Principles of Management

UNIT1 - Introduction to Management

Management is the art of getting things done through others. It is always

required whenever human and non-human resources are used. So
management has to perform various functions to achieve the goals of the
organization. Such management functions are performed effectively and
efficiently through principles and techniques.
Meaning of Management Principles
The management principles are broad and general guidelines for decision-
making and behavior. These guide managers in taking actions and decisions.
These principles are different from principles of science as they are not rigid.
They are applied creatively to humans as per the needs and demands of the
situation, so they are flexible. Management principles have to keep pace with
the changing environment as humans and technology are not static.

Derivation of Management Principles:

The management principles are derived and developed
through Observation and Experimentation.
1. Observation: Certain events and situations are observed and analyzed
by the management thinkers. These observations and analyses give
certain guidelines, rules and methods for doing work, taking actions and
decisions for achieving the organizational goals.
2. Experimentation: The guidelines developed by the management thinker
are tested and experimented repeatedly to test their validity. These
guidelines are tested in various situations and organisations. If they
provide the same result in every situation, then they are designated as
management principles.
Nature of Management Principles
1. Universal Application: Management principles are applicable to all kinds
of organisations, whether big or small, irrespective of the size and nature
of the organisation. Although, the extent of application varies according
to the situation and size and nature of the organisation.
2. General Guidelines: These principles are not ready-to-use solutions.
They are just general guidelines which need to be applied creatively by
the manager depending upon the situation, as real business situations
and environment is very complex and dynamic.
3. Formed by Practice and Experimentation: These principles and
techniques are formed by the collective observation and
experimentation of all the managers over a period of time. For example,
it is a matter of common experience that discipline is very important to
achieve goals.
4. Flexible: Principles of management are not rigid, as in the case of
principles of science. These principles can be modified as per the need of
the organisation. They are flexible and give managers enough discretion
to modify and apply them as per the situation.
5. Mainly behavioural: Managers have to deal with human behaviour
because work in every organisation is performed by humans. As human
behaviour is very complex and dynamic in nature, these principles aim at
influencing the behaviour of humans to achieve organisational goals.
6. Contingent: These principles are dependent upon the prevailing
conditions at a particular point of time. The application of these
principles is changed as per the situation.
7. Cause and effect relationships: Management principles are based on
cause and effect relationship so that they can be used in similar cases in
a large number of cases. Outcomes of the managerial actions are
predicted using these principles.
Significance of Management:
1. Providing Managers with useful insights into reality: Knowledge, ability
and understanding of managers are improved with the help of principles
of management, as they provide guidance. These principles also help to
improve the efficiency of managers as they avoid the hit and trial
method. They provide useful insights into the real world situations. It
also enables managers to learn from their past mistakes and take
corrective actions in the future.
2. Optimum utilisation of resources and effective administration: Physical,
financial and human resources are utilised optimally with the help of
principles of management. The cause and effect relationship avoids hit
and trial method and reduces inefficiency and wastage of resources.
3. Scientific decisions: Decisions taken with the help of principles of
management are more realistic, practical and free from personal biases.
They are made after repeated experimentation, therefore they minimize
the chances of wastage of resources because the hit and trial method is
not used. Thus, these principles facilitate scientific and balanced
decisions.
4. Meeting changing environment requirements: Business environment is
dynamic, and in order to survive in this fast changing environment,
business should adapt to the changes. Management principles guide
managers to take corrective actions and help organisations to implement
the changes to survive in the dynamic environment.
5. Fulfilling social responsibility: As businesses use resources of society, it
is the duty of the business to perform social responsibilities. Principles of
management not only help in achieving organisational goals but also
help managers in performing social responsibilities. For example, the
Principle of Remuneration focuses on giving just and fair remuneration to
the employees, irrespective of caste, religion, gender, etc.
6. Management training, education and research: As these principles are
at the core of the management theory, they are used for training,
education and research. These principles are also included in graduate
and postgraduate courses, like B.Com, M.Com, BBA, MBA, etc. These
principles help in the refinement of management practices by developing
new techniques.
The Scope of Management
The definition of the scope of management comes from the business ideas,
theories, principles and responsibilities that a business uses for managing its
various functions. The scope of management is:
1. Financial Management
Every enterprise prioritizes financial management because finances can get
extremely tricky if not managed properly. Effective financial management
ensures there are fair returns to stakeholders, proper estimation of capital
requirements and laying down optimal capital. It includes preparation and
examination of financial statements, creating proper dividend policies and
negotiations with external stakeholders.

