Principles of Management

Debasis Mohanty,Lecturer Page 1
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According to Professor Robert Katz, there are three managerial skills, viz.,
1. Conceptual Skills,
2. Human Relations Skills, and
3. Technical Skills
1. Conceptual Skills
Conceptual skill is the ability to visualise (see) the organisation as a whole. It includes Analytical,
Creative and Initiative skills. It helps the manager to identify the causes of the problems and not
the symptoms. It helps him to solve the problems for the benefit of the entire organisation. It helps
the manager to fix goals for the whole organisation and to plan for every situation. According to
Prof. Robert Katz, conceptual skills are mostly required by the top-level management because they
spend more time in planning, organising and problem solving.
2. Human Relations Skills
Human relations skills are also called Interpersonal skills. It is an ability to work with people. It
helps the managers to understand, communicate and work with others. It also helps the managers
to lead, motivate and develop team spirit. Human relations skills are required by all managers at
all levels of management. This is so, since all managers have to interact and work with people.
3. Technical Skills
A technical skill is the ability to perform the given job. Technical skills help the managers to use
different machines and tools. It also helps them to use various procedures and techniques. The
low-level managers require more technical skills. This is because they are incharge of the actual
operations.
Apart from Prof. Robert Katz's two managerial skills, a manager also needs (requires) following
additional managerial skills.
4. Administrative Skills
Administrative skills are required at the top-level management. The top-level managers should
know how to make plans and policies. They should also know how to get the work done. They
should be able to co-ordinate different activities of the organisation. They should also be able to
control the full organisation.
5. Analytical skills in management are often defined as the ability to break problems into parts to
see relationships or interdependencies. Managers with analytical abilities plan well and lead
projects successfully. They are able to accurately forecast financial results and develop plans to
meet goals and objectives. Analytical leaders work with their people to plan and create action
plans for their areas of responsibility and work to accomplish these goals. Managers who possess
analytical skills systematically accomplish their plans and logically produce predictable results.

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Evolution of Management Thoughts
Five Major Schools of Management Thought
MANAGEMENT
SCHOOLS
Beginning
Dates
Emphasis
CLASSICAL SCHOOL Managing workers and organizations more efficiently.
Scientific Management 1880s
Administrative
Management
1940s
Bureaucratic
Management
1920s
BEHAVIORAL
SCHOOL
Understanding human behavior in the organization.
Human Relations 1930s
Behavioral Science 1950s
QUANTITATIVE
SCHOOL
Increasing quality of managerial decision-making through the
application of mathematical and statistical methods.
Management Science 1940s
Operations
Management
1940s
Management
Information Systems
1950s—
1970s
SYSTEMS SCHOOL 1950s Understanding the organization as a system that transforms inputs
into outputs while in constant interaction with its' environment.
CONTINGENCY
SCHOOL
1960s Applying management principles and processes as dictated by the
unique characteristics of each situation.

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SCIENTIFIC MANAGEMENT
1) Science, Not Rule of Thumb:
This principle says that we should not get stuck in a set routine with the old techniques of doing
work, rather we should be constantly experimenting to develop new techniques which make the
work much simpler, easier and quicker.
2) Harmony, Not Discord:
As per this principle, such an atmosphere should be created in the organisation that labour (the
major factor of production) and management consider each other indispensable.
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.
(3) Cooperation, Not Individualism:
According to this principle, all the activities done by different people must be carried on with a
spirit of mutual cooperation. Taylor has suggested that the manager and the workers should jointly
determine standards. This increases involvement and thus, in turn, increases responsibility. In this
way we can expect miraculous results.
(4) Development of Each and Every Person to His / Her Greatest Efficiency and Prosperity:
According to this principle, the efficiency of each and every person should be taken care of right
from his selection. A proper arrangement of everybody‘s training should be made.
It should also be taken care that each individual should be allotted work according to his ability
and interest. Such a caring attitude would create a sense of enthusiasm among the employees and a
feeling of belongingness too.
1. Functional Foremanship
F.W. Taylor has propounded the functional organisation. This form of organisation is totally based
on the principle of specialisation and makes full utilisation of the expertise of various experts.
In a functional organisation, work is divided into many small parts and each part is assigned to an
expert. In this manner, all the benefits of specialisation are availed of.

