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MANAGEMENT 11

Principles of Management and Organization

Dutchque Van E. Dato-on


I.E., MBA-HROM

MANAGEMENT DEFINED

According to Harold Koontz, Management is an art of getting things done through and with the people in formally organized groups. It is an art of creating an environment in which people can perform and individuals and can co-operate towards attainment of group goals.

MANAGEMENT DEFINED

According to Frederick Winslow Taylor, Management is an art of knowing what to do, when to do and see that it is done in the best and cheapest way.

MANAGEMENT DEFINED

According to Henry Fayol, management has 14 principles that are derived: (1) on the basis of observation and analysis i.e. practical experience of managers. And (2) by conducting experimental studies.

MANAGEMENT DEFINED

Management is a purposive activity. It is something that directs group efforts towards the attainment of certain pre determined goals.

Management principles are the statements of fundamental truth based on logic which provides guidelines for managerial decision making and actions.

DEFINITION OF TERMS
Principle refers to a fundamental truth. It establishes cause and effect relationship between two or more variables under a given situation. Management is a purposive activity. It is something that directs group efforts towards the attainment of certain pre-determined goals. Management Principle are the essentials, underlying factors that form the foundations of a successful management. Organization - is a social group which distributes tasks for a collective goal.

MANAGEMENT
Management can be defined in detail in following categories : Management as a Process Management as an Activity Management as a Discipline Management as a Group Management as a Science Management as an Art Management as a Profession

MANAGEMENT AS A PROCESS
It is the process by which management creates, operates and directs purposive organization through systematic, coordinated and co-operated human efforts (1) Management is a social process - It is the duty of management to make interaction between people productive and useful for obtaining organizational goals. (2) Management is an integrating process - Management undertakes the job of bringing together human physical and financial resources so as to achieve organizational purpose (3) Management is a continuous process - It is concerned with constantly identifying the problem and solving them by taking adequate steps. It is an on-going process.

MANAGEMENT AS AN ACTIVITY
Management is also an activity because a manager is one who accomplishes the objectives by directing the efforts of others. According to Koontz, Management is what a manager does. (1) Informational activities - A communication link has to be maintained with subordinates as well as superiors for effective functioning of an enterprise. (2) Decisional activities - Managers are continuously involved in decisions of different kinds since the decision made by one manager becomes the basis of action to be taken by other managers. (3) Inter-personal activities - Management involves achieving goals through people. Therefore, managers have to interact with superiors as well as the sub-ordinates.

MANAGEMENT AS A DISCIPLINE
Management as a discipline refers to that branch of knowledge which is connected to study of principles & practices of basic administration. It specifies certain code of conduct to be followed by the manager & also various methods for managing resources efficiently. MANAGEMENT
AS A

GROUP

Management as a group refers to all those persons who perform the task of managing an enterprise. Thus as a group technically speaking, management will include all managers from chief executive to the first - line managers

MANAGEMENT AS A SCIENCE
Science is a systematic body of knowledge pertaining to a specific field of study that contains general facts which explains a phenomenon. (1) Universally accepted principles - Some fundamental principles which can be applied universally like the Principle of Unity of Command i.e. one man, one boss. This principle is applicable to all type of organization business or non business.

(2) Experimentation & Observation - Management principles are also based on scientific enquiry & observation.

MANAGEMENT AS A SCIENCE
(3) Cause & Effect Relationship Same is true for management, it also establishes cause and effect relationship. If you know the cause i.e. lack of balance, the effect can be ascertained easily i.e. in effectiveness. Similarly if workers are given bonuses, fair wages they will work hard but when not treated in fair and just manner, reduces productivity of organization. (4) Test of Validity & Predictability - Principles of management can also be tested for validity. E.g. principle of unity of command can be tested by comparing two persons - one having single boss and one having 2 bosses. The performance of 1st person will be better than 2nd.

