PRINCIPLES

OF
MANAGEMENT
DEFINITION OF MANAGEMENT

 Management = Manage Men or people

 It is a process of getting the work done by
others with the aim of achieving goals
effectively and efficiently
 MANAGEMENT

 Harold Koontz and Heinz Weihrich define

management as “the process of designing and
maintaining an environment in which individuals,
working together in groups, efficiently
accomplish selected aims.”

 Mary Parker Follet termed management as “the

act of getting things done through people.”
 "Management is efficiency in climbing the ladder of
success; leadership determines whether the ladder is
leaning against the right wall."
— Stephen R. Covey
 "If you pick the right people and give them the
opportunity to spread their wings—and put compensation
as a carrier behind it—you almost don't have to manage
them."
— Jack Welch
 "Make your top managers rich and they will make you
rich."
— Robert H. Johnson
MANAGEMENT
MANAGEMENT
 CHARACTERISTICS of
MANAGEMENT
• Goal oriented process
• Group activity
• Intangible force
• Continuous process
• Multidimensional (Mgmt of work, Mgmt of
people, Mgmt of operations)
• All Pervasive
• Dynamic function
FUNCTIONS OF MANAGEMENT
 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. It bridges
the gap from where we are & where we want to be.
 A plan is a future course of actions. It is an exercise in
problem solving & decision making.

 Planning is determination of courses of action to achieve

desired goals. Thus, planning is a systematic thinking
about ways & means for accomplishment of predetermined
goals.

 Planning is necessary to ensure proper utilization of human

& nonhuman resources. It is all pervasive, it is an
intellectual activity and it also helps in avoiding confusion,
uncertainties, risks, wastages etc.
 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 for its functioning i.e.
raw material, tools, capital and personnel‘s.

 To organize a business involves determining & providing

human and non-human resources to the organizational
structure.
 ORGANIZING
Organizing as a process involves:

• Identification of activities.
• Classification of grouping of activities.
• Assignment of duties.
• Delegation of authority and creation of responsibility.
• Coordinating authority and responsibility
relationships.
 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 right man on

right job.
Staffing involves:

• Manpower Planning (estimating man power in

terms of searching, choose the person and giving the
right place).
• Recruitment, selection & placement.
• Training & development.
• Remuneration.
• Performance appraisal.
• Promotions & transfer.
 It is that part of managerial function which actuates
the organizational methods to work efficiently for
achievement of organizational purposes.

 Direction is that inert-personnel aspect of

management which deals directly with influencing,
guiding, supervising, motivating sub-ordinate for
the achievement of organizational goals.
Direction has following elements:

• Communication
• Supervision
• Leadership
• Coordination
• Motivation

(i) Communication- is the process of passing

information, experience, opinion etc from one
person to another. It is a bridge of understanding.
 (ii) Supervision- implies overseeing the work of
subordinates by their superiors. It is the act of watching
& directing work & workers.

 (iii) Leadership- may be defined as a process by which

manager guides and influences the work of subordinates
in desired direction.

 (iv) Coordination- Bringing together all the activities.

 (iv) Motivation- means inspiring, stimulating or

encouraging the sub-ordinates with zeal to work.
Positive, negative, monetary, non-monetary incentives
may be used for this purpose.
 It implies measurement of accomplishment against
the standards and correction of deviation if any to
ensure achievement of organizational goals.

 The purpose of controlling is to ensure that

everything occurs in conformities with the
standards. An efficient system of control helps to
predict deviations before they actually occur.
 According to Theo Haimann, ―Controlling is the
process of checking whether or not proper progress
is being made towards the objectives and goals and
acting if necessary, to correct any deviation.

 According to Koontz & O‘Donell ―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.
Controlling has following steps:

(i) Establishment of standard performance.

