Principles of Management

Class 12 Business Studies

Principles of management are general guidelines, which can be used for conduct in work places under certain situations. They help managers to take and implement decisions.

A managerial principle is a broad and general guideline for decision- making and behaviour. For example while deciding about promotion of an employee one manager may consider seniority, whereas the other may follow the principle of merit.

Nature of Principles of Management

The nature of management principles can be discussed under the heads - formed by practice; general guidelines; universal; flexible; behavioural; contingent; and cause and effect relationship.

(i) Universal applicability

The principles of management are intended to apply to all types of organisations, business as well as non-business, small as well large, public sector as well as private sector, manufacturing as well as the services sectors.

(ii) General guidelines

The prin­ciples are guidelines to action but do not provide ready-made, straitjacket solutions to all managerial problems. This is so because real business situations are very complex and dynamic and are a result of many factors.

(iii) Formed by practice and experi­mentation

The principles of management are formed by experience and collective wisdom of managers as well as experimentation.

(iv) Flexible

The principles of management are not rigid prescriptions, which have to be followed absolutely. They are flexible and can be modified by the manager when the situation so demands.

(v) Mainly behavioural

Manage­ment principles aim at influencing behaviour of human beings. Therefore, principles of management are mainly behavioural in nature.

(vi) Cause and effect relationships

The principles of management are intended to establish relationship between cause and effect so that they can be used in similar situations in a large number of cases. As such, they tell us if a particular principle was applied in a particular situation, what would be its likely effect.

(vii) Contingent

The application of principles of management is contingent or dependent upon the prevailing situation at a particular point of time. The application of principles has to be changed as per requirements.

Significance of Principles of Management

Proper understanding of significance of management principles is essential to make sound decisions by managers. The significance can be discussed under the following heads - Increase in efficiency; Optimum utilisation of resources; Scientific decision making; Adaptation to changing environment; Fulfilling social responsibilities; Proper research and development; Training managers; and Effective administration.

(i) Providing managers with useful insights into reality

The principles of management provide the managers with useful insights into real world situations. Adherence to these principles will add to their knowledge, ability and understanding of managerial situations and circumstances. It will also enable managers to learn from past mistakes and conserve time by solving recurring problems quickly.

(ii) Optimum utilisation of resources and effective administration

Resources both human and material available with the company are limited. They have to be put to optimum use. By optimum use we mean that the resources should be put to use in such a manner that they should give maximum benefit with minimum cost. Principles equip the managers to foresee the cause and effect relationships of their decisions and actions.

(iii) Scientific decisions

Decisions must be based on facts, thoughtful and justifiable in terms of the intended purposes. They must be timely, realistic and subject to measurement and evaluation. Management principles help in thoughtful decision-making. They emphasise logic rather than blind faith.

(iv) Meeting changing environment requirements

Although the principles are in the nature of general guidelines but they are modified and as such help managers to meet changing requirements of the environment.

(v) Fulfilling social responsibility

The increased awareness of the public, forces businesses especially limited companies to fulfill their social responsibilities. Management theory and management principles have also evolved in response to these demands.

(vi) Management training, education and research

Principles of management are at the core of management theory. As such these are used as a basis for management training, education and research.

Taylor's Scientific Management

Scientific management refers to an important stream of one of the earlier schools of thought of management referred to as the "Classical" school. The other two streams belonging to the classical school are Fayol's Administrative Theory and Max Weber's Bureaucracy.

(i) Science not Rule of Thumb

Taylor pioneered the introduction of the method of scientific inquiry into the domain of management practice.

Scientific method involved investigation of traditional methods through work-study, unifying the best practices and developing a standard method, which would be followed throughout the organisation. According to Taylor, even a small production activity like loading pigs of iron into boxcars can be scientifically planned and managed. This can result in tremendous saving of human energy as well as wastage of time and materials. The more sophisticated the processes, greater would be the savings.

(ii) Harmony, Not Discord

Factory system of production implied that managers served as a link between the owners and the workers. Since as managers they had the mandate to ‘get work done’ from the workers, there always existed the possibility of a kind of class-conflict, the mangers versus workers. Taylor recognised that this conflict helped none, the workers, the managers or the factory owners. He emphasised that there should be complete harmony between the management and workers.

(iii) Cooperation, Not Individualism

There should be complete cooperation between the labour and the management instead of individualism. This principle is an extension of principle of ‘Harmony not discord’. Competition should be replaced by cooperation. Both should realise that they need each other.

(iv) Development of Each and Every Person to His or Her Greatest Efficiency and Prosperity

Industrial efficiency depends to a large extent on personnel competencies. As such, scientific management also stood for worker development. Worker training was essential also to learn the 'best method' developed as a consequence of the scientific approach.

Techniques of Scientific Management

These are based on the various experiments he conducted during his career.

Functional Foremanship

In the factory system, the foreman represents the managerial figure with whom the workers are in face-to-face contact on a daily basis. He is the pivot around whom revolves the entire production planning, implementation and control. Thus, Taylor concentrated on improving the performance of this role in the factory set-up.

