Chapter- 2

Principles of Management

Meaning of Principle
A principle is a fundamental statement of truth that provides guidance to thought and action.

Meaning of Principles of Management

Principles of management are broad and general guidelines for managerial decision making and
behavior (i.e. they guide the practice of management).

Nature of Management Principles:

1. Universal Applicability: The principles of Management are intended to apply to all types of Organization,
business as well as non- business, small as well as large, Public sector as well as private sector,
manufacturing as well as the service sectors.
2. General Guidelines: The Principles are guidelines to action but do not provide readymade solutions to all
managerial problems.
3. Formed By Practice And Experimentation: The principles of Management are formed by experience &
collective wisdom of managers as well as experimentation.
4. Flexible: The principles of management are not rigid prescriptions, which have to be followed absolutely.
They are flexible & can be modified by the manager when the situation demands.
5. Mainly Behavioral: Management Principles aim at influencing behavior of human beings. Therefore
principles of Management are mainly behavioral in nature.
6. Cause & Effect Relationship: The Principles of Management are intended to establish a relationship
between cause & effect so that they can be used in similar situations in a large number of cases.
7. Contingent/Relative: 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 Management Principles:

1. Providing Useful Insights to Managers: The principles of Management provide the managers with useful
insights into real world situations. Adherence to these principles will add to their knowledge, ability, &
understanding of Managerial situations & circumstances.
2. Optimum Utilization of Resources: Resources both human & material available with the company are
limited. They have to be put to optimum use. We mean that the resources should be put to use in such a
manner that it should give maximum benefit with minimum cost.
3. Scientific Decisions: Decisions must be based on facts, thoughtful & justifiable in terms of the intended
purposes. They must be timely, realistic, & subject to measurement & evaluation. Management principles
help in thoughtful decision making. They emphasize logic rather than blind faith.
4. Meeting Changing Environmental Requirements: Although the principles are in the nature of
general guidelines, they are modified and as such help managers to meet changing requirements of the
environment.
5. Fulfilling Social Responsibilities: The increased awareness of the public, forces businesses especially
limited companies to fulfill their social responsibilities.
6. Management Training, Education and Research: Principles of Management are at the core of
management theory. As such these are used as a basis for the management
training, education and research.
Fredrick Winslow Taylor (F.W.Taylor) (1856-1915)
Major contributions of Taylor
● Introduced scientific methods in management, as opposed to the rule of thumb.
● Emphasised on scientifically analysis of work and proposed to find, ‗one best way‘ to do work,
by conducting time, motion and method studies.
● Sought to increase the efficiency of workers by eliminating wastage of all types.
● Emphasised on the need to have a mental revolution – a complete change in the outlook for both
workers and management.

Taylor emerged as the ‘Father of Scientific Management’.

Scientific Management
According to Taylor, ‘Scientific Management is knowing exactly what you want your men to do
and seeing that they do it in the best and the cheapest way‟.
It includes finding the most efficient methods of production, scientific selection and training of
workers, proper allotment of duties and work and achieving cooperation between workers and
management.

Principles of Scientific Management

1. Science and not rule of thumb
Before Taylor developed the Principles of Management, the Rule of Thumb was a widely used concept. Under
the rule of thumb, each manager handled a situation or problem based on his/her understanding as and when it
arose using a trial and error method. It was an easily applicable process but was a very vague and inaccurate
technique of determining solutions to problems. Taylor fostered the introduction of scientific methods. He
believed that each job must be performed on the basis of scientific enquiry and not on the basis of intuition or
hit and trial method. One best method of doing a job must be developed to maximize efficiency.
2. Harmony and not discord
There should be complete harmony between management and workers. Management should be willing to share
gains of the firm with the workers and workers should work hard and accept change for the good of the firm
and not go on strikes.There should be Mental Revolution‘ both should transform their way of thinking –
interest of the two are the same and long term prosperity of management cannot be at the cost of management
and vice versa.(eg –Japanese culture).this will help to build a friendly working environment which will develop
harmonious relations between them.
3. Co-operation , not individualism
This principle is an extension of harmony and not discord. Management and workers should develop
understanding and secure mutual cooperation.Management should give importance to suggestions made by
the workers and workers must desist from going on strikes and making unreasonable demands.Managers
should also share the gains of the company with workers, awarding them with sufficient incentives to
work. Similarly, the workers should willingly work, giving their best contribution to the company. He
insists for a paternalistic style, whereby the employer takes care of the needs of employees. This will build
mutual trust and a feeling of belongingness in both.
4. Development of each and every person to his/her greatest efficiency and prosperity
Efficiency should be built right from the process of employee selection, assignment of work on the basis of their
capabilities, giving training when needed.Employees should be recruited in a scientific manner. They should be
assigned work according to their mental/physical qualities. For increasing efficiency, workers should be given
proper training.