(ii) Measurement of actual performance.
(iii) Comparison of actual performance with the
standards
(iv) finding out deviation if any.
(iv) Taking Corrective action.
CONTROLLING
Management: Science or Art?
Management – Science

 Systematized body of knowledge

 Principles based on continuous observations,
experimentation and fact findings.
 Universal application
 The organized body of knowledge can be taught and
learnt in the classroom.
 Management: Science or Art?
Management is science
 Systematized body of knowledge

 Principles based on experimentation

 Universal application
 Management theories and principles can be taught
inside the classroom.
Management: Science or Art?
Management – Art

 Systematized body of knowledge

 Personalised application
 Based on Practise
 Creativity
Management: Science or Art?
Management is art

 Systematized body of knowledge

 Personalised application
 Based on Practise
 Creativity
Management: Science or Art?
Management is both science and art:

Management can be learnt as science in the classroom

but it requires personal skills as art to achieve the
desired result.
 ENTREPRENEUR
 The term ‘entrepreneur’ is a French origin which means ‘go
between’ or ‘between-takers’.

 An entrepreneur is a person who creates a new enterprise by

assembling inputs (i.e. land, labour and capital) for production
purposes.

 He assumes all risk and uncertainty, in order to achieve profit

and growth of the business venture by identifying new
opportunities and combining resources for the purpose of
capitalizing them.

 He innovates new ideas and business processes.

The characteristics of a successful entrepreneur are

Risk taker

Commitment and Conviction

Capacity to analyse

Initiative and Independence

High personal efficiency

High need for achievement

 MANAGER
 ‘Manager’ is a person who gets the things done through
his subordinates, with the aim of accomplishing business
objectives efficiently and effectively.

 The five primary functions of a manager are planning,

organizing, directing and motivating, coordination and
control.

 The manager is in charge of the particular division, unit or

department of the company.

 He may directly command to workers, or he may direct

the supervisors, who will command workers.
Bases of difference Entrepreneur Manager

1. Motive main motive of an entrepre- main motive of a manager is

neur is to start a venture by to render his services in an
setting up an enterprise enterprise already set up by
someone
2. Status entrepreneur is the owner of manager is the employee in
the enterprise the enterprise owned by the
entrepreneur
3. Risk Bearing entrepreneur being the manager as a employee does
owner of the enterprise not bear any risk involved in
assumes all risks and the enterprise
uncertainty involved in run-
ning the enterprise
4. Rewards reward an entrepreneur gets manager gets salary as
for bearing risks involved in reward for the services
the enterprise is profit which rendered by him in the
is highly uncertain enterprise. Salary is fixed
5. Innovation Entrepreneur himself thinks manager does is simply to
over what and how to execute the plans prepared
produce goods to meet the by the entrepreneur
changing demands of the
customers
Managers can be top level managers, middle-level managers,
low-level managers.

No basic distinction is made between managers, executives,

administrators, and supervisors.

All managers carry out managerial functions. However, the time

spent for each function may differ.

The aim of all managers is to make a profit.

Managers must establish an environment in which people can

achieve as much as possible of a desired goal with available
resources. So that they can make profits.
 TOP LEVEL MANAGERS
 Spend more time on planning and organizing

 Creating a context for change

 Developing commitment and ownership in employees

 Creating a positive organizational culture through

language and action

 Monitoring their business environments

 MIDDLE LEVEL
MANAGERS
 Plan and allocate resources to meet objectives

 Coordinate and link groups, departments, and divisions

 Monitor and manage the performance of subunits and

managers who report to them

 Implement changes or strategies generated by top

managers
 FIRST LEVEL
SUPERVISORS OR
LOW LEVEL MANAGERS
 Manage the performance of entry-level employees

 Encourage, monitor, and reward the performance of

workers

 Teach entry-level employees how to do their jobs

 Make detailed schedules and operating plans

 MANAGERIAL SKILLS
AND THE ORGANIZATIONAL
HIERARCHY
Robert L. Katz identified four kinds of skills for
administrators:
 Technical

