UNIT I

INTRODUCTION TO MANAGEMENT AND ORGANIZATIONS

Definition of Management – Science or Art – Manager Vs Entrepreneur - types of managers -
managerial roles and skills – Evolution of Management – Scientific, human relations, system and
contingency approaches – Types of Business organization - Sole proprietorship, partnership,
company-public and private sector enterprises - Organization culture and Environment – Current
trends and issues in Management.

DEFINITION OF MANAGEMENT
Management is the process of designing and maintaining an environment in which individuals, working
together in groups, efficiently accomplish selected aims.
According to Harold Koontz, “Management is an art of getting things done through and with the people in
formally organized groups. It is an art of creating an environment in which people can perform and individuals can co-
operate towards the attainment of group goals”
FUNCTIONS OF MANAGEMENT
The following are the 5 basic functions of management
1. Planning
2. Organizing
3. Staffing
4. Directing
5. Controlling

1. Planning
 Planning involves selecting missions and objectives as well as the actions to achieve them, which
requires decision-making.
 Planning, in simple, is looking ahead. It is the basic function of management
 It is the process of preparing for the future.
 Effective planning leads to efficient management
 It provides answers to questions such as – what to do? When to do? How to do?
 It involves
o Determination of goals of the organization
o Formulating policies, rules, procedures etc. for the organization
o Forecasting the future based on past and present activities
2. Organizing
 Organizing involves establishing an intentional structure of roles for people to fill in an organization
  It is the process of bringing together physical, financial and human resources and developing productive
relationship amongst them for achieving goals.
 According to Henry Fayol, “To organize a business is to provide it with everything useful or its
functioning i.e. raw materials, tools, capital and personnels”
 It involves,
o Identification and analysis of activities for achieving goals
o Assignment of duties
o Follow-up the activities
3. Staffing
 Staffing involves filling and keeping filled, the positions in organization structure
 It is the process of selecting candidates for positions, fixing salary, training and developing them for
effective organizational functions.
 According to Koontz and O‟Donell, “Managerial function of staffing involves manning the organization
structure through proper and effective selection, appraisal &development of personnel to fill the roles
designed un the structure”
4. Directing/Leading
 Leading is influencing people so that they will contribute to organizational and group goals.
 It involves guiding, supervising, communicating and motivating the subordinates in their jobs
 Motivation, leadership and communicating are three important sub functions of directing
o Motivation helps to increase the performance of the workers
o Communication provides with a proper information to the subordinates for the improved and
effective management
o Leadership is the process by which a manager guides and influences the work of his
subordinates
5. Controlling
 Controlling is measuring and correcting individual and organizational performance to ensure that the
events conform to plans.
 It involves checking and verifying the activities against the predetermined standards.
 It involves
o Establishing standards
o Measuring current performance
o Comparing this performance to the established standards
o Taking corrective actions if deviations are detected.

IS MANAGEMENT A SCIENCE OR AN ART

“Managing as practice is an art; the organized knowledge underlying the practice is a science”
Science of management
 Characteristics of science
o The existence of a systematic body of knowledge with array of principles
o Principles should be verifiable
 o Reliable basis for predicting future events
 Management fulfills the science criterion
 The application of these principles helps to achieve the desired goals
 Management is a dynamic subject which includes economics, psychology, sociology, mathematics and
engineering
 Science classified into 2 types. They are exact and inexact science. In exact science, the results are accurate.
Management comes under inexact science because,
o Every organization has different attitudes, aspiration and perceptions. So, standard results may not be
obtained
o Readymade and standard solutions cannot be obtained
Art of management
 Art means application of skill in finding desired result
 Art is the way of doing things skillfully
 Management is an art because,
o It involves practical knowledge and personal skill
o Management is creative
Management is both science and art
Management is a science because it contains general principles. It is also an art because it requires certain
personal skills to achieve desired results.
MANAGEMENT VS ADMINISTRATION
The two terms 'management' and administration are used interchangeably. There is a lot of controversy on the usage of
these two terms.
1. Administration is above management
Many management experts, such as Oliver Sheldon, Milward, Lansberg etc., are of the view that administration is
higher-level activity. Administration is concerned with decision making and policy formulation, while management is
concerned with the execution of what has been laid down by the administrators.
2. Administration is a part of management
According to E.F.L. Breech "management is the generic term for the total process of executive control involving the
responsibility for effective planning and guidance of the operations of an enterprise. Administration is a part of
management which is concerned with the installation and carrying out of the procedures by which the programme is
laid down, communicated, the progress of activities is resulted and checked against plans. This Breech concerns
administration as the part of management.
3. Administration and management are the same
The third view is a more practical one, where there is no distinction between the two terms „management‟ and
'administration'. Management is used tor higher level functions, such as plans, organizing, directions and controlling in
a business organization where as administration is used for the same set of functions in government organizations.
Many experts are, such as Henry Fayol, William Newman, George R. Terry favoured this view.
Difference between administration and management
Sl.No Administration Management
1. It is higher level functions It is lower level functions
2. It refers to the owners of the organization It refers to the employees
3. Administration is concerned with decision Management is concerned with execution of decision
making
4. It acts through the management It acts through the organization
 5. Administration lays down broad policies and Management executes these policies into practice.
principles for guidance

