Chapter 2 - Prinisiples of Management PDF

THEEXTRACL ASS.
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PRINCIPLES OF MANAGEMENT
Any fundamental statement of truth that establishes a cause and effect relationship between
two or more variables is called principle. Principles are a guide to thought and action.
Principles of management are not rigid prescriptions which have to be followed by the
managers. They are broad and general guidelines for decision- making and behaviour of
managers.
PRINCIPLE OF MANAGEMENT v/s PRINCIPLE OF PURE SCIENCE
• Management principles are not as rigid as principles of pure science.

• Management principles deal with human behaviour, therefore they cannot be tested in
laboratories.
PRINCIPLE OF MANAGEMENT v/s TECHNIQUES OF MANAGEMENT
• Techniques are methods, which involve a series of steps to be taken to accomplish

desired goals.
• Principles are guidelines to take actions while practising techniques.
PRINCIPLE OF MANAGEMENT v/s VALUE
• Values are something which are acceptable or desirable. Values are formed through
common practises.
• Management principles are basic truths or guidelines for behaviour. Management
principles are formed after research in work situations.
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THEEXTRACL ASS.COM PAGE 2
CHARACTERISTICS / NATURE OF MANAGEMENT
1. Universal Applicability:
Management principles apply to all types of organisations, business as well as non-

business, small as well as large, public sector as well a private sectors.
2. Formed by practise and experimentation:

The principles of management are not developed overnight they are formed by
experience and observation.
3. General guidelines:
The management principles are general guidelines and does not ensure any
readymade solution to all the problems. Because the environment in which a
business runs is very complex and dynamic.
4. Flexible:
The principles of management are not rigid prescriptions, which have to be
followed absolutely. They are flexible and can be modified by the manager when
the situation demands.
5. Cause and effect relationship:

The principles of management established establishes cause and effect relationships
so that they can be used in similar situations in a large number of cases. The
principles of management are less than perfect, since they mainly apply to human
behaviour.
6. Behavioural:
Management principles aim at influencing behaviour of human beings. Therefore,
principles of management are mainly behavioural in nature.
SIGNIFICANCE OF MANAGEMENT PRINCIPLES
1. Optimum utilisation of resources and effective administration:

• A company has limited resources therefore they must put these resources to
optimum use. Principles equip the managers to forecast the cause and effect
relationship of their decisions and actions.
• Therefore, the wastages associated with trial and error approach and
reduced.
2. Provide useful insights into reality:

• The principles of management provide the managers with useful insights
into real world situations.
• These principles will increase the knowledge, ability and understanding of
the managers.
• It will also help managers to learn from past mistakes.
3. Fulfilling social responsibility:
Management principles also guide the managers to perform social responsibilities.

For example. One of the principle states that each employees should be treated
equally in the company.
4. Scientific/thoughtful decisions:
Management principles are based on the objective assessment of the situation.
They emphasise on logic rather than blind faith, this help management to take
unbiased decisions.
5. Management training, education and research:

• Management principles are used as a base for management training,
education and research.
• These principles provide basic groundwork for the development of
management as a discipline.
• Professional courses such as MBA, BBA also teach these principles as a part
of their curriculum at the beginner’s level.
FAYOL’S PRINCIPLES OF MANAGEMENT
HENRI FAYOL
Lifetime – 1841 to 1925
Education – Graduated from mining academy at St. Entinne in 1880
Profession – Mining engineer and management theorist
The 14 principles of management are given by Henri Fayol, he developed the principles
based on his own experience.
These principles were discussed in detail in his book which was published in 1917 as
‘Administration Industrielle et Generale.’ It was published in English as General and
Industrial Management’ in 1949 and is widely considered a foundational work in classical
management theory. He is also known as ‘Father of General Management’ for his contribution.
Following are the 14 principles of management:
1. Division of work:
According to Fayol, “The intent of division of work is to produce more and better work for
the same effort. Specialisation is the most efficient way to use human effort”
What he wanted to say by this statement is that, work should be divided into small tasks
and a trained employee who is competent is required to perform each job. This will result in
increased efficiency and effective output. Thus, in a company we have various separate
departments like finance, human resource, marketing etc.
This principle can be applied to both technical as well as managerial work.
2. Authority and responsibility:

The concepts of Authority and responsibility are closely related. Authority was defined by
Fayol as the right to give orders and the power to extract obedience. Responsibility involves
being accountable, and is therefore naturally associated with authority. Whoever assumes
authority also assumes responsibility.
Managers require authority in proportion with responsibility. There should be a balance

between authority and responsibility.
FOR EXAMPLE- Ria is the marketing manager of Lenovo is assigned a responsibility of

advertising of companies product and now she is required to Rs.5,00,000 to the advertising
agency but she don’t have the authority to transfer any funds exceeding Rs.2,00,000 . This
shows that there is imbalance in authority and respoinsibility in the organisation.
A manager must have the right to punish his subordinate for wilfully not obeying orders but
only after sufficient opportunities has been given to a subordinate for presenting his case.
3. Discipline:
According to Fayol, discipline requires good superiors at all levels, clear and fair agreements
and judicious application of penalties.
• It implies respect for agreements (rules and regulations) designed to secure obedience.
• It must prevail throughout an organization to ensure its smooth functioning.

• Discipline ensures fair and clear agreements, good supervision and judicious
application of penalties
4. Unity of command:
According to Fayol there should be one and only one boss for every individual employee.
He felt that if this principle is violated “authority is undermined, discipline is in jeopardy,
order disturbed and stability threatened”. The principle states that in a formal organisation
each participants should receive orders from one and be responsible to only one superior.
• If an employee gets orders from two superiors at the same time the principle of unity
of command is violated.
• Dual subordination should be avoided.
5. Unity of direction:
• All the units of an organisation should be moving towards the same objectives
through coordinated efforts.
• Each group of activities having the same objectives must have one head and one
plan.
ONE HEAD ONE PLAN
FOR EXAMPLE- Honda produces cars as well a motorcycles therefore to avoid any
confusion it has two separate divisions for both of them . Each divisions have a separate
incharge, plans and resources.
6. Subordination of Individual Interest to General Interest:

According to Fayol, The interests of an organisation should take priority over the
interests of any one individual employee. Every individual have different interests for
working in a company. But the company has its own objective. In all the situations the
interest of company should supersede the interest of any one individual because larger
interests of workers and stakeholders are more important than interest of any one
person.
7.Remuneration of employees:
Remuneration should be just and equitable i.e. overall compensation or pay should be fair
to both employees and the organisation. The employees should be paid fair wages so
that they can at least afford a reasonable standard of living.
A fair compensation will ensure good relations between workers and management.
8. Centralisation and Decentralisation:
According to Fayol, “There is a need to balance subordinate involvement though

decentralisation with managers’ retention of final authority through centralisation.”
The concentration of decision – making authority is called centralisation whereas its

dispersal among more than one person is known as decentralisation.
The degree of decentralisation depends on many factors such as size of the

organisation, generally large organisations have more decentralisation.
9. Scalar chain:
The formal lines of authority from highest to lowest ranks are known as scalar chain.
According to Fayol, “organisations should have a chain of authority and communication

that runs from top to bottom and should be followed by managers and the
subordinates.”
An organisation consists of superiors and subordinates, let us consider a situation

where there is one head ‘A’ who has two lines of authority under him. One line consists of B-
C-D-E-F. Another line under ‘A’ is L-M-N-O-P.
If E has to communicate with ‘O’ who is at the same level of authority then he has to
traverse the route E-D-C-B-A-L-M-N-O. This is due to the principle of scalar chain
being followed in this situation.
According to Fayol, this chain should not be violated in the normal course of formal
communication. However in the case of emergency then E can directly contact O
through ‘Gang bang
Gang
plank
10.Order:
According to Fayol, “people and materials must be in suitable places at appropriate

