MGT.

1. CONCEPTUAL FOUNDATION OF
MANAGEMENT

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CONTENT
Unit-I:
Nature, Scope and Significance of Management; Process of
Management; Management as an Art, Science and Profession;
Management and Administration; Role of Managers; Principles of
Management; Levels of Management.
Unit-II:
Evolution of Management Thought: Classical, Neoclassical
and Contingency; Contemporary Management Thinkers: Peter F.
Drucker, Michael Porter and C. K. Prahlad.
Unit-III:
Planning: Meaning and Importance of Planning; Planning
Process; Making Planning Effective; Types of Plans; Decision
Making: Concept, Nature, Types of Decision, Process and
Techniques, Creativity in Decision Making. Management by
Objectives.
Unit-IV:
Organizing – Nature, Importance, Process and Principles of
Organizing Departmentation, Decentralization, Centralization,
Delegation, Authority and Responsibility Relationship - Line, Staff
and Functional; Formal vs. Informal Organizations. Directing:
Concept, Nature and Importance
Unit-V:
Motivation: Concept and Significance, Theory X and Theory Y,
Maslow’s Theory of Motivation. Leadership: Meaning, Importance
and Characteristics of a Good Leader, Control: Nature, Process and
Significance, Control Methods: Pre-action Control, Steering Control
and Post-action Control, Control Techniques.

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UNIT – I
NATURE OF MANAGEMENT
THIS UNITINCLUDES:
Nature, Scope and Significance of Management; Process of Management; Management as an
Art, Science and Profession; Management and Administration; Role of Managers; Principles
of Management; Levels of Management.
anagement is needed whenever people work together in an organisation.
The managerial function must be performed by anyone who manages
organized efforts, whether it is a business enterprise, social institution –
such as planning, organizing, directing and controlling. These functions are
performed at all levels in an organisation, regardless of its type or size. The
services of management are essential in all cooperative endeavours.
Definition of management
Different experts have defined management on the basis of its features. Following are the
some definitions of management.
1) According to Terry, “Management is a distinct process consisting of
planning, organizing, actuating and controlling; utilizing in each both science and
art, and followed in order to accomplish pre-determined objectives.”
2) According to Knootz, “Management is the art of getting thing done through
others and with formally organized groups.”
3) According to F. W. Taylor, “Management is the art of knowing what you
want to do and then seeing that they do it in the best and the cheapest way.”
4) According to Sisk, “It is the coordination of all resources through the process
of planning, organizing, directing and controlling in order to attain stated
objectives.
Both of these definitions point to the activities which relate to getting things by others.
Thus management is the sum total of activities which lay down plans, policies, purpose and
secure men, machine, money and material required for the completion of these purposes,
put all of them into operation, supervise and check their performance and provide
incentives and satisfaction to men for the execution of these desired operation.
NATURE OF MANAGEMENT
The study and application of management technique in managing the affairs of the
organisation changed its nature over the period of time. Similarly, other changes have also
occurred. Thus the nature of management can be described as follows:
1. Multidisciplinary:
Management is basically multidisciplinary. This implies that, although management
has been developed as a separate discipline, it draws knowledge and concepts from
M

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various discipline. It draws freely ideas and concepts from such discipline as
psychology, sociology, anthropology, economics, history etc. Therefore, the
contribution in the field can be expected from any discipline which deals with some
aspects of human beings.
2. Dynamic nature ofprinciples:
Principles are a fundamental truth which establish cause and effect relationship of a
function. However, these principles are flexible in nature and change with the
changes in the environment in which an organisation exist. Because of the
continuous development in the field. In fact, there is nothing permanent in the
landslide of management.
3. Relative,Not absolute principles:
Management principles are relative, not absolute and they should be applied
according to the need of the organisation. Each organisation may be different from
others. The difference may exist because of time, place, socio-culture factors, etc.
therefore, principles of management should be applied in the light of prevailing
conditions. Allowance must be made for different changing environment.
4. Universality ofmanagement:
Management is a universal phenomenon. However, management principles are not
universally applicable but are to be modified according to the needs of the situation.
5. Management is intangible:
As pointed out by Terry, management is intangible. It cannot be seen. It is an
unseen force. However, its presence can be felt by the results of its efforts in the
form of production, sales and profits.
6. Management is goal-oriented:
Management seeks to achieve goals. These goals may be economic or non-economic.
In a business organisation, the primary goal is to produce and distribute goods with
a view to earn profit.
7. Management is a social process:
According to Newman, management is a social process because it deals with people.
To make the best use of human efforts, managers have to create close cooperation
among employees in an organisation. They have to use resources for the benefit of
society as a whole. They have to look after the interest of employees, shareholders.
8. Management is a groupactivity:
Management is concerned with getting things done through people. People join
groups in order to achieve results collectively. Management helps people in realizing
individual as well as group goals in a coordinated way.
9. Management is a system ofauthority:
A manager is supposed to get things done, rather than doing things himself, by using
authority. Authority is the right to give orders and the power to obtain obedience
from subordinates. In this sense, management may be understood as the rule
making and rule enforcing body in an organisation.
10. Management science or art:
There is a controversy whether management is science or art. However,
management is both a science and an art. Thus management is both science and art.

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Conclusion:
The nature of management suggests that it is a multidisciplinary phenomenon; its
principles are flexible, relative and not absolute.
SCOPE OF MANAGEMENT
The scope of management is very wide. Basically, it refers to three distinct ideas. According
to Herbisonand Myers, management may be understood as (1) an economic resource,
(2) as a system of authority and (3) a class or elite.
1) Management as an economic resource:
Management is one of the factors of production along with land, labour and capital.
In modern organisation, the effective use of the five M’s of management ( money,
materials, manpower, machinery and methods or ways of doing things) depends to
a great extent on the quality of management. In other words, how effectively and
economically the five M’s are combined together to produce desired results.
According to Newman, management is required to convert the disorganized
resources of men, material, money and machine into a productive, useful, on going
concern.
2) Management as a system of authority:
According to Herbisonand Myers, management is the rule making and rule
enforcing body. It is bound together by a web of relationship between superiors and
subordinates, this is, people are bound by authority relationship, managers working
at top level enjoy more authority than people working at lower level.
3) Management as a class or elite:
Sociologists view management as a distinct class in society having its own value
system. The managerial class has become very important in modern organisation
owing to its contribution to business success. As a separate group, the term
management refers to the group of individuals occupying managerial positions. All
the managers from the chief executive to the first line supervisors are collectively
addressed as “Management”, which refers to the group.
SIGNIFICANCE OF MANAGEMENT
In the ancient times business was done on a small scale and management had no
special importance. Now business is done on a big scale and consequently, various
complexities confront us. The need of management has been felt in view of these
complexities and their situation.
According to Terry, “No organisation can be successful for a long time without
effective management. To a large extent the achievement of social, economic and
political objectives depends on able managers”.
The followings facts clearly highlight the importance of management:-
1) Achieving pre-determinedobjectives:
Each organisation is established with certain aims. Management is the only
medium which can help in the attainment of these aims. A manager with the help
of his expertise and cleverness makes an assessment of the future events. He

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makes plans, creates an organisation, distributes work, grants requisites
authority, directs the employees & controls them. By a critical assessment he
tries to find out deviations and finally by his corrective action makes the
impossible look simple.
2) Ensuring maximum utilizationof resources ofproduction:
Management is that power which by establishing an effective coordination
between the various resources of production makes an optimum use of these
resources. It means that most efficient use of the limited resources is the key to
the successful business. This fact can be converted into reality with the help of
management.
3) Overcoming competition:
A modern producer faces competition not only from a local producer or
competition at the national level but international competition is also getting
sharpen. In such a competitive atmosphere only that organisation can survive
which can make available to its customers the best quality of goods at the
cheapest rates. Only an efficient and clever manager can make it a reality and
save the reputation of an organisation.
4) Ensuring integrationwith changing environment:
Management is not only limited to various internal functions of an organisation
but it has to compromise with the outer atmosphere also. Thus, only an efficient
manager can coordinate his work with the fast changing atmosphere. With the
help of efficient and effective management a coordination between the new and
prevalent work system and methods can be established to save the reputation of
an organisation.
5) Ensuring smoothrunning of large scale business:
In view of the large scale production the means of production will also required
on a large scale. To perform these functions efficiently and in a controlled
manner, the need of an efficient manager is paramount. Therefore, without an
efficient manager smooth running of large scale business is not possible.
6) Maintaining a sound organisational structure:
A sound organisational structure is needed for the success of any enterprise. A
sound organisational structure means defining a clear relationship between the
superior and subordinates. It has to be decided what work will be done by
various persons and what rights and duties they enjoy. It will lead to the creation
of a team spirit and keep the work atmosphere clean and healthy. All the
superiors and subordinates will work without any tension. A sound
organisational structure can be created by an efficient manager.
7) Establishing goodlabour-owner relationship:
Labour and capital are the two main resources of production. The owners invest
capital and determine objectives while the labour tries to transform those
objectives into reality. Therefore, existence of a sweet relationship between the
two is of paramount importance.

