Principles of Management - Introduction to Management

MG6851 – PRINCIPLES OF
MANAGEMENT

OBJECTIVES:
To enable the students to study the evolution of
Management, to study the functions and principles of
management and to learn the application of the principles in
an organization.
R.ArunKumar,AP/Mech,RIT

OUTCOMES:
Upon completion of the course, students will be able to have
clear understanding of managerial functions like planning,
organizing, staffing, leading & controlling and have same
basic knowledge on international aspect of management.

UNIT – I
INTRODUCTION TO MANAGEMENT AND ORGANIZATIONS
Definition of Management – Science or Art – Manager Vs
Entrepreneur - types of managers - managerial roles and skills –
Evolution of Management – Scientific, human relations, system
and contingency approaches – Types of Business organization -
Sole proprietorship, partnership, company-public and private
sector enterprises - Organization culture and Environment –
Current trends and issues in Management.

Objective:
 To understand the basic principles that forms the foundation of
the management.
Outcome:
 The student will be able to discuss the evolution of management
and the functions and roles of managers.

UNIT – II PLANNING
Nature and purpose of planning – planning process – types of
planning – objectives – setting objectives – policies – Planning
premises – Strategic Management – Planning Tools and Techniques
– Decision making steps and process.

Objective:
 To study different types of planning, its tools and techniques.
Outcome:
 The student will be able to explain the different types of
planning process and tools used for planning.

UNIT – III ORGANIZING
Nature and purpose – Formal and informal organization –
organization chart – organization structure – types – Line and staff
authority – departmentalization – delegation of authority –
centralization and decentralization – Job Design - Human Resource
Management – HR Planning, Recruitment, selection, Training and
Development, Performance Management , Career planning and
management.

Objective:
 To understand the different types of organization and the concept
of human resource management.
Outcome:
 The student will be able to elaborate different organization
structures and functions of human resources manager.

UNIT – IV DIRECTING
Foundations of individual and group behaviour – motivation –
motivation theories – motivational techniques – job satisfaction –
job enrichment – leadership – types and theories of leadership –
communication – process of communication – barrier in
communication – effective communication –communication and IT.

Objective:
 To perceive the concept of motivation and the process of
communication in directing.
Outcome:
 The student will be able to illustrate the different theories of
motivation and leadership.

UNIT – V CONTROLLING
System and process of controlling – budgetary and non-budgetary
control techniques – use of computers and IT in Management
control – Productivity problems and management – control and
performance – direct and preventive control – reporting.

Objective:
 To study the various techniques for controlling the functions of
management.
Outcome:
 The student will be able to describe the control techniques and
the role of technology in management.

Why should we study management?
 Most important human activities is managing.
 Evolved when human began to work in a group.
 Purpose is to promote excellence among people in
organizations, especially among managers, aspiring managers
and other professionals.

MANAGEMENT:
 Management involves coordinating and overseeing the
work activities of others so that their activities are completed
efficiently and effectively.
 Involves planning, organizing, staffing, leading and
controlling.

Definition(s):
 Harold Koontz (75), an
American organizational theorist,
Professor of business management at
the University of California, Los
Angeles.
 According to Koontz and
Weihrich "Management is the process
of designing and maintaining an
environment in which individuals,
working together in groups, effectively
accomplish selected aims“.

Definition(s):
 Fredrick Winslow Taylor (59),
American Mechanical Engineer called
as Father of the Scientific
Management.
 He was one of the first
management consultants.
 According to F.W. Taylor,
"Management is the art of knowing
what you want to do and then seeing
that it is done in the best cheapest
way".

 Henry Fayol, French mining
engineer, mining executive, author and
director of mines. He developed a
general theory of business
administration that is often called
Fayolism.
 According to Henry Fayol, “To
manage is to forecast and plan,
organize, to command, to co-ordinate
and to control”.
 In general, management is a
process of effective accomplishment
of tasks through others.

MANAGEMENT - SCIENCE OR ART
MANAGER VS ENTREPRENEUR

FUNCTIONS OF MANAGEMENT:
 Henri Fayol, a French businessman, first proposed in the
early part of 20th century the various functions of a manager.
1) Planning
2) Organizing
3) Commanding
4) Coordinating
5) Controlling

FUNCTIONS OF MANAGEMENT:
 In recent days these functions have been condensed to four:
1) Planning
2) Organizing
3) Leading
4) Controlling

1. Planning:
Defining the goals, establishing strategy and developing
plans to coordinate activities.

2. Organizing:
Determining what needs to be done, how it will be done
and who is to do it.

3. Leading:
Motivating, leading any other actions involved in dealing
with people.

4. Controlling:
Monitoring activities to ensure that they are
accomplished as planned.

FEATURES OF MANAGEMENT:
 Group activity
 Goal oriented
 Factor of production (org)
 Invisible force
 Integrative Process
 Social process
 Eternity
 Universality
 Intellectual exercise
 Profession

MANAGEMENT – AN ART OR SCIENCE
Or

MANAGEMENT – AS A SCIENCE
 Science is a systematic body of knowledge relating to a
specific field of study that contains general facts which
explains a phenomenon.
 It establishes cause and effect relationship between two or
more variables and underlines the principles governing their
relationship.
 These principles are developed through scientific method of
observation and verification through testing.