TYPES OF MANAGERS
1. Functional Managers
Functional Managers are those who manage people who do one type of specialized work and those who manage people
who engage in different specialties. Functional managers supervise the work of employees engaged in specialized
activities such as accounting, engineering, information systems, food preparation, marketing, and sales. A functional
manager is a manager of specialists and of their support team, such as office assistants.
2. General Managers
General Managers are responsible for the work of several different groups that perform a variety of functions. The job
title “plant general manager” offers insight into the meaning of general management. Reporting to the plant general
manager are various departments engaged in both specialized and generalized work such as manufacturing,
engineering, labor relations, quality control, safety, and information systems. Company presidents are general
managers. Branch managers also are general managers if employees from different disciplines report to them. The
responsibilities and tasks of a general manager highlight many of the topics contained in the study of management.
LEVELS OF MANAGEMENT
The three levels of management are
1. Top level management
2. Middle level management
3. Lower level management

1. Top Level Management

 The top level management is at the very first levels of the hierarchy
 They have the most authority and are ultimately responsible for the entire organization
 Typical titles such as executive vice president, president, managing director, chief operating officer, chief
executive officer, or chairman of the board
 Main Functions are:
o To formulate goals and policies of the company
o To formulate budgets
o To appoint top executives
o To provide overall direction and leadership of the company
o To decide the distribution of profits etc
2. Middle level Management
 Middle level managers are those managers beneath the top levels of the hierarchy
 They directly supervise other managers below them
 They have titles such as department head, project leader, plant managers, or division managers
 Main functions are,
 o To monitor and control the performance of the sub-units and individual managers below them
o To implement overall organizational plans to achieve goals
o To train, motivate and develop supervisory level.
o Implement changes or strategies generated by top managers
o To co-ordinate among themselves so as to integrate the various activities of a department
3. Lower level or Supervisory management
 They are also called as first – line supervisors
 They have the least authority and are at lowest level in the hierarchy of the organization
 They are directly responsible for the work of operating employees
 The main functions are,
o To train and develop the efficiency of the workers
o To assign jobs to workers
o To give orders and instructions
o To maintain discipline and good human relations among workers
o To report feedback information about workers
Managerial Functions At Different Organizational Levels
 All managers carry out managerial functions, but the time spent for each function may differ

 Top-level managers spend more time for planning and organizing than do lower level managers
 First-line supervisors spend more time for directing/Leading
 The difference in time spent on controlling varies only slightly for managers at various levels.
MANEGERIAL SKILLS
Skills required for any manager are classified into 3: technical, human and conceptual and design skills

1. Technical Skill
 Technical skills are skills that reflect both an understanding of and a proficiency in a specialized field, such as
engineering, accounting, or manufacturing
  These skills are more important at lower levels of management since these managers are directly dealing with
employees
2. Human Skill
 Human Skill refers to the ability of the manager to work effectively as a group member and to build a
cooperative effort in the team he leads.
 Human skills are concerned with understanding of „people‟
 Managers with human skills know how to communicate, motivate, lead and inspire enthusiasm and trust
3. Conceptual and design Skills
 This skill is also called as design and problem solving skill
 It involves the ability
o To see the organization and various components as a whole
o To understand how its various parts and functions are working
o To foresee how changes in anyone of them may affect all the others
ROLES OF MANAGERS
Henry Mintzberg describes a set of ten roles that a manager performs. These roles fall into 3 categories:

(a) Interpersonal roles

The interpersonal roles are ones that involve people (subordinates and persons outside the organization) and
other duties that are ceremonial and symbolic in nature. The three interpersonal roles include figurehead, leader, and
liaison.
1. Figurehead Role:
o Perform ceremonial and symbolic duties, such as greeting visitors and signing legal documents.
2. Leader:
o Direct and motivate subordinates
o Counsel and communicate with subordinates
o Responsible for staffing and training
3. Liaison
o Maintain information links both inside and outside organization via mail, phone calls, and meetings
(b) Informational Roles
The informational roles involve collecting, receiving, and disseminating information. The three informational
roles include monitor, disseminator, and spokesperson.
4. Monitor
o Seek and receive information
o Scan periodicals and reports
o Maintain personal contact with stakeholders
5. Disseminator
o .It is forward information to organization members, via memos, reports, and phone calls
6. Spokes person
o Transmit information to outsiders via reports, memos, and speeches.
(c) Decisional Roles
The decisional roles entail making decisions or choices. The four decisional roles include entrepreneur,
disturbance handler, resource allocator, and negotiator.
7. Entrepreneur
o Initiate improvement projects; identify new ideas and delegate idea responsibility to others.
8. Disturbance Handler
o Take corrective action during disputes or crises; resolve conflicts among subordinates; adapt to environments
9. Resource allocator
o Decide who gets resources; prepare allocator budgets; set schedules and determine priorities.
10. Negotiator
o Represent department during negotiations of union contracts, sales, purchases, and budgets.
EVOLUTION OF MANGEMENT THOUGHT
The origin of management can be traced back to the days when man started living in groups. History reveals
that strong men organized the masses into groups according to their intelligence, physical and mental capabilities. Eg.
The organization of public life in ancient Greece, the organization of the Roman Catholic Church and the organization
of military forces.
Most of the evolutionary changes and new perspectives occurred as a result of the Industrial Revolution that
transformed agricultural societies into industrial societies.
Evolution of management thought is divided into following four stages:
I. Pre-scientific or pre-classical management period
II. Classical Management Theory
(i) Scientific management theory
(ii) Administrative management theory
(iii) Bureaucratic Management Theory
III. Neo-classical Theory or Behavioral Theory
IV. Modern Theory
(i) Systems Approach
(ii) Contingency Approach