Techniques of Scientific Management:

1. Functional Foremanship:

Taylor suggested the division of the factory into two departments:

1)Planning department 2)Production department.
Each department consists of 4 functional experts to guide, supervise and instruct workers.
Specialists under the Planning In charge:
1. Route Clerk: Route Clerk would specify route/sequence production operations
2. Instruction Card Clerk: Instruction Card Clerk would draft instructions for workers, in handling their
jobs.
3. Time and Cost Clerk: would fix
● Dates for starting and completing work as per schedule.
● Cost sheet to determine expenses for material, labour and other overheads.
​Disciplinarian: would ensure systematic performance of jobs by enforcing rules and regulations.

Specialists under the Production In charge:

1. Gang Boss:Gang Boss would do all preliminary work—keeps materials, machines, tools etc. ready for
workers.
2. Speed Boss: Speed Boss would ensure timely and accurate completion of jobs.
3. Inspector: Inspector would check the quality of work done by workers.
4. Repair Boss: Repair Boss would ensure that machines and tools are kept in proper working conditions
and are maintained and repaired properly.

2. Standardization and Simplification of Work:

Standardization refers to the process of setting standards for every business activity ( setting a benchmark). It
can be standardization of process, raw materials, time, product, machinery, methods, working conditions. It is
done with a view to:
● To reduce a given line or product to fixed types, sizes and characteristics.
● To establish interchangeability of manufactured parts and products.
● To establish standards of excellence and quality in materials.
● To establish standards of performance of men and machines.

Therefore standardization ensures:

● The product is according to a predetermined type, form, design, size, weight, quality etc.
● Manufacture of identical parts and components which are interchangeable with one another.
● Standards are established as regards quality of manufactured goods.
● Standards are established for workers and machines at all levels.
Simplification aims to eliminate unnecessary diversity in products as more varieties would mean more
inventory, more machinery, more labour cost etc.
Simplification would lead to savings in cost of labour, machines and tools.

3. Work Study

Work study means a comprehensive and objective assessment and analysis of all the operations involved in
performing the various jobs in the organization.
This is done with a purpose of producing maximum possible output of the best quality at minimum costs.
It has 4 components: time study, motion study, method study and fatigue study.

a. Time Study
It is a technique used to measure the time that may be taken by an average worker of reasonable skill and
efficiency to perform a well defined job.

To conduct time study, the job is broken into a number of elements and the time taken to complete each element
is noted with the help of a stopwatch. After adding necessary time for rest periods, the standard time of each
element of the job and the standard time for performing the complete job is determined. Many techniques such
as process charts, operation research etc are used for this purpose.
Purpose of time study is that it helps to determine:
The number of workers to be employed, to frame suitable incentive schemes and determine labour costs.

b. Motion Study
It is a technique to closely observe movements of the body of a worker involved in performing a job in
order to eliminate unnecessary movements.
Aim is to identify:
● Motions that are productive
● Motions that are incidental and
● Motions that are unproductive.
Purpose of motion study: To eliminate the unproductive or unnecessary movements so that it takes less time to
complete the job efficiently.

c. Method Study
There may be a number of possible methods of performing a job with different cost requirements. Taylor
suggests finding ‘One best way’ of performing a job from the various methods available .
Purpose of method study:
The purpose of method study is to minimize production costs and use organization‘s resources such as
land, labour, capital etc. for better results.

Methods of production should not be decided by “rule of thumb" but after trying all methods and the method
that maximizes benefits with minimum cost must be selected.

For example, Taylor devised the concept of assembly line by using the method study. This technique was used
successfully by Ford Motor company and is used by the auto companies even today.

d. Fatigue Study
This technique is conducted to find out:
1. Frequency of rest intervals
2. Duration of rest intervals
 3. And the number of rest intervals, in completing a job.

If an employee keeps working without rest pauses, physical and mental fatigue affects the health and efficiency
of workers. Excessive specialization and poor working conditions may also cause monotony and boredom
resulting in more accidents, spoilage, absenteeism and labour turnover.

Taylor suggested that the time and frequency of the rest intervals should not be decided by manager‘s wish/
experience.

To do it scientifically, fatigue study should be conducted, by noting down:

1. Duration, after which, an average worker starts getting tired and his efficiency starts decreasing.
2. Duration within which the worker gets refreshed to resume working.

4. Differential Piece Wage System:

Taylor was a strong advocate of a differential piece rate plan. To bring about a differentiation between
efficient and inefficient workers, he introduced the concept of Standard Output/fair day's work. This is the
amount of work which an average worker working under proper working conditions can perform during a
working day.
According to Taylor, two wage rates would be used; one for efficient workers producing standard output or
more, and the other for inefficient workers producing less than standard output.
E.g Suppose Standard Output = 10 units. Workers producing Standard output or more, would get Rs. 50 per unit
while those producing less than standard output get only Rs.40 per unit.