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Taylor has defined functional organisation as follows:
―Functional organisation consists of so dividing the management that each man from the assistant
superintendent shall have as few functions as possible to perform. If practisable, the work of each
man in the management should be confined to the performance of a single leading function.‖
Taylor has suggested the division of the work of factory manager into two sub departments:
(i) Planning department, and (ii) production department. Four experts are appointed in each
department. The experts in the planning department do planning and the experts in the production
department help in production.
(i) Specialists of Planning Department and their Functions
(a) Route Clerk:
This clerk ensures the sequence of completing a particular work, meaning thereby the stages it
shall have to pass before being finalised. He also decides the job to be done for the day and where
it is to be done.
(b) Instruction Card Clerk:
This clerk prepares the instruction cards for the workers and hands them over to the gang boss.
These cards contain information about the nature of the work, procedure of doing it, material to be
used and the details about machinery.
(c) Time and Cost Clerk:
This clerk decides as to when a particular work is to be started and finished, meaning thereby as to
what time the whole work will take place. It is also decided at the same time at what cost the
product will be produced.
(d) Discipline Officer:

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The discipline officer ensures that every work is being performed in a disciplined manner.
(ii) Specialists of Production Department and their Functions
(a) Gang Boss:
The workers are divided into various groups from the point of view of control. A group leader is
selected who is known as the gang boss. He is expected to ensure that both the workers and the
machines are fit enough for production and that the material required for their use has been made
available to them.
(b) Speed Boss:
The main function of the speed boss is to ensure that all the workers are performing their job at the
required or expected speed. If it is not so, the speed boss tries to find out the cause of slow speed
and hence a solution for it.
(c) Repair Boss:
The main function of the repair boss is to keep the machines and tools in working condition.
(d) Inspector:
He inspects the things produced and compares their quality with the standard prescribed for them
and tries to find out the difference. In case of unfavourable result he initiates corrective action.
2. Standardisation of Work
Standardisation means setting standards for different factors, after due deliberation.
For example, the amount of work to be done by a worker in a day may be standardised.
In other words, the worker is expected to do the standard amount of work every day.
In the same manner standards may also be set for raw materials, machines and tools, techniques,
conditions of work, etc. The following is a brief description of such standards:
(i) Standardised Material:
By standardisation of material we mean that the raw material provided should be according to the
quality of finished goods required.
For example, if for producing ‗A‘ quality of finished goods ‗X‘ quality of raw materials are
required (and the same has been determined after due deliberation), then we can say that for ‗A‘
quality of finished goods ‗X‘ quality of raw materials have been standardised.

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In the future whenever it is required to produce ‗A‘ quality of finished goods, ‗X‘ quality of raw
materials will be used without any hesitation. By doing so good quality of finished goods can be
produced in the least possible time.
(ii) Standardised Machines and Tools:
Standardisation of machines and tools ensures that they are of the required quantity and type to
produce the desired finished goods.
For example, if for producing ‗A‘ quality of finished goods ‗X‘ machine and M, N and O tools are
required, then whenever finished goods of‘ A‘ quality are to be produced, it can be done with the
use of ‗X‘ machine and M, N and O tools.
Standardisation of machines and tools will reduce errors on the part of workers as to which
machine or tools are to be used, and hence work can proceed at a much faster pace.
(iii) Standardised Methods:
By standardising the optimum techniques of doing work, it can proceed at a faster pace and with
much greater ease. The technique determined for doing a particular work is used uniformly
whenever such work is performed.
(iv) Standardised Working Conditions:
Working conditions have a very deep impact on the efficiency of workers. In standardising
working conditions, it is noted that how much temperature, ventilation, lighting, cleanliness and
safety is necessary at the workplace.
After due studies, the working conditions are standardised and efforts are made to maintain them
at the workplace.
3. Simplification
Simplification means putting an end to the unnecessary types, qualities, sizes/weights, etc. For
example, it is all right for a shoe manufacturing company to manufacture shoes of 0, 1, 2, 3, 4, 5,
sizes but if it starts manufacturing shoes of 0, 0.5, 1, 1.25, 1.5, 1.75, 2, 2.25, 2.5, 2.75, 3, it will be
simply wrong.
There is no justification in the difference of such sizes. In such a situation different types of
machines shall have to be installed, more stock shall have to be maintained and increased labour
costs shall have to be borne.
Therefore, it is advisable to manufacture shoes only of the proper sizes. In other words,
simplification of the product is the answer.

