Chapter 1 (Part 1) Nature and Significance of Management, CBSE, Class 12, Business Studies PDF Download

Chapter 1

INTRODUCTION
Schools, hospitals, shops and large corporations are all organisations with diverse goals that are aimed at achieving something. No matter what the organisation is or what its goals might be, they all have something in common - management and managers. Successful organisations do not achieve their goals by chance but by following a deliberate process called 'management'.

CONCEPT 

•  management as an activity which is necessary wherever there is a group of people working in an organisation.
• People in organisations are performing diverse tasks o but they are all working towards the same goal.
•  Management aims at guiding their efforts towards o achieving a common objective - a goal. Thus, management has to see that
• tasks are completed and goals are achieved (i.e., effectiveness) • with the least amount of resources at a minimum cost (i.e., efficiency). 
  Management as a process: getting things done with the aim of achieving goals effectively and efficiently.

Three important concepts are (a) process, (b) effectively, and (c) efficiently

Process

• the primacy functions or activities that management performs to get things done.
• These functions are planning, organising, staffing, directing and controlling . 

Effectiveness

• doing the right task,
• completing activities and
• achieving goals.
• it is concerned with the end result.
• being efficient or doing work efficiently. 

Efficiency

• doing the task correctly and with minimum cost.
• cost-benefit analysis involved and
• the relationship between inputs and outputs. o If by using less resources (i.e., the inputs) o more benefits are derived (i.e., the outputs)
• then efficiency has increased.
• Input resources are money, materials, equipment and persons.
• reduce costs and ultimately lead to higher profits.

Effectiveness versus Efficiency

• they are interrelated.
• need to be balanced
• it is easier to be effective and ignore efficiency o complete the given task but at a high cost. 

Example:

• a company's target production is 5000 units in a year. To achieve this target the manager has to operate on double shifts due to power failure most of the time. o The manager is able to produce 5000 units but o at a higher production cost. • In this case, the manager was effective but not so efficient, since for the same output, more inputs (labour cost, electricity costs) were used. o a business may concentrate more on producing goods with fewer resources 

▪ i.e., cutting down cost

• but not achieving the target production.
• the goods do not reach the market and
• the demand for them declines and
• competitors enter the market.
• This is a case of being efficient but not effective since the goods did not reach the market. 

Therefore, it is important for management to achieve goals (effectiveness) with minimum resources i.e., as efficiently as possible while maintaining a balance between effectiveness and efficiency. Usually high efficiency is associated with high effectiveness which is the aim of all managers. But undue emphasis on high efficiency without being effective is also not desirable. Poor management is due to both inefficiency and ineffectiveness. 

CHARACTERISTICS OF MANAGEMENT

1. Management is a goal-oriented process:

• set of basic goals (the basic reason for its existence).
• These should be simple and clearly stated.
• Different organisations have different goals. For example, the goal of a retail store may be to increase sales, but the goal of The School is to impart education to children.
• unites the efforts of different individuals towards achieving these goals.
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2. Management is all pervasive: o economic, social or political organisations.
For example:

• A petrol pump needs to be managed as much as a hospital or a school.
• What managers do in India, the USA, Germany or Japan is the same.

How they do it may be quite different.

• due to culture, tradition and history.

3. Management is multidimensional:

• Management of work:
• All organisations exist for the performance of some work.
• In a factory, a product is manufactured,
• in a garment store a customer's need is satisfied and
• in a hospital a patient is treated.
• Management translates this work in terms of goals
• to be achieved and
• assigns the means to achieve it.
• problems to be solved,
• decisions to be made,
• plans to be established,
• budgets to be prepared,
• responsibilities to be assigned and
• authority to be delegated.
  • Management of people: ▪ Human resources or people are an organisation's greatest asset.
  • Despite all developments in technology
  • "getting work done through people" is still a major task.
  • Managing people has two dimensions:
  • dealing with employees as individuals with diverse needs and behavior;
  • dealing with individuals as a group of people.
  • to make people work towards
  • achieving the organisation's goals, o by making their strengths effective and o their weaknesses irrelevant.
• Management of operations:
  • No matter what the organization serve, 
• product or
• service
  • in order to survive.
• requires a production process
• the flow of input
  • material and
  • the technology for transforming this input into
• the desired output for consumption.
• Thisis interlinked with both
• the management of work and
• the management of people.

4. Management is a continuous process:

• a series of continuous, composite, but separate functions
• planning,
• organising,
• staffing,
• directing and
• controlling

5. Management is a group activity:

• An organisation is a collection of diverse individuals with different needs .
• Every member of the group has a different purpose for joining the organisation but as members of the organisation they work towards fulfilling the common organisational goal.
• This requires team work and coordination of individual effort in a common direction.

