Class 12 Business Studies

Chapter 1 - Nature and Significance of Management

Definition of Management
“Management is defined as the process of planning, organizing, actuating and
controlling an organization’s operations in order to achieve coordination of the
human and material resources essential in the effective and efficient attainment
of objectives.”
Robert L. Trewelly and M. Gene Newport

Concept of Management
Management is a process that aims to bring the efforts of the people working in
the organization to achieve a common objective effectively and efficiently.
● Process: The term process refers to the primary activities performed in an
organization by the management to achieve the objective. It includes
planning, organizing, staffing, directing and controlling.
● Effectively: The term effectively refers to completion of the given task in
the allotted time frame.
● Efficient : The term efficient means completing the task within minimum
cost as well as optimum utilization of resources.

Difference between Effectiveness and Efficiency

Basis Effectiveness Efficiency
Meaning It refers to the process of It refers to completing
completing the assigned the assigned task with
task within the given minimum wastage and at
time frame. a minimum cost.
Objective To achieve the targets on Optimum use of
time. resources and at
minimum cost.
Main element Time Cost

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Characteristics of Management
1. Goal Oriented Process: Every organization has its own set of objectives to
achieve as an end result. It is through management that the efforts of the people
working in the organization are directed towards accomplishment of these
objectives. Hence, we can say management is a goal oriented process. It is
fruitless to operate if an organization doesn't have a set goal.

2. All Pervasive: Management is a universal process. It is necessary in all types

of organization whether big or small and is performed at every level of authority;
top, middle or lower. The five activities of management are the same for all the
organizations irrespective of economic, social or political boundaries. Its just that
the methodology differs but the basics and foundation remains the same.

3.Multidimensional: Management has three important dimensions. These are as

follows:
• Management of work: Every enterprise has a purpose behind its
existence. The major purpose is performance of certain works for
accomplishment of end results. Management converts the work to be
performed in terms of goals and helps in achieving them.
For example: A hospital operates for the treatment of patients. A super
market exists for the fulfillment of day to day demands of people.
• Management of people: Management unites the efforts of the group of
individuals working in the enterprise so that they can work together as a
team. Human resource or manpower is said to be the biggest asset of an
organization. The task of a management is to get things done by individuals
as well as groups of people.
• Management of operations: Every enterprise has some basic product or
service to deliver which requires a production process, and a set of
operations where the inputs are converted to final product, this is
management of operations.

4. Continuous Process: Management is a continuous process as it consists of a

series of interrelated activities. These functions should be performed in a
systematic and orderly manner and in a proper sequence. It is a never ending
process. The activities include functions like planning, organizing, directing,
staffing and controlling.

5. A Group Activity: Management is a group activity as it is concerned with the

efforts of a group of individuals. It unites the efforts of the members in the group
and directs them towards attainment of a common objective.

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6. A Dynamic Function: The business policies and practices of the organization
needs to be changed according to the business environment which consists of
various social, economic and political factors. The world is changing dynamically
in all aspects so new practices and conventions must be followed to cater to the
ever-changing needs of the environment.

7. Intangible Force: Management is an invisible force. It cannot be seen, but it

can be felt through the achievement of objectives.

Objectives of Management
Objectives are the desired results that drive the management to work towards it.
There are three objectives of management:

1. Organizational Objectives: Organizational Objectives are those objectives

that are set by the management of an organization within a predetermined time
period. An organization has different types of objectives to be achieved, these
objectives are determined in consideration to the different interests of the
stakeholders. The main objective of an organization is optimum utilisation of
resources in the most effective and efficient manner. It is further divided into
three parts- survival, profit and growth.
• Survival: Ensuring survival in the market in the long run by taking positive
decisions in respect of business activities is the primary objective of
management. Earning enough revenues to cover the cost of production is
of utmost importance to an organization.
• Profitability: Any person or individual who runs a business has the
ultimate objective of earning profit. Management ensures to earn sufficient
profit to meet its various needs. Management makes best use of men,
money, material, machinery and other resources in order to earn profit.
Good amount of profit provides better return to investors in terms of
dividend, interest etc.
• Growth : Management should aim towards continuously improving the
performance of the organization. It is the general objective of management
to secure maximum results through minimum resources to increase
prosperity and growth. Growth of an organization can be measured in
various ways and depending upon various parameters. The growth
indicators can vary from organization to organization. Some may consider
an increase in sales volume, some may look for an increasing number of
products, etc.
2. Social Objectives: Any organization that operates, doesn't solely have an
objective of profit making. It also has some social obligations or social objectives