Fig. Evolution of Management Thought

 Fig. Chronological development of management theories
I. PRE-SCIENTIFIC OR PRE-CLASSICAL MANAGEMENT PERIOD
The advent of industrial revolution in the middle of 18th century had its impact on management. During the
period, the traditional character of management is changed by introducing new ideas and approaches. The important
contributors of this period are:
1. Robert Owen (1771-1858)
 He is regarded as the father of personnel management.
 He believed that workers performance in industry was influenced by the working conditions and treatment of
workers.
 He introduced new ideas of human relations, such as shorter working hours, housing facilities, training of workers
in hygiene, education of their children, provision of canteen etc.
2. Charles Babbage (1792-1871)
 He is considered as the “father of modern computing”
 He felt that the methods of science and mathematics could be applied to the solution of methods in the place of
guess work for the solution of business problems.
3. Henry Robinson Towne (1844-1924)
 He advised the combination of engineers and economists as industrial managers. This combination of qualities,
together with at least some skill as an accountant, is essential to the successful management of industrial workers.
Pre-classical contributors were pioneers of management though. But the impact of their contributions on the industry as
a whole was insufficient. However, they laid groundwork for major management theories.
II. CLASSICAL MANAGEMENT THEORY
The classical management theory developed during the industrial revolution when new problems related to the
factory system started to appear. Managers were unsure of how to train employees or deal with increased labor
dissatisfaction. So they began to test solutions. As a result, the classical management theory developed to find the
“one best way” to perform and manage task. A classical management is made up of three parts:
(i) Scientific Management Theory
(ii) Administrative Management Theory
(iii) Bureaucratic Management Theory
(i) Scientific Management Theory
 Frederick Winslow Taylor is known as the father of scientific management.
 Scientific management is also called Taylorism or the Taylor system
 Scientific management is defined as the use of the scientific method to define the “one best way” for the job to be
done.
 It was developed due to the need to increase productivity and efficiency.
 The “one best way” is found
o by examining how work process was actually accomplished
o by scrutinizing the skills of the workforce.
 The major contributors are,
1. Frederick Winslow Taylor (1856-1915)
 Taylor analyzed the causes of low efficiency in industry and came to the conclusion that much of waste and
inefficiency is due to the lack of order and system in the methods of management.
 He pioneered the time-motion study, where by a work task is broken down into various motions and eliminating
unnecessary motions.
2. Henry Gantt (1861-1919)
 He developed the Gantt chart, a bar graph that measures planned and completed work along each stage of
production.
3. Frank Gilbreths (1868-1924) and Lillian Gilbreths (1878-1972)
 A husband and wife team studied job motions. They refined Taylor’s time and motion study,
o Break-up each of the component actions and analyze every individual action necessary to perform a
particular task,
o Find better ways to perform each component action.
o Reorganize each of the component actions so that action as a whole could be performed more efficiently
at less cost of time and effort.
(ii) Administrative Management Theory
 Whereas scientific management focused on productivity of individuals, the administrative management theory
concentrates on developing organizational structure that leads to high efficiency and effectiveness.
 Organizational structure is the system of task and authority relationships that control how employees use resources
to achieve the organization‟s goals
 The emphasis is on the development of managerial principles rather than work methods
 Henri Fayol was the most important contributor of this theory
o He is considered as the father of modern theory general and industrial management
o He indentified 14 principles of management based on his management experiences
o They are division of work, authority and responsibility, discipline, unity of command, unity of direction,
subordination of individual interest to general interest, remuneration of personnel, centralization, scalar
chain, order, equity, stability of tenure of personnel, initiative and esprit de corps.
(iii) Bureaucratic Management Theory
 Bureaucratic management focuses on the ideal form of organization.
 Max Weber was the major contributor to bureaucratic management. He believed that organizations should be
managed impersonally and a formal organizational structure, where specific rules were followed. This non-
personal objective form of organization was called a bureaucracy.
 Weber believed that there are three types of authority exists
o Traditional – Subordinate obedience based upon custom or tradition (e.g kings, queen, chiefs)
o Charismatic - Subordinate obedience based upon special personal qualities associated with certain social
reformers, political leaders, religious leaders or organizational leaders (e.g Gandhi, Jawaharlal Nehru,
Martin Luther King)
 o Rational – Legal - Subordinate obedience based upon the position held by superiors within the
organization (e.g police officer, executives, supervisors)
 Weber also contended that managers' authority in an organization should be based not on tradition or charisma but
on the position held by managers in the organizational hierarchy.
 Characteristics of Bureaucratic Management
o A well defined hierarchy – All positions within a bureaucracy are structured in a way that permits the
higher positions to supervise and controls the lower positions. Positions should be arranged hierarchically
so that the employees should know whom to report and who reports to them.
o Division of labor and specialization – All responsibilities in an organization are specialized so that each
employee has the necessary expertise to do a particular task
o System of written rules and regulations – Organization must create a well-defined system of rules
standard operating procedures, and norms so that they can effectively control the behavior within an
organization.