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Objectives of simplification:
(i) Effecting economy in the use of machines.
(ii) Bringing down the labour cost with the help of specialisation. (The benefits of specialisation
can be obtained by restricting specialisation only to a few products.)
(iii) Affecting economy in the staff.
According to another example, a paper manufacturing company in the USA started the work of
simplification of the types of papers it was manufacturing and succeeded in reducing their types
from 2,000 to 200 only. The effect of such an exercise can simply be imagined.
4. Scientific Study of Work
It means to conduct the deep analysis of all the activities being performed in the organisation with
the aim of producing maximum possible quality output at minimum costs. Taylor has conducted
the following studies:
(i) Method Study, (ii) Motion Study, (iii) Time Study, and (iv) Fatigue Study.
(i) Method Study:
It refers to identify the most suitable way to do a particular activity. To conduct this study, process
chart and operation research techniques are used. The main objective of this study is to minimise
the cost of production and maximise the quality and level of consumer satisfaction.
(ii) Motion Study:
It refers to conduct the study of motions being performed by workers and machines while doing
the job. The main objective of this study is to eliminate the unnecessary motions.
For example, during an experiment it was found that while laying a brick, a mason was conducting
18 different activities, but after eliminating the unnecessary activities the number of activities
could be reduced to five, and in certain cases even down to two activities.
(iii) Time Study:
It refers to determine the standard time required to complete a particular activity. The standard
time is determined on the basis of average time taken by the several experiences of the same work.
The main objectives of the study are (i) to get the estimated figure of labour costs, (ii) to determine
the number of required workers and (iii) to decide about the suitable incentive plan.
(iv) Fatigue Study:

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It refers to determine the duration and frequency of rest intervals to complete a particular job. The
rest refreshes the workers. They work again with their full capacity.
The main objective of this study is to maintain the efficiency level of workers. There may be so
many causes of fatigue, such as long working hours, poor working conditions, unsuitable work,
unhappy relations with the boss, etc.
5. Differential Wage System/Differential Piece Rate
Taylor has advised the adoption of differential wage systems in order to motivate the employees.
According to this system, wages are paid on the basis of work done and not on the basis of time
spent in doing the work.
In this system two different wage rates are used: one is the high wage rate and the other is the low
wage rate. Those workers who are able to produce the standard number of units within a fixed
duration are paid as per the high wage rate, and those workers who are not able to produce the
standard number of units within the same time are paid as per the lower wage rate.
For example, let the standard output per day be 20 units and the two wage rates be 5 per unit and 4
per unit respectively. Worker ‗A‘ produces 20 units in a day and in doing so he earns 100 (20 units
X 5 per unit).
Another worker ‗B‘ produces only 18 units in a day and hence he will earn only 72 (18 units x 4
per unit). In this way, even though ‗B‘ has produced only 2 units less than ‗A‘ the difference in
their wages will be 28 100 – 72).
As a result, less efficient workers will be motivated to work more and efficient workers will be
motivated to maintain their efficiency.
6. Mental Revolution
Mental revolution calls for a change in the mindset of both employers and workers. As per Taylor,
a revolution in mindset of both the employers and the workers is required because it will promote
feeling of cooperation, and will be beneficial to both the parties.
Normally, it is seen that conflict between employers and workers results in division of profits,
with both the parties demanding a larger share of profits.
This is the main reason why a mental revolution is required. According to Taylor, instead of
fighting over division of profits, both the parties should make efforts for increasing the profits.
Such a situation will result in an increase in production, and as such a high increase in profits that
will make any talk of division of profits meaningless.