6. Management is a dynamic function:

• An organisation interacts with its external environment:
  • social,
  • economic and
  • political factors.
• In order to be successful, an organisation must change itself and its goals according to the needs of the environment.

7. Management is an intangible force:

• that cannot be seen but its presence can be felt in the way the organisation functions.
• The effect of management is noticeable in an organisation where targets are met according to plans, employees are happy and satisfied, and there is orderliness instead of chaos. 

OBJECTIVES OF MANAGEMENT

1. Organisational Objectives:

• Management is responsible for setting and achieving objectives
• a variety of objectives in all areas (all stakeholders) including,
  • shareholders,
  • employees,
  • customers and
  • the government.
• main objective of any organisation should be to utilise
  • human and
  • material resources
• to fulfill the economic objectives of a business.
  • Survival: The basic objectives of any business is survival. Management must strive to ensure the survival of the organisation. In order to survive, an organisation must earn enough revenues to cover costs.
  • Profit: Mere survival is not enough for business. Management has to ensure that the organisation makes a profit. Profit provides a vital incentive for the continued successful operation of the enterprise. Profit is essential for covering costs and risks of the business.
  • Growth:

A business needs to add to its prospects in the long run, for this it is important for the business to grow. To remain in the industry, management must exploit fully the growth potential of the organisation. Growth of a business can be measured in terms of sales volume increase in the number of employees, the number of products or the increase in capital investment, etc.

2. Social objectives:

• the creation of benefit for society.
• As a part of society, every organisation whether it is business or non-business, has a social obligation to fulfill.
• This refers to consistently creating economic value for various constituents of society.
• This includes using environmental friendly methods of production , giving employment opportunities to the disadvantaged sections of society and providing basic amenities like schools and creches(infant children of unknown parents) to employees.

3. Personal objectives:

• .Organisations are made up of people who have different personalities, backgrounds, experiences and objectives.
• They all become part of the organisation to satisfy their diverse needs.
• These vary from financial needs such as competitive salaries and perks, social needs such as peer recognition and higher level needs such as personal growth and development.
• Management has to reconcile personal goals with organisational objectives for harmony in the organisation.

IMPORTANCE OF MANAGEMENT

1. Management helps in achieving group goals:

• Management is required not for itself but for achieving the goals of the organisation.
• The task of a manager is to give a common direction to the individual effort in achieving the overall goal of the organisation.

2. Management increases efficiency:

• The aim of a manager is to reduce costs and increase productivity through better planning, organising, directing, staffing and controlling the activities of the organisation.

3. Management creates a dynamic organisation:

• All organisations have to function in an environment which is constantly changing.
• It is generally seen that individuals in an organisation resist change as it often means moving from a familiar, secure environment into a newer and more challenging one.
• Management helps people adapt to these changes so that the organisation is able to maintain its competitive edge.

4. Management helps in achieving personal objectives:

• A manager motivates and leads his team in such a manner that individual members are able to achieve personal goals while contributing to the overall organisational objective.
• Through motivation and leadership the management helps individuals to develop team spirit, cooperation and commitment to group success.

5. Management helps in the development of society:

• An organisation has multiple objectives to serve the purpose of the different groups that constitute it.
• In the process of fulfilling all these, management helps in the development of the organisation and through that it helps in the development of society.
• It helps to provide good quality products and services, creates employment opportunities, adopts new technology for the greater good of the people and leads the path towards growth and development. 

NATURE OF MANAGEMENT

1. MANAGEMENT AS A SCIENCE 
The basic features of science are as follows:

• Systematised body of knowledge: Its principles are based on a cause and effect relationship. For example, the phenomenon of an apple falling from a tree towards the ground is explained by the law of gravity.
• Principles based on experimentation: 
• Scientific principles are first developed through observation and then tested through repeated experimentation under controlled conditions.
•  Universal validity: Scientific principles have universal validity and application.

Management can be said to be an Science:

• Management has a systematised body of knowledge. It has its own theory and principles that have developed over a period of time, but it also draws on other disciplines such as Economics, Sociology, Psychology and Mathematics. Like all other organised activity, management has its own vocabulary of terms and concepts. For example, all of us discuss sports like cricket and soccer using a common vocabulary. The players also use these terms to communicate with each other. Similarly managers need to communicate with one another with the help of a common vocabulary for a better understanding of their work situation.
• The principles of management have evolved over a period of time based on repeated experimentation and observation in different types of organisations. However, since management deals with human beings and human behaviour, the outcomes of these experiments are not capable of being accurately predicted or replicated. Therefore, management can be called an inexact science. Despite these limitations, management scholars have been able to identify general principles of management. For example, scientific management principles by F.W. Taylor and Functional Management principles by Henri Fayol.
• Since the principles of management are not as exact as the principles of science, their application and use is not universal. They have to be modified according to a given situation. However, they provide managers with certain standardised techniques that can be used in different situations. These principles are also used for training and development of managers. 