2. Marketing Management
The scope of management in marketing extends to planning, organizing,
directing and controlling activities in the marketing department. Identifying
customer requirements is crucial for providing business solutions. When a
manager is fully aware of the benefits of the products and/or services the
organization provides, they achieve better results. Marketing management
ensures that available resources are properly utilized and the best possible
outcomes are achieved.

3. Personnel Management
Personnel management—as the name suggests—deals with personnel or
individuals in a business environment. It includes the recruitment, transfer,
termination, welfare and social security of employees. This aspect of
management is extremely important as employees form teams and teams
drive an organization’s goals. Individual productivity also contributes to overall
efficiency. Without attending to employee needs and wants, an organization is
likely to struggle.
4. Production Management
This type of management refers to the process of creating utilities. When you
convert raw materials to finished products and oversee the planning and
regulation, you’re engaging in production management. Without production,
there isn’t any finished good or service and without it, organizations can’t
generate interest or profits. The final product must fulfill customer
requirements. The process includes quality control, research and development,
plan layout and simplification.

5. Office Management
This includes controlling and coordinating all office activities to achieve an
organization’s goals and targets. For example, an administration’s efficiency
impacts a business significantly. The more organized the departments and
responsibilities are, the more effective an organization is.
THE EVOLUTION OF MANAGEMENT
The evolution of management can be traced back to the days when human
beings started living in groups. One can argue that management took the form
of leadership which was essential to coordinate the efforts of the group
members in order to arrange the necessaries of life. According to Egyptian
literature of 1300 B.C., the art of management was being practised in different
forms by different people. The literature clearly indicates the recognition of
the importance of organisation and administration in the bureaucratic setup.
Modern management has developed through several stages or approaches.
These approaches to the study of management may be classified as under:
1 Classical Approach
2 Neo-classical Approach
3 Behavioural Science Approach
4 Social System Approach
5 Modern Organization Approach
6 Contingency Approach

1 Classical Approach
The classical theory represents the traditionally accepted views about
organisations. In a way, it signifies the beginning of the systematic study of
organisations. That is why it is said to be the oldest school of thought about
organisations and their management. The classical theory concentrated on
organisation structure for the achievement of organisational goals and also
developed certain principles of management. The classical writers thought of
the organisation in terms of its purpose and formal structure. They placed
emphasis on the planning of work, the technical requirements of the
organisation, principles of management and the assumptions of rational and
logical behaviour. The classical theory ignored the impact of the external
environment on the working of the organisation. Thus, it treated organisations
as closed systems. The classical thought can be studied under three streams,
namely:
• Administrative Functional or Process Approach (Henri Fayol)
• Scientific Management (F.W. Taylor)
• Bureaucratic Approach (Max Weber)
2 Neo-Classical Approach
The classical writers including Weber, Taylor and Fayol neglected the human
relations aspect. The neo classicists focussed on the human aspect of the
industry. They modified the classical theory by emphasizing the fact that
organisation is a social system and the human factor is the most important
element within it. They conducted some experiments (known as Hawthorne
Experiments) and investigated informal groupings, informal relationships,
patterns of communication, patterns of informal leadership, etc. This led to the
development of the Human Relations Approach.
Elton Mayo is generally recognized as the father of the Human Relations
School. The human relations approach is concerned with the recognition of the
importance of the human element in organisations. It revealed the importance
of social and psychological factors in determining workers’ productivity and
satisfaction.
The neo-classical or human relations approach put stress on inter-personal
relations ad informal groups at the workplace. The human relations argued
that the achievement of organisational objectives is impossible without the
willing cooperation of people and such cooperation cannot be automatically
secured or ordered. It has to be consciously achieved. The neo-classical
approach advocated a people-oriented organisation structure which will
integrate both formal and informal organisations.

3 Behavioural Science Approach

Organizational behaviour involves the study of attitudes, behaviour, and
performance of individuals and groups in an organizational setting. It is also
known as the human resource approach because it stresses the development
of human beings for the benefit of both individuals and the organisation. The
behavioural approach is multi-dimensional and inter-disciplinary in nature.
Under it, the knowledge is drawn from behavioural sciences, e.g. psychology,
sociology, anthropology, etc is applied to understand, explain and predict
human behaviour. Therefore, this approach is also known as the Behavioural
Science Approach. Under the behavioural science approach, the knowledge
drawn from behavioural sciences is applied to explain and predict human
behaviour. It focuses on human behaviour in the organisation. It lays emphasis
on the study of motivation, leadership, communication, group dynamics,
participative management, etc.