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An efficient manager, with the help of his knowledge and experience,
understands the feelings of labour and tries to remove their grievances. He
offers them an opportunity to be partners in the process of management.
8) Giving importance to researchand investigation:
A recent research has brought out the fact that only those companies or business
enterprises which are constantly taking interest in research activities are
developing fast. In the context of business, research and investigation mean
finding out new products and new markets for the extension of business field,
new methods of distribution and adopting the use of new techniques to solve
financial problems and using new techniques in the field of communication.
Efficient manager invariably establish research and investigation department to
achieve this important purpose.
9) Fulfilling the social responsibility:
The social responsibility of a business organisation include ensuring the safety of
the capital and sufficient profit, proper remuneration and work conditions for
the employee, making available to the consumers goods of good quality at the
tight time and proper prices. An enterprise can ensure these expectations only
through the medium of management. Thus, management has a special
significance in the task of fulfilling the social responsibilities of business.
10) Aiming at increasedprofits:
In order to increase the profits of any organisation it is the basic principle either
to increase the sales revenue or reduce costs. Increasing the sales revenue is
beyond the control of an organisation to some extent but to affect a reduction in
costs is primarily an internal affair of the organisation and it can certainly be
accomplished with the help of good quality raw material, modern machinery and
trained employees. By reducing costs the profits of an organisation can be
achieved by the management and future development can be expected.
In conclusion, it can be said that management is the life-breath of
business and it will not be wrong to say, business without efficient management
is a house built on sand, which can fall any time.
MANAGEMENT PROCESS
The term process refers to an identifiable flow of information through
interrelated stages of analysis directed towards achievement of an objective.
Management has been defined as a process. Under this process many works
related with each other have been included. These functions are known as the
elements of management.
Fayol has divided business activities into six parts includes the process of
management also. Following are the six activities:-
1) Technical activities:
Activities connected with production have been included in the technical
activities.
2) Commercial activities:
It includes sale and purchase activities.

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3) Financial activities:
It includes the function of making available the capital and using it
appropriately.
4) Security activities
It is concerned with the safety of property of the people.
5) Accounting activities:
It includes maintenance of accounts and statistics.
6) Managerial activities:
Managerial activities include planning, organizing, staffing, directing and
controlling.
A process is a systematic way of doing things. The functions in management is known as
management process. The use of management function in any business enterprise is as
follows:
1) Planning:
It refers to thinking before doing. In other words, planning is the determination of a
future course of action to achieve a desired result. The first step in planning is the
selection of goals for the organisation. Once these are determined, programs are
established for achieving goals in a systematic manner. Plans made by top
management for the organisation as a whole may cover periods as long as five or ten
years. Plans made by middle or first line manager, cover much shorter periods. Such
plans may be for the next day’s work.
Technical (Production)
Managerial (Planning,
controlling etc.)
Commercial (Buying,
selling and exchanging
Managerial
Activities
Financial (Search for &
optimum use of capital
Accounting (Including
statistics)
Security (protection of
property and persons

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Planning is a long process, for the consummation of which following steps are taken:
i) Setting objective
ii) Developing premises
iii) Identifying alternative courses of action
iv) Evaluating alternative courses
v) Selecting an alternative
vi) Implementing the plan
vii) Follow up action
2) Organizing:
Organizing is the process of arranging and allocating work, authority and resources
among an organization’s members so they can achieve the organization’s goals. In
other words, it refers to harmonious adjustment of various parts to achieve common
objective. In organizing process of dividing work into convenient tasks or duties,
grouping of such duties in the form of positions, grouping of various into
department and sections, assigning duties to individual positions, and delegating
authority to each position so that the work is carried out as planned.
Following steps are taken to culminate the organizing function of management:
i) Identification and division of work
ii) Departmentalization
iii) Assignment of duties
iv) Establishing reports relations
3) Staffing:
It refers to filling and keeping filled the post with people. In planning, ideas are
given a written shape, on the other hand organizing, with the objective of converting
these ideas into reality, prepares a structure of various posts. After organizing
comes staffing which deploys people on these posts so that jobs can be performed.
Following steps are taken in the third step of management process:
i) Estimating the manpower requirements
ii) Recruitment
iii) Selection
iv) Placement and orientation
v) Training and development
4) Directing:
It refers to instructing, guiding, communicating and inspiring people in the
organisation. When people are available in the organisation, they must know what
they are expected to do in the organisation. Superior managers fulfill this
requirement by communicating to subordinates about their expected behavior.
Once subordinates are oriented, the superiors have continuous responsibility of
guiding and leading them for better work performance and motivating them to work

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with zeal and enthusiasm. Thus directing includes communicating, motivating and
leading.
Directing includes following four activities:
i) Supervision:
It refers to monitor the progress of routine work of one’s subordinates and
guiding them properly.
ii) Communication:
It refers to an art of transferring facts, ideas, feeling, etc. from one person to
another and making him understand them.
iii) Leadership:
It refers to influence others in such a manner to do work what the leader wants
them to do.
iv) Motivating:
It refers to that process which excites people to work for attainment of desired
objective.
5) Controlling:
It refers to bring the actual results closer to the desired results. Under this, the
manager monitors whether the jobs are being performed in accordance to the set
plans or not. S/he also checks whether the quality and quantity of job performed is
in alignment to the pre-determined standards/parameters or not. In the form of
conclusion, controlling process has five main steps:
i) Setting performance standards.
ii) Measurements of actual performance.
iii) Comparison of actual performance with standards.
iv) Analyzing deviations, and
v) Taking corrective action.
Planning
Organising
StaffingDirecting
Controlling

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MANAGEMENT AS AN ART, SCIENCE OR PROFESSION
There is a conflict about the nature of management whether management is a science or an
art. Some management experts consider it as a science, while some place it in the category
of art. It is a very old and misleading conflict. The nature of management will become clear
in the following description:
 Management as a science:
It is important to understand the meaning of science before accepting management
as a science.
 Meaning of science:
Science refers to that systematic body of knowledge which is required on the basis
of observation and experiments and verification of this knowledge is possible.
 Testing of management as a science:
Following are some point which shows that management is a science:
a. Systematized body of knowledge
b. Based on collection of facts, analysis and experiments
c. Universal application
d. Cause and effect relationship
e. Verification of validity and prediction of results possible.
Conclusion:
The management cannot be treated as a perfect science, but as its principles are subject to
change with time, situation and human nature, it is better to call it applied science.
 Management as an art:
It is important to understand the meaning of art before accepting management as an
art.
 Meaning of art:
Art refers to the skill to put into action, a systematic body of knowledge, for the
achievement of a specific task.
 Testing of management as an art:
Following are some points which shows that management is an art:
a. Personal skill
b. Practical knowledge
c. Concrete result oriented approach
d. Development through practice
e. Creative power

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Conclusion:
Therefore, management is both a science as well as an art. As a science, management with
the help of its principles provides the necessary guidance to the managers to achieve
practical efficiency. It is therefore, reasonable to treat management both as a science and
an art.
 Management as a profession:
It is important to understand the meaning of profession before accepting
management as a profession.
 Meaning of profession:
Profession is a vocation requiring some significant body of knowledge that is
applied with high degree of consistency in service of some relevant segment of
society.
 Testing of management as a profession:
Following are some point which shows that management is a profession:
a. Body of specialized knowledge and technique
b. Formalized methods of acquiring training and experience
c. Establishment of representation professional association
d. Code of conduct
e. Priority of service over economic consideration
Conclusion:
On the basis of the above points it can be said that management does fulfill some of the
characteristics of the profession and some of the characteristics have yet to blossom or
develop. In conclusion it can be said that in India management as a profession is still
developing. More the increase in development, greater the recognition of management as a
profession will come to it.
MANAGEMENT AND ADMINISTRATION
There is often terminological conflict between management and administration. Some
author suggest that there is no fundamental difference between management and
administration; whatever the difference between the two exist; it exists only in terms of
usage in different walks of life. There are three different approaches for the both term
“management” and “administration”. These approaches are:
i) Administration is above management
ii) Administration is a part of management; and
iii) Administration and management are the same.

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1) Administrationis above management:
According to many classical thinkers, administration is above management so far as
different function in the organization are concerned. They perceive that both
administration and management activities are different though both of them may be
performed by a single individual in an organization. The general view is that
administration relates to policy formulation and management relates to policy
execution and these two activities are not the same. The basic approach of the
authors is that administration determines the basic framework of the organization
within which managerial functions are taken. The only exception came from Henry
Fayol who studied the entire management function and never distinguished
between management and administration.
2) Administrationis a part of management:
This approach holds the view that management is a comprehensive term and
administration is its part. For example, Brech has taken management “as the generic
name for the total process of executive control in industry or commerce.” He defines
management as “a social process entailing responsibility for the effective and
economical planning and the regulation of the operation of an enterprise, in the
fulfillment of a given purpose of task.” On the other hand, he defines administration
as “that part of management which is concerned with the installation and carrying
out of the procedures by which it is laid down and communicated and the process of
activities regulated and checked against plans.” If this view is accepted,
administration becomes a subordinates function to overall management function
and as such administration which concerned with day to day executive routine work
is a part of management. Thus the previous analysis of distinction between
management and administration stands completely revised if this view is accepted.
3) Management and administrationare same:
According to third approach which is the most popular and practical one,
management and administration are same. Both involve the same functions,
principles and objectives. For example, while speaking at the second international
congress of administrative science, Fayol, one of the most important early thinkers
on management thought, has said, “all undertakings require planning, organisation,
command, coordination and control, and in order to function properly, all must
observe the same general principles. We are no longer confronted to public and
private affair.” Thus there is no difference between management and
administration. Whatever the difference between the two lies is mostly in their use
in different fields of human activities.