time for maximum efficiency.”
If everything will be at fixed place, then there will be no hindrance in the action of
business. This will lead to increased efficiency and productivity.
A place for everything

and everything.
11.Equity:
This principle emphasises kindliness and justice in the behaviour of managers towards
workers. There should be no discrimination on account of sex, religion, language,
belief, nationality, caste, etc. This will ensure loyalty and devotion. There will be cordial
relations between managers and workers. For example now-a-days in MNC’S we find
people from different background working under same roof in a discrimination free
environment.
12.Stability of personnel:
According to Fayol “Employee turnover should be minimised to maintain

organisational efficiency.” A personnel should be selected after rigorous procedures and
checks. But once they are selected they should be kept for at least a minimum fixed
tenure.
They should be given reasonable time to show results. Recruitment, selection and
training cost will be high if there’s insecurity among employees.
13.Initiative:
According to Fayol workers should be encouraged to develop and carry out their plans
for improvements. Initiative means taking the first step with self-motivating.
A good company should have an employee suggestion system whereby suggestions

which result in substantial cost/time reduction should be awarded.
14.Espirit De Corps:
According to Fayol, management should promote a team spirit of unity and harmony
among employees. Management should promote team work especially in large
organisation because otherwise objective would be difficult to realise.
A manager should replace ‘I’ with ‘We’ in all his conversations with workers to foster
team spirit
I with We
Principle of Scientific Management
F. W . T A Y L O R
Lifetime – 1856 to 1915

Profession: American mechanical engineer
Education: Degree in mechanical engineering from Stevens institute

of technology in 1883.
Taylor is known as ‘Father of Scientific Management’. He proposed scientific management as

opposed to rule of thumb. Taylor believed that there was only one best method to maximise
efficiency which can be developed through scientific study and analysis of each element of a
job. It implies conducting business activities according to standardised tools, methods and
trained personnel in order to increase the output, improve its quality and reduce costs and
wastes.
“Scientific management means knowing exactly what you want men to do and seeing that
they do it in the best and the cheapest way.” – F.W. Taylor
THEEXTRACL ASS.COM P A G E 11
Scientific management means conducting business activities according to standardised tools,

methods and trained personnel in order to increase the output, improve its quality and
reduce the costs and wastes.
Principles of scientific management:
1. Science not rule of thumb: According to Taylor there is only one best method to
maximise efficiency. This method can be developed through study and analysis. The
method so developed should substitute ‘rule of thumb’ throughout the organisation.
Scientific method involves investigation of traditional methods through work study,

unifying the best practices and developing a standard method.
The more sophisticated the processes, greater would be the savings.
2. Harmony, not discord: There should be complete harmony between the

management and the workers. Both should realise that each one is important. Taylor
called for complete ‘mental revolution’ on the part of both management and workers.
• Management should share the gains of the company with the workers. At the
Paternalistic
same time the workers should work hard and should be welcome changes for
style of
management the good of the company.
is one where • Japanese work culture is a classic example of such a situation. Companies in
the employer
Japan have paternalistic style of management. There is complete openness
takes care of
between the management and the workers. If workers go on a strike they
the needs of
employees. wear a black badge but work more than normal working hours to gain
sympathy of the management.
THEEXTRACL ASS.COM PA G E 12
3.Cooperation, not individualism:
This principle is an extension of principle of ‘harmony and discord’.
There should be complete cooperation between the management and the workers
instead of individualism.
Competition should be replaced by cooperation.
Both should realise that they need each other.
Management should not close its ears to any constructive suggestions made by
employees infact it should reward them for their suggestions if it results in substantial
reduction in costs.
Workers should be part of the management and if any important decisions are taken
they should be taken into confidence.
Workers should also avoid going on strikes and making unreasonable demands.
4. Development of each and every person to his/her greatest efficiency