4 Social System Approach

According to Social System Approach, an organization is a cooperative system
in which persons are able to communicate with each other and are willing to
contribute to a common purpose. It is based on the generalisation that an
organisation is a system and its components are interrelated and
interdependent. A system is an interrelated set of elements that are organised
according to a plan and function as a whole. Its important feature is that it is
composed of a hierarchy of sub-systems. The world as a whole can be
considered to be a system in which various national economies are sub-
systems. In turn, each national economy is composed of its various industries,
each industry is composed of firms, and of course, a firm can be considered a
system composed of sub-systems such as production, marketing, finance,
accounting and so on. Thus, each sub-system may comprise several sub-
systems and, in turn, each sub-system may be further composed of sub-
systems. Chester Barnard is regarded as the founding father of this system.

5 Modern Organization Theory

Modern organization theory is considered far superior to the earlier theories
due to the following features:
a) The open system of Organization: The classical theory treated organisation
as a closed system. But modern theory considers the organisation as an open
system which has continuous interaction with the environment. It gets various
resources from the environment and transforms them into outputs desired by
the environment.
b) Adaptive Change: Organisation is an open system, its survival and growth in
a dynamic environment demand an adaptive system which can continuously
adjust to changing environment. Management tends to bring changes in the
sub-systems of the organisation to cope with the challenges of environmental
forces.
c) Integrative: The classical theory focused on formal organizations, whereas
neo-classical theory concentrated on informal organizations. Modern
organization theory considers both formal and informal organizations and tries
to integrate these with the concepts drawn from behavioural and quantitative
approaches. Problems in an organization are dealt with in an integrated rather
than in a piecemeal manner. This provides better and holistic solutions rather
than patchwork.
d) Traditional and neo-classical theorists were prescriptive in nature: They
provided some appropriate ways to design and manage organizations. The
focus was on prescribing ‘one best way’, but the systems approach adopts a
realistic view and recognizes the complex problems organizations face. It
considers both formal and informal relations and tries to generate unique
solutions to unique problems that organizations face.

6 Contingency Approach
The contingency approach is a relatively new approach to organization and
management. It is related to the system approach. The belief that
organizations are open systems widened the perspective further leading to the
development of the contingency approach. It is also known as the situation
approach. The contingency approach is based on the belief that there is no one
best way to tackle the problems of management. The application of
management principles and practices is contingent upon the environment. In
the words of Kast and Rosenzweig, “The contingency view seeks to understand
the inter-relationships within and among sub-systems as well as between the
organisation and to define patterns of relationships of variables”.
Management as an Art, Science and Profession