o Impersonal Relationships between managers and employees – Managers should maintain an
impersonal relationship with employees so that favoritism and personal prejudice do not influence on
decisions.
o Selection and evaluation system – Selection and evaluation of their performance should not be based on
„”who you know”, but they should be on the basis of their performance or work output.
o Records – A bureaucracy needs to maintain complete files regarding all its activities.
III. BEHAVIORAL MANAGEMENT THEORY
 The above classical method could not explain the behavior of individual employees. It ignored employee
motivation and behavior.
 The behavioral theory pointed out the role of psychology and sociology in understanding of individual and
group behavior in an organization. Some of the contributors are:
1. Mary Parker Follett (1868-1933)
 She felt that Taylor was ignoring the human side of the organization.
 She identified
o the importance of the functioning of groups, not just individuals, in organization
o the principle of “power with” rather than “power over” in management employee relations
o finding solution to a conflict that would satisfy both parties
2. Elton Mayo (1880-1949)
 Elton Mayo made Hawthrone Studies which is a series of experiments that applied classical management theory
to reveal its shortcomings
 The Hawthrone experiment consists of 4 parts as follows
(i) Illumination Experiment
This experiment was conducted to establish a relationship between lighting levels to worker productivity.
When the intensity of light was increased, the output also increased. Surprisingly, they discovered that workers
productivity increased even when the lighting levels decreased. Therefore, it was concluded that there is no consistent
relationship between output of workers and illumination in the factory. There must be some other factors which
affected the productivity.
(ii) Relay Assembly Test Room Experiment
This phase aimed at knowing the impact factors, such as length of working day, rest hours, and other physical
conditions. A group of 5 women were supervised in separate room over 5 years. The women were given special
privileges, such as the right to leave their workstations without permission, take rest periods, and enjoy free lunches.
Productivity increased considerably during the period of the experiment. Productivity went on increasing and
stabilized when all the improvements were taken away. Thus it was concluded that socio-psychological factors are the
key for higher productivity
(iii) Bank Wiring Test Room Experiment
 This experiment was conducted to study a group of 14 workers. They were put in a special room, and placed
an observer full time to record everything that happened. It was observed that the group set its own production norms
for each individual worker. Those workers who tried to produce more than the group norms were isolated, harassed or
punished by the group. These results show that workers were more responsive to the social force of their groups than
the control of management.
(iv) Mass Interview Programme
The workers were interviewed and asked about supervisory practices and employee morale. The results proved
that upward communication in an organization creates a positive attitude in the work environment.
4. Abraham Maslow (1908-1970)
 He developed hierarchy of needs theory. It is a theory of motivation based upon a consideration of human needs.
 His theory of human needs was based upon 3 assumptions:
o Human beings have needs that are never completely satisfied
o Human behavior is aimed at satisfying the needs that are yet unsatisfied at a given point of time
o Motivation needs can be classified according to a hierarchical structure of importance, from the lowest to
highest.
 Maslow broke down the needs of hierarchy into 5 specific areas:
o Physiological needs
o Safety needs
o Belonging and love needs
o Esteem needs
o Self-actualization needs
 Maslow‟s hierarchy of needs theory helped managers to visualize employee motivation.
5. Douglas McGregor (1906-1964)
 He believed that two basic kinds of managers exist.
o The Theory X manager, has a negative view of employees and assumes that they are lazy,
untrustworthy, and incapable of assuming responsibility.
o The Theory Y manager assumers that employees are not only trustworthy and capable of assuming
responsibility, but also have high levels of motivation.
6. Chester Barnard (1886-1961)
 He felt that executives serve two primary functions:
o they must establish and maintain a communications systems among employees
o they must establish the objectives of the organization and motivate employees
IV. MODERN THEORY
1. System Approach
 System is a set of interrelated and interdependent parts arranged in a manner that produces a unified whole, while
an organization as a whole is a system; the various components or parts within it are called the subsystem.
 The organization can be visualized as system of interrelated parts or subsystems that operate as a whole to achieve
goals.
 An organization is composed of 5 elements:
o Input – The various human, materials, financial, equipment, and informational resources required to
produce goods and services.
o Transformation Process – The organization‟s managerial and technological abilities are applied to
convert inputs into outputs.
o Output – The products, services, and other outcomes produced by an organization.
o Feedback – Information is about results and organizational status relative to its environment
o Environment – The set of forces and conditions operate beyond an organization‟s boundaries but affect a
manager‟s ability and utilize resources
 The following terminologies are important in system approach
 Closed System – An organization that interacts little with its external environment and therefore, it
o
receives less feedback from it is called closed system. A closed system has fixed boundaries, its operation
is relatively independent of the environment outside the system.
o Open System – An organization that interacts with its environment is called open system. Thus, an open
system is one which constantly comes into contact with the environment
o Entropy – It is the tendency of systems to deteriorate or break down over time
o Synergy – When all subsystems work, making the output is greater than the sum of output of its parts.
 Management theorists can model the activities of organizations using the open-system view as shown in figure