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ROLES OF A MANAGER
Following are the roles of a manager in an organization:
1) Interpersonal Roles:
i. Figurehead:
In this role, every manager has to perform some duties of a ceremonial
nature, such as greeting the touring dignitaries, attending the wedding of
an employee, taking an important customer to lunch and so on.
ii. Leader:
As a leader, every manager must motivate and encourage his employee.
He must also try to reconcile their individual needs with the goals of the
organization.
iii. Liaison:
In this role of liaison, every manager must cultivate contacts outside his
vertical chain of command to collect information useful for his
organization.
2) Informational Roles:
i. Monitor:
As monitor, the manager has to perpetually scan his environment for
information, interrogate his liaison contacts and his subordinates, and
receive unsolicited information, much of it as a result of the network of
personal contacts he has developed.
ii. Disseminator:
In the role of a disseminator, the manager passes some of his privileged
information directly to his subordinates who would otherwise have no
access to it.
iii. Spokesman:
In this role, the manager informs and satisfies various groups and people
who influence his organization. Thus, he advises shareholders about
financial performance, assures consumer groups that the organization is
fulfilling its social responsibilities and satisfies government that the
organization is abiding by the law.
3) Decisional Roles:
i. Entrepreneur:
In this role, the manager constantly looks out for new ideas and seeks to
improve his unit by adapting it to changing conditions in the
environment.
ii. Disturbance Handler:

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In this role, the manager has to work like a fire fighter. He must seek
solutions of various unanticipated problems-a strike may loom large, a
major customer may go bankrupt, a supplier may renege on his contract,
and so on.
iii. Resource Allocator:
In this role, the manager must divide work and delegate authority among
his subordinate. He must decide who will get what.
iv. Negotiator:
The manager has to spend considerable time in negotiation. Thus, the
president of a company may negotiate with the union leaders a new
strike issue, the foreman may negotiate with the workers a grievance
problem, and so on.
PRINCIPLES OF MANAGEMENT
Fayol presented 14 principles of management as general guides to the management
process and management practice. These are as under:-
1. Division of work
2. Authority and responsibility
3. Discipline
4. Unity of command
5. Unity of direction
6. Subordination of individual interest to general interest
7. Remuneration to employees
8. Centralization and decentralization
9. Scalar chain
10. Order
11. Equity
12. Stability of personnel
13. Initiative
14. Esprit de corps
These are discussed as follow:-

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1) Division of work/specialization:-
Division of work in the management process produces more and better work with
the same effort. All the function of management cannot be performed efficiently by a
single proprietor or by a group of directors. They must be entrusted to specialists in
related fields. Fayol presented work specialization as the best way to use the human
resources of the organization. This principle of Fayol tells us that as far as possible
the whole work should be divided into different parts and each individual should be
assigned only one part of the work according to his ability and taste rather than
giving the whole work to one person. When a particular individual performs the
same job repeatedly, he will become an expert in doing that particular part of the
whole job. Consequently, the benefits of specialization will become available.
For example:-
A furniture manufactures gets and order for manufacturing 100 lecture stands. He
has five workers who will do the job. There are two ways to complete this order.
First every worker should be asked to complete 20 lecture stands. The second
method can be distributing different parts of the lecture stand- legs, top board,
centre support, assembling, and polishing- to all the five workers in a manner that
only one worker does the same job for all the 100 lecture stands. Here, the second
method is the first principle of Henri Fayol.
2) Authority and responsibility:-
The concept of authority and responsibility are closely related. Authority was defined by
Fayol as the right to give orders and the power to exact obedience. Responsibility involves
being accountable, and is therefore naturally associated with authority. Whoever assumes
authority also assumes responsibility. According to this principle, authority and
responsibility should go hand in hand. It means that when a particular individual is given a
particular work and he is made responsible for the results, this can be possible only when
he is given sufficient authority to discharge his responsibility. In the words of Fayol,“The
result of authority is responsibility. It is natural result of authority and essentially another
aspect of authority and whenever authority is used, responsibility is automatically born”.
For example:-
The CEO of a company has doubled the sales target of the sales manager for the coming
year. To achieve this target, authority for appointing necessary sales representatives,
advertisements according to the need, etc. shall have to be allowed. In case these things are
not allowed the sales manager cannot be held responsible for not achieving the target.
3) Discipline:-
Employees must obey and respect the rules that govern the organization. Good discipline is
the result of effective leadership, a clear understanding between management and workers
regarding the organization’s rules, and the judicious use of penalties for infraction of the
rules. Discipline is essential for any successful work performance. Fayol considers
discipline to mean obedience, respect for authority, and observance of established rules.

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Discipline can be established by providing good supervision at all levels, clearly explaining
the rules, and implementing a system of reward and punishment. A manager can present a
good example to his subordinates by disciplining himself.
For example:-
If the employees break their promise of working up to their full capacity. It will amount to
the violation of obedience. Similarly a sales manager has the authority to do business on
credit. But in case he allows this facility not to the general customers but only to his
relatives and friends, then it will amount to ignoring his respect to his authority.
4) Unity ofcommand:-
According to the principles of unity of command, an individual employee should receive
orders from only one superior at a time and that employee should be answerable only to
that superior. Fayol believes that if an employee was to report to more than one superior,
he would be confused due to conflict in instructions and also it would be difficult to
pinpoint responsibility to him. If there are many superior giving orders to the same
employee, he will not be able to decide as to which order is to be given priority.
For example:-
In a company, manager give order to his subordinate that he should be complete this file
today and on the other hand another superior give order to the same subordinate that he
should complete the sales report today than he will not be able to decide as to which order
is to be given priority. Thus, the result is that the subordinate can’t give his best to the
organization.
5) Unity ofdirections:-
It means that there should be complete identity between individual and organizational
goals on the one hand and between departmental goals inter se on the other, they should
not pull in different directions. Unity of direction means that there should be one head for
one plan for a group of activities having the same objective. In other words, there should be
one plan of action for a group of activities having the same objective and there should be
one manager to control them.
For example:-
Suppose an automobile company is manufacturing two products, namely, scooters and
cars, hence having two divisions. As each product has its own markets and problems
therefore each division must have its own targets. Now each division must plan its target as
per its environmental conditions to get better results.
6) Subordinationof individual interest to general interest:-
According to this principle, the general interest or the interest of the organization is above
everything. In a business concern, an individual is always interested in maximizing his own
satisfaction through more money, recognition, status, etc. This is very often against the
general interest which lies in maximizing production. Hence the need to subordinate the
individual interest to general interest.

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For example:-
A purchase manager of a company has to purchase 100 tonnes of raw material. His son
happens to be a supplier along with other supplies in the market. The manager purchases
the raw material from the firm of his son at a rate higher than the market rate. This will
profit the manager personally, but the company will incur heavy loss. This situation is
undesirable.
7) Remunerationto employees:-
Fayol is of the opinion that the employees should get a fair remuneration so that the
employees and the owners find equal amount of satisfaction. The remuneration paid to the
personnel of the firm should be fair. It should be based on general business conditions, cost
of living, productivity of the concerned employees and the capacity of the firm to pay. Fair
remuneration increases workers efficiency and morale and fosters good relations between
them and the management.
For example:-
Suppose that the things are getting dearer and company is getting good profits. In such a
situation, the remuneration of the employees should be increased even without their
asking. If this is not done, the employees will leave the company at the first opportunity.
Expenses shall have to be incurred on new recruitment which shall bring loss to the
company.
8) Centralizationand decentralization:-
Fayol defined centralization as lowering the importance of the subordinate role.
Decentralization in increasing the importance. The degree to which centralization or
decentralization should be adopted depends on the specific organization in which the
manager is working. According to this principle, the superior should adopt effective
centralization instead of complete centralization and complete decentralization. Fayol does
not mean that authority should be completely centralized. He feels that the superiors
should keep the authority of taking important decisions in their own hands. While the
authority to take daily decisions and decisions of less importance should be delegated to
the subordinates.
For example:-
The decisions in respect of determining the objective and policies, expansion of business
etc. should remain in the hands of the superiors. On the other hand, authority for the
purchase of raw material, granting leave to the employees, etc. should be delegated to the
subordinates.
9) Scalar chain:-
Scalar chain means the hierarchy of authority from the highest executive to the lowest one
for the purpose of communication. It states superior-subordinates relationship and the