Universally accepted principles:
 Scientific principles represent basic truth about a particular
field of enquiry.
 These principles may be applied in all situations, at all time
& at all places.

Experimentation and observation:
 Scientific principles are derived through scientific investigation &
researching i.e. they are based on logic.
 Management principles are also based on scientific enquiry
and observation.
 They have been developed through experiments and practical
experiences of large number of managers.
Example:
 The principle that earth revolves the sun has been scientifically
proved.
 It is observed that fair remuneration to personal helps in
creating a satisfied work force.

Cause and effect relationship:
 When metals are heated, they are expanded. The cause is
heating & result is expansion.
 Similarly if workers are given bonuses, fair wages they will
work hard but when not treated in fair and just manner, reduces
productivity of organization.

Test of validity and predictability:
 Validity of scientific principles can be tested at any time or any
number of times i.e. they stand the time of test.
 Moreover future events can be predicted with reasonable
accuracy by using scientific principles.
Examples:
The chemical combination of Hydrogen and Oxygen will give
water.
Similarly, principle of unity of command can be tested by
comparing two persons – one having single boss and one having two
bosses, the performance of first person is better than second.

Conclusion:
 The reason for the inexactness of science of management is
that it deals with human beings and it is very difficult to predict
their behavior accurately.
 Since it is a social process, therefore it falls in the area of
social sciences.
 Ernest Dale has called it as a Soft Science.

MANAGEMENT – AS AN ART
 An art requires the qualities: practical knowledge,
personal skill, creativity, perfection through practice,
goal oriented.

Practical Knowledge:
 Every art requires practical knowledge therefore learning of
theory is not sufficient.
 It is very important to know practical application of
theoretical principles.
Example:
 A manager can never be successful just by obtaining degree
in management; he must have also know how to apply various
principles in real situations by functioning in capacity of
manager.

Personal skill:
 Although theoretical base may be same for every artist, but each
one has his own style and approach towards his job.
 That is why the level of success and quality of performance differs
from one person to another.
Example:
 Several qualified painters exist but M.F. Hussain is recognized
for his style. Similar in case of managers.

Creativity:
 Every artist has an element of creativity in line.
 Management is also creative in nature like any other art.
 It combines human and non-human resources in an useful
way so as to achieve desired results.
Example:

Perfection through practice:
 Practice makes a man perfect.
 Every artist becomes more and more proficient through constant
practice.
 Similarly managers learn through an art of trial and error
initially but application of management principles over the years
makes them perfect in the job of managing.

Goal oriented:
 Every art is result oriented as it seeks to achieve concrete
results.
 In the same manner, management is also directed towards
accomplishment of pre-determined goals.
 Managers use various resources like men, money, material,
machinery & methods to help in the growth of an organization.

MANAGEMENT – AN ART AS WELL AS SCIENCE
 It is considered as a science because it has an organized body
of knowledge which contains certain universal truth.
 It is called an art because managing requires certain skills
which are personal possessions of managers.
 Science teaches to ’know’ and art teaches to ’do’.
 A manager to be successful in his profession must acquire the
knowledge of science & the art of applying it.
&

MANAGER VS ENTREPRENEUR
VS

BASED ON FUNCTIONS
Manager
 Performs the basic functions
such as planning,
organising, directing and
controlling.
Entrepreneur
 Main function is to reform or
revolutionize the factors of
production such as:
land, capital, labour,
organization, enterprise.

BASED ON EDUCATION
Manager
 A person can become a
manager by the acquisition
of knowledge through
formal education in
business management
(MBA)
Entrepreneur
 They learn by trial and
error method.
 They learn from their own
mistakes and mistakes of
others.
 They are self made.

BASED ON JOINING THE ORGANIZATION
Manager
 They join the business only
after it is established
Entrepreneur
 They are founders of the
organization.

BASED ON WORK NATURE
Manager
 They sets objectives,
policies, procedures,
rules, strategies and
formal communication
network.
Entrepreneur
 They spot out
opportunities, raise
capital, hire labour,
arrange supply of raw
materials, finding site and
introduce new techniques.

BASED ON DESIRE
Manager
 They desire to produce best
results in the shortest time
and least cost and to
achieve profit and growth.
Entrepreneur
 They are the owners of the
business.
 They visualizes a business,
take bold decisions to
establish and undertaking
and bear the risk of
uncertainties.

BASED ON DIFFERENT NAMES
Manager
 Disturbance handler,
 Resource allocator,
 Negotiator,
 Spokesperson,
 Liaison officer and
 Disseminator
Entrepreneur
 Risk taker,
 Uncertainty bearer,
 Problem solver,
 Innovator and
 Idealist.

BASED ON FAILURE
Manager
 Failure of a manager results
in little loss to his career
and he can join another
company.
Entrepreneur
 Leads to great loss of
money and career.

