Chapter 2 (Part 1) Principle of Management , CBSE, Class 12, Business Studies PDF Download

Chapter 2 (Part 1) Principle of Management 

A principle refers to a statement which reflects the fundamental truth about some phenomenon based on cause and effect relationship.
Management principles are the statements of fundamental truth which act as guidelines for taking managerial actions and decisions. (a) On the basis of observation and analysis i.e., practical experience of managers. (b) By conducting experimental studies. 
 

NATURE  OF  PRINCIPLES  OF  MANAGEMENT

1. Universal  applicability: a. all  types of  organisations,  i. business  as  well  as  non-business,  ii. small  as  well  large,  iii. public  sector  as  well  as  private  sector,  iv. manufacturing  as  well  as  the  services  sectors.  b. applicability would  vary  with : i. the  nature of  the  organisation,  ii. business  activity,  iii. scale of  operations

 2. General  guidelines:  a. The  principles  are  guidelines  to  action but  do  not  provide i. readymade,  ii. strait jacket solutions  to  all  managerial  problems.  b. real  business  situations  are  very  complex and  dynamic and  are  a  result  of  many  factors.  For  example,  in  dealing  with  a  situation  of  conflict  between  two  departments,  a manager  may  emphasise  the  primacy  of  the  overall  goals  of  the  organisation.

3. Formed  by  practice  and  experimentation: a. experience and  collective  wisdom of  managers   For  example,  it  is  a  matter  of  common  experience  that  discipline  is  indispensable  for  accomplishing  any  purpose.  in  order  to  remedy  the  problem  of  fatigue  of  workers  in  the  factory,  an  experiment  may  be  conducted  to  see  the  effect  of  improvement  of  physical  conditions  to  reduce  stress.

4. Flexibile: a. not  rigid  prescriptions,  which  have  to  be  followed  absolutely.  b. They  are  flexible  and  can  be  modified by  the  manager  when  the  situation so  demands.  For  example,  the  degree  of  concentration  of  authority (centralisation)  or  its  dispersal (decentralisation)  will  depend  upon  the  situations  and  circumstances  of  each  enterprise.  c. the  manager  has  to  decide  which  tool  to  use  under  what  circumstances.

5. Mainly  behavioural: a. aim  at  influencing  behaviour of  human  beings.  b. It  is  not  that  these  principles  do  not  pertain  to  things  and  phenomenon  at  all,  it  is  just  a  matter  of  emphasis.  c. better  understanding  of  the  relationship  between human and  material  resources in  accomplishing  organisational  purposes.  For  example,  while  planning  the  layout  of  a  factory,  orderliness  would  require  that  workflows  are  matched  by  flow  of  materials  and  movement  of  men.

6. Cause  and  effect  relationships: a. they  can  be  used  in  similar  situations  in  a  large number  of  cases.  b. As  such,  they  tell  us  if  a  particular  principle  was  applied  in  a  particular  situation ,  what  would  be  its  likely  effect.  c. The  principles of  management  are  less  than  perfect since  they  mainly  apply  to  human  behaviour.  d. In  real  life,  situations  are  not  identical.  e. So,  accurate  cause  and  effect  relationships  may  be  difficult  to  establish .  f. However.principles  of  management  assist  managers  in  establishing  these  relationships  to  some  extent and  are  therefore  useful.  g. In  situations  of  emergencies,  it  is  desirable  that  someone  takes  charge  and  others  just  follow.  h. But  in  situations requiring  cross-functional  expertise,  such  as  setting  up  of  a  new  factory,  more  participative  approach  to  decision-making  would  be  advisable.

7. Contingent: a. dependent  upon  the  prevailing  situation  at  a  particular  point  of  time.  b. The  application  of  principles  has  to  be  changed as  per  requirements.  For  example,  employees  deserve  fair  and  just  remuneration.  But  what  is  just  and  fair  is  determined  by  multiple  factors.  They  include  contribution  of  the  employee,  paying  capacity  of  the  employer  and  also  prevailing wage  rate  for  the  occupation  under  consideration.