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Fayol's Principles of Management
During the early 20th century, Fayol developed 14 principles of management in order to help
managers manage their affairs more effectively. Organizations in technologically advanced
countries interpret these principles quite differently from the way they were interpreted during
Fayol's time as well. These differences in interpretation are in part a result of the cultural
challenges managers face when implementing this framework. The fourteen principles are:
Henry Fayol, a French industrialist, developed the theory of management. According to him,
managerial excellence is atechnical ability and can be acquired. He developed theories
and principles of management which are universally accepted andmake him universalistic. He
was pioneer of the formal educationin management. Fayol's principles of management meet
therequirements of modern management.Henry Fayol, offered fourteen principles of
management for thefirst time in 1916. During the period of 1920-40 in the U.S.many authors
did hard work in developing and testing various principles of management. Today, there is a
very lengthy list of management principles and it is not possible to give anexhaustive lot of
these management principles. Here, we aregiving some important principles of management.
Henry Fayol's Principle of Management
Followings are the 14 principles of management developed bythe Henry Fayol:1.
1.Division of Work: According to Henry Fayol under division of work, "The worker always on the
same post, the manager always concerned with the same matters, acquire an ability, sureness and
accuracy which increases their output. In other words, division of work means specialization.
According to this principle, a person is not capable of doing all types of work. Each job and work
should be assigned to the specialist of his job. Division of work promotes efficiency because it
permits an organizational member to work in a limited area reducing the scope of his
responsibility. Fayol wanted the division of work not only at factory but at management levels
also.
2. Authority and Responsibility:
Authority and responsibility go together or co-existing. Both authority and responsibility are the
two sides of a coin. In this way, if anybody is made responsible for any job, he should also have
the concerned authority. Fayol's principle of management in this regard is that an efficient
manager makes best possible use of his authority and does not escape from the responsibility. In
other words when the authority is exercised the responsibility is automatically generated.
3.Discipline:
According to Henry Fayol discipline means sincerity about the work and enterprise, carrying out
orders and instructions of superiors and to have faith in the policies and programs of the business
enterprise, in other sense, discipline in terms of obedience, application, energy and respect to
superior. However, Fayol does not advocate warming, fines, suspension and dismissals of worker

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for maintaining discipline. These punishments are rarely awarded. A well disciplined working
force is essential for improving the quality and quantity of the production.
4.Unity of Command:
A subordinate should take order from only one boss and he should be responsible and accountable
to him. Further he claimed that if the unit of command is violated, authority is undermined,
disciplined in danger, order disturbed and stability threatened. The violation of this principle will
face some serious consequences. In this way, the principle of unity of command provides the
enterprise disciplined stable and orderly existence. It creates harmonious relationship between
officers and subordinates, congenial atmosphere of work. It is one of the Fayol's important
essential principles of management.
5. Unity of direction:
Fayol advocates "One head and one plan" which means that group efforts on a particular plan be
led and directed by a single person. This enables effective co-ordination of individual efforts and
energy. This fulfils the principles of unity of command and brings uniformity in the work of same
nature. In this way the principle of direction create dedication to purpose and loyalty. It
emphasizes the attainment of common goal under one head.
6.Subordination of individual interests to general interests:
The interest of the business enterprise ought to come before the interests of the praise individual
workers. In other words, principle of management states that employees should surrender their
personnel interest before the general interest of the enterprise. Sometimes the employees due to
this ignorance, selfishness, laziness, carelessness and emotional pleasure overlook the interest of
the organization. This attitude proves to be very harmful to the enterprise.
7.Fair Remuneration to employees:
According to Fayol wage-rates and method of their payment should be fair, proper and
satisfactory. Both employees and ex-employers should agree to it. Logical and appropriate wage-
rate and methods of their payment reduces tension and differences between workers and
management, create harmonious relationship and a pleasing atmosphere of work. Further Fayol
recommends that residential facilities be provided including arrangement of electricity, water and
facilities.
8.Centralization and Decentralization:
There should be one central point in the organization which exercises overall direction and control
of all the parts. But the degree of centralization of authority should vary according to the needs of
situation. According to Fayol there should be centralization in small units and
proper decentralization in big organization. Further, Fayol does not favor centralization or
decentralization of authorities but suggests that these should be proper and effective adjustment
between centralization and decentralization in order to achieve maximum objectives of the
business. The choice between centralization and decentralization is made after taking into
consideration the nature of work and the efficiency, experience and decision-making capacity of
the executives.