BASED ON WORK LIMITS
Manager
 Manager has to work
within the framework of
policy guidelines laid down
by the entrepreneur.
Entrepreneur
 He/she has full freedom of
work.
 He has the chance of
working independently and
can show their talent.

BASED ON SALARY
Manager
 Managers are entitled to
receive salaries for their
job.
Entrepreneur
 Supplies all capital needed
to run the organization.
 He/she enjoys the profit of
the business

BASED ON EXPERTISE
Manager
 Managers are specialists.
 They are focused on
managing and growing a
business.
Entrepreneur
 They are generalists.
 They need to know about
everything.

BASED ON REWARDS
Manager
Rewards come in the form of
 Salaries,
 Promotions,
 Job title,
 Bonus and incentives.
Entrepreneur
 Capital gains,
 Asset acquisition and
 Cash flow

BASED ON DECISION MAKING
Manager
 Cannot make quick
decisions.
 Need some consultants.
Entrepreneur
 Can make quick decisions.
 They need not consult with
anyone while making
decisions.

BASED ON LIABILITIES
Manager
 Managers have no
liabilities
Entrepreneur
 Payments dues for loans,
salaries for staff are the
liabilities.

BASED ON RISK
Manager
 Do not like to take risk.
Entrepreneur
 They thrive on risk and
uncertainty.

TYPES OF MANAGERS
MANAGERIAL ROLES AND SKILLS

Who are Managers?
 In simple words, a manager is someone who coordinates
and oversees the work of other people so that organizational
goals can be accomplished.

TYPES OF MANAGERS:

Top Managers:
 They are responsible for making organization wide
decisions.
 Establish the plans and goals that have an impact over
entire organization.
 They are few in numbers.

Top Managers:
 E.g.: Executive vice president, president, managing
director, chief operating / executing officer.

Middle Managers:
 They are found between first – line managers and top
managers.
 Manage the work of first – line managers.

Middle Managers:
 E.g.: Regional manager, project leader, store manager
or division manager.

First - Line Managers:
 Manage the work of non – managerial employees.
 First – line managers are usually called as supervisors.

First – Line Managers:
 E.g.: Shift managers, district managers, department
managers or office managers.

MANAGERIAL ROLES AND SKILLS:

MANAGERIAL ROLES:
 Managerial roles refers to the specific action or
behaviors expected from a manager.
 For e.g. Consider yourself. (student, son/daughter, citizen,
etc.).

MANAGERIAL ROLES:
 Henry Mintzberg, a well-known management researcher,
undertook a careful study of five chief executives (consulting
firm, school, hospital, technology firm and consumer good
manufacturer) at work.

MANAGERIAL ROLES:
 Concluded that managers perform ten different but highly interrelated
roles that are grouped around interpersonal relationship, the transfer of
information, and decision making.

1. Interpersonal roles:
 Involves people (either subordinates or persons outside
organization) and other duties that are ceremonial and
symbolic in nature.
 Three interpersonal roles are:
1. Figure head
2. Leader
3. Liaison

ROLE DESCRIPTION IDENTIFIABLE ACTIVITIES
Figurehead Symbolic head, obliged to
perform a number of routine
duties of a legal or social
nature.
Greeting visitors, signing legal
documents.
Leader Responsible for the
motivation and activation of
employees, responsible for
staffing, training, and
associated duties.
Performing virtually all activities that
involve outsiders.
Liaison Maintains self-developed
network of outside contacts
and informs who provides
favour and information.
Acknowledging mail, doing external
board work; performing other
activities that involve outsiders.

2. Informational roles:
 Involves collecting, receiving and disseminating
information.
 Three interpersonal roles are:
1. Monitor
2. Disseminator
3. Spokesperson

ROLES DESCRIPTION IDENTIFIABLE ACTIVITIES
Monitor Seeks and receives wide variety of
special information (much of it
current) through develop through
understanding of organization and
environment; emerges as nerve
centre of internal and external
information about the organization.
Reading periodicals and reports;
maintaining personal contacts
Disseminator Transmits information received
from other employees to the
members of the organization –
some information is factual, some
involves interpretation and
integration of diverse value
positions of organizational
influences
Holding informational meeting;
making phone calls to relay
information
Spokesperson Transmits information to
outsiders on organization’s plans,
policies, actions, results, etc. serves
as expert on organization’s industry
Holding board meetings; giving
information to the media

3. Decisional roles:
 Entails making decisions or choices.
 Four interpersonal roles are:
1. Entrepreneur
2. Disturbance handler
3. Resource allocator
4. Negotiator

ROLES DESCRIPTION IDENTIFIABLE ACTIVITIES
Entrepreneur Searches organization and its
environment for opportunities
and initiates “ improvement
projects” to bring change;
supervises design of certain
projects as well
Organizing strategy and review
sessions to develop new
programs
Disturbance
handler
Responsible for corrective
action when organization
faces important disturbances
Organizing strategy and review
sessions that involve
disturbances and crises
Resource
allocator
Responsible for the allocation
of organizational resources of
all kinds – in effect, the
making or approval of all
significant organizational
decisions
Scheduling; requesting
authorization; performing any
activity that involves budgeting
and the programming of
employee’s work
Negotiator Responsible for representing
the organization at major
negotiations
Participating in union contract
negotiations or in those with
suppliers

MANAGERIAL SKILLS:
 Robert L.Katz developed an approach to describe the skills
of management:
 He concluded that managers need three essential skills:
1. Technical skills
2. Human skills
3. Conceptual skills

1. Technical skills:
 Technical skills are the job – specific knowledge and
techniques needed to perform proficiently.
 These skills are more important for first line managers, as
they directly deal with the line employees.