SIGNIFICANCE  OF  PRINCIPLES  OF  MANAGEMENT

1. Providing  managers  with  useful  insights  into  reality:  a. Adherence  to  these  principles  will  add to  their  i. knowledge,  ii. ability and  iii. understanding of  managerial  situations  and  circumstances.  b. It  will  also  enable  managers  to  learn  from  past  mistakes and  conserve  time  by  solving  recurring  problems  quickly.  c. As such  management  principles  increase  managerial  efficiency.  For  example,  a  manager  can  leave  routine  decision-making  to  his  subordinates  and  deal  with  exceptional  situations  which  require  her  /his  expertise  by  following  the  principles  of  delegation.

2. Optimum  utilisation  of  resources  and  effective  administration: a. Resources both  human  and  material  available  with  the  company  are  limited.  b. They  have  to  be  put  to  optimum  use. (the  resources  should  be  put  to  use  in  such  a  manner  that  they  should  give  maximum  benefit  with  minimum  cost.)  c. Principles  equip  the  managers  to  foresee  the  cause  and  effect  relationships of  their  decisions  and  actions. d. As  such  the  wastages  associated  with  a  trial-and-error  approach  can  be  overcome.  e. Effective  administration  necessitates  impersonalisation of  managerial  conduct  so  that  managerial  power  is  used  with  due  discretion.  f. Principles of  management  limit  the  boundary  of  managerial  discretion so  that  their  decisions  may  be  free  from  personal  prejudices  and  biases.  For  example,  in  deciding  the  annual  budgets for different departments,  rather  than  personal  preferences, managerial  discretion  is  bounded  by  the  principle  of  contribution  to  organisational  objectives.

3. Scientific  decisions:  a. Decisions  must  be  based  on  facts,  thoughtful  and  justifiable in  terms  of  the  intended  purposes.  b. They  must  be  timely,  realistic  and  subject  to  measurement  and  evaluation.  c. Management  principles  help  in  thoughtful  decision-making.  d. They  emphasise  logic  rather  than  blind  faith.  e. Management  decisions  taken  on  the  basis  of  principles  are  free  from  bias  and  prejudice.  f. They  are  based  on  the  objective assessment  of  the  situation.

4. Meeting  changing  enviornment  requirements:  a. management  principles  are  flexible  to adapt  to  dynamic  business  environment.  For  example, management  principles  emphasise  division  of  work  and  specialisation.  In  modern  times  this  principle  has  been  extended  to  the  entire  business  whereby  companies  are  specialising  in  their  core  competency  and  diverting  non-core  businesses.  even  core  processes  such  as  R&D,  manufacturing  and  marketing  are  being  outsourced  today.  Haven't  you  heard  of  proliferation  of  'Business  Process  Outsourcing'  (BPO)  and  'Knowledge  Process  Outsourcing'  (KPO)?

5. Fulfilling  social  responsibility: a. The increased awareness  of  the  public,  forces  businesses  especially  limited  companies  to  fulfill  their  social  responsibilities.  b. Management  theory  and management  principles  have  also  evolved  in  response  to  these  demands.  c. Moreover, the interpretation of  the  principles  also  assumes  newer  and  contemporary  meanings  with  the  change  in  time.  