If worker A produces 11 units and worker B produces 9 units, their respective wage payments would be as
follows:
⮚ A = 11 * Rs. 50 = Rs.550
⮚ B = 9 * Rs. 40 = Rs. 360
According to Taylor, a difference of Rs. 190 would be enough to motivate the inefficient worker to perform
better.
This system rewards efficient workers and puts pressure on inefficient workers to improve their efficiency.
Also when the payment is given according to the number of units produced, automatically the production
will be maximized.

What is ‘Mental Revolution’?

“Mental Revolution” means both management & workers should transform their way of thinking and attitude
against each other from competition to cooperation. Both should realise they require one another. Management
should share a part of the profits or surplus with the workers.Workers should work hard to make the company
profitable.
The latest development in scientific management is LEAN MANUFACTURING‘. Nowadays robotics
and computers are being used in production and other business activities.
HENRY FAYOL(1841-1925)

His career profile and his achievements:

● Started working as an engineer in coal mining company in France in 1860
● Became the managing director of the company in 1888.
● Was considered to be the Father of General management.

Major contributions of Fayol

● Fayol was the first one to identify four functions of management: Planning, Organizing, Directing and
Controlling. Although his version was a bit different: Plan, Organise, Comand, Coordinate and Control.
● Based on his own experience, Fayol developed his concept of administration and propounded 14 principles
of management, which act as guidelines for managers to perform managerial activities. He is known as the
Father of General Management.

FAYOL PRINCIPLES OF MANAGEMENT:

1. Division of Work
The whole work should be divided into small tasks or units and each unit of work should be assigned to one
person according to his capability , qualifications and experience. The person to whom the job is assigned is a
specialist or a trained employee.This will lead to specialization, improvement in performance, and speed and
accuracy in doing the jobs. Division of work produces more and better work for the same effort and leads
to specialization that is the most useful way to use human effort.
Example: In a company, we have separate departments for finance, marketing, production and Human resource
development. This leads to specialization and efficiency. This principle is applicable not only in factory work
but technical, managerial and skilled jobs should also be divided into small units for specialisation.

2. Authority And Responsibility

Authority refers to the right to issue orders and ensure compliance of the same. Authority may be
official(formal and positional) or personal (informal). Responsibility means obligation of an employee to
complete the job assigned, on time. There should be a balance between the authority and responsibility
granted to a personality. If there is excess authority, it may be misused and if there is insufficient authority, the
employee will be ineffective.

3. Discipline
Observance of rules and regulations and judicious application of penalties. According to Fayol, discipline
requires good superiors at all levels, clear and fair agreements and judicious application of penalties.

4. Unity Of Command
According to Fayol there should be one and only one boss for every individual employee. Employees should
receive orders from one superior only. He felt that if this principle is violated leads to confusion and chaos,
which in turn leads to instability and disturbance.
Dual subordination should be avoided to avoid confusion in the mind of employees and possibility of conflicts
between superiors, and it will be easier to fix responsibility for non- performance of work. This principle
resembles a military organization.

5. Unity of Direction
One head, one plan- one manager and one plan for all operations having the same objective. All the
units of an organisation should be moving towards the same objectives through coordinated and focused
efforts.

Example: If an organization is producing different lines of products-cosmetics, medicines, confectionery

items, each product will have its own market and business environment. Each division must plan its target and
every employee of that division must put his efforts towards the achievement of the plan for their division
under the direction of one head only.

6.Subordination of Individual Interest to General Interest

Management and employees must reconcile the interest of the individuals and general interest of the firm.
In case such reconciliation is not possible ,then interest of an organisation must supersede the interest of
individuals or employees.

7. Remuneration of Employees

Remuneration to employees must be just and fair both to employees and employers. That is, it must enable
employees to maintain a reasonable standard of living and must be within the paying capacity of the employer,
as per the minimum wages Act of the government and comparable to average wage rate for similar work in the
industry.

Example: If in a particular year the organization has earned more profit, then apart from giving extra profit to
shareholders and owners, some part of the profit must also be given to employees in the form of bonus. This
will motivate them to put extra efforts and increase the profit of the organization.

8. Centralisation and Decentralisation

The concentration of decision making authority by top management is called centralisation. If decision
making authority is shared with lower levels it is called decentralisation. In any organisation, there must be a
balance between centralisation and decentralisation of authority. Degree of centralisation and decentralisation
depends on the nature and size of the organisation.

Example: Determination of overall objectives and formulation of policies and procedures should be
centralized, while activities of routine work like purchase of raw materials, carrying out production can be
decentralized.