19. ~ 19 ~
authority of superiors in relation to subordinates at various levels. As per this principle, the
orders or communications should pass through the proper channels of authority along the
scalar chain. Under this chain each communication moves from top to lower level and vice-
versa according to an established system.
For example:-
If there are A, B, C, D, E five people and the message from A to E is to be communicated, it
will move from A to B, them from B to C them from C to D and finally from D to E. this
process of communicating is known as scalar chain.
10) Order:-
According to the principles of order, a right person should be at right job and a right thing
should be placed at the right place. Accordingly to Fayol every enterprise should have two
different orders- Material order for physical resources and Social order for human
resources. Keeping the physical resources in order means that ‘a proper place for
everything and everything in its right place’. Similarly, keeping the human resources in
order means ‘a place for everyone and everyone in his appointed places’. Maintaining these
two orders properly will ensure that everybody known his workplace, what he is to do and
from where he would get his required material.
For example:-
An employee working in a factory should know the place or source from where he can get
his tools in case of nee. Similarly, he should know the place where his supervisor will be
available in case of any need.
11) Equity:-
This principles tells that the managers should treat their subordinates in a just and kind
manner so that they develop a feeling of dedication and attachment for their work. All the
employees should be treated equality. Fayol tells us in connection with this principle that
there should not be any equality of treatment between a person whose work is really good
and a person who is shirker by nature. Rather the latter should be treated sternly. Doing so
would be equitable. It is because of this point of view that Taylor has presented his
differential remuneration method.
For example:-
A labourer completes 10 units of goods in a day. Another labourer who happens to be a
relative of the supervisor complete 8 units but both get equal remuneration. This violates
the principles of equality. The second labourer should get less remuneration than the first
one.
12) Stability of personnel:-
In order to motivate workers to do more and better work, it is necessary that they should
be assured security of job by the management. If they have fear of insecurity of job, their
morale will be low and they cannot give more and better work. Further, they will not have
any sense of attachment to the firm and they will always be on the lookout for a job

20. ~ 20 ~
elsewhere. Fayol thinks that instability in the tenure of employees is a cause of poor
management and results. High rate of labour turnover will result in increased expenses
because of selecting them time and again, and giving them training afresh. Consequently,
the sense of dedication cannot be created among them.
For example:-
It is true that if the workers in a company are not treated well and the atmosphere in the
company is also unhealthy, the employees will not stay for a long time. In other words, they
will leave the company at the first opportunity available. This situation is absolutely
harmful.
13) Initiative:-
Initiative means freedom to think out and execute a plan. The zeal and energy of employees
are augmented by initiative. According to Fayol it is the duty of the manager to encourage
the feeling of initiative among his employees for doing some work or taking some decisions
but within the limits of authority and discipline. It will be possible only when the manager
will welcome the thoughts of his/her subordinates. By doing so the subordinates will
present new and useful ideas time and again and gradually they will become an integral
part of the organization.
For example:-
A salesman suggests to his sales manager to implement a new advertisement technique.
The sales manager sends him away by telling him that it is not possible. In future the
salesman will never offer any suggest. On the contrary, if his suggestion had been listened
to carefully he could have taken the courage to offer some suggestion in future. Such an
action would simply have encouraged his initiative.
14) Esprit de corps:-
As per this principles, a manager should continuously make efforts to develop a team spirit
among the subordinates. To do this, he/she should use the word “we” instead of “I” during
the conversation with subordinates.
For example:
A manager should always say that ‘we will do this work’ instead of ‘I will so it’. This
behavior of a manager will keep alive the spirit of cooperation among the subordinates.
Conclusion:
Clarifying the principles of management, Fayol has pointed out that since management is
related to human beings nothing can be said with a sense of finality. What principles are to
be applied at what time, in what situation and to what degree it all depends on the
experience, efficiency and decision-making power to the manager. Thus, the principles
advocated by Fayol have an element of flexibility.

21. ~ 21 ~
LEVELS OF MANAGEMENT
Various levels of a management can be put under three levels as shown in the figure:
1. Top level management:
In top level management, board of directors, chief executive officer, etc. are
included. Chief executive officer can be single person or a committee of officers.
Chief executive officer can be called by many names. Like managing director, general
manager, president, etc. top management has all the management authorities, and
because of these authorities officers of these levels are accountable to owners or
shareholders of the company.
Following functions are included in the list for top level management:
i. Determining objectives
ii. Determining policies
iii. Determining activities
iv. Assembling resources
v. Controlling the work performance
vi. Approving budgets
2. Middle level management:
Middle level management lies between top level and lower level management.
Under this, divisional heads, departmental heads and deputy department heads are
included. Some big organizations divide middle level management into two parts,
MANAGEMENT
TOP MANAGEMENT
BOARD OF DIRECTOR
CHAIRMAN
CHIEF EXECUTIVE
SUPERVISORY MANAGEMENT
SENIOR SUPERVISOR
INTERMEDIATE SUPERVISOR
FRONT LINE SUPERVISOR
MIDDLE MANAGEMENT
SECTIONAL HEADS
DEPT. HEAD
DIVISIONAL HEADS

22. ~ 22 ~
like the upper level middle management and the lower level middle management. In
the former category departmental heads are included while in the latter deputy
departmental heads are placed.
Following are the main functions of middle level managers:
i. Interpreting policies
ii. Preparing organizational set-up
iii. Appointing employee
iv. Issuing instructions
v. Motivating employee
vi. Creating cooperation
vii. Collecting and submitting information
viii. Submitting suggestions
3. Lower level:
It is also known as supervisory management. Under this, various supervisors are
included. The situation of managers of this level is very strange, because they are
direct link to workers, top level managers rate them as well wisher of workman and
based on this perception do not trust them.
Following are various functions of lower level management:
i. Submitting workers’ grievances.
ii. Ensuring proper working environment
iii. Ensuring safety of workers
iv. Helping middle level management
v. Inviting suggestions.

23. ~ 23 ~
UNIT 2
EVOLUTION OF MANAGEMENT THOUGHT
anagement experts have expressed different views from time to time. Some
management experts have given importance to physical resources, while some
others have highlighted the importance of human resources. In addition to this
some management experts have laid stress upon the system study. The ideas expressed by
all the three about management are associated with decision making. In other words,
according to the first thought the managers give more importance to the physical resources
while taking decisions. According to the second thought the human resources are preferred
to the physical resources. However, according to the third point of view all the concerned
factors are taken into consideration while taking decision.
The approach to management idealogy continued developing with the presentation of new
thoughts. The process of development of management thought can be divided into three
main heads:
1. Classical Approaches
2. Neo-Classical Approaches
3. Modern Approaches
Every approach can be further sub-divided into some branches. The story of the evolution
of management thought has been shown in the following diagram:
M
Management Thought
Classical Approach Neo-Classical Approach Modern Approach
ScientificMgt.
Approach
Administrative
Mgt. Approach
Approach
BureaucraticMgt.
Approach
Human Relations
Approach
Behavioural
Science Approach
Quantitative
Approach
SystemApproach
Contingency
Approach

24. ~ 24 ~
1) CLASSICALAPPROACH:
The classical approach to management started around the year 1900. The principles
developed under this approach are accepted even today. Under this approach it is
felt that man is an inactive source of production and it is important to control him. It
also believes that the employee is motivated by the economic incentives. This
approach has three branches:
a. Scientific management approach
b. Administrative management approach
c. Bureaucratic management approach
A. Scientific management approach:
F.W. Taylor is the father of scientific management. In addition to Taylor,
Frank and Lillian Gilbreth. Henry L. Gantt and Harrington Emerson have also made
significant contribution to the development of scientific management.
FrederickW. Taylor:
Taylor was a person who within a very short duration (1878-1884) rose from the
ranks of an ordinary labourer to the position of Chief Engineer. In 1878 he joined
the Midvale Steel Company in USA as a labourer and, due to his hard work and
dedication, he was able to reach the position of Chief Engineer in the same company
within a short span of six years (1884). During this period, Taylor conducted a
number of experiments and came to the conclusion that the amount of work a
labourer was doing was far less as compared to what he was supposed to be doing.
He gave a number of suggestions to solve this problem and, in doing so, he gave a
scientific outlook to management. Taylor worked in The Bethlehem Steel Works up
to 1901 and thereafter started providing services as a management consultant. In
1903 he published a research paper titled ‘Shop Management’ and in1911 his book
Principles of Scientific Management created ripples in the field of management.
 Meaning of Scientific Management:
The literary meaning of scientific management is performing the work of
management in a scientific manner. In other words, discarding the traditional
approach to management and adopting newer and more scientific approaches in
their place is called scientific management. Taylor has said that before commencing
any work, a manager should first analyse it thoroughly, and only then should be take
any decision.
 Principles ofscientific management:
Taylor has given certain basic principles of scientific management. The fundamental
principles that Taylor saw underlying the scientific management may be given
below:
1. Replacing Rule Of Thumb with Science:

25. ~ 25 ~
Taylor has emphasised that in scientific management, organized knowledge should
be applied which will replace rule of thumb. According to this principle, all the
activities being performed in an organisation should be analysed in detail with the
aim of developing a technique of accomplishing maximum possible work in an
efficient manner and at the minimum possible cost. This principle says that we
should not get stuck in a set and continues with the old techniques of doing work,
rather we should be constantly experimenting to develop new techniques which
make the work much simpler.
2. Principles ofscientific selectionand training of workers:
According to this principle, the selection and training of workers should be done in a
scientific manner. Scientific appointment means appointing only those people to do
a particular work who posses the necessary capabilities to do it. However, only
scientific selection of workers is not adequate in itself, the workers should also be
imparted the necessary training from time to time. Proper training of workers
increases their efficiency and hence benefits both the workers as well as the
organisation.
3. Principles ofcooperationbetweenlabour and management:
As per this principle, such an atmosphere should be created in the organisation the
labour and management consider each other indispensable.
Labour should understand that it cannot proceed in its work without the existence
of management, and management should understand that it had no identity without
the existence of labour. If such an atmosphere prevails in an organisation then both
the parties would aim for the achievements of the same goal and hence both of them
will be successful in achieving in goals. Taylor has referred to such a situation as a
“Mental Revolution”. Taylor firmly believed that the occurrence of a mental
revolution would end all conflicts between the two parties and would be beneficial
to both of them.
4. Principles ofmaximum output:
As per this principle, both labour as well as management should make full efforts to
produce maximum output. They should spare no efforts for maximum utilization of
the factors of production available in the organisation. This will have a direct impact
on the profits of the organisation, and the organisation will earn the maximum
possible profits. Higher profits will result in higher wages for the workers and thus
make them more dedicated towards the organisation.
5. Principle of harmony in group action:
Taylor has emphasised that attempts should be made to obtain harmony in group
action rather than discord. Group harmony suggests that there should be mutual
give and take situation and proper understanding so that group as a whole
contributes to the maximum.
 Main features of scientific management:
Taylor conducted various experiments at his work place to find out how human
beings could be made more efficient by standardizing the work and better method
of doing the work. These experiments have provided to the following features of
scientific management.
1) Separationof planning and doing:

26. ~ 26 ~
Taylor emphasized the separation of planning aspect from actual doing the work.
Before Taylor’s scientific management, a worker used to plan about how he had to
work and what instruments were necessary for that. The worker was put under the
supervision of a supervisor commonly known as gang boss. Thus supervisor’s job
was merely to see how the workers were performing. This was creating lot of
problems, and Taylor emphasised that planning should be left to supervisor and
worker should emphasise only operational work.
2) Functional foremanship:
Separation of planning from doing resulted into development of supervision system
which could take planning work adequately besides keeping supervision on
workers. For this purpose, Taylor evolved the concept of functional foremanship
based on specialization of function. In this system, eight persons are involved to
direct the activities of workers. All the eight persons give instructions to workers on
different aspect of work. This is against unity of command principle.
3) Standardization:
As far as possible, standardization should be maintained in respect of instruments
and tools, periods of work, amount of work, working conditions, cost of production,
etc. These things should be fixed in advance on the basis of job analysis and various
elements of costs that go in performing a work.
4) Scientific selectionand training ofworkers:
Taylor has suggested that workers should be selected on scientific basis taking into
account their education, work experience, aptitude, physical strength, etc. A worker
should be given work for which he is physically and technically most suitable. Apart
from selection, proper emphasis should be given on the training of workers which
makes them more efficient and effective.
5) Scientific taskplanning:
Scientific task planning implies analyzing all the different aspect of the work before
actually commencing upon it, such as what is to be done? How it is to be done?
Where it is to be done? And when it is to be done? Taylor has advised the manager
of industrial organizations to establish a separate planning department for this
purpose.
 Contributionand limitationof scientific management:
Scientific management is however, severely criticized on the following grounds:
a. Taylor’s belief that economic incentives are strong enough to motivate workers for
increased proved wrong. No man is entirely an economic man, that is, a man’s
behaviour is not always dictated by his financial needs. He has many other needs
also, such as security needs or social needs which motivate him far more potently
than his desire for money, at least after he has risen above the starvation level.
b. Taylor’s time and motion study is not accepted as entirely scientific. This is because
two time studies done by two separate individuals may time the same job entirely
differently. There is no such thing as one best way so far as the component motions
are concerned, because no two individuals can be expected to work in the same way
at the same rhythm, with the same attention and the same learning speed.
c. Separation of planning and doing and the greater specialization inherent in the
system tended to reduce the need for skill and produce greater monotony of work.

27. ~ 27 ~
Having a man take orders from 7 to 8 different bosses resulted in confusion, besides
increasing the overhead cost.
d. Advances in methods and better tools and machines eliminated some workers, who
found it difficult to get other job. This caused resentment among them.
B. Administrative management approach:
While Taylor is considered the father of scientific
management, Henry Fayol (1841-1925) is considered
the father of administrative management.
Henri Fayol was a French mining engineer and director
of mines who developed a general theory of business
administration. He and his colleagues developed this
theory independently theory of scientific management
but roughly contemporaneously. He was one of the
most influential contributors to modern concepts of
management. Fayol's career began as a mining
engineer. He then moved into research geology and in
1888 joined, Comambault as Director. Comambault
was in difficulty but Fayol turned the operation
round. On retirement he published his work - a
comprehensive theory of administration - described
and classified administrative management roles and
processes then became recognized and referenced by
others in the growing discourse about management. He
is frequently seen as a key, early contributor to a classical or administrative
management school of thought (even though he himself would never have recognized
such a "school"). Fayol was born in 1841 in suburb of Istabul, Turkey, where his father,
an engineer, was appointed superintendent of works to build a bridge over the Golden
Horn (Galata Bridge). They returned to France in 1847, where Fayol studied at the
mining school "Ecole Nationale Superieure des Mines" in Saint-Etienne. When 19 years
old he started as an engineer at a mining company "Compagnie de Commentry-
Fourchambeau-Decazeville" in commentry. By 1900 the company was one of the
largest producers of iron and steel in France and was regarded as a vital industry.
Fayol became managing director in 1888, when the mine company employed over
1,000 people, and held that position over 30 years until 1918. In 1916 he published his
14 principles of management in the book "Administration Industrielle et Generale", at
about the same time as Frederick Winslow Taylor published his principles of scientific
management. Fayol also created a list of the six primary functions of management,
which go hand in hand with the principles. Fayol’s 14 principles was one of the earliest
theories of management to be created, and remains one of the most comprehensive.
He’s considered to be among the most influential contributors to the modern concept
of management, even through people don’t refer to “The 14 principles” often today.
The theory falls under the Administrative Management school of thought (as opposed
to the scientific management school, led by Frederick Taylor).

28. ~ 28 ~
Henri Fayol’s “14 principles of management” have been significant influence on
modern management theory. His practical list of principles helped early 20th century
managers learn how to organize and interact with their employees in a productive
way.
Although the 14 principles aren’t widely used today, they can still offer guidance for
today’s managers. Many of the are now considered to be common sense, but at the time
they were revolutionary concepts of organizational management.
Henri Fayol (1841-1925) is considered the Father of Administrative Management
theory with focus on the developments of broad administrative principles applicable to
general and higher managerial levels. He wrote a monograph in French in1916,
entitled “General and Industrial Administration”. Until this book was translated into
English in 1929, little was known about him by the Western World.
In his treatise, Fayol provided a broad analytical framework of the process of
administration. (He used the word “Administration” for what we call management.) His
perspective, unlike that of Taylor extended beyond the shop level and the physical
production processes at the organizational level. Fayol’s 14 principles, functions and
managerial activities are written above.
 Contributionand limitationof administrative management:
Both Taylor and Fayol had essentially the same goal of increasing production but they
tried to reach this goal from different directions. Taylor worked from the bottom of the
hierarchy upward, whereas Fayol worked from the apex downwards.
Ideas of Fayol and his followers have come to be criticised as under:
a. For many of Fayol’s principles one can find an equally acceptable contradictory
principle and there is nothing in Fayol’s writings to indicate which is the proper one
to apply. Simon substantiated the criticism by referring to the principles of unity of
command and the principles of specialization or division of labour. Both the
principles, he said, cannot be followed simultaneously.
b. These principles are based on few case studies only and have not been tested
empirically. Indeed, whenever these principles have been tested empirically, they
have fallen like autumn leaves.
c. These principles are often stated as unconditional statements of what ought to be
done in all circumstances when what is needed are conditional principles of
management.
d. These principles are based on the assumption that organisation are closed systems.
But this is not so. Organizations are open systems. Hence the rigid structures which
these principles tend to create, do not work well under unstable conditions.
C. Bureaucratic management approach:
Max Weber, a German social scientist, advocated the bureaucratic approach to
management. Weber was of the view that strict rules should be framed to eliminate
managerial inconsistency because inconsistency breeds inefficiency. Moreover, he felt
that success in a big organisation was possible only with the help of the bureaucratic
management. The principles enunciated by him are very close to the principles
advocated by Fayol but he has advocated their strict adherence.
 Features of Bureaucratic management:

29. ~ 29 ~
The following are the chief characteristics of the Bureaucratic management:
i. Proper divisionof work:
Proper division of work means distribution of work on the basis of specialization. It
means an individual should be allotted the work in which he specialists.
ii. Clear hierarchy of authority:
The authority of the superiors and the subordinates should be clearly defined. Every
employee is responsible for the decisions taken by him and his subordinates.
iii. System ofrules:
Clear rules should be framed to govern the activities carried on within the organisation.
These rules should be strictly implemented.
iv. Impersonal relations betweenpeople:
Under this approach, personal relations should be ignored. Rewards are gives not on
the basis of personal relations but on the basis of efficiency.
 Limitations of Bureaucratic management:
Following are some limitations of Bureaucratic management:
a. Increase in paper formality
b. Increase in red-tapism
c. Personal relations are ignored
d. Lack of initiative in the workers
e. Workers oppose change
2) Neo- classical approach:
The neo-classical approach to management developed around the year 1930. The basis
of this approach is the classical approach. Under this approach, the classical approach
has been presented with some modification. The main difference between the classical
and neo-classical approach is regarding the treatment of the human resource. Under the
classical approach, the human resource is ignored and much importance is given to
work and physical resource. On the other hand, neo-classical approach understands the
importance of human resource. Under the neo-classical approach individual and group
relationship have been given due importance. This approach has two basic pillars:
A. Human relations approach
B. Behavioural science approach
A. Human Relations Approaches
Both the scientific management approach of Taylor and administrative management
approach of Fayol have fail to increase production efficiency and work place harmony.
The major cause of their failure was not to give proper importance to the human
resource. The origin of the human relations approach is mainly due to this reason. The
famous psychologist Elton Mayo presented the human relation approach to
management. To give final touches to this approach Mayo undertook some experiments
with his colleagues. These experiments are known as Hawthorne Experiments.
These experiments were conducted in the Western Electric Company’s Hawthorne
plant in the USA during 1927 to 1932. They are called Hawthorne experiments simply
because they were conducted at Hawthorne. This plant manufactured the parts of