MANAGEMENT AS AN ART
Management is a judicious blend of science as well as an art because it proves the principles and the way these principles are applied is a matter of art. Science teaches to know and art teaches to do. E.g. a person cannot become a good singer unless he has knowledge about various ragas & he also applies his personal skill in the art of singing. Same way it is not sufficient for manager to first know the principles but he must also apply them in solving various managerial problems. The old saying that Manager are Born has been rejected in favor of Managers are Made. It has been aptly remarked that management is the oldest of art and youngest of science. To conclude, we can say that science is the root and art is the fruit.

MANAGEMENT AS A PROFESSION
Management fulfils several essentials of a profession:
It does not restrict the entry in managerial jobs for

account of one standard or other.


No minimum qualifications have been prescribed for

managers.
Managers are responsible to many groups such as

shareholders, employees and society.


Managers are known by their performance and not mere

degrees.

ULTIMATE GOAL OF BUSINESS


The ultimate goal of business is to maximize profit and not social welfare. The slogan for management is becoming - He who serves best, also profits most.

EFFICIENCY VS EFFECTIVITY
Good management includes both being effective and efficient. Being effective means doing the appropriate task while being efficient means doing the task correctly.

EFFICIENCY VS EFFECTIVITY

FEATURES OF MANAGEMENT
(1) Management is Goal-Oriented: Management is a tool which helps use of human & physical resources to fulfill the pre-determined goals. (2) Management integrates Human, Physical and Financial Resources: In an organization, human beings work with non-human resources like machines. Materials, financial assets, buildings etc. Management integrates human efforts to those resources.

(3) Management is Continuous: Management is an ongoing process. It involves continuous handling of problems and issues. It is concerned with identifying the problem and taking appropriate steps to solve it.

FEATURES OF MANAGEMENT

(4) Management is all Pervasive: Management is required in all types of organizations whether it is political, social, cultural or business because it helps and directs various efforts towards a definite purpose. (5) Management is a Group Activity: Management is very much less concerned with individuals efforts. It is more concerned with groups. It involves the use of group effort to achieve predetermined goal.

LEVELS OF MANAGEMENT
-refers to a line of demarcation between various

managerial positions in an organization. The number of levels in management increases when the size of the business and work force increases and vice versa.
-The levels of management can be classified in three broad

categories:
-(1) Top level / Administrative level -(2) Middle level / Executory

-(3) Low level / Supervisory / Operative / First-line

managers

LEVELS OF MANAGEMENT

-Managers at all these levels perform different functions. The

role of managers at all the three levels is discussed below

OBJECTIVES OF MANAGEMENT
The main objectives of management are:

(1) Getting Maximum Results with Minimum Efforts: to secure maximum outputs with minimum efforts & resources. Management is basically concerned with thinking & utilizing human, material & financial resources in such a manner that would result in best combination.
(2) Increasing the Efficiency of factors of Production: through proper utilization of various factors of production, a firms efficiency can be increased to a great extent.

OBJECTIVES OF MANAGEMENT
The main objectives of management are:
-(3) Maximum Prosperity for Employer & Employees: Management ensures smooth and coordinated functioning of the enterprise. This in turn helps in providing maximum benefits to the employee.
-(4) Human betterment & Social Justice: serves as a tool

for the upliftment as well as betterment of the society. Management ensures better standards of living for the society.

IMPORTANCE OF MANAGEMENT
(1) It helps in Achieving Group Goals - By defining objective of organization clearly there would be no wastage of time, money and effort. Management converts disorganized resources of men, machines, money etc. into useful enterprise.

(2) Optimum Utilization of Resources - Management utilizes all the physical & human resources productively. This leads to efficacy in management. Management provides maximum utilization of scarce resources by selecting its best possible alternate use in industry from out of various uses.

IMPORTANCE OF MANAGEMENT
(3) Reduces Costs - It gets maximum results through minimum input by proper planning and by using minimum input & getting maximum output. This helps in cost reduction. (4) Establishes Sound Organization - No overlapping of efforts (smooth and coordinated functions). Management fills up various positions with right persons, having right skills, training and qualification. All jobs should be cleared to everyone.

FUNCTIONS OF MANAGEMENT

PLANNING

It is the basic function of management. It deals with chalking out a future course of action & deciding in advance the most appropriate course of actions for achievement of pre-determined goals. According to KOONTZ, Planning is deciding in advance - what to do, when to do & how to do.