 Human

 Conceptual

 Design skills
 Supervisors
 Technical skills – important
 Human skills – helpful for frequent interactions with subordinates
 Conceptual – not important for this level
 Design Skills – not important for this level

Middle Management
 Technical skills – need will be decreasing
 Human skills – important
 Conceptual skills – important
 Design Skills – not important

Top Management
 Technical skills – some exposure
 Human skills – important
 Conceptual skills – important
 Design Skills – important
Managerial Roles
 Identified by Professor Henry Mintzberg
 One of the newest approach to management theory
 After studying the activities of five chief executives in
various organizations, mintzberg came to conclusion
that executives are not performing the managerial
functions such as planning, organizing, staffing,
directing and controlling
 Engaged in variety of other activities
 Mintzberg came to conclusion that managers fit in to
the 10 roles from his research
Managerial Roles
 Interpersonal Roles

 Informational Roles

 Decisional Roles
Managerial Roles
 Interpersonal Roles
 Figurehead role : As a manager, you have social, ceremonial
and legal responsibilities. You're expected to be a source of
inspiration. People look up to you as a person with authority

 Leader role: This is where you provide leadership for your

team, your department or perhaps your entire organization;
and it's where you manage the performance and
responsibilities of everyone in the group

 Liaison role: Managers must communicate with internal and

external contacts. You need to be able to network effectively
on behalf of your organization
Managerial Roles
 Informational Roles
 Monitor role: In this role, you regularly seek out information
related to your organization and industry, looking for relevant
changes in the environment. You also monitor your team, in
terms of both their productivity, and their well-being

 Disseminator role: This is where you communicate potentially

useful information to your colleagues and your team.

 Spokesperson role: Managers represent and speak for their

organization. In this role you're responsible for transmitting
information about your organization and its goals to the
people outside it.
Managerial Roles
 Decisional Roles
 Entrepreneurial role: As a manager, you create and control change
within the organization. This means solving problems, generating new
ideas, and implementing them

 Disturbance handler role: When an organization or team hits an

unexpected roadblock, it's the manager who must take charge. You also
need to help mediate disputes within it

 Resource allocator role: You'll also need to determine where

organizational resources are best applied. This involves allocating
funding, as well as assigning staff and other organizational resources

 Negotiator Role: You may be needed to take part in, and direct,
important negotiations within your team, department, or organization
History
 The systematic study of management began
after 1900.
 Management philosophies and organization
forms change over time to meet new needs.
 Some ideas and practices from the past are
still relevant and applicable to management
today.
 Management Theories
1. Classical
 Scientific Management
 Administrative Management Theory
 Human Relations Movement
2. Behavioural
 Group Influences
 Maslow’s Need Theory
 Theory X and Theory Y
 Hawthorne Studies
3. Modern
 Systems Approach
 Contingency Approach
 Theory Z and Quality Management
Scientific Management
 Frederick Winslow Taylor known as the father of
scientific management
 Focuses on how to improve the productivity of
operative personnel
 His experience as an apprentice, common labourer,
foreman, master mechanic, chief engineer of steel
company have him an excellent opportunity to see the
possibilities for improving the quality of management
 He proposed work methods designed to increase
worker productivity in his book “Principles of
Scientific Management”
Scientific Management
 Knowing exactly what you want your men to do and
seeing to it that they do it in the best and cheapest
way.
Principles of Scientific Management
 Science, not rule of thumb
 Harmony, not discord
 Cooperation, not individualism
 Development of each and every person to his greatest
efficiency
Scientific Management
Techniques of Scientific Management:
1. Functional Foremanship
 Taylor suggested two new concepts – Separation of planning
and production
 Each workmen will be reporting to 8 different clerks
 2. Standardization and Simplification
Process of setting standards for every activity
(standards for products, raw materials, machinery,
method and working condition)
Removing unnecessary diversity of products
(Savings in cost of labour, Machines & tools, reduced
inventories)
Reorganisation of supervision
Factory
Manager

