Chapter 2

Principles of Management

What do you understand by the “principles of management”? 2 marks

Principles are fundamental truth that explains the relationship between variables factors. Principles are based on scientific study, inquiry and analysis. They establish relationship between causes and effect. They are universally acceptable, verifiable and

their results predictable. Since management principles are fundamental truth, they provide guidelines for managerial decision making.

Explain the nature of principles of management 5 marks

State any two characteristics of the principles of management 2 marks

Briefly explain the characteristics of principles of management 2 marks

Management principles are fundamental truth. These principles help management as guidelines in decision making. Following are the following features highlights the characteristics of management principles:

1. Universal application

Management principles are applied in every situation where the objectives are attained through group efforts. All social, economic, political or religious organizations apply management principles for their successful operations. Every organization must make the best possible use of its available resources by the application of management principles such as planning, organizing, staffing directing and controlling.

2. Flexibility

Management principles are dynamic guidelines not static rules. Management helps the business to maximize the profit at minimum cost. The business situations and the socio-economic environment are rapidly changing. Therefore the management principles are dynamic to adapt to the changing situations.

3. General Statements

Management principles are concerned mostly with human behavior, which cannot be tested under laboratory conditions. Human behavior cannot be predicted accurately. Therefore management principles are not as exact as the principles of physical science.

4. Influencing human behavior

Management explains how to get work done by people. Human element is an essential factor of production. It activates and extracts work from other factors also. Each person is different from other as regards his ability, knowledge, skills social status, attitudes and ideologies. Management is concerned with the integration of individual efforts to group objectives.

5. Cause and effect relationship

Management principles also display a cause and effect relationship. They indicate the consequences of certain action or inaction in the business. For example if he wages are paid on piece-rate system, the quantity of work will increase, but the quality will suffer. The principle of unity of command will avoid confusion, duplication and overlapping.

6. Equal importance

All principles of management are equally important. There is no superiority or inferiority between them. No one principle has greater significance than the other. We cannot say that the principle of unity of command is more important than the principle of unity of direction or vice versa.

7. Careful and discreet application

Management principles cannot be applied blindly because these principles are relative, not absolute. These principles should be applied according to original needs and situations.

8. Decision making

Management is always concerned with decision-making. Factors of production are scarce and they have alternative uses. Management has to decide the best possible combination of available resources and the most suitable technique of production. Management principles are the source of decision making process.

Describe the importance of principles of management 5 marks

Explain in brief the meaning of “universality of management principles” 2 marks

Management principles are essential for the successful running of business organization. These principles are guideline to management. They highlight the areas where the management should pay immediate attention. These principles simplify the process of management, increase the all round efficiency of management and help in the achievement of objectives. The significance of management principles can be summarized as follows:

1. Generating sound understanding

Management principles generate sound understanding of the complex problem of business. They develop scientific approach to the problem to arrive at the right solutions to the problems. The management cannot adopt ‘trial and error, methods in a business.

2. Increasing Efficiency

Management principles provide guidelines to management in handling complex situations in the business. It facilitates management in performing their duties smoothly. The efficiency of the management is increased when the management adopts management principles in decision making. The work will be systematic and efficient.

3. Directing the areas of training

The management principles identify the present and prospective areas of management where managers should be specially trained. Besides situations are themselves complex and they change considerably with the change in business environment. Management principles identify these areas and impart required training to business executives

4. Guide to research work in management

Management principles are guidelines which require necessary modifications with the changing situations. In order to make management meaningful and practical, researchers examine these principles, justify their utility and suggest modifications if necessary.

5. Achieving social objectives

Management develops spirit of cooperation and coordination among workers and employees. It also helps in the optimum utilization of social resources. The principles of management are directed towards maximizing profit without sacrificing the social objectives. Modern management is keen to fulfill the social objectives along with the economic objectives.

