Principles of Management Prof Prasad P Mahale UNIT

Principles of Management Prof. Prasad P. Mahale

UNIT - 1 Basic Concepts of Management : Definition, classification, Characteristics and Importance of management, Principles of Management • • Management objectives, Types of objectives • Functions of managers, Managerial accounting Development of management thoughts : Functional approach to management by Henry Fayol • • Scientific Management Approach by Taylor, Gilbreth, Gantt • Human Relation Approach by Elton Mayo, Follet • Schools of management Thoughts • Tools of Management science, Managerial economics

Management Definition: The organization and coordination of the activities of a business in order to achieve defined objectives. According to the herald koontz, “management is the art of getting things done, through & with the people in formally organized group. It is an art of creating an environment in which people can perform & individuals and can co-operate towards attainments of group goals. ”

• Classification of Management There is no universally acceptable list of the functions of management. Various persons have classified the resources in different ways. However, the following heads of functions are generally acceptable: 1. Decision oriented definition 2. People oriented definition 3. Function oriented definition

Classification of Management • Top level management: Managing director or general manager and other high rank officers like Deputy General Manager etc. • Middle level management: Different departmental heads like purchase officer, production superintendents, chief store officer, works manager etc. come under this level • Lower level management: It consist of foremen, supervisors, Inspectors, charge men and office superintendent and such other staff.

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• Characteristics: 1. Management is goal oriented 2. Management integrates human, physical & financial resource 3. Management is continuous 4. Management all pervasive 5. Management is a group activity 6. Management is organized activity 7. Management is existence of objective 8. Management is decision making

9. Management is relationship among resources 10. Management is working with & through people 11. Management is multidisciplinary 12. Management is dynamic 13. Management is relative, not absolute principles 14. Management 15. Management as profession 16. Management is universal

Importance 1. Management meats challenges of change 2. Effective utilization of 8 M’s: - Man, Machine, Material, Money, Methods, Motivation, Market & Management 3. Accomplish of group goals 4. Effective functioning of business 5. Resource development

Importance 6. Sound organization structure 7. Management directs the organization 8. Innovation 9. Tackling problem 10. Stability

Management objective Management objectives is a process of defining objective within an organization so that management & employee agree to the objectives & understand what they need to do in the organization in order to achieve them. The term “management by objective” was first popularity by Peter Drucker in his 1954 book the practice of management.

Management objectives Objective provides a direction for the organization goal and quality of work to be accomplished within a given period of time. Managerial objectives should be: 1. Clearly defined and communicated 2. Based upon the overall organisational goals 13

Types of Objectives 1. To increase organizational effectiveness 2. To achieve optimum utilization of various resources 3. To have co-ordination between various department in the organization 4. To have co-ordination between various agencies & company 5. To control material quality 6. To reduce the execution time for various activities of the org 7. To control the quality of workmanship 8. To manage and control economy execution.

Types of objectives: General Objectives: Nature of business Continuous supply of capital Growth of firm Increasing production and productivity Economic Objectives (e. g- profit) Social Objectives (e. g- to offer goods of superior quality and services to the society at reasonable rates) Human Objectives (e. g- to understand the needs of subordinates to motivate them and to boost their morale). Specific Objectives: Nature of goods to be produced or services to be rendered. Type of customer (e. g- rich, poor, individuals, government etc) Market standing (e. g- local, national or international) 15

Function of managers § Planning § Organizing § Staffing § Directing § Controlling

Function of managers

Functions of management 1. Forecasting: It is concerned with the estimation of quantities cost, finance problems, capital expenditure, profit /loss alternatives available and planning is started. 2. Planning: Planning means “thinking before doing”. 3. Organizing: when complete planning is done, then next step to arrange the men, money and material for actual execution of manufacture. 4. Directing: it means the system of directing the plan to operation. 5. Motivating: to find out motives of work in a man & then he should be encouraged to do work by keeping his moral high. 18