Planning Production
Incharge Incharge

Repa
Instruction Route Time & Discipli Speed Gang Inspe
ir
Card Clerk Clerk Cost Clerk narian Boss Boss ctor
Boss

Workman
Scientific Management
3. Job Analysis
 Method Study: To find out one best way of doing the job
so as to minimize the cost and maximize product quality
 Motion Study: To eliminate unnecessary and
unproductive movements, so that a job can be done in
less time
 Time Study: To determine the number of workers to be
employed so that the task can be achieved efficiently
and effectively
 Fatigue Study: To determine the amount and frequency
of rest required for the employees in completing a task
Scientific Management
4. Differential Payment and Incentive Schemes
 Introduced new payment plan called “Differential Piece
work” – worker gets the normal pay if he achieves the
standards and gets higher pay if he surpasses the
standards, this motivates the workers to put their
maximum efforts
5. Scientific selection and Training
 Management should develop and train every worker to
bring out his best and enable him to do higher, more
interesting and more profitable class of work than he
has done in the past
Scientific Management
6. Economy
 Scientific Management enhances profit and economy.
Profit and economy can be achieved by optimum
utilization of resources
7. Intimate cooperation between the management and
workers
 There should not be any conflict between the
management and the workers, they need to have a
common interest in increasing productivity
Scientific Management
Contributions:
 Tools and physical movements: Task can be made
more efficient
 Scientific selection of workers: A Person cannot be
expected to do his job properly without proper
training
 Work design: Encouraged managers to seek one
best way of doing a job
Scientific Management
Criticism against Taylor’s contributions
 Average workers cannot be motivated to work hard
through economic incentives
 Time and motion study is not accepted as entirely
scientific, two individuals may time the same job entirely
different, no two individuals can be excepted to work in the
same way at the same rhythm and the same learning speed
 Separation of planning and doing: Taking orders from 7 or
8 different bosses resulted in confusion
 Advances in methods and better tools and machines
eliminated some workers, who found it difficult to do their
jobs
 Administrative Management
Theory
 Henri Fayol known as the father of Administrative
management
 French mining engineer
 14 principles of management
Administrative Management Theory
DAD U C USSR O I SEE
D – Division of work O - Order
A – Authority & Responsibility I - Initiative
D – Discipline S - Subordination of
U – Unity of Command individual interest to general
C – Centralization & interest
Decentralization E - Equity
U – Unity of Direction E – Esprit de corps
S – Scalar Chain
S – Stability of Tenure
R - Remuneration
14 Principles of Management –
HENRI FAYOL
1. Division of Work
 Entire work should be subdivided in
to smaller pieces
 Each piece of the work going to handle
by specialist / trained employee
 Specialist / trained employee will be
doing that particular job in most
Effective and Efficient way
 14 Principles of Management –
HENRI FAYOL
2. Authority and Responsibility
 Authority – Right to give orders
 Responsibility – obligation to
perform the assigned duties on time
 Authority without responsibility
results in irresponsible behavior
 Responsibility with out authority
makes people ineffective
 Both must go together
 14 Principles of Management –
HENRI FAYOL
3. Discipline
 It is Obedience, behaviour and respect shown by
employees
 All the personnel serving in organisation should be
disciplined
 14 Principles of Management –
HENRI FAYOL
4. Unity of Command
 Each worker must receive
orders only from one boss
 An individual cannot serve 2
bosses at the same time
 Confusion, misunderstanding
and conflicts
 14 Principles of Management –
HENRI FAYOL
5. Unity of Direction
 All the units of an organization
should be working in the same
direction
 Accomplishment of organisational
goals
 14 Principles of Management –
HENRI FAYOL
6. Subordination of Individual Interest to General
Interest
 Interest of the organization should
take priority over individual
interest
 If individual and organizational
interests are different then
managers try to reconcile them
 If not, then individual interest
should be sacrificed
 14 Principles of Management –
HENRI FAYOL
7. Remuneration
 Employees should be given salaries
what they deserves
 Equitable salary
 Remuneration of employees
should be fair, reasonable and
satisfactory
 Dissatisfaction will lead to
increase in employee turnover
 14 Principles of Management –
HENRI FAYOL
8. Centralization and Decentralization