Fig. Open system model of an organization

 Based on the system approach, managerial levels are classified as,
o Technical Level – It involves actual production and distribution of products and services
o Organizational level – It coordinates and integrates work performance at the technical level
o Institutional level – It relates activities of the organization to environmental system.
2. Contingency Approach
 The contingency approach is also called as situational approach.
 The crucial message of contingency theory is that “there is no one best way to organize”.
 According to contingency theory, the characteristics of environment affect an organization‟s ability to obtain
resources. For example, some management concepts are more effective in one situation. The same management
concept may fail in another situation. Results or solutions differ because situations differ
 In contingency theory, managers identify which is suitable technique for a particular situation, particular
environment of the organization at a specific time.

Fig. Contingency approach to management

1.9.1. Contribution Of Taylor And Fayol
F.W. Taylor and Henry Fayol are generally regarded as the founders of scientific management and administrative
management and both provided the bases for science and art of management.
I. Taylor's Scientific Management
 Frederick Winslow Taylor is known as the founder of scientific management
 He recognized the need for scientific approach to the task of managing an enterprise.
 He concluded that much of waste and inefficiency is due to the lack of order and system in the methods of
management
 His experience as an apprentice, a common laborer, a foreman, a master mechanic, and then the chief engineer
gave an opportunity to know about the problems and the attitudes of worker.
 The fundamental principles that Taylor saw underlying the scientific approach are:
Science, not rule of thumb
Harmony, not discord
Co-operation, not individualism
Maximum output, in place of restricted output
The development of each man to his greatest efficiency and prosperity.
Elements of Scientific Management [or Features of Scientific Management]
Taylor conducted various experiments at the work place to find how human beings could be made more efficient.
1. Planning the Task.
2. Scientific Task and Rate-setting (work study)
3. Scientific Selection and Training
4. Standardization (of working conditions, material equipment etc.)
5. Specialization
6. Financial Incentives
7. Economy
8. Mental Revolution.
1. Planning the Task:
 Taylor suggests the separation of planning from actual doing
 Taylor says that supervisor should do the planning
 The workers only concentrate on doing things
2. Scientific Task and Rate-Setting (work study):
Work study may be defined as the systematic examination of all the factors affecting the efficiency of any specified
activity. Work study includes.
(a) Methods Study: The management should try to ensure that the plant is laid out in the best manner and is
equipped with the best tools and machinery. The possibilities of eliminating or combining certain operations may be
studied.
(b) Motion Study: It is a study of the movement, of an operator (or even of a machine) in performing an operation
with the purpose of eliminating useless motions.
(c) Time Study (work measurement):This study determines the proper time for performing the operations. The
movement, which takes minimum time, is the best one.
(d) Fatigue Study: Fatigue study indicates the amount and frequency of rest required for completing the job. Taylor
suggests that regulate the working hours and provide for rest periods at scientifically determined intervals.
(e) Rate-setting: Taylor recommended the differential piece wage system, under which workers performing the
standard task within prescribed time are paid a much higher rate per unit than in efficient workers.
3. Scientific Selection and Training:
 Taylor suggested that workers should be selected scientifically by a central personnel department. The procedure
of selection will also have to be systematized.
 A worker should be physically and technically most suitable for the selected post.
 After selection, workers should be given a proper training which makes them more efficient and effective.
4. Standardization:
 Standards must be determined in respect of the equipments& tools, period of work, amount of work, working
condition, cost of production etc. These standards will be fixed in advance on the basis of various experiments.
5. Specialization:
 Taylor developed a theory called functional foremanship based on specialization of function. Under this plan, the
two functions of 'planning' and 'doing' are separated in the organization of the plant. The `functional foremen' are
specialists who join their heads to give thought to the planning of the performance of operations in the workshop.
 Taylor suggested eight functional foremen under his scheme of functional foremanship.
a) The Route Clerk: To lay down the sequence of operations and instruct the workers concerned about it.
b) The Instruction Card Clerk: To prepare detailed instructions regarding different aspects of work.
c) The Time and Cost Clerk: To send all information relating to their pay to the workers and to secure
proper returns of work from them.
d) The Shop Disciplinarian: To deal with cases of break of discipline and absenteeism.
e) The Gang Boss: To assemble and set up tools and machines and to teach the workers to make all their
personal motions in the quickest and best way.
f) The Speed Boss: To ensure that machines are run at their best speeds and proper tools are used by the
workers.
g) The Repair Boss: To ensure that each worker keeps his machine in good order and maintains cleanliness
around him and his machines.
h) The Inspector: To show to the worker how to do the work.
6. Financial Incentives
 Financial incentives can motivate the workers to put up their maximum efforts.
 Taylor suggested that wages should be based on individual performance and not on the position
 According to this scheme, a worker who completes the normal work gets wages at higher rate and who does not
complete gets at lower rate.
7. Economy
 Scientific management enhances profit and economy
 The economy and profit can be achieved by eliminating the wastages and by making the resources more
productive
8. Mental Revolution:
 Scientific management is based on co-operation between management and workers
 Mutual conflict should be replaced by mutual co-operation which is beneficial to both.
II. Henry Fayol's Administrative Management:
 Henry Fayol is considered as the father of modern management theory of general and industrial management.
 He identified 14 principles of management based on his management experiences
The principles of management are given below:
1. Division of work:
Work should be divided in a proper way with reference to the available time. Division of work or specialization alone
can give maximum productivity and efficiency.
2. Authority and Responsibility:
The right to give order is called authority. The obligation to accomplish is called responsibility. Authority and
Responsibility are the two sides of the management coin. They exist together. They are complementary and mutually
interdependent.
3. Discipline:
The objectives, rules and regulations, the policies and procedures must be honored by each member of an
organization. There must be penalties (punishment) for non-obedience or indiscipline. Organization can work smoothly
with discipline – preferably voluntary discipline.
4. Unity of Command:
In order to avoid any possible confusion and conflict, each member of an organization must receive orders and
instructions only from one superior (boss).
5. Unity of Direction:
All members of an organization must work together to accomplish common objectives.
6. Subordination of Personal Interest to General Interest:
 Every employee‟s interest is to earn money to meet his personal needs. The general interest of the organization is
the development and progress of the organization.
 The employees should give importance first to the general interest than his personal interest. It will lead to
effective management of the organization.
7. Remuneration of personnel
The wage payment system should satisfy the employees. Exploitation of employees in any manner must be eliminated.
Sound scheme of remuneration includes adequate financial and nonfinancial incentives.
8. Centralization:
There must be a good balance between centralization and decentralization of authority and power. Extreme
centralization and decentralization must be avoided.
9. Scalar Chain:
Scalar principle states that instructions and orders should be sent form top management to the bottom management.