6. Co-ordinating: the task of co-ordination is to integrate and harmonize them to achieve a common object. 7. Controlling: means to watch actual performance with the plans and to point out defective work, to rectify then and to prevent recurrence. 8. Communication: this function transmits the information and instructions to all concerned parties i. e. to employees, customers, suppliers, shareholders and to general public. 9. Leadership: all the managers are supposed to have the quality of leadership as they are leaders of concern. 10. Decision making: as managers are required to take decisions very frequently, and the efficiency of the concern, loss or profit etc. are affected by these decisions, great amount of attention is required. 19

Management accounting § Information § Budgets § Performance reports § Other

Development of management thoughts: Functional Approach to Management by Henry Foyal § Division of work § Authority & responsibility § Discipline § Unity of command § Unity of direction § Subordination of individual to general interest § Remuneration of personnel

Development of management thoughts: Functional Approach to Management by Henry Foyal § Centralization § Scalar chain § Order § Equity § Stability of tenure § Initiative § Esprit De Corps

Scientific Management approach Scientific Management tries to increase productivity by increasing efficiency and wages of the workers. It find out the best method for performing each job. It selects employees by using Scientific Selection Procedures. It provides Scientific Training and Development to the employees. It believes in having a close co-operation between management and employees. It uses Division of Labour. It tries to produce maximum output by fixing Performance Standards for each job and by having a Differential Piece-Rate System for payment of wages. 1. By Frederick Taylor (1856 -1912) 2. Gilbreth 3. Henry Gantt (1861 -1919) 23

Frederick Taylor (1856 -1912) Is known as founder of scientific management. Developed principle of breaking a task(job) into elements for timing the same. Taylor's scientific management consisted of four principles: 1. Replace rule-of-thumb work methods with methods based on a scientific study of the tasks. 2. Scientifically select, train, and develop each employee rather than passively leaving them to train themselves. 3. Provide "Detailed instruction and supervision of each worker in the performance of that worker's discrete task” 4. Divide work nearly equally between managers and workers, so that the managers apply scientific management principles to planning the work and 24 the workers actually perform the tasks.

Also developed concept of-A Fair Day’s Task, studies on fatigue incurred by the workers and time necessary to complete a task. He suggest that for increasing production rate, the work of each person should be planned at least one day in advance. Developed functional organization in which one foreman was made in charge for each function. Introduced and operated various costing systems. 25

Scientific Management Approach by Taylor, Gilbreth, Gantt 1. Replacing rule of thumb with science 2. Harmony in group action 3. Co-operation 4. Maximum output 5. Developments of workers

Henry Gantt (1861 -1919) Henry L. Gantt worked under Taylor and was his close associate. Gantt had a humanistic approach. He was more concerned with the man behind the machine. He improved upon Taylor’s Differential piece rate system and brought out his task and bonus plan. Taylor’s Differential piece rate system was an incentive plan whereby the worker was paid on the basis of his daily output. Gantt task and bonus plan was so structured that the worker received a day’s wage even if he did not complete the task. But if 27 he completed the task in less than the prescribed time, he received a bonus.

Gantt developed the daily balance sheet now known as “Gantt chart”. This chart shows the planned work and the completed work at each stage of production. It also shows the time taken to do the work. Gantt pleaded for wider recognition of the human factor in management. He was of the view that financial incentives influence employee behaviour. Gantt also pleaded for a policy of preaching and teaching workmen to do their work rather than on profits. Gantt introduced the concept of industrial responsibility. Gantt’s contributions were more in the nature of refinements rather than fundamental concepts. 28

Scientific Management Approach by Gilbreth Frank B. Gilbreth (1868 -1924) did work with his wife Lillian M. Gilbreth (1878 -1972) regarding modern management. His wife Lillian was a trained psychologist, she helps to Mr. Gilbreth in the matters related to the fatigue and monotony. Frank & Lillian Gilbreth did a lot of work in order to improve work methods & thus to discover one best way to accomplishing a task. Their main field of interest was Motion study. In 1917, Gilbreth suggested the first definition of Motion study as, “the science of eliminating wastefulness resulting from unnecessary, ill directed and inefficient motions”. According to Gilbreth the purpose of motion study was to discover and establish the scheme of least waste methods of labour. 31 Gilbreth evolved the principles of motion economy.

