Principles of Management

Principles of Management
Prabhu Krishnamurthy Assistant Professor KCT Business School

Management - Definition
Process consisting of planning, organizing, actuating and controlling, performed to determine and accomplish the objectives by the use of people and resources - George R Terry

Management - Definition
Art of getting things done by others - Mary Parker Follett To forecast, plan, organise, command, coordinate and control - Henry Foyal (Father of Modern Management)

Characteristics of Management The main characteristics of management are as follows: I. Management is an activity II. Invisible Force III. Goal Oriented IV. Accomplishment through the efforts of Others V. Universal activity VI. Art as well as Science VII. Multidisciplinary Knowledge VIII. Management is distinct from ownership IX. Need at all levels X. Integrated process

Frederick Winslow Taylor
American Mechanical Engineer Focused on industrial efficiency through scientific techniques (7) Referred as Father of Scientific Management One of the first few Management Consultants 1. Work Study Time study – recording the time of commencement and completion of the several elements of a job. Motion Study – studying the motions / actions performed by the worker when performing the job. 2. Application of scientific methods: Observation and recording of the facts of a problem – situation with a view to determine the best method to perform a job. 3. Incentive method: Differential piece wage rate – One for the worker achieved or exceeded the standard output. The other for the standard worker. 4. Principles of Management: Developed theory on functional authority. 5. Experiments: Shovelling – different sizes of shovels for different types of materials Metal cutting – most effective way of cutting metals while keeping them cool 6. Standardization Cost and time for each piece of work – optimum processes of production for different products 7. Mental revolution Workers and managers had to work in harmony for mutual progress and prosperity. ( )

Henry Foyal French Industrialist
Principles of Administration to be applied in any field of organized activity Focus provided on top management 14 principles of management Referred as father of Modern Management 14 Principles of Management 1. Division of Work 2. Authority and Responsibility 3. Discipline 4. Unity of Command 5. Unity of Direction 6. Sub-ordination of individual interest to group interest 7. Remuneration of personnel 8. Centralization 9. Scalar Chain 10. Order 11. Equity 12. Stability of tenure of personnel 13. Initiative 14. Esprit de corps (Loyalty and Devotion) ( )

Mary Parker Follett American Social Worker and Management consultant
Focused on psychology behind group actions Referred as Mother of Scientific Management She admonished overmanaging employees, a process now known as micromanaging, as “bossism”. She felt that business ought to promote unity of society . She believed that the principle executive of an undertaking should be less of an autocrat and more of a coordinator and organiser of the skills of other men– a skill which would give him authority in the matters in which he was an expert. ( )

George Elton Mayo Australian psychologist, sociologist and organization theorist Focused on workers attitude Raising productivity level ( )

Management - Qualities
Dynamic and life giving element Coordinates current activities and plan future ones Arbitrates disputes and provides leadership Dynamic and life giving element – No business runs on its own, even on momentum. Every business needs repeated stimulus or encouragement and support from the management. Hence, management is dynamic and life giving element without which resources will remain as mere resources and there will be no production. Ex: Breathing in different environment; Watering a plant; Refueling the vehicle; Sleeping (to manage one’s system in shape) etc

Management - Importance
Accomplishment of Group Goals Efficient running of an organization Sound organizational structure Accomplishment of Group Goals - Sound resource planning - Changing needs - Consistent direction and control Efficient running of an organization - Management involves its employees mentally and emotionally - Involvement creates motivation - Motivation results in quality output, increase in productivity and reduction in wastage Sound Organizational Structure - Creates organization structure - Defines authority and responsibility - Staffing with appropriate skills - Environment

Management - Functions
Planning Organizing Staffing Directing Leading Controlling

Functions - Planning Looking ahead and preparing for future
Process of deciding business objectives and identifying methods to accomplish What is to be done? How and where is it to be done? Who is to do it? How results are to be evaluated? Is a function performed by managers at all levels – Top, Middle and Supervisory

Functions - Organizing
Require humans and materials Create organization Staffing Success of organization depends on how well it can coordinate the various resources

Functions - Directing Can also be referred as leading, motivating, actuating Involves communication, leadership and motivation Communication – process of passing information and understanding from one person to the other Leadership – process by which manager guides and influences his team members to accomplish certain tasks Motivation – Act of stimulating or inspiring workers Financial – salary hike, bonus, profit – sharing etc Non – financial – job security, promotions, recognition, praise etc

Functions - Controlling
Establishing standards of performance Measuring current performance and comparing it against the established standards Taking action to correct any performance that does not meet standards