30. ~ 30 ~
telephone and 29,000 workers worked there. During his experiments Mayo and his
colleagues studied the following factors:
i. Relationship between light and production
ii. Relationship between the condition of work and production
iii. Informal group and relationship with production
iv. Relationship between economic incentives and production
The outcome of these experiments was that production was not so much related with
the conditions of work as it was associated with emotional factors. Mayo and his
associates reached the conclusion that during the time of work informal relationship
among the employee play a very important role. They said that the workers are not
simply means of production but they are social being having their own desires, feelings
and tendencies. If we look at the worker only as a human beings he will decidedly be
more useful. They pointed out that more production and employee’s satisfaction were
mutually interdependent. Human relationship means the same thing.
 Contributionand limitationof human relations approach:
Contribution:
The contribution of the movement may be summarized as follow:
 There is no relationship between the condition of work and productivity.
 The non-economic awards do affect the efficiency of worker.
 The psychology of the workers is very important. Therefore, it should be
properly understood.
 The workers should be associated with decision making
 The workers should be kept information about everything
 The honour and self respect of the workers should always be respected
Limitations:
The following are the main limitations of this approach:
 This approach is plays the greatest attention to human factor and the remaining
factors have been ignores.
 It is wrong to think that a business organisation can be established in the form
of a family because people having different religions, castes and interests work
in it. These people do form separate groups but not a family.
 It is difficult to satisfy all the employee with non-economic awards.
 It is wrong to think that people remain more satisfies in informal groups.
In conclusion, it can be said that the central point in the human relation approach to
management is an individual. According to this approach the production capacity of a
satisfied man is comparatively more.
B. Behaviroural science approach:
It has been observed in the human relation approach that there is a direct relationship
between satisfaction and production. In other words, the more satisfied the workers are
the more production will be possible. The behavioural science approach in nothing but
an improved version of the human relations approach to management. Under the
approach, the study of human behaviour is given more importance than the human
relations. The exponents of this approach include scholars like Douglas, McGregor,
Chester I Barnard, Rensis Likert, Chris Argyris, Frederick Herzberg, Warren G. Bennis

31. ~ 31 ~
etc. The major contribution of the behavioural scientists has been in the field of
leadership, communication, motivation, organizational conflicts, etc. The behavioural
science approach came into vague after 1940.
The details about the contribution made by some of the propounder of behavioural
science approach are like this:
1. Abraham Maslow:
Maslow presented the Need Hierarchy principle. According to this principle, the needs
of a human being are varied and their order can be determined. The moment his first
need is satisfied, he starts thinking about his second need and this chain continues. In
conclusion, it can be said that human needs act as a motivation for him.
2. Frederick Herzberg:
According to Herzberg, alongwith the motivators the maintenance factors are also
helpful in boosting the enthusiasm of the workers.
3. Douglas McGregor:
McGregor has presented the traditional approach of motivation as ‘X’ approach and the
modern approach as the ‘Y’ approach.
4. Rensis Likert:
Likert had contacts with numerous managers during the course of his research and, in
conclusion, presented four models of management. They are called Management System
of Likert.
5. Robert Tannenbaum:
Tannenbaum presented the approach of continuum of leadership behaviour. According
to Tannenbaum, it is not possible that any single system of leadership can be applied to
all the situations. That is why he has described not one or two, but seven system of
leadership.
Conclusion:
The propounders of the behavioural science approach have offered the following
suggestions after their study:
 The employee should have a share in the matter of policy determination.
 The employee should have be treated in a human way.
 It is the duty of the manager to bring out the talent of the employee.
 It is the duty of the manager to provide a healthy environment.
 The system of self-discipline instead of the imposed discipline should be
adopted.
3) Modern Approaches:
The modern approach to management was developed around the year 1950. This
approach is an improvement upon both the classical and neo-classical approach to
management. This approach has three basic pillars:
A. Quantitative Approach
B. System Approach
C. Contingency Approach

32. ~ 32 ~
A. Quantitative Approach:
The quantitative approach was propounded by C. W. Churchman and his colleagues
around the year 1950. This approach is also known by the name of Operational
Research or Operational Analysis. The classical approach lays stress upon the physical
resource while the neo-classical approach gives importance to human resources. Both
these approaches are silent about some of the most serious problems usually faced by
the managers. The quantitative approach to management makes some suggestions to
solve different problem facing the manager. It tells the managers to solve their
problems with the help of the mathematical and statistical formulas. Some special
formulas have been prepared to solve managerial problems. For example:
 Theory of probability
 Sampling analysis
 Time series analysis
 Ratio analysis
 Variance analysis
 Linear programming
 Game theory
 Network analysis
 Break- even analysis
The main objective of the quantitative approach is to find out a solution for the
complex, problems facing the big companies. The help of a computer is usually taken in
order to make use of the above mentioned techniques. The chief advantage of the
approach is to solve complex problems quickly. But the chief disadvantage is that this
approach offers an alternative to decision and cannot take decision.
B.System Approach:
This is a newly developed approach which came into existence in 1960. This approach
was developed by Chester I Bernard, Herzbert A. Simon and their colleagues.
The system approach means a group of small units are individually called sub-system.
All the small units are in themselves independent, but somehow or the other are
connected with the sub-system of the relation system. All the sub-system influence one
another. For example, a scooter is a system which has many sub- systems in the form of
engine, shaft, gear, wheels body, etc. All these sub-systems are inter-related with one
another and if them fails the whole system stops working. Therefore, the success of the
system depends on the cooperation and efficiency of the sub-systems.
It can, therefore, be said that a system means different inter-related parts which work n
cohesion simultaneously to achieve a particular purpose.
According to the system approach, the whole organisation is a system and its various
departments are its sub-systems. All the sub-systems work in unison. Then and only
then the objectives of the organisation can be achieved. Therefore, when manager takes
some decision regarding a particular sub-system, he should also take into consideration
the effect of his decision on the other sub-systems.
C. Contingency or situational approach:

33. ~ 33 ~
According to this approach, management principles and concepts of various schools
have no general and universal applicability under all conditions. In other words, there is
no one best way of doing things under all conditions. Methods and techniques which are
highly effective in one situation may not work in other situations. Results differ because
situations differ. Accordingly, the contingency approach suggests that the task of
managers is to try to identify which techniques will, in a particular situation best
contribute to the attainment of management goals. Managers have, therefore, to
develop a sort of situational sensitivity and practical selectivity.
Contingency views are applicable in designing organizational structure, in deciding the
degree of decentralization, in planning information decision systems, in motivational
and leadership approaches, in establishing communication and control systems, in
resolving conflicts and managing change, in employee development and training
programmes and in several other areas of organisation and management.
CONTEMPORARY MANAGEMENT THINKERS
Contributionof Peter Drucker:
Among the contemporary management thinkers, Peter Drucker outshines all. He has
varied experience and background which include psychology, sociology, law and
journalism. Through his consultancy assignments, he has developed an insight of
managerial problems. He has written many books and papers. The more important
books are The Practice of Management (1954), Managing by Results (1964), The
Effective Executive (1967), The Age of Discontinuity (1969) and Management: Tasks,
Responsibilities and Practices (1974). The main contribution of Drucker can be
presented as follows:
i. Nature of Management:
Drucker is against bureaucratic management and has emphasised management with
creative and innovative characteristics. The basic objective of management is to lead
towards innovation. The concept of innovation is quite broad. It may include
development of new ideas, combining of old and new ideas, adaptation of ideas from
other fields or even to act as a catalyst and encouraging others to carry out innovation.
He has treated management as a discipline as well as a profession. As a discipline,
management has its own tools, skills, technique, and approaches. However,
management is more a practice rather than a science. Thus, Drucker may be placed in
‘empirical school of management’. While taking management as a profession, Drucker
does not advocate to treat management as strict profession but only a liberal profession
which places more emphasis on result-achievement rather than meeting criteria of a
true profession. He has emphasised that managers should not only have skills and
techniques but should have right perspective putting the things into practice. They
should be good practitioners so that can understand the social and cultural
requirements of various organizations and countries.
ii. Management Functions:
According to Drucker, Management is the organ of its institution. It has no functions in
itself, and no existence in itself. He sees management through its tasks. Accordingly,
there are three basic functions of a manager which he must perform to enable the
institution to make its contributions for (i) the specific purpose and mission of the