Management as a Science
To understand this topic, we should first know what does science means?
Science means a systematized body of knowledge that can be acquired
through observation and experimentation. It consists of universally accepted
principles that establish a relationship between causes and their effects.
The essential features of Science are:
• Systematized body of knowledge: Science is a systematic body of
knowledge. Its principles are based on a cause-and-effect relationship.
• Observation and Experiments: All scientific principles are first
developed through observations and then tested through repeated
experimentation under controlled conditions.
• Causes and Effect Relationship: Science is based on causes and their
effects. For example, if a person eats lots of fast food without any
physical activity, he will put on extra weight.
• Universal Validity: Scientific principles have universal validity and can
be applied in all situations and times. basic truths.
We can say management has some features of Science as :
1. Management is a systematized body of knowledge in the form of basic
principles and concepts. It not only has
theories and principles that have developed over time, but it also draws
on other disciplines, such as
Economics, Sociology, Psychology, and Mathematics. Like all other
organized activities, management has its vocabulary of terms and
concepts.
2. The knowledge of management has been built up through endless
observation and experiments. Management experts and practitioners
have developed the knowledge after thorough analysis, inquiry and
experience. The principles of management make use of the scientific
method of observation and analysis. As management deals with human
behaviours that cannot be scientifically predicted, the methods of
observation used in management are not completely objective.
3. Principles of management establish a cause-and-effect relationship
between various factors. If there is a cause or an action, there will be an
effect due to that cause. For example, dual subordination leads to
confusion.
4. Principle of management is not applicable universally as they are not
exactly like the principles of science, only the fundamental principles of
management are universally applicable. These results can be tested and
verified. The principle of management is modified as per the situation.
However, managers are provided with certain fundamental techniques
that are used in different situations.
Management as an Art
Now, what do we mean by arts? Arts means the practical application of
knowledge and skills to achieve the desired results. It is personal application of
knowledge to achieve results. It is attained through study, observation and
experience.
The essentials features of arts are:
• Theoretical knowledge: Art comprises the application of theoretical
knowledge. A particular art has its basic principles and theory. Some
fundamental principles have been derived by the experts which apply to
their particular form of art. For example, painting has its principles and
theory to start with.
• Personal skills: Every artist has his way of working. The use of basic
knowledge varies from individual to individual. Even how they tackle
their problems for reaching the result or the goal which they are willing
to achieve differs. Applying this basic knowledge with practise,
creativity, imagination, initiative, and innovation is a personal skill.
• Creativity: Art consists of lots of creativity. The theoretical knowledge
should be practised and applied differently to become more creative and
achieve the ultimate goal.
• Perfection through Practice: As arts require nonstop practice to gain
mastery. By performing the task again and again, the artists gain
perfection through practise. For example, a dancer who practices for
hours daily will get smooth and perfect with his steps through practise.
We can say management has some features of arts as :
1. There are many texts available in forms of theoretical knowledge for
different areas of management, like marketing, finance, and human
resources, in which the manager has to specialize. A manager practices
the art of management in his everyday job of managing a business based
on these studies, observations and experience.
2. Every manager has his unique method of working. He tackles various
problems based on his own opinion and understanding of the situation.
There are many theories of management introduced by various
 management thinkers, which define certain universal principles. A
manager applies these universal principles and theoretical knowledge in
different situations and problems. So, management is an individual skill.
3. Management is creative, as it converts inputs into outputs. A manager
applies this attained knowledge in his personal and skillful way in the
realities of a given situation. Management is goal-oriented and result-
oriented. It aims at achieving ultimate productivity and profitability, i.e.
at the lowest cost.
4. Management also involves regular practice. An efficient manager can
convert a challenge into an opportunity through unceasing decision-
making and leadership. Most management practices rely on the same
set of principles and theories. The distinction between a successful and a
less successful manager is his ability to put these principles into practice.
Management as a Profession
What is a profession? Profession means a vocation requiring specialized
knowledge, practical training, service motive and a code of conduct. A
Profession is an addicted group of individuals who obey ethical standards and
hold themselves out and are accepted by the public as having special
knowledge and skills.
The essential features of a profession are:
• Specialized Knowledge: All professions are based on a well-defined
body of knowledge that can be acquired
through instruction.
• Specialized Knowledge - A profession must have a systematic body of
knowledge that can be used for development of professionals. Every
professional must make deliberate efforts to acquire expertise in the
principles and techniques. Similarly a manager must have devotion and
involvement to acquire expertise in the science of management.
• Formal Education and Training: Almost all professions provide
specialized education and training in their respective field. The
professionals have to complete their education and training to get a job.
There are various universities and formal institutions for attaining a
complete education. For example, a doctor needs to complete his formal
education and training to practice his knowledge before providing his
services to the people.
• Service Motive: The basic motive of a profession is to serve their client’s
interests by rendering dedicated and committed service. All
professionals are also anticipated to serve society rather than simply
earn profit.
• Social Obligations - Profession is a source of livelihood but professionals
are primarily motivated by the desire to serve the society. Their actions
are influenced by social norms and values. Similarly a manager is
responsible not only to its owners but also to the society and therefore
he is expected to provide quality goods at reasonable prices to the
society.
 • Statutory Body: A legally recognized body regulates all professions. All
professions are affiliated with a professional association that regulates
entry, grants certificates of practice, and formulates and enforces a code
of conduct.
We can say management has some features of the profession as :
1. Management has a transmittable body of specialized knowledge.
Management is growing all over the world as a discipline. It is based on a
systematic body of knowledge comprising well-defined principles based
on a variety of business situations. This knowledge can be attained at
different colleges and professional institutes and through several books.
2. Some specialized institutions provide education and training in
management. Having completed their education and training, students
get placed as managers. Management is taught at different institutions,
few of these have been set up with the definite purpose of providing
management education, for example, the Indian Institutes of
Management (IIMs) in India.
3. The elementary purpose of management is to help the organization to
achieve its stated goal. This may be profit making for a business
enterprise and service for a hospital. But, profit maximization as the only
objective of management will not help the company. Having a good
management team that works effectively and efficiently will serve
society by offering a better quality of products at reasonable prices.
Alike other professional managers are also anticipated to serve society
rather than simply earning profit for the owner.
4. A legally recognized body regulates all professions. Managers also have
their associations (e.g., All India Management Association). There is no
compulsion for managers to be members of such an association.
However, management associations are not statutory bodies.