Concept of Scientific Management
Science, not Rule of Thumb Harmony, not Discord Cooperation, not Individualism Maximum Output, Not restricted Output Development of each man to his greatest efficiency and prosperity. Science, not Rule of Thumb : The time and methods of doing any part of the work are fixed objectively. Tools and working conditions arranged scientifically. 2. Harmony, not Discord: Provide adequate remuneration to workers Workers perform their jobs sincerely and enthusiastically Management will gain increased productivity. 3. Cooperation, not Individualism: The Management should promote cooperation between workers and management and between workers. Adopt an enlightened attitude towards workers Acknowledging their importance in raising productivity levels. Provide them Standard Materials, Tools, Working conditions and Training 4. Maximum Output, Not restricted Output For the management, maximum output leads to increased profits. For the workers , it leads to increase in wages and bonus . Development of each man to his greatest efficiency and prosperity. Taylor emphasized on Scientific observation of each element of a workers job. Job specialization Proper selection, training and development Planning and Scheduling of work Standardization in operations , working conditions Rewards for efficiency , wage incentives

Elements or Techniques of Scientific Management
1.Work Study Method Study Time Study Motion Fatigue study 2.Application of Scientific methods 3.Incentive method 4. Principles of Management 5. Experiments 6. Standardization 7. Mental Revolution 1.Work Study Method Study Selection of job to be studied Recording of details of the job and methods employed to perform it. Critical analysis of the job Development of the new method Installation of the new method Maintenance of the new method Time Study - Using a special watch to note the time of commencement and completion of each of the elements of a job. It necessitates splitting up of a job into number of parts to know how long it takes each of the different workers engaged therein to perform it. Motion Study - Studying the motions performed by a worker while executing a job. Fatigue study - Study of levels of physical and mental exhaustion . Taylor introduced suitable rest intervals as also the optimum size of tools to be used while performing any job. 2.Application of Scientific methods Consists of recording the facts of a problem – situation to determine the best method to perform a job. 3.Incentive method Taylor evolved Differential Piece Wage Rate System One for the worker who achieved the standard output and the other for the standard worker. 4. Principles of Management Taylor developed a theory on Functional Authority (Functional Foremanship). Everything in the organization had to be done by a plan Planning and Execution to be done separately. Profitability and Efficiency is improved through specialized knowledge and skill 5. Experiments Shovelling - Designed different types of shovels for different types of materials. Metal cutting – Designed most effective way of cutting metals while keeping them cool. 6. Standardisation - There are predetermined standards such as task , methods, material , quality and time. For Effective management workers and managers had to work in harmony , not as two hostile groups but as partners in mutual progress and prosperity. 7. Mental Revolution

Merits of Scientific Management
For Business Reduction in Costs Production Planning and Controlling Standardisation Rise in Profits For Workers Improved working conditions Improvement in Standard of living Free training For Society Increased Production Industrial peace Greater Economic Prosperity

Fayol’s Theory of Management
According to Fayol, the activities of the industries are divided into six groups like Technical, Commercial , Financial , Security, Accounting and MANAGERIAL. Fayols studies are divided into three parts Managerial Qualities and Planning Principles of Management Elements of Management

Managerial Qualities and Training
Physical and Mental ability Qualities of a Manager Energy Willingness to accept responsibility Initiative Loyalty Tact and Dignity

General Principles of Management
1.Division of Work Makes it possible to specialise in a single thing rather in doing everything by oneself. 2.Authority & Responsibility Responsibility without Authority will make a person ineffective. Authority without Responsibility might promote irresponsible behavior on his part. 1.Division of Work Makes it possible to specialise in a single thing rather in doing everything by oneself. 2.Authority & Responsibility Responsibility without Authority will make a person ineffective. Authority without Responsibility might promote irresponsible behavior on his part. Makes it possible to specialise in a single thing rather in doing everything by oneself.

3. Discipline “Is an essence of Obedience, Application , Energy Behavior and Outward marks of respect observed in accordance with the standing agreements between the firms and its employees”

4. Unity of Command An employee should receive orders from only one superior.

5. Unity of Direction Efforts of all members of the organisation should be directed towards the achievement of common goals

6.Subordination of Individual interests to group interests.
Interests of the group, be it a family or a business undertaking, should be accorded priority over the interests of its individual members.

7. Remuneration of Personnel
Remuneration of employees should be fair and should satisfy both employers and employees.

8. Centralisation The decision making authority is vested in the hands of one or few individuals. Everything that reduces the work of the subordinates. The manager can centralize authority only if he depends on his Intelligence , Experience, and the decision making ability.