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9.Scalar chain:
The scalar chain is a chain of supervisors from the highest to the lowest rank. It should be short-
circuited. An employee should feel the necessity to contact his superior through the scalar chain.
The authority and responsibility is communicated through this scalar chain. Fayol defines scalar
chain as "the chain of superiors ranging from the ultimate authority to the lowest rank." The flow
of information between management and workers is a must.
10.Order:
According to Fayol there should be proper, systematic and orderly arrangement of physical and
social factors, such as land, raw materials, tools and equipments and employees respectively. As
per view, there should be safe, appropriate and specific place for every article and every place to
be used effectively for a particular activity and commodity. In other words, principles that every
piece of land and every article should be used properly, economically and in the best possible way.
Selection and appointment of the most suitable person to every job. There should be specific place
for everyone and everyone should have specific place. This principle also stresses scientific
selection and appointment of employees on every job.
11.Equity:
The principle of equality should be followed and applicable at every level of management. There
should not be any discrimination as regards caste, sex and religion. An effective management
always accords sympathetic and human treatment. The management should be kind, honest and
impartial with the employees. In other words, kindness and justice should be exercised by
management in dealing with their subordinates. This will create loyalty and devotion among the
employees. Thus, workers should be treated at par at every level.
12. Stability of Tenure of personnel:
Principle of stability is linked with long tenure of personnel in the organization. This means
production being a team work, an efficient management always builds a team of good workers. If
the members of the team go on changing the entire process of production will be disturbed. It is
always in the interest of the enterprise that its trusted, experienced and trained employees do not
leave the organization. Stability of job creates a sense of belongingness among workers who with
this feeling are encouraged to improve the quality and quantity of work.

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13. Initiative:
Under this principle, the successful management providesan opportunity to its employees to
suggest their new ideas,experiences and more convenient methods of work. The
employees, who has been working on the specific job sincelong discover now, better alternative
approach andtechnique of work. It will be more useful, if initiative to doso is provided to
employees. In simple, to ensure success, plans should be well formulated before they
areimplemented.
14.Team-Spirit or Esprit de corpS Morale (also known as esprit de corps (French
pronunciation: [ɛspʀi də kɔʀ] is the capacity of a group's members to maintain belief in an
institution or goal, particularly in the face of opposition or hardship. Morale is often
referenced by authority figures as a generic value judgment of the willpower, obedience, and
self-discipline of a group tasked with performing duties assigned by a superior. According to
Alexander H. Leighton, "morale is the capacity of a group of people to pull together
persistently and consistently in pursuit of a common purpose”. In order to achieve the best
possible results, individual and group efforts are to be effectively integrated and coordinated.
Production is a team work for which the whole-hearted support and co-operation of the
members at all levels is required. Everyone should sacrifice his personal interest and contribute
his best energies to achieve the best results. It refers to the spirit of loyalty, faithfulness on the
part of the members of the group which can be achieved by strong motivating recognition and
importance of the members for their valuable contribution, effective coordination, informal
mutual social relationship between members of the group and positive and constructive
approach of the management towards workers' welfare.
THE BEHAVIORAL SCHOOL
The behavioral school of management thought developed, in part, because of perceived weaknesses in the
assumptions of the classical school. The classical school emphasized efficiency, process, and principles. Some felt
that this emphasis disregarded important aspects of organizational life, particularly as it related to human behavior.
Thus, the behavioral school focused on trying to understand the factors that affect human behavior at work.
HUMAN RELATIONS.
The Hawthorne Experiments began in 1924 and continued through the early 1930s. A variety of researchers
participated in the studies, including Clair Turner, Fritz J. Roethlisberger, and Elton Mayo, whose respective books
on the studies are perhaps the best known. One of the major conclusions of the Hawthorne studies was that
workers' attitudes are associated with productivity. Another was that the workplace is a social system and informal
group influence could exert a powerful effect on individual behavior. A third was that the style of supervision is an
important factor in increasing workers' job satisfaction. The studies also found that organizations should take steps
to assist employees in adjusting to organizational life by fostering collaborative systems between labor and
management. Such conclusions sparked increasing interest in the human element at work; today, the Hawthorne
studies are generally credited as the impetus for the human relations school.
According to the human relations school, the manager should possess skills for diagnosing the causes of human
behavior at work, interpersonal communication, and motivating and leading workers. The focus became satisfying