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to fulfill towards the society. This may differ from organization to organization.
For example: Some aim at providing basic infrastructure to the people living
around, some aim at providing maximum employment, some aim at producing
products that are environment friendly.

3. Personal Objectives: Each and every individual joins an organization for

pursuing their personal objectives. Some join for a good package of salary, some
join for greater recognition, some just for survival. So, this depends upon
individual to individual. It is important for an organization to identify the personal
objectives to integrate it with the organizational objectives to bring harmony in
the organization.

Importance of Management
1. Achievement of group objectives: Management creates coordination and
team spirit in the group of individuals. Management also inspires the members of
the groups to make their best contribution towards the achievement of the
common objective. This common objective is set by the management itself.

2. Optimum utilization of resources: Management brings together men, money,

material, machine in the right proportion to reduce cost and maximize production.

3. Minimization of Cost: Management improves efficiency and reduces cost

through better planning, sound organization and effective control. By eliminating
wastage and minimum cost, management helps an organization to face cut throat
competition.

4. Social development: Management increases the standard of living of the

people by providing good quality products and services at minimum cost. It also
helps in generating employment opportunities and adopting new technologies.

5. Achievement of personal objectives: Each and every individual joins an

organization for pursuing their personal objectives. Some join for a good package
of salary, some join for greater recognition, some just for survival. So, this
depends upon individual to individual. Management plays an important role in
identifying the personal objectives so as to integrate it with the organizational
objectives to bring harmony in the organization, as well as successful fulfilment
of the personal objectives of the individuals..

Nature of Management
Management has evolved over time, it has become very dynamic in modern
times. Earlier it was based on a set of rules and regulations or we may state them

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as conventions that evolve slowly and gradually as per the ever changing needs.
Management can be an art, science or a profession.

Management as an Art
Art refers to putting the knowledge and capabilities into practise so as to achieve
the desired results. It can be acquired through various methods like observation,
study and experience.
The basic features are as follows :
1. Existence of theoretical Knowledge: Art involves the application of
theoretical knowledge. Management is an art of getting things done through
individuals for accomplishment of desired results by putting the available
knowledge into practice.

2. Personalized application: The use of knowledge varies from person to person

and hence management is basically an individual skill. Two different people can
perform the same type of work but will always differ in the way they perform.
For example: two singers will always perform differently.

3. Based on practice and creativity: Management is goal-oriented and result-

oriented. As for art, management also requires practice, continuous practice hones
the skills and creativity of an individual.
Hence, management can be considered as an art, as both requires skills, practice
and creativity.

Management as a Science :
A systematized body of information that can be learned by observation and
experimentation is referred to as science. It is made of universally acknowledged
concepts that define the relationships between causes and effects.
The following are the essential characteristics of science:
1. A well-organized body of knowledge: Management is a systematised body of
knowledge with its own set of ideas and concepts based on cause-and-effect
relationships.

2. Principle based on experiments and observation: Fundamental principles of

management are developed through experiments and observations. Their results
can be tested and verified.

3. Universal Validity: The principles of management have no universal validity

and application like that of science. The basics of management is imparted to the
managers, rest has to be tailored as per the requirement of the organization and
environment.

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Thus, management is definitely a science, but a social science as it is based on
human behaviour. Human behaviour cannot be subjected to experiments and
therefore management can be called soft science.

Management as a Profession.
A vocation that requires specific knowledge, practical training, a service
motivation, and a code of conduct is referred to as a profession.
The following are the essential characteristics of a profession:
1. Specialized Knowledge: Management has its own set of principles, concepts
and is a well defined body of knowledge.