PLANNING
Planning is a process consisting of several steps. The process begins with environmental scanning which simply means that planners must be aware of the critical contingencies facing their organization in terms of economic conditions, their competitors, and their customers. Planners must then attempt to forecast future conditions. These forecasts form the basis for planning.

PLANNING
TYPES of PLANNING:
Strategic planning involves analyzing competitive opportunities and threats, as well as the strengths and weaknesses of the organization, and then determining how to position the organization to compete effectively in their environment. It has a long time frame, often three years or more. Generally includes the entire organization and includes formulation of objectives. It is often based on the organizations mission, which is its fundamental reason for existence. An organizations top management most often conducts strategic planning.

PLANNING
Tactical planning is intermediate-range (one to three years) planning that is designed to develop relatively concrete and specific means to implement the strategic plan. Middle-level managers often engage in tactical planning.
Operational planning generally assumes the existence of organization-wide or subunit goals and objectives and specifies ways to achieve them. Operational planning is short-range (less than a year) planning that is designed to develop specific action steps that support the strategic and tactical plans.

ORGANIZING

It is the process of bringing together physical, financial and human resources and developing productive relationship amongst them for achievement of organizational goals. According to Henry Fayol, To organize a business is to provide it with everything useful or its functioning i.e. raw material, tools, capital and personnels.

ORGANIZING
Organizing at the level of a particular job involves how best to design individual jobs to most effectively use human resources. Traditionally, job design was based on principles of division of labour and specialization, which assumed that the more narrow the job content, the more proficient the individual performing the job could become. However, experience has shown that it is possible for jobs to become too narrow and specialized.

ORGANIZING
Recently, many organizations have attempted to strike a balance between the need for worker specialization and the need for workers to have jobs that entail variety and autonomy. Many jobs are now designed based on such principles as empowerment, job enrichment and teamwork.

STAFFING

It is the function of manning the organization structure and keeping it manned. Staffing has assumed greater importance in the recent years due to advancement of technology, increase in size of business, complexity of human behavior etc. The main purpose of staffing is to put the right man on right job.

LEADING

It is that part of managerial function which actuates the organizational methods to work efficiently for achievement of organizational purposes. It is considered life-spark of the enterprise which sets it in motion the action of people because planning, organizing and staffing are the mere preparations for doing the work.

CONTROLLING
The purpose of controlling is to ensure that everything occurs in conformities with the standards. According to Koontz & ODonell Controlling is the measurement & correction of performance activities of subordinates in order to make sure that the enterprise objectives and plans desired to obtain them as being accomplished.

MANAGEMENT TOOLS
Over the past three decades, management tools have become a common part of executives' lives. Whether trying to boost revenues, innovate, improve quality, increase efficiencies or plan for the future, executives have looked for tools to help them. Successful use of such tools requires an understanding of the strengths and weaknesses of each tool as well as an ability to creatively integrate the right tools, in the right way, at the right time. The secret is not in discovering one magic device, but in learning which mechanism to use, and how and when to use it.

TOP 10 MANAGEMENT TOOLS USED


Benchmarking Strategic Planning Mission and Vision Statements (MVS) Customer Relations Management (CRM) Outsourcing

TOP 10 MANAGEMENT TOOLS USED


Balanced Scorecard Change Management Programs Strategic Alliances Business Process Re-engineering (BPR) Total Quality Management (TQM)

BENCHMARKING
Benchmarking improves performance by identifying and applying best demonstrated practices to operations and sales. Managers compare the performance of their products or processes externally with those of competitors and best-in-class companies and internally with other operations within their own firms that perform similar activities. Companies then improve their performance by tailoring and incorporating these best practices into their own operationsnot by imitating, but by innovating.

BENCHMARKING
Benchmarking involves the following steps:
Select a product, service or process to benchmark Identify the key performance metrics

Choose companies or internal areas to benchmark

BENCHMARKING
Collect data on performance and practices
Analyze the data and identify opportunities for improvement Adapt and implement the best practices, setting reasonable goals and ensuring companywide acceptance.

