Principles of

Management ,2e
Anil Bhat
Arya Kumar
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 Chapter 1

ESSENTIALS OF
MANAGEMENT

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Learning Objectives
 To understand the role of organizations in
modern societies
 To appreciate the importance of
management for organizations
 To understand difference between
efficiency and effectiveness
 To comprehend generic functions of
management
 To learn about different managerial roles
 To appreciate different types of managerial
skills and their importance at different
levels of organization

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Role of Organizations in Modern
Societies

 In Modern times it is appropriate that

Term“Market Economy” be replaced by term
“Organizational Economy”- Herbert Simon
 Positive association between prosperity of an
Economy and Role of Companies- Sumantra
Ghoshal
 Companies engender Value-Creation through
Resource Combination and Exchange that
markets alone can not do
 Companies have Distinct capability to Share,
Transfer, Synthesize and Create Knowledge over
Markets

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Efficiency and Effectiveness
 Efficiency refers to “ Doing Things Right”
 Effectiveness refers to “Doing the Right
Thing”- Peter Drucker
 Efficiency is concerned with getting most
output out of scarce resources (Capital,
Human Resource, Raw Material etc.)
 Effectiveness is achieved by setting right
organizational goals. No amount of
efficiency can make up for lack of
effectiveness.

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“MANAGEMENT" Variously
Understood………
 Specific Organ Of an Organization that
has the responsibility to deliver results
consistently
 Process that drives an Organization
towards its Performance
 People who have authority to Plan,
Organize, Lead and Control different
Organizational activities
 Applied Discipline
 Profession or a career

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Generic Functions of Management
 Managerial Jobs are characterized by
Variety, Fragmentation, Brevity and
Oral communication with several
people.
 First written about by Henri Fayol and
later elaborated by Lyndall Urwick,
Classical Management functions are:-
 PLANNING
 ORGANIZING
 LEADING
 CONTROLLING

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Management Functions
 Henri Mintzberg called these functions as
“folklore”. He forwarded Role theory of
Managerial work.
 Harold Koontz defends Fayol’s approach
 As managerial work is largely cerebral and
not directly observable.
 Further it allows us to look at universal
aspects of management across different
contexts.
 Managerial functions approach also helps in
classification of management knowledge

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PLANNING
 Setting Objectives
 Formulating Strategies
 Policies
 Procedures
 Methods

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Steps Involved in Planning
Situational Analysis

Desired Goals, Objectives and Result from System

Goal and Plan Evaluation

Establish Goals and Plans

Chalk out Strategies to Reach Goals and

Implementation

Acknowledge Completion and Celebrate Success

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ORGANIZING
 An Intentional Structure of Roles
 Organizational Structure
 Responsibility & Authority for
achieving objectives
 Departmentation
 Span of Control
 Line & Staff Relationships

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LEADING
 Leadership Skills
 Motivation
 Team Work
 Communication
 Negotiation
 Conflict Resolution

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CONTROLLING
 Anticipate, Monitor & Respond to changing
Environment.
 Measurement of Actual Performance
 Comparison against the Standard
 Managerial Action to correct Deviation
 Traditional Financial Controls are based on
 LIQUIDITY
 ACTIVITY
 PROFITABILITY
 LEVERAGE
 BALANCE SCORECARD

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Managerial Roles
 INTERPERSONAL
 Figurehead
 Leader
 Liaison
 INFORMATIONAL
 Monitor
 Disseminator
 Spokesperson
 DECISION
 Entrepreneur
 Disturbance Handler
 Resource Allocator
 Negotiator

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Management Skills
 TECHNICAL SKILLS
 CONCEPTUAL SKILLS
 HUMAN SKILLS
 Managers at Top Level need
Conceptual Skills the most and First-
Line Managers Technical Skills the
most

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