9. Scalar Chain

10. Order Two aspects of order
“ A place for everything and everything in its place” – Material order “A place for everyone and everyone in his place” – Social order (The right man in the right place)

12. Stability of tenure of personnel
11. Equity Combination of Fairness, Kindliness and justice. Only a manager with good nature, fair judgment and experience can apply equity. 12. Stability of tenure of personnel Even an employee with all requisite abilities needs more to time to gain familiarity with his work and to specialise therein. .

13. Initiative Initiative is the power of thinking out a plan and ensuring its successful implementation.

14. Esprit de corps The spirit of loyalty and devotion which unites the members of the group or society.

Elements of Management
Planning Organising Directing Coordination and Control.

Planning Definition “Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. Planning bridges the gap from where we are to where we want to go. It makes it possible for things to occur which would not otherwise happen”. - Koontz and O'Donnell.

Nature of Planning 1. A thinking process 2. Forecasting v Planning
3. Accomplishment of group objectives 4. Choice between alternatives 5.Pervasiveness of Planning 6.Flexibility 7. Integrated process Nature of Planning 1. A thinking process – An intellectual exercise , existing resources adjusted and adapted to meet the emerging opportunities. 2. Forecasting v Planning Forecasting – What one expects to happen if no changes are made to escape that happening . Planning – What one wants to happen through Assumptions, estimates, judgments but in the modern context planning as become highly scientific based on quantified data and information . 3. Accomplishment of group objectives An organization is an assorted group of widely varied human beings, Planning is essential to any goal – directed activity, enables people with divergent perceptions and motivations to work together to achieve common goals. 4. Choice between alternatives Planning seeks to adjust and adapt the existing mix of resources to meet the emerging opportunities. Decisions to be taken by the management Objectives of the business(Profitability, Growth, Consumer Satisfaction, Service.. Etc) Strategy to be adopted Determining the assignment of tasks. 5.Pervasiveness of Planning Involvement of managers at all levels is essential to the success of planning. People are highly motivated and gives them psychological satisfaction, when they are offered involvement in meeting a challenge. 6.Flexibility Only through proper planning the manager can adjust and adapt the resources as desired. 7. Integrated process Involves selection of achievable objectives and formulation of simple and realistic policies , programmes, procedures etc..

Process of Planning 1.Identification of the Opportunity or Problem 2. Collection and Analysis of relevant information 3. Establishment of Objectives. 4. Determination of Planning premises 5. Examining alternative courses of action 6. Weighing alternative courses of action 7. Selection a course 8. Determining secondary plans 9. Providing for future evaluation. 1.Identification of the Opportunity or Problem The constraints and threats provided by the environment Government regulations Changing technology Customer preferences Hike in oil prices The organization should adapt and attune to its environment through proper planning. 2. Collection and Analysis of relevant information Effective planning depends on the collection of Quality , Relevance and valid information from various sources External – suppliers, customers, newspapers, magazines etc. Internal – meetings, reports, contacts with superiors and subordinates. Analysis of information – price/demand, quality/cost, wage increase/productivity.. 3. Establishment of Objectives. Objectives need to be established in every area where performance and results are to have a direct effect on survival and growth of the business. Objectives is a part of the learning – adapting responses of the organisation. Market Leadership – quality, cost reduction, customer satisfaction, etc.. 4. Determination of Planning premises Planning has to take into account numerous uncertainties(Internal & External) in its environment . It is difficult to accurately predict the future environmental conditions like the Fiscal policies of the government Population trends Consumer tastes and preferences .. Etc Planning has necessarily to be based on assumptions Realistic , positive and pessimistic assumptions to be formulated which are to critically affect the enterprise plans. 5. Examining alternative courses of action Objective is to maximize profits How?? 6. Weighing alternative courses of action 7. Selection a course It can be directed by individual preferences and prejudices. A plan ultimately chosen should be the optimum. 8. Determining secondary plans To be prepared for the execution of basic plans. 9. Providing for future evaluation. It is necessary to devise a system for continuous evaluation and appraisal of the plan to identify the shortcomings and initiate corrective action in time

Types of Planning On the basis of the length of the planning horizon, Long term plan (5 to 15 years) Involves great deal of uncertainty due to occurrence of certain events Technological changes Consumer behavior Governmental policies etc… Medium term plans(2 to 5 Years) Purchase of materials Labour Operational expenses

Short term plans Inventory planning Production for the month Work methods Recruitment Depending on the Nature and Scope Standing (or) 2. Single use plans repeated use plans Vision & Mission Objectives Programmes Policies Budgets Procedures Rules Strategies

Standing or repeated use plans Mission or Purpose –
Short but precises one or two sentence statements used by companies to explain 'who we are., what we do, and where we're going‘ Identifies the basic function or task of an agency or an enterprise or an institution. The purpose of a Business – Production and Distribution of goods and services Court – Interpretation of Laws and their application University – Teaching , Research and Services to the community.