USES OF BENCHMARKING
Improve performance. Benchmarking identifies methods of improving operational efficiency and product design. Understand relative cost position. Benchmarking reveals a company's relative cost position and identifies opportunities for improvement.

USES OF BENCHMARKING
Gain strategic advantage. Benchmarking helps companies focus on capabilities critical to building strategic advantage. Increase the rate of organizational learning. Benchmarking brings new ideas into the company and facilitates experience sharing.

USES STRATEGIC PLANNING


Strategic Planning processes are often implemented to: Change the direction and performance of a business. Encourage fact-based discussions of politically sensitive issues. Create a common framework for decision making in the organization.

USES STRATEGIC PLANNING


Set a proper context for budget decisions and performance evaluations. Train managers to develop information to make better decisions. better

Increase confidence in the business's direction.

MISSION AND VISION STATEMENTS


A Mission Statement defines the company's business, its objectives and its approach to reach those objectives. A Vision Statement describes the desired future position of the company. Elements of Mission and Vision Statements are often combined to provide a statement of the company's purposes, goals and values. However, sometimes the two terms are used interchangeably.

USES OF MISSION AND VISION STATEMENTS (MVS)


Internally Help define performance standards. Inspire employees to work more productively by providing focus and common goals. Help establish a framework for ethical behavior.

USES OF MISSION AND VISION STATEMENTS (MVS)


Externally Enlist external support. Create closer linkages and better communication with customers, suppliers and alliance partners. Serve as a public relations tool.

USES OF CUSTOMER RELATIONS MANAGEMENT (CRM)

Companies can wield CRM to: Gather market research on customers, in real time if necessary. Generate more reliable sales forecasts. Coordinate information quickly between sales staff and customer support reps, increasing their effectiveness.

USES OF CUSTOMER RELATIONS MANAGEMENT (CRM)

Enable sales reps to see the financial impact of different product configurations before they set prices. Improve customer retention.

Design effective customer service programs.

OUTSOURCING
A company uses third parties to perform noncore business activities. It enables a company to focus its efforts on its core competencies. Outsourcing reduces cost and improves performance of the activity. Third parties that specialize in an activity are likely to be lower cost and more effective, given their focus and scale.

OUTSOURCING
Steps in Outsourcing:
(1) Determine whether the activity to outsource is a core competency. In most cases, it is unwise to outsource something that creates unique competitive advantage; (2) Evaluate the financial impact of Outsourcing. Outsourcing likely offers cost advantages if a vendor can realize economies of scale. A complete financial analysis should include the impact of increased flexibility and productivity or decreased time to market;

OUTSOURCING
Steps in Outsourcing:
(3) Assess the non-financial costs and advantages of Outsourcing. Managers will also want to qualitatively assess the benefits and risks of Outsourcing. Benefits include the ability to leverage the outside expertise of a specialized outsourcer and the freeing up of resources devoted to noncore business activities. A key risk is the growing dependence a company might place on an outsourcer, thus limiting future flexibility;

OUTSOURCING
Steps in Outsourcing:
(4) Choose an Outsourcing partner and contract the relationship. Candidates should be qualified and selected according to both their demonstrated effectiveness and their ability to work collaboratively. The contract should include clearly established performance guidelines and measures.

BALANCED SCORECARD
A Balanced Scorecard defines what management means by "performance" and measures whether management is achieving desired results. The Balanced Scorecard translates Mission and Vision Statements into a comprehensive set of objectives and performance measures that can be quantified and appraised.

CHANGE MANAGEMENT PROGRAMS


Change Management Programs enable companies to control the installation of new processes to improve the realization of business benefits. These programs involve devising change initiatives, generating organizational buy-in, implementing the initiatives as seamlessly as possible and generating a repeatable model for ensuring continued success in future change efforts. This allows leaders to help people succeed, showing where and when trouble is likely to occur and laying out a strategy for mitigating risks and monitoring progress.