Scalar denotes steps.
10. Order:
Two types of order or system 1) Materials Order 2) Social Order
 In any organization materials and men are provided in correct places so that materials can be easily taken out and
men easily located and also saved time
 Materials order:“A place for everything and everything in its place”
 Social order: “A place for everyone and everyone in its place”
11. Equity:
Equity refers to the treatment of employees equally. Equal treatment of the employees helps to achieve organizational
goals.
12. Stability of Staff:
Employees and managers must have job security. A high employee turnover rate is not good for the efficient
functioning of any organization.
13. Initiative:
It is concerned with thinking and execution of a plan. When employees come forward with new ideas, they must be
encouraged by the superiors. It will create good morale of the employee.
14. Esprit de Corps:
It means Union is strength. In organization, employees should be harmony and unity. It improves employee morale.
TYPES OF BUSINESS ORGANIZATIONS
When organizing a new business, one of the most important decisions to be made is choosing the structure of a
business.
1. Sole Proprietorships
The vast majority of small business starts out as sole proprietorships are very dangerous. These firms are owned by one
person, usually the individual who has day-to-day responsibility for running the business. Sole proprietors own all the
assets of the business and the profits generated by it. They also assume "complete personal" responsibility for all of its
liabilities or debts. In the eyes of the law, you are one in the same with the business.
Merits:
 Easiest and least expensive form of ownership to organize.
 Sole proprietors are in complete control, within the law, to make all decisions.
 Sole proprietors receive all income generated by the business to keep or reinvest.
 Profits from the business flow-through directly to the owner's personal tax return.
 The business is easy to dissolve, if desired.
Demerits:
 Unlimited liability and are legally responsible for all debts against the business.
 Their business and personal assets are 100% at risk.
 Has almost been ability to raise investment funds.
 Are limited to using funds from personal savings or consumer loans.
 Have a hard time attracting high-caliber employees, or those that are motivated by the opportunity to own a
part of the business.
 Employee benefits such as owner's medical insurance premiums are not directly deductible from business
income (partially deductible as an adjustment to income).
2. Partnerships
In a Partnership, two or more people share ownership of a single business. Like proprietorships, the law does not
distinguish between the business and its owners. The Partners should have a legal agreement that sets forth how
decisions will be made, profits will be shared, disputes will be resolved, how future partners will be admitted to the
partnership, how partners can be bought out, or what steps will be taken to dissolve the partnership when needed. Yes,
its hard to think about a "break-up" when the business is just getting started, but many partnerships split up at crisis
times and unless there is a defined process, there will be even greater problems. They also must decide up front how
much time and capital each will contribute, etc.
Merits:
 Partnerships are relatively easy to establish; however time should be invested in developing the partnership
agreement.
 With more than one owner, the ability to raise funds may be increased.
 The profits from the business flow directly through to the partners' personal taxes.
 Prospective employees may be attracted to the business if given the incentive to become a partner.
Demerits:
 Partners are jointly and individually liable for the actions of the other partners.
 Profits must be shared with others.
 Since decisions are shared, disagreements can occur.
 Some employee benefits are not deductible from business income on tax returns.
 The partnerships have a limited life; it may end upon a partner withdrawal or death..
3. Joint Stock Company:
Limited financial resources & heavy burden of risk involved in both of the previous forms of organization has led to
the formation of joint stock companies these have limited dilutives. The capital is raised by selling shares of different
values. Persons who purchase the shares are called shareholder. The managing body known as; Board of Directors; is
responsible for policy making important financial & technical decisions.
There are two main types of joint stock Companies.
(i) Private limited company.
(ii) Public limited company
(i) Private limited company: This type company can be formed by two or more persons. Te maximum number of
member ship is limited to 50. In this transfer of shares is limited to members only. The government also does not
interfere in the working of the company.
(ii) Public Limited Com+pany: It is one whose membership is open to general public. The minimum number required
to form such company is seven, but there is no upper limit. Such company‟s can advertise to offer its share to genera
public through a prospectus. These public limited companies are subjected to greater control & supervision of control.
Merits:
 The liability being limited the shareholder bear no Rick& therefore more as make persons are encouraged to
invest capital.
 Because of large numbers of investors, the risk of loss is divided.
 Joint stock companies are not affected by the death or the retirement of the shareholders.
Disadvantages:
 It is difficult to preserve secrecy in these companies.
 It requires a large number of legal formalities to be observed.
 Lack of personal interest.
4. Public Corporations:
A public corporation is wholly owned by the Government centre to state. It is established usually by a Special Act of
the parliament. Special statute also prescribes its management pattern power duties & jurisdictions. Though the total
capital is provided by the Government, they have separate entity & enjoy independence in matters related to
appointments, promotions etc.
Merits:
 These are expected to provide better working conditions to the employees & supported to be better managed.
 Quick decisions can be possible, because of absence of bureaucratic control.
 More flexibility as compared to departmental organization.
 Since the management is in the hands of experienced & capable directors & managers, these ate managed
more efficiently than that of government departments.
Demerits:
 Any alteration in the power & Constitution of Corporation requires an amendment in the particular Act, which
is difficult & time consuming.
 Public Corporations possess monopoly & in the absence of competition, these are not interested in adopting
new techniques & in making improvement in their working.
5. Government Companies:
A state enterprise can also be organized in the form of a Joint stock company; A government company is any company
in which of the share capital is held by the central government or partly by central government & party by one to more
state governments. It is managed by the elected board of directors which may include private individuals. These are
accountable for its working to the concerned ministry or department & its annual report is required to be placed ever
year on the table of the parliament or state legislatures along with the comments of the government to concerned
department.
Merits:
 It is easy to form.
 The directors of a government company are free to take decisions & are not bound by certain rigid rules &
regulations.
Demerits:
 Misuse of excessive freedom cannot be ruled out.
 The directors are appointed by the government so they spend more time in pleasing their political masters &
top government officials, which results in inefficient management.
ORGANIZATIONAL CULTURE
Organizational Culture is a system of shared beliefs and values that develop within an organization and guide the
behaviour of its members. “The way we do things around here.” –Basic assumptions, values, symbols, rituals (usual
behaviour), myths (beliefs) and practices.
Implications:
culture is a perception (based on what is seen, heard or experienced)
culture is shared (described by all in similar terms)
organizational culture is descriptive (it describes rather than evaluates)
Definition
According to Deal and Kennedy, “Organizational Culture is a system of informal rules that spells out how people have
to behave most of the time”
Dimensions of Organizational Culture
Seven dimensions (principles, components) describe an organization‟s culture. The seven components are
1. Attention to Detail
2. Outcome Orientation
3. People Orientation
 4. Team Orientation
5. Aggressiveness
6. Stability
7. Innovation and Risk Taking