and prosperity:
According to this principle, management should aim to develop workers to their
greatest efficiency and prosperity.
• The concern for efficiency should start from the selection process. Every
organisation should follow a scientific system of selection. The selected workers
should be assigned job as per their capabilities.
• To increase the efficiency and to achieve the maximum potential of workers, they
should be provided scientific training. The increase in efficiency will benefit both
the workers and the organisation.
THEEXTRACL ASS.COM PAG E 13
TECHNIQUES OF SCIENTIFIC MANAGEMENT
1.Functional Foremanship-
Functional foremanship is an extension of the principle of division of work. Foremen should

have intelligence, education, tact, judgement, special knowledge, honesty, energy, and good
health. Since all these qualities could not be found in a single person this prompted Taylor
to suggest functional foremanship through eight persons. Each specialist is to be assigned
work according to his/her qualities.
Under the factory manager there was a planning incharge and a production incharge.
i. Instruction card clerk: Draft instructions for workers
ii. Route clerk: Specify the route of production
iii. Time and cost clerk: Prepare time and cost sheet
iv. Disciplinarian worked: Ensure discipline.
Under production incharge there are four personnel namely:
v. Speed boss: Timely and accurate completion of job
vi. Gang boss: Keeping machines and tools etc. ready for operation by workers
vii.Repair boss: Ensure proper working condition of machines and tools
viii.Inspector: Check the quality of work.
II. Standardisation and simplification of work

Standardisation of work refers to the process of setting standards for every business activity,
example standardisation of process, raw materials, time, product, machinery and working
conditions.
Objectives of standardisation of work are:

• To establish standards of excellence and quality in materials.
• To establish standards of performance of men and machines.

• To establish interchange ability of manufactured parts and products.
• To reduce a given line or product to fixed types, sizes and characteristics.
Simplifications of work aims at eliminating unnecessary diversity of products.

• It implies reduced inventories, fuller utilisation of equipment and increasing turnover.
• It results in savings of cost of labour, machines and tools.
III. Method study: there are various methods of doing a particular job, the objective of
method study is to find out one best way of doing the job. Right from the procurement
of raw materials till the final product is delivered to the customer every activity is a
part of method study. The objective of the whole exercise is to maximise the quality
and satisfaction of the customer.
IV. Motion study: it refers to the study of movements like sitting, lifting, putting objects
and changing positions which are undertaken while doing a typical job.
Unnecessary movements should be eliminated so that it takes less time to complete the
job efficiently.
On close examination of body movements Taylor found that there are three types of
motions as follows:
1.Motions which are productive

2.Motions which are incidental (e.g. Going to store)
3. Motions which are unproductive
Taylor used various methods like using symbols and colours and stopwatches to identify
different motions. Through which he was able to design suitable equipment and tools to
educate workers. The results achieved by him were remarkable.
V. Time study: time study determines the standard time taken to perform a well-defined
job. Time measuring devices are used for each element of task. The standard time is set
after taking several readings. The objective of time study is to determine the number of
workers to be employed; frame incentive schemes and determine labour cost.
FOR EXAMPLE- A worker takes 1 hour to type 20 pages assuming that the Jon is of 8
hours shift deducting one hour for rest and lunch. It is determined that in 7 hours a worker
will type 140 pages i.e 20 pages in an hour of work. Now this will be the standard
according to which task is to be performed and wages are decided accordingly.
VI.Fatigue study: A person is bound to feel tired physically and mentally if he/she does
not rest while working. The rest intervals will help the worker to regain stamina and
work with the same capacity which will result in increased productivity.
There can be many causes for fatigue like long working hours, doing unsuitable work, bad
working conditions etc. such hindrances should be removed for better performance. Fatigue
study seeks to determine the amount and frequency of rest intervals in completing a task.
VII.Differential piece wage system:

It is a technique which differentiates between efficient and less efficient workers. It
rewards the efficient workers and motivates the less efficient ones to improve their
efficiency.
In this system, there are two piece rate- one who produces the standard output or more
the other is those who produce less than the standard output. The difference in wages
between both the workers is enough to motivate the less efficient one.
FOR EXAMPLE-Standard output per worker in a day 200