2. Human skills:
 Involves the ability to work well with other people both
individually and in groups.
 These skills are important to all level of managers.
Managers with good human skills get the best out of their people.

3. Conceptual skills:
 Skills, managers use to think and to conceptualize about
abstract and complex situation.
 With this skills, managers see the organization as a whole,
understand the relationships among various subunits.

EVOLUTION OF MANAGEMENT –
SCIENTIFIC MANAGEMENT

History of Management:
 History helps to understand the present theories and practices,
helps what has worked and what has not worked?
 Consider the great construction in past days.
 Management has been practiced a long time.

History of Management:
 The construction of a single pyramid took 20 years and involved
more than 1,00,000 workers.
 Who told each worker what to do? Who ensured that there are
enough stones at the site to keep everyone busy? Managers

 Similarly consider Great wall of China, Madurai temple,
Tanjore temple, Qutub – Minar, etc.

 Another example of early management can be seen during the
1400s in the city of Venice, a major economic and trade centre.
 Venetians used warehouse and inventory system to keep track
of materials, HRM functions to manage labour force, etc.

 Two events are especially significant to management history.
1. Division of labours:
 Adam Smith (16 June 1723 – 17 July 1790) was a Scottish
moral philosopher, pioneer of political economy, and a key
figure in the Scottish Enlightenment.

Contribution of Adam Smith:
 In 1776, Adam Smith published „The Wealth of Nations‟, in
which he argued the economic advantages that organization and
society would gain from the division of labor.
 Defined as breakdown of jobs in to narrow and repetitive
tasks.
 Explained by considering employees of a pin industry.
 Enhancing the individual’s skill and dexterity, saving time.

2. Industrial revolution:
 In the late eighteenth century when machine power
substituted human power, it became the more economical to
manufacture goods in factories than at home.
 Requires someone to forecast and handle the entire task.
That someone are called as managers.

Approaches to management theory:
 The four major approaches to management theory are:
1. Classical approach
a. Scientific management
b. General administrative
2. Quantitative approach
3. Behavioral approach
4. Contemporary approach
a. System approach
b. Contingency approach

CLASSICAL APPROACH:
 The formal study of management began in the early 20th century.
 The first study is called as classical approach.
 Emphasizes the rationality and making organizations and
workers as efficient as possible.

a) Scientific management:
 Modern management can be predicted to be born on 1911, when
F.W. Taylor (the father of scientific management) published
„Principles of Scientific Management‟.
 The contents were widely accepted by managers across the
world.
 An approach that involve using the scientific method to
determine the “one best way” for a job to be done.

F.W. Taylor:
 Taylor worked at the Midvale and Bethlehem Steel
companies in Pennsylvania.
 He was continually appalled by worker’s inefficiency. Taylor
believed that worker output was only about one-third of what was
possible.

Pig Iron experiment:
 Workers loaded “pigs of iron (each weighing 92 pounds) onto rail
cars.
 Their daily average output was 12.5 tons, but Taylor believed
that it can be increased up to 47 or 48 tons.
 Taylor began his experiment by looking for a physically strong
subject who placed a high value on the dollar.
 Taylor offered the person $ 1.85 a day which is $ 0.70 more than other
workers.
 Using money to motivate Schmidt, Taylor asked him to load the
pig irons, alternating various job factors to see what impact the
changes had on Schmidt’s daily output.

 By following the instructions, motivating and allocating optimistic
man power, Taylor was able to reach his 48-ton objective.

 With this experiment, Taylor concluded that the following
principles would result in prosperity for both workers and
managers.
1. Develop a scientific method to replace the old thumb rule
method.
2. Scientifically train, teach and develop the worker.
3. Heartily cooperate with the workers.
4. Divide the responsibility equally among workers and
management.

Frank and Lillian Gilbreth:
 Frank Bunker Gilbreth Sr. (July 7, 1868 – June 14, 1924) was
an early advocate of scientific management and a pioneer
of motion study.
 A construction contractor by trade, Frank Gilbreth gave up that
career to study scientific management after hearing Taylor speak
at a professional meeting.

 Frank and his wife Lillian, a psychologist, studied the brick
laying experiment to eliminate inefficient hand-and-body
motions.
 By carefully analyzing the brick layer’s job, he reduced the
number of motions in laying exterior brick from 18 to about 5
and in laying interior brick from 18 to 2.

 Using Gilbreth’s techniques, a brick layer was more productive
and less fatigued at the end of the day.
 They invented a device called micro chronometer that recorded
a worker’s motions and the amount of time spent doing each
motions.