Standardisation and Simplification of Work

According to him scientific method should be used to analyse methods of production prevalent under the rule of thumb. The best practices can be kept and further refined to develop a standard which should be followed throughout the organisation. This can be done through work-study techniques which include time study, motion study, fatigue study and method study.

Method Study

The objective of method study is to find out one best way of doing the job. There are various methods of doing the job. To determine the best way there are several parameters. Right from procurement of raw materials till the final product is delivered to the customer every activity is part of method study.

Motion Study

Motion study refers to the study of movements like lifting, putting objects, sitting and changing positions, etc., which are undertaken while doing a typical job. Unnecessary movements are sought to be eliminated so that it takes less time to complete the job efficiently.

Time Study

It determines the standard time taken to perform a well-defined job. Time measuring devices are used for each element of task. The standard time is fixed for the whole of the task by taking several readings. The method of time study will depend upon volume and frequency of the task, the cycle time of the operation and time measurement costs. The objective of time study is to determine the number of workers to be employed; frame suitable incentive schemes and determine labour costs.

Fatigue Study

A person is bound to feel tired physically and mentally if she or he does not rest while working. The rest intervals will help one to regain stamina and work again with the same capacity. This will result in increased productivity. Fatigue study seeks to determine the amount and frequency of rest intervals in completing a task.

Differential Piece Wage System

Taylor was a strong advocate of piece wage system. He wanted to differentiate between efficient and inefficient workers. The standard time and other parameters should be determined on the basis of the work- study.

The workers can then be classified as efficient or inefficient on the basis of these standards. He wanted to reward efficient workers. So he introduced different rate of wage payment for those who performed above standard and for those who performed below standard.

Fayol's Principles of Management

In the development of classical school of management thought, Fayol's administrative theory provides an important link. While Taylor succeeded in revolutionising the working of factory shop-floor in terms of devising the best method, fair day’s work, differential piece-rate system and functional foremanship; Henri Fayol explained what amounts to a managers work and what principles should be followed in doing this work.

(i) Division of Work

Work is divided into small tasks or jobs. A trained specialist who is competent is required to perform each job. Thus, division of work leads to specialisation.

(ii) Authority and Responsibility

Authority is both formal and informal. Managers require authority commensurate with their responsibility. There should be a balance between authority and responsibility. An organisation should build safeguards against abuse of managerial power. At the same time a manager should have necessary authority to carry out his responsibility.

(iii) Discipline

Discipline is the obedience to organisational rules and employment agreement which are necessary for the working of the organisation. According to Fayol, discipline requires good superiors at all levels, clear and fair agreements and judicious application of penalties.

(iv) Unity of Command

According to Fayol there should be one and only one boss for every individual employee. If an employee gets orders from two superiors at the same time the principle of unity of command is violated. The principle of unity of command states that each participant in a formal organisation should receive orders from and be responsible to only one superior.

(v) Unity of Direction

All the units of an organisation should be moving towards the same objectives through coordinated and focussed efforts. Each group of activities having the same objective must have one head and one plan. This ensures unity of action and coordination.

(vi) Subordination of Individual Interest to General Interest

The interests of an organisation should take priority over the interests of any one individual employee according to Fayol. Every worker has some individual interest for working in a company. The company has got its own objectives.

(vii) Remuneration of Employees

The overall pay and compensation should be fair to both employees and the organisation. The employees should be paid fair wages, which should give them at least a reasonable standard of living. At the same time it should be within the paying capacity of the company. In other words, remuneration should be just and equitable.

(viii) Centralisation and De-centr­alisation

The concentration of decision-making authority is called centralisation whereas its dispersal among more than one person is known as decentralisation. According to Fayol, "There is a need to balance subordinate involvement through decentra­lisation with managers’ retention of final authority through centralisation."

(ix) Scalar Chain

An organisation consists of superiors and subordinates. The formal lines of authority from highest to lowest ranks are known as scalar chain.

According to Fayol, "Organisations should have a chain of authority and communication that runs from top to bottom and should be followed by managers and the subordinates."

(x) Order

According to Fayol, "People and materials must be in suitable places at appropriate time for maximum efficiency." 

(xi) Equity

"Good sense and experience are needed to ensure fairness to all employees, who should be treated as fairly as possible," according to Fayol. This principle emphasises kindliness and justice in the behaviour of managers towards workers. This will ensure loyalty and devotion.

(xii) Stability of Personnel

"Employee turnover should be minimised to maintain organisational efficiency", according to Fayol. Personnel should be selected and appointed after due and rigorous procedure. But once selected they should be kept at their post or position for a minimum fixed tenure. They should have stability of tenure. They should be given reasonable time to show results.

(xiii) Initiative

Workers should be encouraged to develop and carry out their plans for improvements. Initiative means taking the first step with self-motivation. It is thinking out and executing the plan. It is one of the traits of an intelligent person. Initiative should be encouraged.

(xiv) Esprit De Corps

Management should promote a team spirit of unity and harmony among employees. Management should promote teamwork especially in large organisations because otherwise objectives would be difficult to realise. It will also result in a loss of coordination.