the American Management Association.

The main features of this approach are

1 . Management is the study of managerial experiences.

2. Managerial experiences con be passed over to the practitioners and students.

3. The techniques used in successful cases can be used by future managers for further references.

4. Theoretical research can be combined with practical experiences for better management.

3. The Human Relations Approach (or) the Human Behavior School

This school takes note of the psychological factors causing a change in human behaviour in organized groups
under a given situation. It is based upon the fact that management involves getting things done through
people and therefore management must be centred on interpersonal relations.

This approach has been called the human relations, leadership, or behavioural science approach. Exponents of
this school of thought seek to apply existing and newly developed theories, methods, and techniques of the
relevant social science to the study of intra and interpersonal relations, which varies from personality
dynamics to relations of cultures. This school stresses the people part of management and the understanding
aspects.

The motivation of the individual and adherents of this school is heavily oriented towards psychology and
sociology. The range of thought to this school ore (a) The study of human relations and how managers can
understand and use these relations; (b) The role of manager as a leader and how he should lead others; (c)
The study of group dynamics and interpersonal relationships.

4. The Social Systems School

This school of thought is closely related to human behaviour or the human relations school of thought. It looks
upon management as a social system, which refers to a system of cultural inter relationships. These can be
formal organizational relationships or any kind of human relationship. This approach to management being
heavily sociological in nature does what the study of sociology does.

It identifies the nature of the cultural relationships of various social groups and attempts to show them as
an integrated system. The spiritual father of this school was the late Chester Barnard who developed the
theory of co-operation. The focus of this school of thought is on the study of the organization as a
cooperative or collaborative system. A social system is a unit or entity consisting of various social
subsystems called groups.
5. Decision Theory School

The decision theory approach concentrates on the rational decisions theory, which refers to the selection of a
suitable course of action from various possible alternatives. This approach may deal with the decisions
themselves, with the person or organizational group who makes the decision, or with an analysis of
the decision process.

By expanding the viewpoint well beyond the process of evaluating alternatives, many people use the theory to
examine the nature of the organizational structure, the psychological and social reactions of individuals and
groups, and analysis of value considerations with respect to goals, communication networks, and incentives.
The scientific approach to decision making involves some of the following factors:

1. Defining the problem

2. Collecting all relevant information

3. Developing alternatives

4. Examining all the alternatives and the solutions

5. Testing the solutions, (if you can make this possible)

6. Selecting a course of action

7. Implementing the action.

8. Evaluating the results of the action

6. The Mathematical School

In this group, we have those theorists who see management as a system of mathematical models and
processes. According to the approach of the Mathematical school, decision-making is a logical process that can
be expressed in terms of mathematical symbols and relationships. This approach forces the analyst to define a
problem and allows for the insertion of symbols through a logical methodology which provides a powerful tool
for solving complex phenomena.

Modern managers may normally face some of the following problems:

1. Increase in the size and complexity of organizational structures

2. Increase in paperwork, which stifles the ability to produce

3. Communication problems

4. The need for instantaneous management response in the decision-making areas, which requires an up-to
date, accurate and comprehensive information
5. Increase in demands on management with fewer budgets

6. Increase in the number of people to be dealt with by government and business structures

7. The Systems Approach School

This school is of recent origin having developed in the later 1960s. It is an integrated approach, which
considers management in its totality based on empirical data. According to this approach, attention must be
paid to the overall effectiveness of a subsystem in isolation from the other subsystems. The main emphasis is
on the interdependence and inter-relatedness of the various subsystems, from the point of view of the
effectiveness of a large system. Its essential features are as follows:

●A system has a number of subsystems, parts, and subparts.

●All the subsystems, parts, and subparts are mutually related to each other. A change in one part will affect
the changes in other parts.
●The systems approach emphasizes the study of the various parts in their interrelationships rather than in
isolation from each other.
●The systems approach to management brings out the complexity of a real-life management problem much
more sharply than any of the other approaches.
●It can be utilized by any other school of management thought.

The boundary of a system may be classified into two parts:

1. Closed system that has no environment. This part implies that no outside systems are to be considered.

2. Open system that has an environment. This part implies that it possesses systems with which it relates,
exchanges, and communicates.

8. The Contingency Approach School of Management

The contingency approach to management emphasizes the fact that management is a highly practice-oriented
and action-packed discipline.

Managerial decisions and actions initiatives are known to be matters of pragmatism and not of principles. The
environment of organizations and managers is very complex, uncertain, ever-changing, and diverse. It is the
basic function of managers to analyze and understand the environments in which they function before
adopting their techniques, processes, and practices.