In 1921, Gilbreth introduced Process chart. Gilbreth identified Therbligs-the fundamental motions involved in doing an activity. He split up different motions of a process into fundamental events made by various members of human body and each event was allotted a symbol and letter abbreviation. These 17 Therbligs are: Search, Hold, Select, Grasp, Release, Load, Transport, Loaded, Transport empty, Position, Preposition, Assemble, Disassemble, Use, Inspect, Avoidable delay, Rest to overcome fatigue Plan. While serving U. S. Army, Gilbreth used motion study to find the best method to assemble and dissemble the weapons. Frank and Lillian carried out studies on fatigue and its elimination. They conclude that fatigue could be considerably reduced 32 by allowing rest periods, planning seating arrangements and working conditions.

Human Relation Approach by Elton Mayo, Follet o To remove conflict between individual & organization o To remove individual differences o To achieve the goals of instruction/organization o To make good working environment o To make co-ordination between difference sections o To increase quality & quantity of products & service.

Human relation approach by, Elton Mayo: (1880 -1949) Elton Mayo Born in Australia , director of Hawthrone studies and trained in psychology, is generally recognized as the “father of Human Relations Approach”. Elton Mayo led the team which conducted the study at Western Electrics Hawthorne Plant (1927 -32) to evaluate the attitudes and psychological reactions of workers in on-the-job situations. Elton Mayo’s idea was that logical factors were far less important than emotional factors in determining production efficiency. 35

Elton Mayo concluded that work arrangements in addition to meeting the objective requirements of production must at the same time satisfy the employee’s subjective requirement of social satisfaction at his work place. Elton Mayo was the opinion that the cause of increase in productivity of the workers is not a single factor like changing working hours or rest pauses, but several other factors like less restrictive methods of supervision, cooperation between workers and management etc. 36

Human Relation Approach by Follet (1868 - -1933 ) Known as a visionary genius. Mutual influence is developed when people work together. Do not try to control people. Control the situation together. In contrast to Fayol, Mary Parker Follett (1868– 1933) eschewed the scientific-cum-technical approach to management, emphasising instead the importance of manager–worker relations and the need to view management (and leadership) more holistically. she was an early management consultant and organisation theorist. She also wrote on creativity; the best-known quote from her work is ‘management is the art of getting things done through other people’ (Follett, 1918). 38

she identifies management as an art – not a science. Her strong belief that the key task of management is to facilitate cooperation and the involvement of staff in decision making Her contribution to modern day thinking about management and employer– employee relations is becoming more widely known. Follett’s human relations approach to the basis of effective management was echoed later by such writers as the American social psychologist Rensis Likert (1903– 1981). 39

School of Management Thoughts 1. Classical School § The scientific method applies to work- observation, measurement, logic analysis § Application of the scientific method to work § Selection of the most capable worker § Provide resource to workers § Train the workers § Provide fair pay incentives to workers

Management Process school Also called as “Traditional school / operational approach/ universal approach/ classical school” Henry Fayol is known as father of this school. Other contributions to it are: Lyndall Urwick, Harold Koontz , Newman. This school evolved some universal principles of management. According to this school, management can best be studied in terms of the process that it involves. 41 The management process consist of 5 functions like Planning, Organizing, Staffing, directing and controlling.

Features: Limitations: 1. Management is study functions of managers. of 2. Study of management should be done by focusing the process (functions) it follows. 3. Managers have more or less some functions irrespective of type of organization. 4. The functions of management like Planning, Organizing, Staffing, directing and controlling are the core of management. 1. The various operational theorist do not agree about the functions of management. 42

Empirical school Also termed as “management by customs school” Believes that the management can learn about applying the most effective techniques by the experience of successful manager or the mistakes of unsuccessful manager. Recommends case studies for drawing general conclusions and forming the principles. The main contributors of this school of thought are Harvard business school and Earnest Dale American Manager Association. 43

Features: Limitations: 1. Management is study managerial experiences. of 1. Depends heavily on the historical method of study. 2. Success and failure of management in the process of decision making can provide guidance in future for similar situations. 2. The situation in the past may not have been exactly same as of the present. 3. Theoretical researches can be combined with practical experiences. 4. Practical experience must be a base for future researches. 44