For  example,  So, if  one  were  to  talk  of  'equity'  today,  it  does  not  apply  to  wages  alone.  Value  to  the  customer,  care  for  the  environment,  dealings  with  business  associates  would  all  come  under  the  purview  of  this  principle.  As an  application  of  this  principle,  we  find  that  Public  Sector  Undertakings  have  developed  entire  townships  as,  BHEL  has  developed  Ranipur  in  Hardwar (Uttaranchal).  One  may  also  cite  the  story  of  Shri  Mahila  Griha  Udyog  Lijjat  Papad  as  can  be  seen  in  the  accompanying  box

 6. Management  training,  education  and  research: a. Principles  of  management  are  at  the  core  of  management  theory.  b. As  such  these  are  used  as  a  basis  for  management training,  education  and  research.  For example, You  must  be  aware  that  entrance  to  management  institutes  is  preceded  by  management  aptitude  tests.  Professional  courses  such  as  MBA  (Master  of  Business  Administration).  BBA  (Bachelor  of  Business  Administration)  also  teach  these  principles  as  part  of  their  curriculum  at  the  beginner's  level.

HISTORY OF HENRY FAYOL
FATHER OF MANAGEMENT
Henry Fayol was born in France in 1841. He got degree in Mining Engineering in 1860 and started working as engineer in a Coal Mining Company. In 1888 he was promoted as the managing director of the company. At that time the company was in the situation of insolvency. He accepted the challenge and applied his managerial techniques to bring out the company from this situation and he succeeded. When he retired after 30 years the company was a leading coal-steel company with strong financial background.
Major Contribution of Fayol Henry Fayol becomes as ‘’Father of Management’’ Studies and Thoughts, because of the following contributions: (a) He made clear distinction between technical and managerial skill. (b) He identified the main steps in the process of management which are considered the major functions of management -planning, organizing, staffing, directing and controlling. (c) He developed fourteen principles of management which act as guidelines for managers to perform managerial activities.
 

FAYOL’S PRINCIPLES OF MANAGEMENT
1. DIVISION OF WORK (Stress on Specialization)                                                                                         ▪ Division of work should be applied to all kind of work: technical as well as management. ▪ Each job or work should be assigned to the specialists of that job and division of work promotes efficiency ▪ It also helps the individual acquiring speed, accuracy in his performance.
Positive Effect o Specialization o Improve efficiency

2. AUTHORITY & RESPONSIBILITY (Balance between Authority and Responsibility) ▪ Authority and 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 ▪ Authority without responsibility o leads to irresponsible behavior whereas ▪ Responsibility without authority o makes the person ineffective.
Positive effect o No misuse of authority o Helps in meeting responsibilities on time without any delay

3. CENTRALIZATION AND DE-CENTRALIZATION (delegation of Power from Top to Bottom level) ▪ Centralization means concentration of authority at the top level. ▪ Decentralization means disposal of decision making authority at all the levels of the organization. In other words, sharing authority downwards is decentralization.
According to Fayol, “Degree of centralization or decentralization depends on number of factors like size of business, experience of superiors, dependability & ability of subordinates etc.” ▪ Anything which increase the role of subordinate is decentralization & ▪ anything which decrease the role of subordinate is centralization Positive effect o Benefits of centralization as well as decentralization o Fast decisions at operational level and strict control by top level

4. UNITY OF DIRECTION (One head One plan) ▪ According to this principle efforts of all the members of the organization should be directed towards common goal. ▪ Without unity of direction, unity of command cannot be achieved Positive effect o Achievement of organizational goal o Efforts of all the employees get unified towards one direction only.

5. UNITY OF COMMAND (Order should be given by one superior only) ▪ A sub-ordinate receive orders and accountable to one and only one boss at a time ▪ Unity of command provides the enterprise a disciplined, stable & orderly existence ▪ It creates harmonious relationship between superior and subordinates.
Positive effect o No confusion in the mind of employees o No ego clashes
 

6. SUB-ORDINATION INTEREST INTO GENERAL INTEREST (Subordinate must contribute their interest into common interest) ▪ An organization much bigger than the individual it constitutes therefore interest of the undertaking should prevail in all circumstances ▪ As far as possible reconciliation should be achieved between individual and group interest ▪ But in case of conflict, individual must sacrifice for bigger interest (Organisational Interest) ▪ In order to achieve the attitude it is essential that:-a. Employees should be honest and sincere b. Proper & regular supervision of work.
Positive effect o Achievement of organizational goals o Coordination between individual and organizational goal
 