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worker needs. If worker needs were satisfied, wisdom held, the workers would in turn be more productive. Thus,
the human relations school focuses on issues of communication, leadership, motivation, and group behavior. The
individuals who contributed to the school are too numerous to mention, but some of the best-known contributors
include Mary Parker Follett, Chester Barnard, Abraham Maslow, Kurt Lewin, Renais Likert, and Keith Davis. The
human relations school of thought still influences management theory and practice, as contemporary management
focuses much attention on human resource management, organizational behavior, and applied psychology in the
workplace.
BEHAVIORAL SCIENCE.
Behavioral science and the study of organizational behavior emerged in the 1950s and 1960s. The behavioral
science school was a natural progression of the human relations movement. It focused on applying conceptual and
analytical tools to the problem of understanding and predicting behavior in the workplace. However, the study of
behavioral science and organizational behavior was also a result of criticism of the human relations approach as
simplistic and manipulative in its assumptions about the relationship between worker attitudes and productivity.
The study of behavioral science in business schools was given increased credence by the 1959 Gordon and Howell
report on higher education, which emphasized the importance to management practitioners of understanding
human behavior.
The behavioral science school has contributed to the study of management through its focus on personality,
attitudes, values, motivation, group behavior, leadership, communication, and conflict, among other issues. Some
of the major contributors to this school include Douglas McGregor, Chris Argyris, Frederick Herzberg, Renais
Likert, and Ralph Stogdill, although there are many others.
THE QUANTITATIVE SCHOOL
During World War II, mathematicians, physicists, and other scientists joined together to solve military problems. The
quantitative school of management is a result of the research conducted during World War II. The quantitative approach to
management involves the use of quantitative techniques, such as statistics, information models, and computer simulations,
to improve decision making. This school consists of several branches, described in the following sections.
The management science school emerged to treat the problems associated with global warfare. Today, this view
encourages managers to use mathematics, statistics, and other quantitative techniques to make management
decisions.
 Managers can use computer models to figure out the best way to do something — saving both money and
time. Managers use several science applications.
 Mathematical forecasting helps make projections that are useful in the planning process.
 Inventory modeling helps control inventories by mathematically establishing how and when to order a
product.
 Queuing theory helps allocate service personnel or workstations to minimize customer waiting and service
cost.
MANAGEMENT SCIENCE AND MIS.
Management science (also called operations research) uses mathematical and statistical approaches to solve
management problems. It developed during World War II as strategists tried to apply scientific knowledge and
methods to the complex problems of war. Industry began to apply management science after the war. George

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Dantzig developed linear programming, an algebraic method to determine the optimal allocation of scarce
resources. Other tools used in industry include inventory control theory, goal programming, queuing models, and
simulation. The advent of the computer made many management science tools and concepts more practical for
industry. Increasingly, management science and management information systems (MIS) are intertwined. MIS
focuses on providing needed information to managers in a useful format and at the proper time. Decision support
systems (DSS) attempt to integrate decision models, data, and the decision maker into a system that supports better
management decisions.
The systems management theory has had a significant effect on management science. A system is an interrelated
set of elements functioning as a whole. An organization as a system is composed of four elements:
 Inputs — material or human resources
 Transformation processes — technological and managerial processes
 Outputs — products or services
 Feedback — reactions from the environment
PRODUCTION AND OPERATIONS MANAGEMENT.
This school focuses on the operation and control of the production process that transforms resources into finished
goods and services. It has its roots in scientific management but became an identifiable area of management study
after World War II. It uses many of the tools of management science.
Operations management emphasizes productivity and quality of both manufacturing and service organizations. W.
Edwards Deming exerted a tremendous influence in shaping modern ideas about improving productivity and
quality. Major areas of study within operations management include capacity planning, facilities location, facilities
layout, materials requirement planning, scheduling, purchasing and inventory control, quality control, computer
integrated manufacturing, just-in-time inventory systems, and flexible manufacturing systems.
SYSTEMS SCHOOL
The systems school focuses on understanding the organization as an open system that transforms inputs into
outputs. This school is based on the work of a biologist, Ludwig von Bertalanffy, who believed that a general
systems model could be used to unite science. Early contributors to this school included Kenneth Boulding,
Richard Johnson, Fremont Kast, and James Rosenzweig.
The systems school began to have a strong impact on management thought in the 1960s as a way of thinking about
managing techniques that would allow managers to relate different specialties and parts of the company to one
another, as well as to external environmental factors. The systems school focuses on the organization as a whole,
its interaction with the environment, and its need to achieve equilibrium. General systems theory received a great
deal of attention in the 1960s, but its influence on management thought has diminished somewhat. It has been
criticized as too abstract and too complex. However, many of the ideas inherent in the systems school formed the
basis for the contingency school of management.