 Wasted motions missed by the naked eye could be identified and
eliminated.
 The Gilbreths also devised a classification scheme to label 17
basic hand motions, which they called Therbligs.

Scientific Management in present days:
 Incentive systems
 Hiring process

b) General Administrative theory:
 Focused more on what managers do what constituted good
management practice.
 Henry Fayol and Max Weber are the most prominent behind
this general administrative theory.

Henry Fayol’s contribution:
 Taylor focused on bottom level / first line managers, whereas
Fayol focused on all levels of managers.
 He believed that management is the activity common for all
business endeavors.
 He was pioneer of the formal education in management.

Henry Fayol’s 14 principles (1916):
 Division of work – specialization.
 Authority – authority and responsibility are two sides of a coin.
 Discipline – sincerity towards higher authority order.
 Unity of command – single boss.
 Unity of direction – single plan of action.
 Subordination of individual interests to general interests
 Remuneration – deserving pay / wages.
 Centralization – degree of centralization.
 Scalar chain – rank / line of authority.
 Order – people and material should be at right time.
 Equity – should be no discrimination.
 Stability of tenure of personnel – man power.
 Initiative – opportunities.
 Esprit de corps – promoting team spirit and unity.

Max Weber’s contribution:
 Max Weber was a German Sociologist who studied
organizations.

Max Weber’s contribution:
 In early 1900s, he developed a theory of authority structures and
relations based on an ideal type of organization he called a
bureaucracy.
 Weber realized that this “ideal bureaucracy” didn‟t exist in
reality.
 Instead he intended it as a basis for theorizing about how work
could be done.
 His theory became the structural design for many of today’s
large organizations.

HUMAN RELATIONS APPROACH

Quantitative Approach
 Evolved from the mathematical and statistical solutions
developed for military problems during WW – II.
 It involves applying statistics, optimization models,
information models, computer simulations and other
quantitative techniques to management activities.

 Linear programming is a technique that managers use to
improve resource allocation decisions.

 Work scheduling can be more efficient as a result of critical
path scheduling analysis.

 The economic order quantity model helps managers
determine optimum inventory levels.
 Each of these is an example of quantitative techniques being
applied to managerial decision making.

Whiz Kids – Ford
 The Whiz Kids were a group of ten United States Army Air
Forces veterans of World War II who became Ford Motor
Company executives in 1946.

 The group was part of a management science operation
within the Army Air Force known as Statistical Control.
 Organized to coordinate all the operational and logistical
information required to manage the waging of war.

 After the war, some of the group discussed opportunities to go
into business together.
 Wilbur Anderson
 Charles Bosworth
 J. Edward Lundy
 Robert S. McNamara
 Arjay Miller
 Ben Mills
 George Moore
 Francis "Jack" Reith
 James Wright

Total Quality Management
 A philosophy of management that is driven by continuous
improvement and responsiveness to customer needs and
expectations.

Behavioral Approach
 The field of study that researches the actions (behaviour) of
people at work is called Organizational Behaviour (OB).

Behavioral Approach
 Four people stand out as early advocates of the OB approach:
1. Robert Owen
2. Hugo Munsterberg
3. Mary Parker Follett
4. Chester Barnard.
 Their ideas provided the foundation of such management
practices as employee selection procedures, motivation
programs, and wok teams.

1. Robert Owen
 A successful Scottish
businessman who bought
his first factory in 1789 when
he was just 18 years old.
 Owen became a reformer as
there was a harsh practice in
factories across Scotland.

1. Robert Owen
 He chided factory owners for treating their equipment better
than their employees.
 Claimed that money spent on improving labour conditions
was one of the best investments that business executives could
make.
 Concern for employees was highly profitable for management
and would relieve human misery.

2. Hugo Munsterberg
 Introduced the concept of
industrial psychology.
 The scientific study of
individuals at work to
maximize their productivity
and adjustment.

2. Hugo Munsterberg
 In his text Psychology and Industrial Efficiency, he argued
for the scientific study of human behaviour to identify general
patterns and to explain individual differences.
 Suggested the use of psychological tests to improve employee
selection, the value of learning theory in the development of
training methods & effective techniques to motivate workers.

 An American social worker,
consultant in management field.
 She thought that organizations
should be based on a group ethic
rather than on individualism.
 She insisted that the individual
potential remained as potential
until released through group
association.

 The manager’s job was to harmonize and coordinate group
efforts-notion of “power with” rather than "power over”
employees.
 Workers and Managers should see themselves as partners-as a
part of common group.

4. Chester Bernard
 Barnard was a practitioner- he
was the president of New Jersey
Bell Telephone company.
 Barnard proposed the ideas that
bridged classical and human
resources viewpoints.
 Barnard saw organizations as
social systems that require human
cooperation.

4. Chester Bernard
 The manager’s functions were to communicate and stimulate
subordinates to high levels of effort.
 A major part of organization’s success depended on the
cooperation of its employees and what Barnard called the
“acceptance of authority”
 Barnard introduced the idea that managers had to examine the
external environment.
 If the management failed to ensure a continuous input of
materials and suppliers or to find the markets for its output,
then the organization’s survival would be threatened.