 Retention of authority at the

top level management – all
decisions
 Delegation of authority at all
levels of organization – all the
3 levels have authority
 All organization should have
balance complete
centralization and
decentralization
 14 Principles of Management –
HENRI FAYOL
9. Scalar Chain
 There should be a scalar chain
of authority and of
communication ranging from
the highest to the lowest level
 Gangplank
 Scalar chain can be short
circuited in special cases
 14 Principles of Management –
HENRI FAYOL
10. Order
 Arrangement of things and people
 There should be a place for
everything and everything should
be in place
 Right man should be in a right
place
 14 Principles of Management –
HENRI FAYOL
11. Equity
 Combination of justice and
kindness
 Equity in treatment and
behavior is liked by everyone
 It brings loyalty to the
organization
 Its application requires good
sense, experience and good
nature
 14 Principles of Management –
HENRI FAYOL
12. Stability of Tenure
 No employee should be removed
within short time
 Reasonable security of job
 Unnecessary turnover is bad for
the organization
 It is important to get employee
accustomed to new work and
succeed in doing well
 14 Principles of Management –
HENRI FAYOL
13. Initiative
 Managers should encourage their
subordinates to take initiative, within
the limits of authority and discipline
 It is concerned with thinking out and
execution of a plan
 It encourages energy and zeal
 14 Principles of Management –
HENRI FAYOL
14. Esprit de Corps
 Union is strength
 Manager must encourage
esprit de corps among his employees
 Every employee in the organization
must consider him as a part of a team
and try to achieve the team goal
because team contribution is always
better than individual contribution
Human Relations Movement:
 Hawthorne Studies gave rise to a
new movement which is known
as Human Relations Movement
 Researchers started investigating
the reasons for human behavior
at work
 The credit for the development of
the human relations approach is
given to Elton Mayo
 Other individuals who contributed
are Maslow and McGrefor
Hawthorne Experiment:
 For Human Relations Approach,
there are many contributors
 But the first intensive and
systematic analysis of human factor
in organizations was made in the form
of Hawthorne experiments
 Hawthorne studies were conducted by
Elton Mayo and Fritz Roethlisberger in
the 1920s with workers at the
Hawthorne plant of Western electric
company
 Associate professor of industrial research at
Harvard University
 Founder of Industrial Sociology and the Human
Relations Movement
Hawthorne Experiment:
 Hawthorne plant of Western Electric Company was
Manufacturing telephone system bell
 It employed about 30,000 employees at the time of
experiments
 Although company provided benefits like pension, sickness
benefits and other recreational benefits, there was great
deal of dissatisfaction among the workers and productivity
was not up to the mark
 In 1924, a team led by Elton Mayo and Roethlisberger
investigated the real causes behind this Phenomenon
 They conducted various researchers in 4 phases from
1924 - 32
Hawthorne Experiment (1924 – 32)
 Place : Hawthorne Plant – A Western Electric factory
outside Chicago
 Reason for conducting it: To know the factors that brings
fluctuation in workers productivity
4 parts of Hawthorne Experiments
 Part 1 – Illumination experiments (1924 – 27)

 Part 2 – Relay assembly test room study (1927 – 29)

 Part 3 – Mass interviewing program (1928 – 30)

