PRINCIPLES OF MANAGEMENT

FOUNDATIONS
Management is the process of designing and maintaining an
environment in which individuals, working together in groups
efficiently to accomplish selected aims”
2RATHI G AP/CSE/SREC

HISTORICAL DEVELOPMENTS
IT IS AN ART AND SCIENCE of getting work done through
people.
It is the process of designing and maintaing of an environment in
which individuals working together in groups,efficiently accomplish
selected items.

The main elements of an art are –
Personal Skills
Practical know-how
Result orientation
Creativity
Constant practice aimed at perfection


Management as Science
The essential elements of Science
• is a systematised body of Knowledge
• contains underlying principles and theories developed through
continuous observation, experimentation and research.
• Universal applicability
• Organised body of knowledge can be taught and learnt in class room
and outside.
• Mgt is a science because it contains all the essential of science
• Thus, the theory (Science) and practice (art) of Mgt go side by
side for the efficient functioning of an organisation.

Levels of Management
Top Level Mgt –
•To analyse, evaluate and deal with the environmental forces
•To establish overall long term goals and broad policies of the
company including the master budget
• To appoint departmental and other key executives
•To represent the company to the outside world
•To coordinate the activities and efforts of different department

Middle Level Mgt
• To interpret and explain the policies framed by top management
• To compile and issue detailed instruction regarding operations
• To Cooperate among themselves so as to integrate various parts of
the division or a department
• To motivate supervisory personnel to work for Organization goals
• To develop and train supervisory and operative personnel.

Supervisory / Operating / Lower Level Mgt
•To plan day to day production within the goals lay down by higher
authority
•To assign jobs to workers and to make arrangement for their training
and development
•To supervise and control workers and to maintain personal contact
with them.

Administration and management
• Admin:-
• It is higher level functions
• It refers to the owners of the organization
• It is concerned with decision making
• It acts through the mgmt
• It lays down broad policies and principles for guidance. Legislative
& determination function
• Determination of objectives & policies
• Provides a sketch of the enterprise
• Influenced mainly by public opinion & other outside force
• Mainly top level function involves thinking & planning

Management:-
• Lower level functions
• Refers to the employees
• It is concerned with execution of decision
• It acts through the organisation
• Management execute these policies into action,
• Executive Function
• Implementation of Policies
• Provides the entire body
• Influenced mainly by administrative function
• Mainly middle level function involves doing and acting

Evolution of management
as how the mind controls the human body and its function similar
management (mind) controls the various activities ( human body) in
the Organisation
Collection of physical equipments, 4 M’s in Organisation – Men,
Machine, Materials, Money, leads to nothing. For efficient and
profitable functioning it is necessary that all these factors are put to
work in a co-ordinated manner.


DEVELOPMENT OF MANAGEMENT THOUGHT
Scientific management
Modern operational management theory
Behavioral sciences
Systems theory

Scientific management
Frederick w. Taylor—father of scientific mgnt.
He emphasized using science, creating group harmony and
cooperation.achieving maximum output and developing workers.
Henry L. Gantt---scientific selection of workers and harmonious
cooperation btw labor and mgnt.---developed gantt chart..focused on
training.
Frank and Lillian gilberth----understanding of workers personalities
and needs.

Modern operational management theory
Henri Fayol---father of modern management theory.
Divided industrial activities into six groups:
Technical
Commercial
Financial
Security
Accounting
Managerial
He formulated fourteen priciples of mgnt.

Behavioral sciences
Hugo munsterberg---application of psychology to industry.

FUNCTIONS OF MANAGEMENT
Planning
Organising
Staffing
Directing
Controlling

• PLANNING:Forecasting, decision making, strategy formulation,
policy making, programming, scheduling, budgeting, problem-
solving, innovation, investigation and research.
• ORGANIZING:Grouping of Functions, Departmentation,
delegation, decentralisation, activity analysis, task allocation

• STAFFING :Manpower planning, job analysis, Recruitment,
Selection, Training, Placement, Compensation, Promotion,
appraisal, etc.
• DIRECTING: Supervision, Motivation, communication,
Leadership, etc
• CONTROLLING :Fixation of standard, recording, measurement,
reporting corrective action.

TYPES OF BUSINESS ORGANIZATION
Sole proprietorship / Individual
Partnership
Jointstock Company – Private Ltd Company & Public Ltd Company
Co operative Enterprises
Public Enterprises / State ownership

Sole proprietorship
A type of business unit where one person is solely responsible
forproviding the capital and bearing the risk of the enterprise, and for
the management of the business.