Hawthorne Studies
 In 1924, the electric engineers from Western Electric
Company’s Hawthorne works, Cicerio, Illinois asked
Harvard Professor Elton Mayo to conduct an experiment to
redesign the jobs , changes in the lengths of workday and
workweek, the introduction of rest periods, and individual versus
group wage plans.

Hawthorne Studies
 Illumination Experiments – Light against productivity.
 Relay Assembly Test Room – Test with 6 women workers
 Bank Wiring Observation Room – Group of 10 men workers.
 Interviewing Programme – Upward communication.
Conclusion:
 Concluded that human relations is influenced by social
needs of workers.

SYSTEM AND CONTINGENCY
APPROACH

Contemporary approach:
 Most of the early approaches focused on managers’ concerns
inside the organisation.
 In 1960s, management researchers began to look what was
happening in the external environment outside the
boundaries of the organization.

Contemporary approach:
 Two contemporary management perspectives
1. System approach
2. Contingency approach

System theory
 Systems theory is a basic theory in the physical sciences but had
never been applied to organized human efforts.
 In 1938, Chester Barnard, a telephone company executive, first
wrote in his book, ‘The Functions of an Executive’, that an
organization functioned as a cooperative system.

System theory
 It wasn’t until the 1960s that management researchers began to
look more carefully at systems theory and how it related to
organizations.

 System – System is a set of interrelated and independent
parts arranged in a manner that produces a unified whole.
 Organization is made up of “interdependent factors” including
individuals, groups, attitudes, motives, formal structure,
interactions, goals, status and authority.
 Managers coordinates activities in all the parts of the
organization and they ensure that all the department work
together and achieve their goal.
 When a managers takes decision he/she has to consider its
impact on the other department as well.

Types of Systems
 Closed system – do not depend on environment
 Open system – Depend on environment

 For example, the systems approach recognizes that, no matter
how efficient the production department might be, the
marketing department better anticipate changes in
customer tastes and work with the product development
department in creating products customers want, or the
organization’s overall performance will suffer.

 In addition, the systems approach implies that decisions and
actions in one organizational area will affect other areas.
 For example, if the purchasing department doesn’t acquire
the right quantity and quality of inputs, the production
department won’t be able to do its job.

 The systems approach recognizes that organizations are not self-
contained.
 They rely on their environment for essential inputs and as outlets
to absorb their outputs.
 No organization can survive for long if it ignores government
regulations, suppliers relations, or the varied constituencies on
which it depends.

Contingency approach
 The contingency approach sometimes called the situational
approach says that organizations requires different ways of
managing.
 The early management theorists came up with management
principles that they generally assumed to be universally applicable.

Contingency approach
 Later research found exceptions to many of these principles.
 For example, division of labour is valuable and widely used,
but jobs can become too specialized.
 Bureaucracy is desirable in many situations, but in other
circumstances, other structural designs are more effective.
 Management is not based on simplistic principles to be
applied in all situations.

 Different and changing situations require managers to use
different approaches and techniques.
 A good way to describe contingency is “If this is the way my
situation is, then this is the best way for me to manage in this
situation.
 Management researchers continue working to identify these
situational variable.

 More than 100 different variables have been identified – it
represents those that are most widely used and gives you an idea of
what we mean by the term contingency variable.
 The primary value of the contingency approach is that it stresses
that there are no simplistic or universal rules for managers.

Four popular contingency variables:
1. Organization size – As size increase so the problem of
coordination.
2. Routine of task technology – e.g. leadership styles, structure of
an organization.
3. Environmental uncertainty – Customer requirement.
4. Individual differences – e.g. Motivation techniques

TYPES OF BUSINESS
ORGANIZATION

Business Organization:
 A business is an enterprise which distributes or provides
services where other members of the community need and are
able and willing to pay for it.

Purpose of Business Organization:
 People need to work together to accomplish goals.
 Goals are too large, too complex, too expensive to be achieved
without cooperation.
 By working together, people can produce more & better goods
and services.

Types of Business Organization:
 A business organization is classified in to two types.
1. Individualistic institutions
2. Government institutions

1. Sole Proprietorship:
 ‘A sole proprietorship is a form of legal organization in which the
owner maintains sole and complete control over the
business and is personally liable for business debts’.
 Unlimited liability of proprietor.
 The person who contributes capital and manages the business is
called as sole proprietor.

Characteristics:
 One man ownership
 Unlimited liability
 Enjoyment of entire profit
 No separate legal entity
 Simplicity
 Self employment
 Secrecy

Advantages:
 Low start-up costs.
 Freedom from most regulations.
 Owner has direct control.
 All profits go to owner.
 Easy to exit business.
 Hence efforts and rewards are directly related.
 Owner’s interest and care directly affects the profit of the
business.

Disadvantages:
 Unlimited liability – Owner is entirely responsible for all the
liabilities.
 Death or illness endangers business
 Total responsibility
 More difficult to raise finance for business
 Growth limited to personal energies
 Personal affairs easily mixed or confused

2. Partnership:
 A partnership is a form of legal organization in which two or
more business owners share the management, profit and risk
of the business.