34. ~ 34 ~
institution, whether business, hospital or university; (ii) making work productive and
the worker achieving; (iii) managing social impacts and social responsibilities. All these
three functions are performed simultaneously within the same managerial action. A
manager has to act as administrator where he has to improve upon what already exists
and is already known. He has to act as an entrepreneur in redirecting the resources
from areas of low or diminishing results to areas of high or increasing results. Thus a
manager has to perform several functions: setting of objectives, decision-making,
organizing, and motivating. Drucker has attached great importance to the objective
setting functions and has specified eight areas where clear objective setting is required.
These are: market standing, innovation, productivity, physical and financial resources.
iii. Organisationstructure:
Drucker has described bureaucratic structure because of its too many dysfunctional
effects. Therefore, it should be replaced. He has emphasised three basic characteristics
of an effective organisation structure. These are: (i) enterprise should be organized for
performance; (ii) it should contain the least possible number of managerial levels; and
(iii) it must make possible the training and testing of tomorrow’s top managers- giving
responsibility to a manager while still he young. He has identified three basic aspects in
organizing; activity analyzing, decision analysis, and relation analysis. And activity
analysis shows what work has to be performed, what kind of work should be put
together, and what emphasis is to be given to each activity in the organisation structure.
Decision analysis takes into account the four aspects of a decision: the degree of futurity
in the decision, the impact of a decision over other functions, number of qualitative
factors that enter into it, and whether the decision is periodically recurrent or rare.
Such an analysis will determine the levels at which the decision can be made. Relation
analysis helps in defining the structure and also to give guidance in manning the
structure.
iv. Federalism:
Drucker has advocated the concept of federalism. Federalism refers to centralized
control in decentralized structure. Decentralized structure goes far beyond the
delegation of authority. It creates a new constitution and new ordering principle. He has
emphasised the close links between the decisions adopted by the top management on
the one hand and by the autonomous unit on the other. This is just like a relationship
between federal government and state governments. In a federal organisation, local
managements should also participate in the decisions that set the limits of their own
authority. Federalism has certain positive values over other methods of organizing.
These are as follows: (i) it sets the top management free to devote itself to its proper
functions; (ii) it defines the functions and responsibilities of the operating people; (iii) it
creates yardstick to measure their success and effectiveness in operating jobs; and (iv)
it helps to resolve the problem of continuity through giving the managers of various
units education in top management problems and functions while in an operating
position.
v. Management by objective:
Management by objective (MBO) is regarded as one of the most important contribution
of Drucker to the discipline of management. He introduced this concept in 1954. MbO
has further been modified by Schleh which has been termed as ‘management by

35. ~ 35 ~
results’. MbO includes method of planning, setting standards, performance appraisal,
and motivation. According to Drucker, ‘MbO is not only a technique of management but
it is a philosophy of managing. It transforms the basic assumptions of managing from
exercising control to self-control. Therefore, in order to practice MbO, the organisation
must change itself. MbO has become so popular way of managing that today it is
regarded as the most modern management approach. In fact, it has revolutionalised the
management process.
Drucker’s contributions have tremendous impact on the management practices. His
contribution has been recognized even by the management thinkers of Socialist block.

36. ~ 36 ~
UNIT 3
PLANNING
THIS UNITINCLUDES:
Planning: Meaning and Importance of Planning; Planning Process; Making Planning
Effective; Types of Plans; Decision Making: Concept, Nature, Types of Decision, Process and
Techniques, Creativity in Decision Making. Management by Objectives.
anagement functions, as pointed earlier, are classified as planning, organizing,
staffing, directing, and controlling. All these functions are required to achieve the
objective of an organisation. However, without setting the objective there is
nothing to organize, direct, or control. Therefore, every organisation is required to specify
what it wants to achieve. Planning is basically related with this aspect.
Meaning and definitions of planning:
Planning is a particular kind of decision making the addresses the specific future that
manager desire for their organisation. Planning is the basic function of management and
with it start the other function of management. So long, planning does not determine the
objective and the methods of achieving those objectives, the other functions are
meaningless. Planning forms the part of management which lays down the objectives and
various activities to be done for the attainment of those objectives. Under this it is decided-
what is to be done, how it is to be done, when it is to be done and by whom it is to be done.
Deciding about all these aspects is called planning. A problem about taking decisions on
these matters arises when there are more than one possible answer. Therefore, it can be
said to be a process of choosing. There are some who consider planning synonymous with
decision making. This is also erroneous. Decision making is not the same as planning
because one can make decision in other activities also, though the role of decision making
is highly important in planning. Another confusion that arises in the concept of planning is
the two words: planning and plan. Two words are similar but there are meaning are
different. Planning is an activity. It can be considered as consisting of a process, hence
various subactivities. On the other hand, plan is a commitment to a particular course of
actions believed necessary to achieve specific results.
Definitions:
Followings are some famous definitions of planning:
M

37. ~ 37 ~
1. According to Terry,“Planning is the selection and relating of facts and making
and using of assumptions regarding the future in the visualization and formalization
of proposed activities believed necessary to achieve desired result”.
2. According to Koontz and O’Donnell, “Planning is deciding in advance what
to do, how to do it, when to do it, and who is to do it.
3. According to McFarland, “Planning may be broadly defined as a concept of
executive action that embodies the skills of anticipating, influencing and controlling
the nature and direction of change.
4. According to Haimann, “ Planning is deciding in advance what is to be done”,
On the basis of the definitions of planning, its following features can be identified:
i. Planning is a process rather than behaviour at a given point of time. The process
determines the future course of action.
ii. Planning is primarily concerned with looking into future.
iii. Planning involves selection of suitable course of action. This means that there
are several alternatives for achieving a particular objective or set of objective
however, all of them are not equally feasible and suitable for the organisation.
iv. Planning is undertaken at all levels of the organisation because all levels of
management are concerned with the determination of future course of action.
v. Planning is flexible as commitment is based on future conditions which are
always dynamic. As such, as adjustment is needed between the various factors
and planning.
vi. Planning is a pervasive and continuous managerial function involving complex
processes of perception, analysis, and conceptual thought. The very
pervasiveness of these elements makes it difficult to identify and observe them
in detail.
Characteristics ofplanning:
Following are some characteristics, features or nature of planning:
1. Planning focuses on achieving objective:
Management begins with planning and planning begins with the determining of
objective. In the absence no organisation can ever be thought about. With the
determining of objective, the way to achieve the objective is decided in the planning. In
case, it is necessary to change the previously decided course of action for the
attainment of objective, there is no hesitation to do so. It is thus clear that planning is
helpful in the attainment of objective.

38. ~ 38 ~
2. Planning is Primary functionof Management:
Planning is the first important function of management. The other function, e.g.
organizing, staffing, directing, and controlling come later. In the absence of planning no
other function of management can be performed. This is the base of other functions of
management.
3. Planning is pervasive:
Planning is an important function of every manager, he may be a managing director of
the organisation or a foreman in a factory. The time spent by the higher level managers
in the process of planning is comparatively more than the time spent by the middle
level and lower level managers. It is therefore, clear that all the managers working in an
enterprise have to plan their activities.
4. Planning is continuous:
Planning is a process which begins with the beginning of business itself and it ends with
the ending of the business. It means that as long a business exists, the planning process
is continuous. The rapid changes in the business environment form for this special
characteristic of planning.
5. Planning is a mental exercise:
Planning is known as it is related to thinking before doing something. A planner has
mainly to think about the following questions:
I. What to do?
II. How to do it?
III. When to do it?
IV. Who is to do it?
Importance ofPlanning:
Planning is the first and most important function of management. It is needed at every
level of management. In the absence of planning all the business activities of the
organisation will become meaningless. The importance of planning has increased all the
more in view of the increasing size of organisation and their complexities. Planning has
again gained importance because of uncertain and constantly changing business
environment. In the absence of planning, it may not be impossible but certainly difficult
to guess the uncertain events of future.

39. ~ 39 ~
The following facts show the advantages of planning and its importance for a business
organisation:
1) Planning provides direction:
Under the process of planning the objective of the organisation are defined in simple
and clear words. The obvious outcome of this is that all the employee get a direction
and all their efforts are focused towards a particular end. In this way, planning has an
important role in the attainment of the objective of the organisation.
2) Planning reduces risks uncertainty:
Planning is always done for future and future is uncertain. With the help of planning
possible changes in future are anticipated and various activities are planned in the best
possible way. In this way, the risk of future uncertainties can be minimized.
3) Planning promotes innovative ideas:
It is clear that planning selects the best alternative out of the many available. All these
alternatives do not come to the manager on their own, but they have to be discovered.
While making such an effort of discovery, many new ideas emerge and they are studied
intensively in order to determine the best out of them. In this way, planning imparts a
real power of thinking in the managers. It leads to the birth of innovative and creative
ideas.
4) Planning facilitates decision-making:
Decision-making means the process of taking decision. Under it, a variety of alternatives
are discovered and the best alternative is chosen. But it is important to determine the
objective before the discovery of alternative. Objectives are determined under the
process of planning. Therefore, it can be said that planning facilitates decision-making.
5) To help in coordination:
Though all managerial functions lead to the coordination in the organisation, real
beginning is made at the level of planning stage. Well- considered overall plans unify
interdepartmental activities and consequently restrict the area of freedom in the
development of purely department plans. Thus various departments work in
accordance with the overall plan, and harmony is achieved. It is true to say that
coordination is essence of management and planning is the base for it.