Objectives Provides the organisation with the purpose that keeps its attention and efforts focussed towards a particular direction. Kinds of Objectives - SMART Market standing Innovation Productivity Profitability Performance and Development Public responsibility

Management by Objectives
Managers at subordinate levels participate in the setting of targets so as to ensure their achievement on the basis of formal job specifications laying down key result areas. 3 steps in the MBO process Setting of Objectives: Corporate objectives are defined by BOD Job specification Defining KRA’s , formal responsibilities It involves meetings between superiors and subordinates throughout the organisation for mutual establishment of Objectives.

2.Intermediate review To provide adequate control information to enable the superiors and subordinates to review periodically their performance towards the standards and targets set. 3. Final Review. Final evaluation of performance of subordinates done by their superiors. Merits of MBO Better communication between superior & subordinates. Clarity in job assignments Employees are effectively motivated Improvement of planned activity.

Policies Policies are general statements or understandings that guide managers’ thinking in decision making. They ensure that decisions taken fall within certain boundaries. Strategies Concerns the direction in which the human and material resources will be applied in order to increase the chances of achieving selected objectives. Procedures Objectives and policies may be well established but they seldom produce action. Procedures lay down the ways and means through which objectives and policies are accomplished and implemented.

Rules A rule means a decision made by the management regarding what is to be done and what is not to be done. 2. Single use plans They are designed to meet the non repetitive situations. Programmes Budgets

Organisation

Organization Organization is the machine of management in its achievement of the ends as determined by the administration. - Oliver Sheldon The basic purpose of the organization is to achieve the stated objectives . It also implies a formalized intentional structure of roles and positions. Organising is the establishment of effective authority relationship among selected work, persons, and work places in order for the group to work together efficiently.

Nature and purpose of Organising.
Division of Labour It is at the root of any organisation structure. In a manufacturing enterprise, the total activities may be divided and grouped under Production Marketing Finance and Personnel Even with each of these groups or departments , one or more sub departments are also created. 2. Coordination Organisation has to adopt suitable methods to ensure that there is proper coordination of the different activities performed at various work points

Objectives – Organisation cannot exist for long without objectives and goals.
Social system Activities of the organisation are governed by social and psychological needs. Authority-responsibility structure Managerial authority is the right to act to direct the action of others in the accomplishment of organization goals. 6. Communication Management is concerned with working with others, and unless there is a proper understanding between people, it cannot be effective.

Purpose of Organisation
Facilitates administration Helps optimum utilisation of resources Coordination and Direction Facilitates growth and diversification Stimulates creativity Enlarge abilities of employees

Types of Organisation Structure
The type of an organisation is determined by the nature and size of an enterprise. Military or Line Functional Line and Staff Project Matrix Committee Free-Form

Military or Line Organisation
Oldest organisation structure , vertical line of authority. Greater decision making authority - placed at the top Lesser decision making authority - placed at the bottom Line executives – Involved in the basic activities of the organisation, make things happen for the accomplishment of goals, backbone of the organisation. Every person is accountable to the one and only person who delegates authority and assigns duties to him Kinds of Line organisation. Pure line organisation Departmental line organisation

Military or Line Organisation
General Manager Manager – Eastern Division Manager – District 1 Manager – District 2 Manager – District 3 Manager – Western Division Manager – District 4 Manager – District 5

Line authority - flows down the chain of command.
Line and Staff Organisation Line authority - flows down the chain of command. Example - Production supervisor gets the right to direct an employee to operate a particular machine. VP of finance gets the right to request a certain report from a department head. An individual gets a certain degree of power relating to the performance of an organizational task. Staff authority is the right to advise or counsel those with line authority. Example - HRD employees help other departments by selecting and developing a qualified workforce. A QC manager aids a production manager by determining the acceptable quality level of products or services at a manufacturing company, initiating quality programs, and carrying out statistical analysis to ensure compliance with quality standards.

Line and Staff Organisation

Functional Organisation
The work is organised on the basis of specialisation. It has developed from the increasing complexity of operations in an enterprise and the need to have specialists to aid line executives. Functional organisation at the Top Whether a particular worker is in production, finance or marketing department, questions relating to his salary , promotion etc will be decided by the personnel manager. Functional organisation at the Bottom The foreman should not be burdened with looking after all the aspects of his work, instead, the specialists can help him solving problems of a technical nature.