 Part 4 – Bank wiring observation room experiment

(1932)
Part 1 : Illumination experiments
 Illumination experiments
were conducted to find out
how varying levels of amount
of light at the workplace
(a physical factor) affected
productivity
 Assumption was that higher
illumination increases
productivity
Part 1 : Illumination experiments
 Part 1 : Illumination experiments
 The researchers found that as they increased the
illumination in the experimental group, both groups
increased production
 When the intensity of illumination was decreased, the
production continued to increase in both the groups
 The production in the experimental group decreased only
when the illumination was decreased to the level of
moonlight
 Thus, it was concluded that illumination did not have any
effect on productivity
 But something else was interfering with the productivity
 Therefore, another phase of experiments was undertaken
Part 2 : Relay Assembly Test Room
experiments
 It was designed to determine the
effect of changes in various job
conditions on group productivity
 Researchers set up a relay
assembly test room, which
involved assembly of telephone
relays
 A group of 6 women were selected
 The output depended on the speed
and continuity with which the
women worked
 Specific task in this test was an
electromagnetic switch that consisted of
35 parts that had to be put together by hand
 The experiment started with
introducing various changes
(duration ranged from 4 – 6 weeks)
Part 2 : Relay Assembly Test Room
experiments
 Changes:
1. Incentive system was
changed
- Each girl’s extra pay was
based on the other 5
rather than output of the
large group
- Productivity increased as
compared to before
Part 2 : Relay Assembly Test Room
experiments
2. Two, five minutes rests –
One in morning session
and other in evening
session were introduced
- It was later increased to
10 minutes
- The productivity increased
Part 2 : Relay Assembly Test Room
experiments
3. The rest period was
reduced to 5 minutes but
frequency was increased
- The productivity decreased
slightly
- The girls complained that
frequent rest intervals
affected the rhythm of the
work
Part 2 : Relay Assembly Test Room
experiments
4. The number of rest was reduced
to two of 10 minutes each
- But in the morning coffee or
soup was served with sandwich
- And in the evening, snack was
provided
- Productivity increased
Part 2 : Relay Assembly Test Room
experiments
5. Changes in working hours
and workday were introduced
- Like eliminating Saturday
Work
- Allowing women to leave one
hour early from 5.00pm
to 4.00pm
- Productivity increased
Part 2 : Relay Assembly Test Room
experiments
 As each change was introduced, absenteeism decreased,
morale increased and less supervision was required
 Now, the researchers decided to revert back to original
position, that is no rest and no benefits
 Surprisingly, productivity increased further instead of
going down
 It was concluded that productivity increased not because of
positive changes in physical factors but because of a change
in the girls attitude towards work and their work group
 They developed a feeling of stability and sense of
belongingness
 They developed a sense of responsibility and self -
discipline
 Part 3: Mass interviewing
programme
 Reason for Conducting:- To study the human behavior
in the company
 No of interviews conducted:- with about 20,000
employees
 Theme:- determine employees attitude towards
company, supervision, insurance plans, promotion and
wages
 Part 3: Mass interviewing
programme
 The method was changed from direct interviewing to
non - directive interviewing
 Here, interviewer was asked to listen instead of
talking, arguing or advising
 The interview program gave valuable insights about
human behavior in the company like
1. Worker’s behavior was influenced by group behavior
2. The social demand of a worker are influenced by
social experience in groups both inside and outside
the work plant
 Part 4: Bank wiring observation
room experiments
 Workers involved in experiment:- 14 male workers
 Work given:- The men were engaged in the assembly
of terminal banks for the use in telephone exchanges
 Part 4: Bank wiring observation
room experiments
 It was conducted to analyze the functioning of small group and
its impact on individual behavior
 The men in the room were putting automatic telephone
exchange components that consisted 3000 to 6000 individual
terminals that had to be wired
 The hypothesis was that in order to earn more, workers would
produce more
 Also to get the group bonus, they would help each other to
produce more
 However, this hypothesis did not hold valid
 Workers decided the target for themselves which was lower than
the company target
 This study suggested that informal relationships are an
important factor in determining the human behavior
 Part 4: Bank wiring observation
room experiments
 The workers gave restricted output due to the following reasons
1. Fear of unemployment: if there would be more production per
head, some of the workers would be put out of employment
2. Fear of raising the standards: workers thought if they reach the
standard set by management, they would again raise the
standard
3. Protection of slow workers: the workers were friendly on and
off the job. The fast workers protected the slower workers by
not over producing
4. Satisfaction on the part of management: management seemed
to accept lower production rate as no one was fired for
restricted output
System Approach
 A System is a collection of parts brought together to
accomplish some goal or objective
 Everything is a part of a system
 An organisation is also a system composed of four
interdependent parts namely task, structure, people
and technology
 It is difficult to know which aspect is most useful and
appropriate in a given situation, conceptual framework
is required that can help a manager diagnose a
problem and decide which tool or combination of
tools will best do the job
System Approach
 A system can either be open, closed and subsystem
 Open System:- A system that continually interacts
with the environment around it
 Closed System:- A system independent of the
environment around it
 Subsystem:- A system that is part of a larger system
 Different types of systems exist where they are needed
System Approach
 Information, material and energy enter the system from
the environment as inputs and leave the system as outputs
 Inputs of a business organisation are raw materials,
equipment, human effort, technology and information
 Organisation changes these inputs in to outputs as goods,
services and satisfactions, these change process is known as
‘throughput’
 Synergy means separate departments within an
organisation should cooperate and interact so that they
become more productive
 Entropy means Discord or a lack of predictability; a gradual
decline into disorder
Contingency Approach
 Depending upon the situation, you need to be
adoptable
 Contemporary approaches to management represent
major innovations in ways of thinking about the way in
which people are managed
 Contingency management is based on the ability of
managers to be flexible and adaptive to changes in the
business world
 Contingency theorists support new solutions for each
unique situation
Contingency Approach
 Solutions to business problems must be sourced from
many areas and then the best idea chosen for the best
circumstances
 Contingency management theorists argue that a
solution to one problem may be totally unsuitable for
another problem
 The management style used in each organization will
depend on the requirements of the business and the
task at hand
 To adopt this approach, managers must sample all the
past and present ideas on offer.
Business
 It is an occupation which include all activities which are
connected with production or procurement of goods for sale and
adding a profit margin to that and sending to the customers for
the satisfaction of their needs