Human behavior school 1. Also called as “Human relation school” 2. Main contributions: Elton Mayo, Keith Davis. 3. This school of thought suggest the application of existing and newly developed theories. 4. Puts more attention to motivation of the individual and on human psychology and sociology. 5. This school emphasizes that productivity depends heavily upon the satisfaction of the employees in work situations. 45

Features: Limitations: 1. Management must study interpersonnel relations among people. 1. This approach talks about organization and organizational behaviour in terms of vague. 2. Since work is being got done through and with people, manager must have basic understanding of human behaviour and psychology. 2. If study of management confined to human relation , it would be unduly restricting the scope of technical aspect of job etc. 3. Greater production and Higher motivation can be achieved only through good human relations. 46

Social school Contribution: Max weber, Rensis Likert This school of management closely related to the human relation school of thought. Features: 1. An organization is a social system i. e. of cultural relationships and management concerned with the effectiveness of an organization must study. 2. Formal organization represents cultural relationships of the social groups working within the organization. 3. Cooperation of the members working and the groups is essential and is core of good management. 4. This approach emphasis only on social relations, it does not consider physical aspects. 47

Advantages: 1. This approach is an important contribution in field of management. 2. Organization is a social system hence decisions should be taken by considering one group, but all the groups are considered. 3. There are formal and informal organizations in management has to identify such informal groups and motivate them. Limitations: 1. This school attaches maximum importance to the study of sociology and thus tends to overlook many management concepts, principles and techniques which are also important to practicing managers. 48

Decision Theory School Known as “Decision school/Decision management school” Contributions: Chester Bernard, James March. The essence of management lies in decision making. This school of thought emphasis on rational approach to decision making by the selection of best course of action from various possible alternatives. This theory can be examine to achieve the basic of decision like, 1. Nature of organization 2. Organization structure 3. Psychological & social reactions of individuals or groups 49

Features: 1. Management is essentially decision making. 2. Managers are essentially decision makers and problem solvers. 1. Limitations: This school contributes a towards the sharpening managerial tools especially making suitable decisions in organization. 3. The quality of decisions is a prime factor for increasing the efficiency of the organization. 50 lot of for the

Systems Management School Contributions: Kenneth, Johnson, Churchman A system is composed of elements or sub-systems that are related and dependent upon each other to form the whole. Features: 1. The system has a no. of sub-systems, parts and sub-parts. 2. All sub-systems, parts and sub-parts are related with each other. 3. The systems approach emphasizes the study of various parts in their inter-relationships rather than in isolation from each other. 51

1. 1. Uses: The system approach has been used in studying the functions of complex organization. Limitations: The problem with the systems approach is its utter complexity particularly when it comes to a study of large and complex organizations. 52

Contingency school Contributions: Joan Woodland, Fiedler, Lorsch The Contingency approach to management is based upon the fact that there is no one best way to handle any of the management problems. There are 3 major parts of overall conceptual framework for Contingency management, 1. Environment 2. Management concepts, principles and techniques 3. Contingent relationship between (1) & (2) 53

Tools of Management science A management science also includes many quantitative techniques, and other management science aids. Some of these are: 1. The Program Evaluation and Review Technique (PERT)-PERT is planning and control technique that allows managers to decompose a project into specific activities and to plan far in advance when its is to be completed. The main function PERT is to determine the time required to complete a project. 2. Breakeven Analysis-Breakeven analysis helps managers determine how many units must be sold before a product is profitable.

3. Linear Programming- Linear programming are used to determine the best way to allocate resources to achieve some desired objectives. 4. Game Theory-Game theory attempts to predict how rational people will behave in competitive situation. For example, game theories attempt to describe how competitors will respond to a price increase, the introduction of a new product, or a new advertising campaign. 5. Simulation Models-Simulation models are mathematical representations of the relationships among variables in real-life organizational situations. For example, simulations are popular for the risky business of newproduct innovations.

Need usefulness of management theory. ü Encourage initiative ü Encourage Innovation ü Facilitates growth and expansion ü Improves life of workers ü Improves corporate image ü Motivates employees ü Optimum use of resources ü Reduces wastage ü Increases efficiency ü Improves relations ü Reduces absenteeism and labor turnover ü Encourages Team Work

Question & Answer

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