40. ~ 40 ~
6) Facilitates control:
In planning, the manager sets goals and develops plans to accomplish these goals. These
goals and plans then become standards or benchmarks against which performance can
be measured. The function of control is to ensure that the activities conform to the
plans. Thus, controls can be exercised only if there are plans.
Limitations of planning:
Planning is needed both in the business and non-business organisation. Some people
think that planning is based on the future anticipations and nothing can be said with
certainty about future. Therefore, it is a useless process.
Following are the limitations of planning:
1. Planning does not workin dynamic environment:
Planning is based on the anticipation of future happenings. Since future is uncertain and
dynamic, therefore, the future anticipations are not always true. Therefore, to consider
planning as the basis of success is like a leap in the dark. Generally, a longer period of
planning makes it less effective. Therefore, it can be said that planning does not work in
dynamic environment.
2. Planning reduces creativity:
Under planning all the activities connected with the attainment of objectives of the
organisation are pre-determined. Consequently, everybody works as they have been
directed to do and as if has been made clear in the plans. Therefore, it checks their
incisiveness. It meant that they do not think about appropriate ways of discovery new
alternatives. According to Terry ‘’Planning strangulates the initiative of the employed
and compels them to work in an inflexible manner”
3. Planning involves huge costs:
Planning is a small work but its process is really big planning becomes meaningful only
after traversing a long path. It takes a lot of time to cover this path. During this entire
period the managers remain busy in collecting a lot of information and analyzing it. In
this way, when so many people remain busy in the same activity, the organisation is
bound to face huge costs.

41. ~ 41 ~
PlanningProcess
1. SettingObjective
2. DevelopingPremises
3. IdentifyingAlternative
Coure of Action
4. Evaluating Alternative
Courses
5. Selectingan
Alternative
6. Implementthe Plan
7. FollowUpAction
4. Planning is a time consuming process:
Planning is a blessing in facing a definite situation but because of its song process it
cannot face sudden emergencies. Sudden emergencies can be in the form of some
unforeseen problem or some opportunity of profits and their has been no planning for
all these situations before hand and which now requires immediate decision. In such a
situation, if the manager thinks of completing the planning process taking some
decision, it may be possible that the situations may worsen or the chance of reaming
profit may slip away. Thus, planning is time consuming and it delays action.
5. Planning does not guaranteesuccess:
Sometimes the managers think that planning solves all their
problems. Such thinking makes them neglect their real work and
the adverse effect of such an attitude has to be faced by the
organisation. In this way, planning offers the managers a false
sense of security and makes them careless. Hence, we can say that
mere planning does not ensure success, rather efforts have to be
made for it.
Planning process:
Planning is needed in order to solve a problem or take
advantages of some profitable situation. In this context, a manager
makes an analysis of the strengths and weaknesses of the
enterprise. This analysis keeps in mind the internal and external
environment of the enterprise. The following steps are generally
taken in the business organisation during the planning process.
(1) Setting Objective:
Objectives are those end points for whose attainment all the
activities are undertaken. In the planning process objectives are
determined and defined first of all so that all the employees
concerned can be performed about them to get their complete
cooperation. Objectives have a hierarchy of their own.
(2) Developing Premises:
The basic of planning are those factors/assumptions which influence the possible
results of different alternatives. Before taking a final decision about any alternative a
forecast of these assumptions is made. The rate of success of planning will be in direct

42. ~ 42 ~
proportion to the rate of the success of forecasting. The assumptions of planning are of
two types:
a. Internal Premises: capital, labours, raw material, machinery etc.
b. External Premises: government policies, business competition, tastes of
customers, rate of interest, rate of taxes etc.
(3) Identifying Alternative Course ofAction:
Generally, there is no work which has no alternative method of doing it. On the basis of
the objective of the organisation and the limitations of planning, alternative courses of
doing a particular work can be discovered.
(4) Evaluating Alternative Courses:
All those alternative courses which are up to the expectation of the minimum
preliminary criteria are selected for intensive study. It will be seen as to what extent a
particular alternative course can help in the attainment of the objectives of the
organization. There is, however, one problem which confronts us while analyzing these
alternative courses.
(5) Selecting an Alternative:
After a careful analysis of different alternative the best one is selected. Sometimes the
analysis yields more than one alternative course with similar merits. Keeping in view
the uncertainties of future it is justifiable to select more than one good alternative
course. One of such alternatives is adopted and the other is kept in reserve. In case the
future forecast proves wrong and the first alternative course fails, the reserve one can
immediately be brought into operation and failure can be averted.
(6) Implementing the Plan:
After having decided the chief plan and the subsidiary plans, they are to be
implemented. After the plans the sequence of different activities has to be decided other
words, it is decided as to who will do a particular job and at what time.
(7) Followup Action:
The process of planning does not end with the implementation of plans. Plans are
formulated for future which is uncertain. It is of great importance that there is a
constant review of plans so as to ensure success in the uncertain future. The moment
there appears to be changes in the assumptions on which the plans are based, there
should be corresponding changes in the plans also. In this way we can say planning is a
continuously moving process.

43. ~ 43 ~
Making Planning Effective
The following are some guidelines for making planning effective:
I. Coordination:
The planning process is complex, consisting of many major and derivative plans. Even so
simple a plan as that to select a new piece of factory machinery may require many
subsidiary or derivative plans, such as plans for its purchase, shipment, payment, receipt,
unpacking, inspection, installation, use, maintenance, etc. it is important that all these
derivative plans fit together, not only in terms of content and action but also in terms of
timing. Similarly, short and long range planning should fit together.
II. Communication:
Best planning occurs when every manager in the organization has access to complete
information, not only pertaining to his own area of planning but also to others areas. This is
necessary to make him understand how his departmental goals and policies tie in with
those of the enterprise as a whole. He should know what are the premises upon which he is
expected to plan.
III. Participation:
Participation of subordinates with superiors is also a key element in making planning
effective. It improves understanding of objectives and loyalty in the subordinates and
makes execution of plans easy. There are several methods to increase participation of
subordinates. MBO is one such method. Bottom up planning is another method which
encourages subordinates to develops, depend and sell their ideas. Committees and
management clubs also develop in subordinates a strong feeling of unity with top
management.
IV. Proper Climate:
It is critical that top managers establish proper climate for planning. This involves
stimulating planning interest among the rank and file of managers by setting their goals,
establishing planning premises, communicating policies and developing a tradition of
change in the organization.
Types ofPlans:-
Planning is a process and a plans is its outcome. Plan is a sort of commitment to accomplish
all the activities needed for the attainment of special results. From the point there are many
plans. Every organization has a central goal which is also called mission. A business
organization is considered meaningful only if it has some goal. Goal is that standing plan
which justifies the establishment of the organization. It shows the significance of the
business of the organization and it tells us in what ways the organization is different from
other similar organization.
In the context of achieving the goal many plans are prepared.
First of all the objectives of the organization are determined. Competition is boldly faced
and strategy to convert objectives into reality is formulated. Policies are put forward to
bring unanimity in the decisions of different managers. After having laid down policies the
sequences of activities is determined which is called a procedure. In this way, methods,
rules, budget, progarammes, etc. are chief factors of planning. All these are called plans. A

44. ~ 44 ~
Goal
Strategy
Policies
Procedures
Methods
Rules
Budgets
Programmes
high-level plan gives birth to a lower-level plan and therefore, they are shown in the form
of a hierarchy. This is shown here in triangle.
1) Objective:
Objectives are those end points for the attainment of
which all the activities are undertaken. Objectives are
goals or aims which the management wishes the
organization to achieve. These are the end point or pole-
star towards which all business activities like
organizing, staffing, directing and controlling are
directed. Only after having defined these end points can
the manager determine the kind of organization, the
kind of personnel and their qualifications, the kind of
motivation, supervision and direction and the kind of
control techniques which he must employ to reach these
points.
Characteristics ofObjectives:
Some important features of objectives are as under:
1. Objectives are multiple in numbers. This implies that every business enterprise has
a package of objectives set out in various key areas.
2. Objectives are either tangible or intangible.
3. Objectives have a priority. This implies that at a given point in time, the
accomplishment of one objective is relatively more important than of others.
4. Objectives are generally arranged in a hierarchy. This means that we have corporate
objectives of the total enterprise at the top, followed by divisional or departmental
objectives. Next come objectives of each section and finally individual objectives.
Objectives at all levels serve both as an end and as a means. They are the ends of a
unit and they are also the means of the next higher unit.
5. Objectives sometimes clash with each other.
Advantages ofObjectives:
Basically the following benefits result from objectives:
1. They provide a basis for planning and for developing other type of plans such as
policies, budgets and procedures.
2. They act as motivators for individuals and departments of an enterprise imbuing
their activities with a sense of purpose.
3. They eliminate haphazard actions which may result in undesirable consequences.
4. They facilitate coordinated behavior of various groups which otherwise may pull in
different directions.
5. They function as a basis for managerial control by serving as standards against
which actual performance can be measured.
Hierarchy of Plans