2. Partnership:
Characteristics:
 Agreement
 Lawful business
 Sharing of profits
 Contractual relations
 Common management
 Multiplicity of business
(10 for bank and 20 for other)

2. Partnership:
Advantages:
 Ease of formation
 Group talent
 Wide resources
 Easier access to finance
 Sharing of Risk
 No corporate income tax

2. Partnership:
Disadvantages:
 Unlimited personal liability
 Divided authority and decisions
 Potential for conflict
 Continuity of transfer of ownership.
 Lack of harmony
 Difficult to get rid of bad partner
 Death, withdrawal, or bankruptcy of one partner

2. Partnership:
Types of partners:
 Active Partners – Authorize to manage the business.
 Sleeping or Dormant Partners – Just an investor.
 Nominal Partners – Only lend his name for uplifting the image.
 Partners by estoppels – Behaviour makes other to believe as a partner.
 Secret partner – Name not disclosed to outsiders.
 Minor as a partner – Less than 18.

3. Companies:
 An association of many persons who contribute money / wealth
to a common stock and employ it in some trade and also shares
the profit and loss.

3. Companies:
Advantages:
 Limited liability
 More stable
 Easy expansion
 Democratic setup
 Large finance
Disadvantages:
 More legal formalities
 Delayed decision
 Difficult to maintain secrets.

3. Companies:
Types of companies:
 Private Limited companies – Minimum paid up capital.
 Limited companies – Large scale involving huge amount of
capital.

Private Limited Company:
 A private company is a small concern registered under
Companies Act 1956.

 For a company to be private limited it must satisfy the features:
1. Minimum paid up capital is INR 1,00,000.
2. Minimum number of members is 2 and maximum is 50
excluding the past employees.
3. Restricts to transfer the shares.
4. Prohibits public participation.

Advantages:
 Can be incorporated with just two persons.
 Facilitates easy formation and easy functioning.
 No need to file with a registrar to act as a director.
Disadvantages:
 Can’t expect democracy.
 Exempted from conduction statutory meeting.
 Can work with only two directors.

Limited Company:
 A public company is a large concern registered under
Companies Act 1956.

Limited Company: (Private and Public enterprise)
 For a company to be private limited it must satisfy the features:
1. Minimum paid up capital is INR 5,00,000.
2. Minimum number of members is 7 and maximum is
unlimited.
3. No restriction to transfer the shares.
4. Encourages public participation and capital is collected from
public.
5. Must have three directors.
6. Should send the financial statement to the members and
registrar.

Private enterprise:

Public enterprise:

Cooperative organization:
 Voluntary association of persons for the mutual benefits and
aims are accomplished through self help and collective effort.
 One for all and all for one.

 Every state government has appointed a registrar of
cooperative societies for registering, controlling and supervising.
Types of cooperative societies:
 Producer’s cooperative societies.
 Consumer’s cooperative societies.
 Farmer’s cooperative societies.
 Cooperative marketing societies.
 Cooperative credit societies.

Advantages:
 Easy to form
 No obstruction for membership
 Limited liability
 Surplus shared by the members
Disadvantages:
 Lack of secrecy
 Cash trading
 Excessive government interference
 Absence of motivation
 Disputes and differences

Public Corporation:
 Autonomous corporate body created by a special act of
state/central government.
 It acts as a statutory body to serve the general public.

Public Corporation:
Advantages:
 Financed by government.
 Internal autonomy.
 Free from government interference.
 Serves and protects public welfare.
Disadvantages:
 Misuse of power.
 Lack of interest.
 Inefficient operation.

ORGANIZATION CULTURE AND
ENVIRONMENT

MANAGER – OMNIPOTENT OR SYMBOLIC?
Omnipotent:
 Managers are directly responsible for an organization’s success
or failure.
 The quality of the organization is determined by the quality
of its managers.

MANAGER – OMNIPOTENT OR SYMBOLIC?
Symbolic:
 Managers are not directly responsible for an organization’s
success or failure. Much losses are due to external factors.
 The ability of managers to affect outcomes is influenced and
constrained by external factors.

 In reality, managers are neither all powerful nor helpless.
 Their decisions and actions are constrained.
 Internal constrains comes from the organization’s culture and the
external constrains comes from the organization’s environment.

ORGANIZATION CULTURE:
 Organizational culture is described as the shared values,
principles, traditions, and ways of doing things that
influence the way organizational members act.
 “The way we do things around here.”

Seven dimensions / characters:

Source of organization culture:
 Vision and mission of the founder/organization.
 Past practices of the organization.
 Behaviour of the top management.
 Socialization of new employees to adapt to the culture.

Sources to learn culture:
 Stories – Narratives of significant events
 Rituals – Repetitive sequence of activities (annual meet rewards)
 Material symbols – Facilities and freedom to the employees
 Language – Acronyms (PFA, ASAP, ROFL)

Functions of the culture:
 Distinguishes one organization from other.
 Conveys a sense of identity to all employees.
 Facilitates commitment towards organization interest.
 Enhances the stability of the system.
 Control mechanism that shapes and guide the attitudes and
behaviour of employees.