 Fayol’s Principles of Management

(There are 14 principles of management. They never come as a single question. You must study all the principles. Two questions are given here only as examples)

Explain the principle of equity   2 marks

Describe Fayol’s principle of unity of direction in about 50 words. 3 Marks

Henry Fayol (1841 – 1925) was a French Industrialist and management expert. He developed the theory of management. According to Fayol, managerial excellence is a technical ability and can be acquired. He was the pioneer of formal education in management. He views management as more technical at lower level and more administrative at higher level. He suggests the following 14 principles of management:

1. Division of work

Henry Fayol stressed on specialization of jobs. It requires that every job and its part should be identified as a separate work and be entrusted to most suitable person. The quality and quantity of production will improve by assigning the work to the right person. According to Fayol “the worker always on the same post, the manger always concerned with the same matters, acquire an ability sureness and accuracy which increases heir output”

2. Parity of authority and responsibility

Authority and responsibility are co-existing. If authority is granted to a person, he should also be made responsible. In the same way if anybody is made responsible for any job, he should also have the required authority. An efficient manager makes the best use of his authority and does not escape from responsibility.

3. Discipline

According to Fayol, discipline means sincerity about the work. The workers should have faith in the policies and programmes of the business. Fayol does not advocate warning, fines, suspension and dismissals of workers for maintaining discipline. These punishments should be rarely used. A well-disciplined work force is essential to improve the quality and quantity of production.

Discipline is obedience, application, energy, behavior, and respect. Discipline is absolutely essential for the smooth running of business and without discipline no enterprise could prosper. When a defect in discipline is apparent or when relations between superiors and subordinates leave much to be desired, responsibility for this must not be cast heedlessly, and without going further, on the poor state of the team, because the ill mostly results from the ineptitude of the leaders

4. Unity of command

According to Fayol, every employee should receive orders and instructions from one boss only. The employee should be responsible and accountable to him only, the violation of this principle will have the following consequences:

1. It will be very difficult to maintain discipline

2. Duplication of work

3. Overlapping of orders and instructions

4. Escaping responsibility

5. Disrespect to work and management

Unity of command will have the following benefits:

1. Orders and instructions will be honoured

2. Employees will receive exact orders

3. Fixing responsibility will be easy in case of default

4. Easier to achieve goals

5. No duplication of work

Thus unity of command makes the enterprise disciplined, stable and organized. It promotes harmonious relationship between superiors and subordinates in an organization.

5. Unity of direction

One head and one plan for a group of activities having the same objective (centralization of authority). There should be only one plan, and the person should be responsible for supervising it; all activities have the same objective should be supervised by one person.

Difference between unity of command and unity of direction

6. Subordination of Individual to General Interest

Fayol believed that the individual should subordinate self-interest to the general good. This is difficult, though. In a work situation in which employees perceive no managerial concern for individual well-being. It is incumbent upon management to reduce conflict between the individual and the general wellbeing wherever possible. The interest of the home should come before that of its members and that the interest of the State should have pride of place over that of one citizen or group of citizens. Constant supervision is needed to ensure that the general interest will not be lost sight in favor of individual interest

7. Remuneration

Remuneration for work must be fair and accurate, affording maximum satisfaction for both employee and employer. The manager must examine tasks, identify responsibilities, and decide upon a just level of compensation. The next step is to find someone to carry out the defined duties for the established salaries. Fayol recommends that non-financial benefits such as free education, medical facility, residential facility etc. must be provided.

8. Centralization

Fayol thought centralization of authority to be desirable, at least for overall control. Certainly, both formulation of policy and the generation of basic rules and procedures ought to be centralized. Managerial decisions may be made at a lower level, but only within the framework established by the central administrative authority. Centralization belongs to the natural order. The degree of centralization must vary according to different cases. If the moral worth of the manager, his strength, intelligence, experience and swiftness of thought allow him to have a wide span of activities he will be able to carry centralization quite far. The choice between centralization and decentralization must be taking after taking into consideration the efficiency, experience and decision making capacity of the managers.

According to Fayol there should be centralization in small units and proper decentralization in big organizations.

9. Lines of Command or Scalar Chain

The scalar chain is the chain of superiors ranging from the ultimate authority to the lowest ranks. Organizations need a formalized hierarchy that reflects the flow of authority and responsibility. Fayol suggested that a chain of command is necessary most of the time, but, at times, it is best ignored. In case of urgency the established chains can be violated and Gang Plank (direct contact) between the two concerned authorities, departments or between superior and subordinates may be established.