1. Attention to Detail
Degree to which employees are expected to exhibit precision, analysis, and attention to detail
2. Outcome Orientation
Degree to which managers focus on results or outcomes rather than on how these outcomes are achieved
3. People Orientation
Degree to which management decisions take into account the effects on people in the organization
4. Team Orientation
Degree to which work is organized around teams rather than individuals
5. Aggressiveness
Degree to which employees are aggressive and competitive rather than cooperative
6. Stability
Degree to which organizational decisions and actions emphasize maintaining the status quo
7. Innovation and Risk Taking
Degree to which employees are encouraged to be innovative and to take risks
Strong versus Weak Culture
An organizational culture can be weak or strong. Both have advantages and disadvantage
A strong organizational culture could be one were the majority of the participants hold the same basic beliefs and
values as applies to the organization. The people in this group may follow the perceived rules and ethical procedures
that are basic to the organization, even if those values are not publicly stated by the organization
In strong culture, key values are deeply held (strongly committed to) and widely shared (accepted and applied by
everyone). They have a greater influence on employees than do weak cultures. Employees are more committed than
those in organizations with weak cultures. This can be extremely valuable for building a team where all the participants
have the same goals. Working together to improve efficiency or, possibly, communication with management could be
some of the goals. Therefore, strong cultures promote high performance.
Weak organizational culture is a detriment to a company for obvious reasons. The extra supervision, rules and
bureaucracy cause the company to be less efficient and less effective. In addition, having these extra layers also tends
to be much more expensive, which will obviously show on the bottom line. Weak cultures can not take advantage of an
opportunity that demands quick, decisive action.
Research results are suggesting that in organizations with strong cultures employees tend to be more committed to their
organizations; recruitment efforts and socialization practices are used to build employee commitment; and there is
higher organizational performance. The impact of a strong culture on managers is that as the culture becomes stronger,
it has an increasing impact on what managers do and constraints their decision-making options as they plan, organize,
lead and control.