7. EQUITY (fairness, kindness, justice) ▪ Equity means combination of fairness, kindness, justice ▪ It implies that manager should be fair and impartial while dealing with the subordinates ▪ They should give similar treatment to people of similar position ▪ But equity does not means total absence of harshness Positive effect o Improve efficiency level of employees o No wastage of time and resources

8. ORDER (Orderly arrangement of men and material) ▪ 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 Positive effect o No wastage of time in search of men or material o Smooth and systematic working of organization

9. DISCIPLINE (follow rules and regulations) ▪ According to Fayol, ‘’Discipline means sincerity, obedience, respect of authority & observance of rules and regulations of the enterprises’’. ▪ This Principles applies that subordinate should respect their superiors and obey their order. ▪ Discipline is not only required on path of subordinate but also on the part of management. ▪ Discipline can be enforced if:-a. There are good superior at all levels b. There are clear & fair agreement with workers

c. Sanctions (Punishment) are judiciously applied.
Positive effect o Systematic working in the organization o Improve efficiency  

10. SCALAR CHAIN (Chain of command) ▪ Scalar chain fayol defines scalar chain as “The chain of superior ranging from the ultimate authority to the lowest’’ ▪ Every order, instructions, messages, requests, explanation etc. has to pass through scalar chain. ▪ But for the sake of convenience & urgency this path can be cut short and this short cut is known as Gang Plank. ▪ A Gang Plank is a temporary arrangement between two different points to facilitate quick & easy communication as explained below ▪ Gang Plank clarifies that management principles are not rigid rather they are very flexible. They can be modified as per the requirement of situations Positive effect o Systematic flow of information o No communication gap in the organization.

11. ESPIRIT DE CORPS (Team work) ▪ It refers to team spirit i.e., o harmony in the work group and o mutual understanding among the members. ▪ Spirit de corps inspires the worker to work harder ▪ To inculcate Espirit De Corps following steps should be undertaken:-a. There should be proper co-ordination of work at all levels b. Subordinates should be encouraged to develop informal relation among themselves.
Positive effect o Develop team spirit o Achievement of group goal  

12. FAIR REMUNERATION (fair salary to staff members) ▪ The method of remuneration to be paid to the workers should be fair, reasonable, satisfactory & rewarding of the efforts. ▪ Wages should be determined on the basis of o cost of living, o work assigned, o financial position of the business, o wage rate prevailing, ▪ Logical & appropriate wage rates and ▪ methods of their payment reduce tension & ▪ differences between workers & management creates harmonious relationship and ▪ pleasing atmosphere of work. ▪ Fayol also recommended provision of other benefits such as free education, medical & residential facilities to workers.
Positive effect o Employees get motivated o Devotion and commitment of employees improves

13. STABILITY OF TENURE OF PERSONNEL (No frequent termination) ▪ Fayol emphasized that employees should not be moved frequently from one job position to another i.e., the period of service in a job should be fixed. ▪ Therefore employees should be appointed after keeping in view principles of recruitment & selection but once they are appointed their services should be served. ▪ Stability of job creates o team spirit and o a sense of belongingness among workers which ultimately increase the quality as well as quantity of work.
Positive effect o Improve efficiency level of employees o No wastage of time and resources

14. INITIATIVE (initiate new challenges) ▪ Workers should be encouraged to take initiative in the work assigned to them. ▪ It means eagerness (dedication, enthusiasm) to initiate actions without being asked to do so. ▪ Fayol advised that management should provide opportunity to its employees to suggest ideas experience & new method of work. ▪ They can be encouraged with the help of monetary & non-monetary incentives. ▪ People then enjoy working in the organization because it adds to their zeal and energy.
Positive effect o Develops feeling of belongingness in employees o Employees achieve the target on time if they are set up with their consultation