The following diagram illustrates this:

In normal practice messages should pass through the established chain ie. E -- D—C—B—A—L—M—N—O. In case of emergency direct contact between E and O may be established.

Utility of Gang Plank (direct contact)

The idea of gangplank suggested by Henry Fayol shows that management principles are flexible and not absolute. If we follow the principle of scalar chain strictly there will be possibility of unnecessary delay in the communication. Business opportunities may be lost because the communication not reaching the person concerned on time.

Business opportunities must be immediately availed of. If we need to make direct contact with the concerned employee for the purpose, management the established procedure should not stand in the way. When immediate solutions are required for certain problem, the concerned person can by-pass the established channel and seek emergency help.

10. Order

Relationships between various units must be established in a logical, rational manner, so that these units work in harmony. In the case of material things it means "A place for everything and everything in its place". In case of human order -- "A place for everyone and everyone in his place"

11. Equity

Managers/supervisors elicit loyalty from employees only when they deal with them as individual persons. Employees must be seen as persons, not things to be manipulated. If managers hope to create a good working environment, they must treat everyone fairly and with equity. For the employees to be encouraged to carry out duties with all the devotion and loyalty’ they must be treated with kindliness. Equity results from the combination of kindliness and justice

12. Stability of Tenure

A high rate of employees leaving the organization is expensive for an organization. Lack of stability of work force is both a cause and an effect of bad management, and one way of evaluating a manager/supervisor is to examine the resignation rate of persons working under that manager. Stability of work force may or may not indicate a good manager, but a high rate of resignation of employees indicates the existence of a problem that the manager/supervisor has failed to correct. Naturally, every time an employee leaves, the organization incurs significant costs in time and money spent recruiting, selecting, and training a new employee. Furthermore, the new employee will require time to become an integrated member of the staff. A person who is often absent can create bottlenecks in the flow of material, hindering the entire organization's efficiency (and often costing the organization far more than his or her salary).

Another form of absenteeism not usually reflected in statistics is that of employees who are "present but absent." These people arrive at the last possible moment, take longer than necessary to set up for work, begin coffee breaks early and drag them out, extend lunches beyond the normal schedule, and push cleanup further and further into the working period. The equivalent of one workday per week may be lost by such persons; if this happens, the supervisor (and the supervisor's supervisor} must examine the situation.

13. Initiative

Initiative should be encouraged at all levels and subordinates should be asked to submit plans and new ideas. All of these should be carefully reviewed, and each person who makes a suggestion should be informed as to its status. Although this principle is given lip service by many organizations, in actuality, it is often not practiced. This was not Fayol's intention, and it should not be the intention of a good manager.

14. Esprit de Corps

It refers to team spirit and harmony in work group and mutual understanding among workers. As a good Frenchman, Fayol believed in esprit de corps. He felt that all successful organizations survive only when a feeling of unity pervades the group and that viable organizations cleat with crises as a team. Managers should take steps to create a sense of belonging among the members of a work group. When there is spirit of cooperation default is minimized.

Scientific Management – Principles and Techniques

Frederic Winslow Taylor is regarded as the father of Scientific Management. He published works on scientific management based on his keen observation and experience. He started his career as an operator in a machine-making factory and rose to the position of its Chief Engineer of Midvale Steel Works in 1884. He later joined Bethlehem Steel Company where he introduced scientific management.

By far the most influential person of the time and someone, who has had an impact on management service practice as well as on management thought up to the present day, was F. W. Taylor. Taylor formalized the principles of scientific management, and the fact-finding approach put forward and largely adopted was a replacement for what had been the old rule of thumb.

However, there were problems-Taylor's papers were not always well received, as many of his ideas were associated with bad practice, such as rate-cutting by unscrupulous managers.

In 1911 and 1912 Taylor was questioned at length by a special committee of the US House of Representatives. As a result laws were passed banning the use of stopwatches by civil servants and it was only in 1949 that this restriction was lifted.