Characteristics of Business Activity

 An Economic Activity
 Production / Purchase of goods for sale
 Sale & Exchange of goods and Services for money
 Regularity in dealings
 Profit Earning
 Element of Risk
 Legal & lawful
Business
Business Activities

Industry Trade Commerce

Primary Exchange of goods Trade Auxiliaries

Secondary & services for money to trade
Tertiary 1.Transportation
2. Advertising
3. Warehosuing
4. Banking
5. Insurance
Social Responsibility of Business
 Land, Labour and Capital Society

Interest Group of Business

1. Workers
2. Customer
3. Suppliers
4. Government
5. Competitors
 Types of Business Organization -
Private
 1. Sole Proprietorship
 2. Joint Hindu Undivided Family Business
 3. Partnership
 4. C0-operative Societies
 5. Joint Stock Company
Sole Proprietorship
 Features
 Single Ownership
 Ease of formation & closure
 Risk Bearing
 Unlimited Liability
 No separate legal entity
 Single person management
 Lack of continuity
Sole Proprietorship
 Merits
 Quick Decision Making
 Confidentiality of information
 Simple formation & closure
 Direct incentive of profit
 Sense of accomplishment
 Flexibility of operations
Sole Proprietorship
 Limitations
 Limited resources
 Lack of continuity
 Unlimited liability
 Limited managerial skills
 Limited scope of expansion
 Joint Hindu Undivided Family
Business
 Conditions
1. Minimum of 2 members must be there in the family
2. Existence of ancestral property
 Hindu Succession Act, 1956
 Systems of inheritance
1. Dayabhaga (West Bengal)
2. Mitakshara
 Karta / Mukliya and Coparceners
 Joint Hindu Undivided Family
Business
 Features
 Formation
 Membership
 Control
 Liability
 Continuity
 Minor members
Partnership
 An association of two or more persons who have
agreed to share the profits and losses of the business
carried on by all or by any one of them acting for all
 Partnership Act, 1932
Partnership
 Features
 Formation
 Liability of partners
 Membership
 Risk Bearing
 Decision making
 Continuity of business
 Mutual agency
 Non transferability of share
 Registration
Partnership
 Merits
 Ease of formation & closure
 Balanced decision making
 Sufficient funds
 Risk bearing
 Secrecy
Partnership
 Demerits
 Unlimited liability
 Limited resources
 Possibility of conflicts
 Lack of continuity
 Lack of public confidence
Types of Partners
1. Active partner
2. Sleeping / Dormant partner
3. Secret partner
4. Nominal partner
5. Partner by Estoppel
 Co-operative Societies
It is a voluntary association of member who get together
with the motive of mutual welfare of members.