2. Restricted Entry: Every profession has restricted entry through examination

or through educational degree. Though, to build a career in management, it is not
necessary to have an educational degree etc.

3. Statutory Body: Every profession is regulated by a legally recognized body

like ICAI for a chartered accountant. Management also have their association like
All India Management Association but management associations are not statutory
bodies.

4. Code of Conduct: Like every profession, managers also have a code of

conduct, but it does not legally bind a manager as compared to the professional
code of conduct.

5. Service Motive: Managers aim to serve the society similarly like other
professions.
Hence we can say management does not possess all the characteristics of a
profession.

Levels of Management
There are three levels in management – top level, middle level, lower level.
• Top Level Management: Top level management comprises chief
executing officer, board of directors, managing directors, president, vice
presidents etc. Their responsibility is to decide organizational goals, frame
policies, formulate strategies and approve budgets. They are responsible
for all the major policy making in the organization.
• Middle Level Management: Middle level management comprises
departmental heads, branch managers, divisional heads. Their
responsibility is to execute the plans and policies framed by the top level
management. They are the ones who connect with the lower level
management and instructs, guides and motivates them to reach the goal.

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 • Lower Level Management: Lower or operational level management
comprises foremen, supervisors, office manager etc. Their responsibility is
implementation of the work and policies under the guidance of middle
level management. They also bring employees or workers’ grievances in
knowledge of middle level management and maintain discipline among the
workers.

The Functions of Management

• Planning: Planning is a process of setting goals and objectives and
formulating a strategy and an action plan to achieve it. It bridges the gap
between our current position and desired position. This is the basic function
of an organization and is the first step of management.
• Organizing: Organizing is the process of establishing authority and
responsibility relationships. It involves assigning tasks to individuals and
allocating resources for the same.
• Staffing: Staffing is a process of placing the right person on the right job
at the right time. It includes recruitment, selection, placement, induction
and training of employees. It can be called as the Human Resource function
of the organization.
• Directing: Directing refers to the process of leading, influencing and
motivating the individuals working in the organization to complete the
assigned task effectively and efficiently. The employees need to be
constantly motivated to perform better. Leadership and motivation are the
key components of directing as a function. It tends to bring out the best in
an employee.
• Controlling: Controlling is the process of keeping a check on the
performance of the organization and comparing it with the standards set.
Also, corrective actions are taken, in case any deviation is found between
the actual and desired results.

Coordination - The Essence of Management

Coordination is a force which synchronizes all the five functions and levels of
management in order to achieve the goal of the organization. Coordination is
implicit and inherent in all the functions of an organization. Without coordination
there are chances of overlapping, duplication, delays and chaos in the work. The
function of coordination starts from the planning function itself. Coordination
thus synchronises the different efforts and actions of various units of the
organization.

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Characteristics of Coordination
• Coordination integrates group efforts: Coordination integrates group
efforts and ensures that the performance of the organization is as per the
standards set.
• Coordination ensures unity of action: Coordination is a force which
binds the various departments and ensures that all efforts are directed
towards achieving the organizational goals.
• Coordination is a never-ending process: Coordination is a continuous
and a never-ending process. It is required from beginning to end, at all the
levels of management as well as in all the functions of the organization
• Coordination is the responsibility of all managers: It is the duty of all
the people working in the organization to work in a responsible manner
and coordinate with each other to achieve the objectives or the goals of the
organization.
• Coordination is a deliberate function: Management deliberately needs
to coordinate the efforts of different people working in the organization.
Coordination cannot be established with itself rather it is a deliberate and
conscious effort on part of every manager.
• Coordination is an all pervasive function: Coordination is something
which is required everywhere and in every organization be it big or small.
It is needed at all levels and at every function of the management.

Importance of Coordination
• Growth in Size: Coordination harmonizes individual goals with the
organizational goals. This results in the growth of the organization which
results in an increase in the number of people employed with it.
• Functional Differentiation: The various departments of the organization
have their own objectives, policies and their own style of working. But to
achieve organizational objective coordination is important so as to link the
activities of all departments.
• Specialization: Coordination integrates all the specialists activities into a
collective effort.