CHANGE MANAGEMENT PROGRAMS


Change Management Programs require managers to: Focus on results. Maintain a goal-oriented mindset by establishing clear, non-negotiable goals and designing incentives to ensure these goals are met; Identify and overcome barriers to change. Companies identify employees most impacted and also work to predict, measure and manage the risk of change;

CHANGE MANAGEMENT PROGRAMS


Change Management Programs require managers to: Repeatedly communicate simple, powerful messages to employees. In times of change, leaders alter communication frequency and methods to manage how a shaken workforce perceives and reacts to information: Continuously monitor progress. Companies follow through and monitor the progress of each change initiative to tell if it is following the intended path or veering off course.

STRATEGIC ALLIANCES
Strategic Alliances are agreements among firms in which each commits resources to achieve a common set of objectives. Companies may form Strategic Alliances with a wide variety of players: customers, suppliers, competitors, universities or divisions of government. Through Strategic Alliances, companies can improve competitive positioning, gain entry to new markets, supplement critical skills and share the risk or cost of major development projects.

BUSINESS PROCESS RE-ENGINEERING


Business Process Reengineering involves the radical redesign of core business processes to achieve dramatic improvements in productivity, cycle times and quality. In BPR, companies start with a blank sheet of paper and rethink existing processes to deliver more value to the customer. They typically adopt a new value system that places increased emphasis on customer needs. Companies reduce organizational layers and eliminate unproductive activities in two key areas. First, they redesign functional organizations into cross-functional teams. Second, they use technology to improve data dissemination and decision making.

TOTAL QUALITY MANAGEMENT


Total Quality Management (TQM) is a systematic approach to quality improvement that marries product and service specifications to customer performance. TQM then aims to produce these specifications with zero defects. This creates a virtuous cycle of continuous improvement that boosts production, customer satisfaction and profits.

ACTIVITY: ROLE PLAY


Role-play can take many different forms and serve as many purposes. It is a powerful way of developing social skills.

Information, alone, rarely makes people change their minds, but personal experience often does. Role-playing, like any good inquiry approach, transforms the content of education from information into experience.

ACTIVITY: ROLE PLAY


Steps in an Effective Role Play:

Define the objectives


Choose the context and define the roles

Student Preparation/ Research


The Role play proper Concluding discussions Assessment

ACTIVITY: ROLE PLAY

Instructions:
The role play will focus on Henry Fayols 14 principles of management. Each group will be given one principle for role play which will be drawn by lots. Each principle should be role played in not more than 15 minutes but not less than 5 minutes. Each group will be granted to choose any type of role play to present based on the following criteria: Creativity ----------------------------- 25 Originality ---------------------------- 25 Content of Presentation---------- 25 Coordination & Teamwork------- 25

14 PRINCIPLES OF MANAGEMENT BY FAYOL

These principles are derived: 1. On the basis of observation and analysis i.e. practical experience of managers. 2. By conducting experimental studies.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

1. Division of Labor
Work of all kinds must be divided & subdivided and allotted to various persons according to their expertise in a particular area.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

Division of Labor
Henry Fayol has stressed on the specialization of jobs.

Subdivision of work makes it simpler and results in efficiency.


It also helps the individual in acquiring speed, accuracy in his performance. Specialization leads to efficiency & economy in spheres of business.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

2. Party of Authority and Responsibility


Authority refers to the right of superiors to get exactness from their sub-ordinates.
Responsibility means obligation performance of the job assigned. for the

14 PRINCIPLES OF MANAGEMENT BY FAYOL

Party of Authority and Responsibility


Authority & responsibility are co-existing. If authority is given to a person, he should also be made responsible.
In a same way, if anyone is made responsible for any job, he should also have concerned authority. There should be a balance between the two i.e. they must go hand in hand. Authority without responsibility leads to irresponsible behavior whereas responsibility without authority makes the person ineffective.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

3. Principle of One Boss/ Unity of Command


A sub-ordinate should receive orders and be accountable to one and only one boss at a time. He should not receive instructions from more than one person Unity of command provides the enterprise a disciplined, stable & orderly existence. It creates harmonious relationship between superiors and sub-ordinates.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