 Minimum 10 adult members

 Co-operative Societies Act, 1912
 Co-operative Societies
 Features
 Voluntary Association
 Separate Legal Entity
 Limited Liability
 Control
 Service Motive
 Distribution of Surplus
 Joint Stock Company
An artificial person created by law, having a separate
legal entity, perpetual succession and a common seal
 Companies Act, 2013
 Joint Stock Company
 Features
 Separate legal entity
 Artificial person
 Formation
 Perpetual succession
 Control & ownership
 Limited liability
 Common seal
 Risk bearing
 Transferability of shares
 PRIVATE & PUBLIC SECTOR
PRIVATE SECTOR PUBLIC SECTOR

Sole Proprietorship Departmental

Joint Hindu Undivided Undertaking
Family Business Statutory Corporation
Partnership Government Company
Co-operative Society
Joint Stock company
 PRIVATE & PUBLIC SECTOR
Private Sector Public Sector

Profit Motive Public Service

Private Ownership Reasonable Profit Margin

Managed by Private Entrepreneurs State Ownership

Not accountable to Public State Management & Control

Public Accountability
 Rationale of Public Sector
Undertaking
1. Infrastructure
2. Basic & Heavy Industries
3. Defence Requirement
4. Public Utility Services
5. Balanced Regional Development
6. Employment Generation
7. Control of Monopolistic Tendencies
Departmental Undertaking
Public enterprise which is run as a part of the government
department and under the direction of the minister
concern (Eg: Railways, All India Radio, etc)
 Features
 Formation
 Control
 Appointments
 Management
 Audit (CAG – Comptroller and Auditor General of India)
 Finance
 Administrative Autonomy
 Accountability
 Departmental Undertaking
 Merits
 Ease of formation
 Effective Control
 Source of revenue for the government
 Proper utilization of fund
 Decrease in Tax burden of public
 Accountability
 Departmental Undertaking
 Demerits
 Rigidity
 Red tapism
 Delay in decision making
 Lot of political interference
 Insensitive to consumer needs
 Unable to take advantages of the opportunities
 Statutory Corporation
Organizations which are set up by passing the special act
in the parliament (Eg: Life insurance co-operation,
Metals & minerals trading co-operation etc)
 Features
 Ownership
 Formation
 Freedom from budgetary control
 No interference
 Appointment
 Audit
 Finance
 Statutory Corporation
 Merits
 Being financial autonomy
 Autonomous organizations
 Social service motive
 Protection of public interest
 Statutory Corporation
 Demerits
 Political interference
 Monopoly
 Wastage of Resources
 Suitability
 Government Company
Government company can be defined as a company in
which not less than 51% of paid up share capital is held up
by either the state or the central government (Eg. Steel
authority of India Ltd, Gas authority of India Ltd)
 Features
 Formation (Companies Act 2013)
 Ownership
 Management
 Separate Legal Entity
 Appointment
 Audit
 Financing
 Annual Report
 Government Company
 Merits
 Ease of formation
 Separate Legal Entity
 Autonomy in operation
 Control unhealthy competition
 Easy financing
 Benefits of private participation
 Government Company
 Demerits
 Parliament interference
 Lack of continuity in policy
 No say of minority private shareholders