What do you understand by scientific management? 2 marks

Scientific management refers to the use of scientific methods in decision making to resolve management problems rather than depending on rule of thumb or ‘trial and error’ methods. FW Taylor is regarded as the Father of Scientific Management. Basically scientific management consists of:

1. Scientific study and analysis of work

2. Scientific selection and training of workers

3. Standardization of raw-materials and, equipment and working conditions

4. Reasonable remuneration to employees

5. Work done in efficient manner.

Briefly explain the principles of scientific management. (5 marks)

(rem: several short questions of 2 marks can be asked from this section)

Replacing Rule of thumb with Science

The development of a science for each element of a man's work to replace the old rule-of-thumb methods is the first principle of scientific management. First the employer must know what exactly is expected of the worker instead of going on wasting the resources until the final product comes out. Time, movement, methods and fatigue should be analyzed to set standard output for the work.

Scientific selection, training and development of workers

The scientific selection, training and development of workers instead of allowing them to choose their own tasks and train themselves as best they could, is another important principle of scientific management. Under scientific management right men are selected for the right job. Employees are selected on the basis of predetermined standards in an impartial way.

Close cooperation between workers and management (Harmony not discord)

The development of a spirit of hearty cooperation between workers and management to ensure that work would be carried out in accordance with scientifically devised procedures. Workers should have a sense of belonging towards the enterprise. Taylor believed that the interest of workers and management are basically the same. By producing more there will be more profit to the organization and the same time more reward for the employees.

The division of work between workers and the management in almost equal shares, each group taking over the work for which it is best fitted instead of the former condition in which responsibility largely rested with the workers. Self-evident in this philosophy are organizations arranged in a hierarchy, systems of abstract rules and impersonal relationships between staff.

Maximum output in place of restricted output

The workers and management must try their best to maximize the output at the minimum input. There should not be restricted output. Maximum production will reduce cost and will lead to maximum profit. There will be reward for both management and workers for their effort.

Mental revolution

The workers and management should change their outlook and with respect to their mutual relation and work efforts. Coordination and adjustment between the efforts of management and workers are essential for scientific management. The management should create favourable working conditions and the workers should cooperate with the management in implementing progressive policies.

Techniques / Elements of Scientific Management

Mention briefly the techniques of scientific management 7 Marks

What is meant by time study? 2 Marks

What is meant by motion study? 2 Marks

The ultimate aim of scientific management is to maximize production at the minimum cost. Scientific management is introduced though the techniques of work studies, standardization, administrative reorganization, and scientific rate setting.

1 Work Study

Work study is the careful evaluation of time taken at different processes, method of doing the work, efforts involved etc. to estimate to pin point the wastage of efforts or to plan out better ways of doing the work.

i) Time Study

This involves the analysis of time taken at each work or each part of a work. Time taken by different workers is recorded first and to arrive at time required by an average worker to finish a standard work. The following are the steps in time study:

1. Subdividing the work

2. Recording the time taken by different workers

3. Selection of average worker

4. Recording the time taken by average worker under normal circumstances

5. Standardizing the time allowed for a work

ii) Motion Study

This is the analysis of physical movement in doing a work. Every work involves various forms of human movements such as lifting, holding, turning etc. Under motion study the movements will be analyzed to find out easier ways of doing the work. Following steps are involved in motion study:

1. Selection of efficient workers

2. Analysis of the motions involved in a work

3. Finding the minimum time involved in doing a work

4. Keeping record of the best moves

5. Suggesting the appropriate physical movements to eliminate wastage of efforts

iii) Methods Study

Method study is aimed at standardizing the job.

Methods study simplifies the operations by:

1. Reducing the distance between the place of storage and the place of consumption of raw materials.

2. Simplifying the use of tools and equipment

3. Eliminating unnecessary actions

4. Integration of identical activities

iv) Fatigue Study

Fatigue in the work is natural. When the worker is given continuous work, he will get tired and lose speed and efficiency. He needs rest after working for a few hours. Scientific management studies the nature of work to determine the standard time for finishing the job and to find out when the worker needs rest. The nature, time and period of rest are predetermined. Necessary changes may also be made in the working methods and conditions to reduce fatigue.