4. Unity of Direction
People engaged in the same kind of business or same kind of activities must have the same objectives in a single plan.
Without unity of direction, unity of action cannot be achieved. Fayol advocates one head one plan which means that there should be one plan for a group of activities having similar objectives.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

Unity of Direction
Related activities should be grouped together. There should be one plan of action for them and they should be under the charge of a particular manager.
According to this principle, efforts of all the members of the organization should be directed towards common goal. Without unity of direction, unity of action cannot be achieved. In fact, unity of command is not possible without unity of direction.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

5. Equity
Equity means combination of fairness, kindness & justice. The employees should be treated with kindness & equity if devotion is expected of them.

It implies that managers should be fair and impartial while dealing with the subordinates.
They should give similar treatment to people of similar position.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

Equity
They should not discriminate with respect to age, caste, sex, religion, relation etc.

Equity is essential to create and maintain cordial relations between the managers and sub-ordinate.
But equity does not mean total absence of harshness. Fayol was of opinion that, at times force and harshness might become necessary for the sake of equity.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

6. Order
This principle is concerned with proper & systematic arrangement of things and people. Arrangement of things is called material order and placement of people is called social order. Material order- There should be safe, appropriate and specific place for every article and every place to be effectively used for specific activity and commodity. Social order- Selection and appointment of most suitable person on the suitable job. There should be a specific place for every one and everyone should have a specific place so that they can easily be contacted whenever need arises.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

7. Discipline
Discipline means sincerity, obedience, respect of authority & observance of rules and regulations of the enterprise. Subordinate should respect their superiors and obey their order.
Discipline can be enforced if: There are good superiors at all levels. There are clear & fair agreements with workers. Sanctions (punishments) are judiciously applied.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

8. Initiative
Initiative means eagerness to initiate actions without being asked to do so.
Management should provide opportunity to its employees to suggest ideas, experiences& new method of work. It helps in developing an atmosphere of trust and understanding. They can be encouraged with the help of monetary & non-monetary incentives.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

9. Fair Remuneration
Remuneration to be paid to the workers should be fair, reasonable, satisfactory & rewarding of the efforts. It should accord satisfaction to both employer and the employees. Wages should be determined on the basis of cost of living, work assigned, financial position of the business, wage rate prevailing etc.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

10. Stability of Tenure


Employees should not be moved frequently from one job position to another i.e. the period of service in a job should be fixed. According to Fayol. Time is required for an employee to get used to a new work & succeed to doing it well but if he is removed before that he will not be able to render worthwhile services.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

11. Scalar Chain


Scalar chain is the chain of superiors ranging from the ultimate authority to the lowest. Every orders, instructions etc. has to pass through Scalar chain.
Gang Plank clarifies that management principles are not rigid rather they are very flexible. They can be moulded and modified as per the requirements of situations

14 PRINCIPLES OF MANAGEMENT BY FAYOL

12. Sub ordination of individual interest to common goal


An organization is much bigger than the individual it constitutes therefore interest of the undertaking should prevail in all circumstances. In order to achieve this attitude, it is essential that: Employees should be honest & sincere. Proper & regular supervision of work. Reconciliation of mutual differences and clashes by mutual agreement. For example, for change of location of plant, for change of profit sharing ratio, etc.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

13. Esprit de Corps


It refers to team spirit i.e. harmony in the work groups and mutual understanding among the members. Esprit De Corps inspires workers to work harder. The managers should infuse team spirit & belongingness. There should be no place for misunderstanding. People then enjoy working in the organization & offer their best towards the organization.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

14. Centralization & Decentralization


Centralization means concentration of authority at the top level. In other words, centralization is a situation in which top management retains most of the decision making authority. Decentralization means disposal of decision making authority to all the levels of the organization. In other words, sharing authority downwards is decentralization.

14 PRINCIPLES OF MANAGEMENT BY FAYOL

Centralization & Decentralization


According to Fayol, Degree of centralization or decentralization depends on no. of factors like size of business, experience of superiors, dependability & ability of subordinates etc.

Anything which increases the role of subordinate is decentralization & anything which decreases it is centralization.