The choice of approaches and also their effectiveness is contingent on the behaviour and dynamics of
situational variables. But there is no one universally valid best way of doing things. Management theory and
principles tend to be deterministic, while the pace, pattern and behaviour of events defy the deterministic or
dogmatic approaches. What is valid and good in a particular situation need not be the same in some other
situation.
The Types of Business Structures/ Organizations

Depending on the factors mentioned above, there can be seven different forms of business organizations.
They are as follows:

1. Sole Proprietorship
2. Hindu Undivided Family
3. Company
4. Partnership
5. Corporations or Statutory Bodies
6. Co-operative Societies
7. LLP (Limited Liability Partnerships)

But if we are to consider the three major forms of business organizations, it would include sole proprietorship,
corporations, and partnerships.

Sole Proprietorship - The One Who Goes Solo

The sole proprietorship of a company suggests that the complete ownership of that organization lies with a
single person. This is one of the primary forms of business organizations where an individual not only owns the
company wholly but also manages it single-handedly. Here, the business organization and the owner are a
single entity.

A sole proprietorship is among the simplest forms of business organization, which is why it has minimal or no
registration formalities. This is the ideal form of organization for small or medium-scale businesses. The
biggest advantage of these business organizations is that the owner gets to access the entire incentive. He is
not liable to share the profits with anyone else. However, a huge amount of personal liability can be seen as a
setback in these business organizations.

Corporations or Statutory Bodies - The Bodies Formed by the Parliament of India

A statutory body means any such authority or organization which is non-constitutional. Such bodies have been
set up by the parliament, and hold power to take decisions on behalf of an entire nation. Some notable
examples of statutory bodies in India are:

 National Green Tribunal

 National Commission for Women
 National Human Rights Commission
 National Commission for Backward Classes
 National Law Commission
 Armed Forces Tribunal

On the other hand, corporations are such forms of business organizations that consist of many shareholders. A
corporation has the legal authority to act as a single entity. It usually has a board of directors (elected by all
the shareholders), led by a president. The board of directors is authorized to make management decisions. To
set up this legal form of business organization requires proper paperwork and lawful proceedings.

Partnerships- The Partners Business

If we consider the corporate scenario in India, companies set up on partnership deals are the most popular
and basic form of business organization. A partnership is a mutual agreement between two or more parties
that agree to carry out a common business. Parties entering into a partnership could include individuals,
companies, schools, governments, etc.

This form of business organization has to follow the norms specified under the Indian Partnership Act of 1932.
Such entities are known as partnership firms. Here, the partners work towards the common goal of business,
which is profit.

Businesses run on charitable or non-profit causes cannot be considered partnership firms. Partnerships
happen to be among the 3 main forms of business organizations, and their nature is determined by the types
of partners included.

HUF or Hindu Undivided Family Business- Exists Only in India

This is a special form of business entity that is limited only to India. Such forms of business organizations are
governed by the Hindu law prevalent in the country. Any member of a Hindu Undivided Family can co-own the
business owned by that family. These members will be known as coparceners in the business. The head of a
Joint family Business in India is called the ‘Karta’. He usually holds full control of the management and finance
of the business.

Companies- Sharing the Bread

“Com” means ‘together’ and “Panies” means ‘bread’. The Indian Companies Act of 2013 defines different
types of companies as different forms of business organizations. It is not mandatory for a company to be
multinational or operate in different locations. It can be a small-scale business or even a start-up initiative.

As per the Indian Companies Act, a company can either be private or public. Private companies are the ones in
which the minimum paid-up share capital has to be Rs.1 lakh. On the other hand, public companies are
separate legal entities that must have a paid-up share capital of at least Rs.5 lakh. The shares of these
companies can be owned by members of the public.

Co-operative Societies and Trusts- Common Interest and Benefit Type Business

A cooperative society is a type of business organization that combines joint ownership with shared leadership.
Such forms of business organizations are common in sectors like healthcare, finance, food, agriculture, and so
on. Co-operative societies and trusts work towards the welfare of a section of people.

Limited Liability Partnerships- A Blend of Company and Partnership

This form of business organization is operated by organizations facing troubles of several liabilities in the
business. LLP or Limited Liability Partnerships enable partners to hold separate obligations in business. Here,
the partners continue to share the profits, just like a regular partnership firm. But unlike regular firms, the
partners in LLP can choose the profit-sharing ratio by themselves. In this form of business organization, the
minimum number of partners has to be two.