9. Scalar Principle
Refers to the formal line of authority (in the order of rank) as followed in the organisation. Formal
communication in an organisation follows the scalar chain—a pre-defined, formal path of authority and
communication in the order of highest to lowest.
For example, consider a situation where there is one head S who has two lines of author under him . One line
consists of A- B-C-D-E. Another line consists of L-M-N-O-P. This chain should not be violated in the normal
course of formal communication. If there is an emergency, where D has to communicate with “O”, who is at
the same level of authority he can do so directly through Gangplank. This is a shorter route and has been
provided as there should be no delay in communication.
GangPlank refers to a shorter emergency route through which workers/employees can directly
communicate with each other.

Example: All orders and instructions issued by heads of departments should reach the supervisors through
intermediate managers. Similarly reports on results achieved should be passed from lower to higher levels
through intermediate managers.

10. Order

According to Fayol, “People and materials must be in suitable places at appropriate times for maximum
efficiency.” The principle of order states that “A place for everything (everyone) and everything (everyone) in
its (her/his) place” .Essentially means orderliness, Order refers to orderly arrangement of men and materials i.e
Material order refers to right place for everything and Social order refers to specific place for employees
Example: Head of the production may be allotted an office room, typist a particular table etc. Also toolkits
for keeping tools should be kept in the factory/shop because of its easy approach for workers. This will prevent
any wastage of time and efforts to look for them.

11. Equity
It ensures equal and fair treatment of all employees in an organization. This principle
emphasizes kindliness and justice in the behavior of managers towards workers. This will ensure loyalty
and devotion. Equal, kind, fair and just treatment of subordinates by superiors and no discrimination on any
basis – religion, language, caste etc. Equity does not mean absence of force. It is in fact necessary to maintain
discipline.

12. Stability Personnel

“Employee turnover should be minimized to maintain organizational efficiency”, according
to Fayol. Personnel should be selected carefully and once they are selected, they should not be moved around
very frequently and the firm must make an effort to retain the personnel. If a particular employee is insecure
about his/her job, then this feeling might affect his/her efficiency when doing work. Steps like termination or
transfer must be taken only when they are unavoidable

Example: A typist is shifted from production department to purchase department and then to another
department within a span of 4 months. This would lead to frustration or insecurity in his mind.

13. Initiative

Workers should be encouraged to develop and carry out their plans for improvements according to Fayol.
Initiative means taking the first step with self-motivation. Initiative means eagerness to initiate action without
being asked to do so. According to Fayol, employees should be allowed to think and execute plans, to bring
about improvements in work related matters. However, initiative does not imply freedom to do whatever people
like. They must observe discipline. So once the decisions are taken by management, every employee must
follow it whether it is according to his suggestions or not.

Example: Before setting up the plan, the manager must welcome the suggestions and ideas of
employees to allow maximum participation. But once the plan is made every employee must follow and
implement it.
14. Espirit De Corps

Esprit de corps means union is strength‘. Fayol emphasized on team work and harmony among employees. He
suggested that every employee in the organization must consider himself as a part or member of a team and try
to achieve the team goal.
A manager should replace “ I ” with “we’’ in organizational communication.

Example: Suppose the target of the production department was to manufacture 100 units and there are 10
members, so each was expected to produce 10 units. If two report sick, then the rest of the 8 should co- operate
and achieve the target on time.

Taylor Vs. Fayol

Points of Taylor Fayol

distinction
1. Perspective Shop floor level of a factory. Started from Started his studies and approach from the
the lowest level in the organization and top level and then proceeded downward
then he moved upwards, while formulating with emphasis on unity of command,
principles of scientific management. unity of direction and coordination.

2.Focus Improve productivity of workers and Develop principles to

eliminate all kinds of wastes. ensure better management overall.
3. Personality That of a scientist That of a researcher and practitioner

4.Applicability Applicable to specialized situations. Universally applicable

5.Unity of Functional foremanship, which contradicts Strong supporter of Unity of command.

command Unity of command.

6.Expression General Theory of Administration Scientific Management

7.Basis of Observation and experiments Personal experience
formation

Answer the following questions

Part B (2marks )
1. Give the meaning of Mental Revolution as propounded by Taylor.
2. What is Discipline according to Fayol?
3. State any two differences between Unity of Command and Unity of Direction.
4. What is a Scalar Chain?
5. What is Gang Plank?
 6. What are the aspects of Work Study ?
7. Mention the objectives of :
. i) Time Study ii) Method Study

iii) Motion Study iv) Fatigue Study

8. Distinguish between Standardisation and Simplification .

9. What is Standardisation and Simplification?
Part C (4marks)
10. Discuss the significance of Principles of Management by explaining any four points
11. Explain the Principles of Management contributed by F.W.Taylor.

12. What are the four aspects of work study developed by Taylor? Explain.

13. Explain the Functional Foremanship of Taylor.

14. Explain the nature of Principles of Management.

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