Wage rate I: Rs.5/unit (for output above or equal to 200)
Wage rate II: Rs. 4/unit (for output below 200)
Worker A Worker B
Actual output - 220 units 180 units
Total wages - 220 x 5 = 1100 180 x 4 = 720
Difference in units produce = 40
Difference in wages = Rs.380
According to Taylor, this loss will be the strongest motivating factor for worker B to
complete work according to standards in future.
THEEXTRACL ASS.COM PA G E 17
Basis of difference Henri Fayol F.W. Taylor
Perspective Shop floor level of a

Top level of management
factory
Applicability Applicable Universally Applicable to Specialised

Situation
Basis of Information Personal Experience Observation and

Experimentation
Focus Improving over all administration Increasing Productivity
Personality Practitioner Scientist
Expression General Theory of Administration Scientific Management

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THEEXTRACL ASS.

PRINCIPLE OF MANAGEMENT v/s PRINCIPLE OF PURE SCIENCE

• Management principles are not as rigid as principles of pure science.

PRINCIPLE OF MANAGEMENT v/s TECHNIQUES OF MANAGEMENT

• Techniques are methods, which involve a series of steps to be taken to accomplish

PRINCIPLE OF MANAGEMENT v/s VALUE

CHARACTERISTICS / NATURE OF MANAGEMENT

Management principles apply to all types of organisations, business as well as non-

2. Formed by practise and experimentation:

5. Cause and effect relationship:

SIGNIFICANCE OF MANAGEMENT PRINCIPLES

1. Optimum utilisation of resources and effective administration:

2. Provide useful insights into reality:

3. Fulfilling social responsibility:

Management principles also guide the managers to perform social responsibilities.

5. Management training, education and research:

FAYOL’S PRINCIPLES OF MANAGEMENT

Profession – Mining engineer and management theorist

Following are the 14 principles of management:

2. Authority and responsibility:

Managers require authority in proportion with responsibility. There should be a balance

FOR EXAMPLE- Ria is the marketing manager of Lenovo is assigned a responsibility of

• It must prevail throughout an organization to ensure its smooth functioning.

ONE HEAD ONE PLAN

6. Subordination of Individual Interest to General Interest:

8. Centralisation and Decentralisation:

According to Fayol, “There is a need to balance subordinate involvement though

The concentration of decision – making authority is called centralisation whereas its

The degree of decentralisation depends on many factors such as size of the

According to Fayol, “organisations should have a chain of authority and communication

An organisation consists of superiors and subordinates, let us consider a situation

According to Fayol, “people and materials must be in suitable places at appropriate

A place for everything

According to Fayol “Employee turnover should be minimised to maintain

A good company should have an employee suggestion system whereby suggestions

Principle of Scientific Management

Lifetime – 1856 to 1915

Education: Degree in mechanical engineering from Stevens institute

Taylor is known as ‘Father of Scientific Management’. He proposed scientific management as

Scientific management means conducting business activities according to standardised tools,

Principles of scientific management:

Scientific method involves investigation of traditional methods through work study,

The more sophisticated the processes, greater would be the savings.

2. Harmony, not discord: There should be complete harmony between the

Competition should be replaced by cooperation.

Both should realise that they need each other.

4. Development of each and every person to his/her greatest efficiency

TECHNIQUES OF SCIENTIFIC MANAGEMENT

Functional foremanship is an extension of the principle of division of work. Foremen should

i. Instruction card clerk: Draft instructions for workers

ii. Route clerk: Specify the route of production

v. Speed boss: Timely and accurate completion of job

vii.Repair boss: Ensure proper working condition of machines and tools

viii.Inspector: Check the quality of work.

II. Standardisation and simplification of work

Objectives of standardisation of work are:

• To establish standards of performance of men and machines.

Simplifications of work aims at eliminating unnecessary diversity of products.

1.Motions which are productive

VII.Differential piece wage system:

FOR EXAMPLE-Standard output per worker in a day 200

Basis of difference Henri Fayol F.W. Taylor

Perspective Shop floor level of a