2. MANAGEMENT AS AN ART 
The basic features of an art are as follows:

• Existence of theoretical knowledge: Experts in their respective areas have derived certain basic principles which are applicable to a particular form of art. For example, literature on dancing, public speaking, acting or music is widely recognised.
• Personalised application: The use of this basic knowledge varies from individual to individual . Art, therefore, is a very personalised concept. For example, two dancers, two speakers, two actors, or two writers will always differ in demonstrating their art.
• Based on practice and creativity: Art involves the creative practice of existing theoretical knowledge. For example, We know that all music is based on seven basic notes. However, what makes the composition of a musician unique or different is his use of these notes in a creative manner that is entirely his own interpretation. Management can be said to be an art:
• A successful manager practices the art of management in the day -to-day job of managing an enterprise based on study, observation and experience. There is a lot of literature available in various areas of management like marketing, finance and human resources which the manager has to specialise in. There is existence of theoretical knowledge.
• A manager applies this acquired knowledge in a personalised and skillful manner in the light of the realities of a given situation. He is involved in the activities of the organisation, studies critical situations and formulates his own theories for use in a given situation. This gives rise to different styles of management.
• Scientific principles are first developed through observation and then tested through repeated experimentation under controlled conditions.
• Universal validity: Scientific principles have universal validity and application. Management can be said to be an Science:
• Management has a systematised body of knowledge. It has its own theory and principles that have developed over a period of time, but it also draws on other disciplines such as Economics, Sociology, Psychology and Mathematics. Like all other organised activity, management has its own vocabulary of terms and concepts. For example, all of us discuss sports like cricket and soccer using a common vocabulary. The players also use these terms to communicate with each other. Similarly managers need to communicate with one another with the help of a common vocabulary for a better understanding of their work situation.
• The principles of management have evolved over a period of time based on repeated experimentation and observation in different types of organisations. However, since management deals with human beings and human behaviour, the outcomes of these experiments are not capable of being accurately predicted or replicated. Therefore, management can be called an inexact science. Despite these limitations, management scholars have been able to identify general principles of management. For example, scientific management principles by F.W. Taylor and Functional Management principles by Henri Fayol.
• Since the principles of management are not as exact as the principles of science, their application and use is not universal. They have to be modified according to a given situation. However, they provide managers with certain standardised techniques that can be used in different situations. These principles are also used for training and development of managers. 

3. MANAGEMENT AS A PROFESSION 
A profession has the following characteristics:

• Well-defined body of knowledge: All professions are based on a well-defined body of knowledge that can be acquired through instruction.
• Restricted entry: The entry to a profession is restricted through an examination or through acquiring an educational degree. For example, to become a chartered accountant in India a candidate has to clear a specified examination conducted by the Institute of Chartered Accountants of India.
• Professional association: All professions are affiliated to a professional association which
  • regulates entry,
  • grants certificate of practice and
  • formulates and enforces a code of conduct. For example, To be able to practice in India lawyers have to become members of the Bar Council which regulates and controls their activities.
• Ethical code of conduct: All professions are bound by a code of conduct which guides the behaviour of its members. For example, All doctors, take the oath of ethical practice at the time they enter the profession.
• Service motive: The basic motive of a profession is to serve their client's interests by rendering dedicated and committed service. For example, The task of a lawyer is to ensure that his client gets justice. Management does not meet the exact criteria of a profession. However, it does have some of the features of a profession:
• All over the world there is marked growth in management as a discipline. It is based on a systematic body of knowledge comprising welldefined principles based on a variety of business situations. This knowledge can be acquired at different colleges and professional institutes and through a number of books and journals. The subject of management is taught at different institutions. Some of these have been set up with the specific purpose of providing management education such as the Indian Institutes of Management (IIMs) in India. Entry to different institutes is usually through an examination.
• There is no restriction on anyone being designated or appointed as manager in any business enterprise. Anyone can be called a manager irrespective of the educational qualifications possessed.
• Unlike professions such as medicine or law which require a practicing doctor or lawyer to possess valid degrees, nowhere in the world is it mandatory for a manager to possess any such specific degree. But professional knowledge and training is considered to be a desirable qualification, since there is greater demand for those who possess degrees or diplomas from reputed institutions. Therefore, as such the second criterion has not been strictly met.
• There are several associations of practising managers in India, like the AIMA (All India Management Association) that has laid down a code of conduct to regulate the activities of their members. There is, however, no compulsion for managers to be members of such an association nor does it have any statutory backing.
• The basic purpose of manage ment is to help the organisation achieve its stated goal. This may be profit maximisation for a business enterprise and service for a hospital. However, profit 

maximisation as the objective of management does not hold true and is fast changing. Therefore, if an organisation has a good management team that is efficient and effective it automatically serves society by providing good quality products at reasonable prices .