Sole proprietorship – the individual entrepreneur supplies the entire capital,
employs labour and machines. Individual uses his own skill in the
management of affairs and is solely responsible for the good or bad result
of its operation and working
Merits –
• Simplest form of business
• Least legal complication
• Quick decision
• Maximum Profit
• Personal Care
• Quality product
• Minimum wastage
• Flexible business

characterstics
Single management
No separation of ownership and management
Less legal formalities
No separate entity
Unlimited liability
One man control.

demerits
Lack of continuity
Limited resources
Not suitable for large scale operations

Partnership
Partnership – two or more persons come together and start a business with
their own funds, the parties agree to share the profits as well as bear the
losses in the agreed proportion. The formation and management of
partnership organization is governed by the Indian Partnership Act, 1932.
Merits
• Has larger financial resources
• greater personal contacts of the partners gives more customer base and
benefits
• Persons of different skills and abilities can work for betterment of
Organisation
• Less expenditure per partner is involved in forming partnership
Organisation
• Loss will be divided among the partners

FORMATION OF PARTNERSHIP FORM OF
BUSINESS ORGANISATION
The following steps are to be taken in order to form a
partnership firm:
(a) Minimum two members are required to form a
partnership. The maximum limit is ten in banking
and 20 in other businesses.
(b) Select the like-minded persons keeping in view the
nature and objectives of the business.

 (c) There must be an agreement among the partners to carry on the business and share
 the profits and losses. This agreement must preferably be in writing and duly signed by
 the all the partners. The agreement, i.e., the partnership deed must contain the following:
 (i) Name of the firm
 (ii) Nature of the business
 (iii) Names and addresses of partners
 (iv) Location of business
 (v) Duration of partnership, if decided
 (vi) Amount of capital to be contributed by each partner
 (vii) Profit and loss sharing ratio
 (viii) Duties, powers and obligations of partners.
 (ix) Salaries and withdrawals of the partners
 (x) Preparation of accounts and their auditing.
 (xi) Procedure for dissolution of the firm etc.
 (xii) Procedure for settlement of disputes
 The partners should get their firm registered with the Registrar of Firms of the concerned
 state.

Demerits
 Instability
 Unlimited Liability
 Non transferability of share
 Limited capital
 Possibility of conflicts
Types of partners:-
Based on the extent of participation:
Active partners
Sleeping partners
Based on sharing profits:
Nominal partners
Partners in profits

Based on Liability, the partners can be classified as
‘Limited Partners’ and ‘General Partners’. The liability of
limited partners is limited to the extent of their capital
contribution.
A person who behaves in the public in such a way as to
give an impression that he/she is a partner of the firm, is
called ‘partner by estoppel’
if a partner or partnership firm declares that a particular
person is a partner of their firm, and such a person does
not disclaim it, then he/she is known as ‘Partner by
Holding out’

Public Ltd Company – the minimum number of members required are 7 and
there is no upper limit. Such companies offer shares to general public.
Public Ltd companies are supervised and controlled by the Government to
protect the interest of Share holder public. The company is governed by an
elected body called board of directors.
Merits
• The shareholders bears no risk as the liability is limited
• large scale business can be undertaken
• take advantage of economies of scale in production because management
can employ specialized labour, can use latest machinery and thus can
achieve large scale production at low cost.
• not affected by the retirement of any share holder hence the existence of
Organisation is permanent in nature.
• works on democratic principles, which results in economy and efficiency.

• Joint Stock Company – Capital is contributed by a large number of
person in the form of shares of different values.
• Private Ltd Company – can be established with two to fifty
members. The maximum number of membership is limited to 50.
When this type of Organisation expands beyond certain limit, it can
restrict its liability by registering the firm as a limited company. The
company is registered under Indian Company act 1956.

Cooperative enterprises
Cooperative Society as “a society, which has its objectives for the promotion
of economic interests of its members in accordance with cooperative principles.”
Characterstics:
 Voluntary Association
 Open Membership
 Registration of the Society
 Number of members
 State control
 Capital
 Democratic set up
 Service motive
 Return on capital
 Investment
 Distribution of surplus

In India, cooperative societies are registered under
the
Cooperative Societies Act 1912 or under the State
Cooperative Societies Act

Merits
Easy to form
 Limited liability
 OpenMembership
State Assistance
 Stable life
 Tax concessions
 Democratic Management

Limitations
Limited Capital
 Lack of Managerial Expertise
 Less Motivation
 Lack of Interest
 Dependence on Govt.

Types
1. Consumers’ Cooperative Societies
2. Producer’s Cooperative Societies
3. Marketing Cooperative Societies
4. Housing Cooperative Societies
5. Farming Cooperative Societies
6. Credit Cooperative Societies

Consumers’ Cooperative Societies: These societies are formed to protect the
interest of consumers by making available consumer goods of high quality at reasonable
price.
(b) Producer’s Cooperative Societies: These societies are formed to protect the
interest of small producers and artisans by making available items of their need for
production,like raw materials, tools and equipments etc.
(c) Marketing Cooperative Societies: To solve the problem of marketing the
products,small producers join hand to form marketing cooperative societies.
(d) Housing Cooperative Societies: To provide residential houses to the members,
housing cooperative societies are formed generally in urban areas.
(e) Farming Cooperative Societies: These societies are formed by the small farmers
to get the benefit of large-scale farming.
(f) Credit Cooperative Societies: These societies are started by persons who are in
need of credit. They accept deposits from the members and grant them loans at
reasonable rate of interest.

PRINCIPLES OF MANAGEMENT

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