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 An organization that interacts little with its external environment (outside environment) and
therefore receives little feedback from it is called a closed system.
 An open system, in contrast, interacts continually with its environment. Therefore, it is well
informed about changes within its surroundings and its position relative to these changes.
 A subsystem is any system that is part of a larger one.
 Entropy is the tendency of systems to deteriorate or break down over time.
 Synergy is the ability of the whole system to equal more than the sum of its parts.
CONTINGENCY SCHOOL
The contingency school focuses on applying management principles and processes as dictated by the unique
characteristics of each situation. It emphasizes that there is no one best way to manage and that it depends on
various situational factors, such as the external environment, technology, organizational characteristics,
characteristics of the manager, and characteristics of the subordinates. Contingency theorists often implicitly or
explicitly criticize the classical school for its emphasis on the universality of management principles; however,
most classical writers recognized the need to consider aspects of the situation when applying management
principles.
The contingency school originated in the 1960s. It has been applied primarily to management issues such as
organizational design, job design, motivation, and leadership style. For example, optimal organizational structure
has been theorized to depend upon organizational size, technology, and environmental uncertainty; optimal
leadership style, meanwhile, has been theorized to depend upon a variety of factors, including task structure,
position power, characteristics of the work group, characteristics of individual subordinates, quality requirements,
and problem structure, to name a few. A few of the major contributors to this school of management thought
include Joan Woodward, Paul Lawrence, Jay Lorsch, and Fred Fiedler, among many others.
Contingency management recognizes that there is no one best way to manage. In the contingency perspective,
managers are faced with the task of determining which managerial approach is likely to be most effective in a
given situation. For example, the approach used to manage a group of teenagers working in a fast‐food restaurant
would be very different from the approach used to manage a medical research team trying to find a cure for a
disease.
The Managerial Environment

GIMS, GIET, Gunupur
The Internal Environment
• Management and Culture
– Organizational culture
• The values, beliefs, and assumptions about appropriate behavior that
members of an organization share.
• Mission
– A organization’s purpose or reason for being.
• Top management’s responsibility is to develop a mission with clear
measurable objectives.
• Should be relevant to all stakeholders’ interests.
• Is an expression of the ends the organization strives to attain.
• Structure
– The way in which resources are grouped to effectively achieve the organization’s
mission.
– Organizations structure resources to transform inputs into outputs.
– All of an organization’s resources must be structured effectively to achieve its
mission.
The External Environment
• Task Factors
• General Factors
• Chaos and Interactive Management
• Task Factors
• Customers
• Their needs decide what products businesses offer.
• Competition

GIMS, GIET, Gunupur
Competitors’ business practices often have to be duplicated to maintain customer
value.
• Suppliers
• Poor quality suppliers mean poor quality products.
• Labor force
• Quality labor is needed to produce quality products.
• Shareholders
The board of directors monitors management and provides direction for the organization
• General Factors
– Society
• Businesses are pressured by societal forces to behave in an acceptable
manner.
– Technology
• Firms must stay current on technology to stay competitive and provide
customer value.
– The Economy
• Economic activity has both short and long-term effects on an organization’s
ability to provide customer value.
– Governments
Policies, rules, and regulations affect what, how much, and how business is conducted
• Chaos and Interactive Management
– Reactive managers
• Make changes only when forced to by external factors.
– Responsive managers
• Try to adapt to the environment by predicting and preparing for change
before they are required to do so.
– Interactive managers
• Design a desirable future and invent ways of bringing it about by trying to
prevent, not prepare for, threats and to create, not exploit, opportunities.

Principles of Management

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