2. Standardization

According to Taylor, maximum objectives of the business can be achieved only when the raw materials, labour, machines and methods are standardized. Standardization may take the following forms:

a. Standardization of product

The product, their design, weight and quality must have uniformity. Standardization of product must be based upon the tastes and preferences of the customer.

b. Standardization of raw materials

Standardization of raw materials helps regulate the amount of work and the quality of products. The use of standardized raw materials helps to reduce wastage, increases output and simplifies the work.

c. Standardization of machines and equipment

Machines, tools and equipment must also be standardized on the basis of raw-materials used and the quality requirements.

d. Standardization of methods

Methods and techniques of production must also be standardized after carefully analyzing the time and energy required in each activity. Taylor suggests that the methods should be standardized before commencing the production.

e. Standardized working conditions

Management should arrange suitable working conditions. There should be adequate lighting, ventilation and refreshing atmosphere for work.

3. Administrative reorganization – Functional foremanship

Taylor suggested functional foreman ship for better supervision of workers. Under functional foremanship there are specialist foremen at each job. He classified specialist foremen into two departments namely planning and production departments. Both the departments have four foremen each. The names and functions these foremen are as follows:

Planning Department

1. Route Clerk – Determining the process of production and the route through which the raw materials will pass.

2. Instruction Card Clerk – Laying down instructions according to which the workers are required to perform work.

3. Time and Cost Clerk – Setting the time table for doing a job as per predetermined route and time schedule. He specifies the material and labour cost in respect to each operation

4. Shop Disciplinarian – Maintaining proper discipline in the factory.

Production Department

1. Gang Boss – Arranging machines, materials, tools, workers etc. for the job.

2. Speed Boss – maintaining the planned speed of production, investigating the causes for delay and to remove them.

3. Repair Boss – Maintenance of the machines and equipment. Proper arrangements for their oiling, greasing, cleaning and repairs and preventing misuse of machines.

4. Inspectors – Seeing that the work conforms to the standard of quality laid down the planning department.

Functional Foremanship

4. Scientific Rate Setting – Differential Piece Rate System

Under differential piece rate system Taylor suggested higher wage rate for higher efficiency. This system is a source of incentive to workers who will continuously attempt to improve efficiency for higher rate of wages. Under differential piece rate system more efficient workers are paid at a higher rate for their entire output. When the production falls below the standard, wages are paid at lower rate. The important characteristics of this system are the following:

1. Different piece rates

2. Lower rates for those who produce less than the standard quantity

3. Minimum wages is not guaranteed

4. Standard time is fixed for standard amount of work

What is the basic difference between unity of command and functional foremanship?

Unity of command

Unity of command is part of General principles of management by Henry Fayol. He firmly believed that the employees should be under direct command and supervision of one boss only. This makes the business more disciplined stable and organized. It promotes harmonious relationship between superiors and subordinates in an organization.

Functional foremanship

Functional foremanship is part of Scientific Management advocated by FW Taylor. His principles are basically related to manufacturing activity. Functional foremanship helps specialization in supervisory management level. This will help solving problems faster, which in turn will generate more production.

Taylor’s Principles of scientific management and Fayol’s principles of management are mutually complementary. Do you agree with this view? Give any four reasons in support of your answer.

Fayol’s principles of management and Taylor’s principles of scientific management are mutually complementary. Fayol is mainly concerned about the overall administration of a business whereas Taylor’s principles are developed on the basis of his experience in factory. Taylor believed firmly in the efficiency in production is the foremost aspect that would ultimately determine the destiny of a business. Following are the reasons for considering these two principles of management are mutually complementary:

i.                     Taylor’s principles begin from the lowest level or from the level of the ordinary factory worker. Fayol’s principles start with the problems and solutions at the top administrative level from where it comes down to lower level.

ii.                   Taylor’s principles are focused on the production activity, while Fayol’s principles cover all the functional areas of business

iii.                  Taylor’s techniques are more specific. It tells exactly what to do. Fayol’s principles are general advises.

iv.                 Taylor’s principles are focused on the efficiency of workers, while Faylol’s principles are based on the efficiency of management.

v.                   Taylor’s principles require the workers to be accountable to various supervisors while Fayol considers unity of command extremely important.