ORGANIZATION ENVIROMENT:
 The events that occur which affects the way a business
operates, in either positive or negative way.
 There are two different types of factors.
a) Internal environment b) External environment

Internal Environment factors:
 Management
 Organization structures
 Employees
 Organizational cultural change
 Financial changes

External Environment factors:
a) Macro / general environment b) Micro / task environment

Macro / general Environment:
 Technology
 Economic conditions
 Political factors
 Socio cultural factors
Micro / task Environment
 Suppliers
 Competitors
 Customers

TYPES AND ELEMENTS OF
ORGANIZATION CULTURE

Types of culture:
1. Subculture:
 Set of values shared by a minority group of the organization
members formed to help members of particular group.
 Can weaken and undermine the organization if they are
conflict with the dominant culture.

Types of culture:
2. Dominant culture:
 Dominant culture is the core value of an organization.
 It refers to the overall organization culture.
 Dominant culture is one which gives uniqueness to an
organization.

Types of culture:
3. Strong culture:
 Core values of an organization are accepted by most of the
employees and followed with commitment.
 It influences the behaviour of the people and builds loyalty.
 Management will be least concerned about rules and
regulations.

Types of culture:
4. Weak culture:
 Core values of an organization are not being accepted by most
of the employees and followed with commitment.
 Creates low cohesiveness and loyalty.

Types of culture:
5. Authoritarian culture:
 Leader of the organization exercises complete control over the
subordinates who issues the orders and instructions.

Types of culture:
6. Participative culture:
 Subordinates suggests or contributes in important decision
making of an organization.
 Motivation in the organization will be maximum.

Types of culture:
7. Normative culture:
 Norms and procedures are predefined.
 Employee behave in an ideal way and strictly adhere to the
policies of the organization.
 No employees dares to break the rules.

Types of culture:
8. Pragmatic culture:
 Customer satisfaction is the major motive of the employees.
 Every employee strives hard to satisfy his clients needs to
maximize the business.

Types of culture:
9. Academy culture:
 Employees hire skilled individuals.
 Roles and responsibilities are delegated according to the
qualification and work experience.
 More focused on equipping the employees.

Types of culture:
10. Fortress culture:
 Employees won’t be sure about their career growth and
longevity.
 Employees will be terminated if the organization is not
shining.
 Individuals suffer the most when the organization is at loss.

Elements or components of an Organization culture:
 Support
 Rules
 Innovation
 Coordination

1. Support:
 Related to support or the aid that an employee is receiving from
an organization.
 E.g. Training, counselling.

2. Rules:
 Ensures the tasks are performed within the limit without any
deviation.

3. Innovation:
 Implementing new ideas to satisfy the needs of the customer /
consumer.

4. Coordination:
 Blending efforts to ensure successful attainment of objectives.
 Can be achieved by means of planning, organizing, actuating
and controlling.

Creating and Managing Culture:
Creating culture:
 The vision and the functions of an organization are creators
of the culture of an organization.

Creating and Managing Culture:
Maintaining culture:
 After creating, managing the culture is a big deal. It involves
three steps.
i. Selection process
ii. Top management actions
iii. Socialization

CURRENT TRENDS AND ISSUES IN
MANAGEMENT

 Changes in socio – economic and political conditions are
bound to bring the changes in environment within the
organization.

1. Workforce diversity:
 The biggest challenge for an organization will be
accommodating diverse groups of people at work place.
 If an organization succeeds in this, it can increase the
creativity and innovation.

2. Changing demographics of workforce:
 Increase in young workers, friends, women employees, etc.
 Such workforce requires to be handled with circumspection.

3. Changing employee expectation:
 Organization have to redraw new methods of motivation such
as job design.
 In terms attractive remuneration (housing, job security,
empowerment, etc.)

4. Organization design and structure:
 Designing an organization with foreign concepts such as quality
circles, TQM, etc.

5. Technological up gradation:
 In wake of technological advances, new jobs will be created and
many old jobs will become redundant.

6. Management of human relations:
 Satisfaction of employees.
 Ego based on qualification of employees.

7. Changes in legal environment:
 Change in political situation, women working in night shift.

8. Change in industrial relations:
 Tie up with industries.

9. Expanding globalization:
 Business have crossed national boundaries.

10. Adaptability:

Indian business in the globalization:
 New Industrial Policy (NIP) 1991.
 Advances in technology in area of telecommunication,
transportation and IT have made possible the global business.

Globalization:
 Globalization means integration of countries through
commerce, transfer of technology, and exchange of information
and culture.

Multi National Corporations:
 An enterprise operating in several countries but managed
from home country.

 Any company or group that derives a quarter of its revenue
from operations outside of its home country is considered as
MNC.

Advantages:
 Inexpensive labor.
 Availability of natural resources.
 Favorable tax arrangements.
 Fresh markets for products.
 New jobs with higher pay and greater challenge.
 Transfer of advanced technology.
 Array of social benefits from sharing.

Disadvantages:
 Competition from MNC affects local industry.
 Utilizes local labour force at low wages to yield high profits.
 Lack of development in local R&D.

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