Project Organisation It is set up with the object of overcoming the major weaknesses of the functional organization , namely, Absence of unity of command Delay in decision making Lack of Coordination A project organisation is composed of a core of functional departments though its main units are programmes or projects . A project organisation is suitable in case of accomplishment of a Small no of large projects.

Matrix Organisation Is referred to as the “multiple command system” has two kinds of command. First chain – Functional, The flow of authority is vertical. Second chain – Horizontal, depicted by a project team which is led by the project manager who is an expert in his team’s area of specialization.

Committee Organisation
A committee is a group of persons taken, elected or selected from the entire organisation to do some assigned work collectively. There are various types of committees divided on the basis of time, function, character and structure. On the basis of time Standing Committee – Permanent body formed for a specific purpose. Adhoc committee – Temporary body formed for a special purpose. On the basis of functions Managerial Committee – To undertake managerial functions (Production , Finance, Marketing, etc…) Non Managerial Committee.

On the basis of Structure
Formal – Established as a part of the organisation structure. Informal – Does not form a part of the organisation structure. On the basis of character. Line committee – vested with the power to decide and execute the decision Staff Committee – Advisory committee meant to render advices in different fields. Free – Form Organisation A free form organisation in many ways similar to the project and matrix organisation. It is also described as an Organic or Ad hoc Organisation.

Departmentation Departmentation by enterprise function means grouping of activities according to the functions of an enterprise, such as production , selling and financing Departmentation is a means of dividing a large organization into smaller , flexible units Er.Sartaj Singh Bajwa

Advantages Increase the efficiency of the organization as various activities are grouped together Furnishes means of tight control at the top. Simplifies training. It provides for fixation of standards of performance and ensures effective control Creates opportunities for the departmental heads to take initiative Er.Sartaj Singh Bajwa

Disadvantages Reduces coordination between functions as the organization is divided into various parts Responsibilities for profits is at top only. Slow adaptation to change in environment. It increases the levels of management which is expensive and thus increases the gap between the top management and the workers Departmentation creates difficulties of communication among the various departments of the organization Er.Sartaj Singh Bajwa

Factors affecting Departmentation
To get the benefits of specialization Control should be effective so as to ensure clear authority and responsibility Coordination should be taken into consideration Key activities need to be separated Expenses involved in creating separate departments Er.Sartaj Singh Bajwa

Basis Of Departmentation
Functional Departmentation Product wise Departmentation Territorial or Geographical Departmentation Process wise Departmentation Customer wise Departmentation Time wise Departmentation Er.Sartaj Singh Bajwa

Functional Departmentation
Grouping of common or homogeneous activities to form an organization unit is known as functional departmentation Further functions in an organization are divided in two categories basic and secondary functions Basic functions are those which are necessary for the smooth running of the business like production ,marketing , finance When span of management is too large then further departments are created within the main departments they take care of secondary functions In this case like the basic function is marketing but it may further be divided into advertisement , sales , market research Er.Sartaj Singh Bajwa

Product wise Departmentation
Product departmentation involves the grouping together of all the activities necessary to manufacture a product or product line Eg In an automobile organization the departmentation could be car division , truck division , bus division Er.Sartaj Singh Bajwa

DEPARTMENTATION BY TERRITORY OR GEOGRAPHY
Departmentation by territory or geography means “ Grouping of activities by area or territory is common in enterprises operating over wide geographic areas”. Organizations which are involved in banking , insurance , transportation Eg India could be divided into north , south , east , west , central zones Further North zone can be divided into Chandigarh , new Delhi , Jalandhar , Ajmer divisions Er.Sartaj Singh Bajwa

Process Departmentation
In this processes involved in production or various type of equipments used are taken as basis of departmentation The basic aim to do process departmentation is to achieve economic benefit Eg process departmentation in case of textile organization can be by dividing the production into spinning , dyeing , weaving , finishing departments Er.Sartaj Singh Bajwa

Customer wise Departmentation
Grouping of activities around marketing channels involves making an organization structure reflect the ways an organization reaches the ultimate customer Advantage of this type is that it focuses on customer who are the ultimate suppliers of money to the organization Eg in pharmaceutical companies different customers could be doctors , hospitals , government , retail stores Further it could be wholesale , retail , export Er.Sartaj Singh Bajwa

Time wise Departmentation
In some organizations where work is performed through day and night , the work is divided into shifts Thus when an organization may operates on three shifts, three different departments may exist Er.Sartaj Singh Bajwa

For any queries or support, please write to me at prabhu@kctbs.ac.in

 All the Best 

Principles of Management

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