How Employee Learn Culture?

Employee learn culture from
1. Stories: a narrative of significant events or people
2. Rituals: repetitive sequences of activities. Example: morning physical exercises or singing as it is done in Japan
3. Material Symbols: Physical assets distinguishing the organization. Example: Type of automobiles, of furniture, the
size of offices, dress code
4. Language: Unique terminology or jargon: Acronyms (word forms), characteristic language, use of terms, phrases,
and word meanings specific to an organization.
ORGANIZATION AND ENVIRONMENTALFACTORS
 All organizations draw input from the environment and convert it into output and sent them back to the
environment.
 The environment of the business consists of two components, such as internal and external environment.
o The internal environment includes suppliers, customers, competitors, etc.
o The external environments include technology, economic condition, political environment, socio-
cultural factors
Internal Environment Factors
1. Suppliers
 The raw materials supplied by suppliers in the organization are converted to its output.
 The relationship between organization and the suppliers of these inputs induces the changes in the environment
that directly influence the operations of an organization.
 Sudden shortages in supplying raw materials, labor strikes affect the fulfillment of delivery promise and it will
lead to loss in sales in the short run and damage the customer goodwill in long run.
 If an organization is unable to obtain this essential input of right quality, quantity and at the right price, it
cannot possibly achieve their objectives.
 Many organizations prefer to buy multiple sources to avoid over dependency on only one supplier

Fig. Organization and environment

2. Customers
 Customer is one of the important parts of every organization.
 Any organization which neglects the customer‟s expectations and aspirations would find some difficulties in long
term survival
 Customer's taste and preferences are not static but they keep on changing.
 Organizations which are adopted indentifying the changes in the customer's attitudes and preferences or would
survive
3. Competitors
 Competitor of a company is a major influence in shaping its organization.
 For example, Coke has competitors with Pepsi.
 If the organization plans a strategy at one side, a number of other organizations might do the same calculations.
 Each and every company must
o identify their competitor,
o monitor their activities,
o capture their moves and
o maintain customer loyalty.
External Environment Factors
1. Technology
 India is making rapid and significant advances in the fields, such as energy, electronic, microelectronics, and
information technologies.
 Computer technologies develop new marketing opportunities, such as BPO, call centre, computer manufacturing,
etc.
 The technological developments have tremendous impact on the organization
 The manager must copes with this development to survive in the competitive market.
 Technological changes occur and vary from industry to industry. Every organization has to assess the
technological environment from time to time.
2. Economic conditions
 Managers must also assess how changes in general economic conditions which will affect the operations
 The fluctuations in economic activities of a nation such as
o gross domestic product,
 o price level,
o employment,
o demand,
o supply of consumer, will impact the prosperity of the business.
 Organizations must be able to tackle effectively the inflation in the economy.
 When the economy is in upbeat moods, firms normally benefit enormously. Firms have to adjust themselves to the
down turn in economic condition
 Efficiency in operation, elimination of wastage, product planning, etc., are the key for the survival of firms in
such an adverse economic condition.
 Therefore, a manager must be able to clearly assess the impact changes in economic conditions on the industry
3. Political Factors
 The performance, growth and survival of business depend on the attitude of the government towards the
business.
 Since government is fully empowered to monitor and control the various institutions of the society, it affects the
business.
 Unstable Government Policies affect the business in a significant way
 In the late seventies, during the Janatha Party ruling at the centre, Coco-cola, IBM and a few other multinationals
were forced to leave the country. The whole thing has changed in the last few years as much as that multi nations
are not only welcome but they also offered many facilities.
 One Government adopts restrictive policies while another government adopting liberal economic policies by. All
these make significant impact in business
 Companies, such as Aravind Mills, L & T, Reliance, Ranbaxy, etc., are able to go for globalization, because of
their ability to assess the changing environment effectively and to adapt to the changes with considerable case
4. Socio Cultural Factors
 Socio-cultural environment comprises the basic beliefs, values and norms which shape the people.
 It plays a major role in deciding the wants and needs of the people
 New demands are created and old ones are lost in due course of action. They change our life style and social value
 Sound understanding of the cultural variables is more important for firms in a country, such as India where
there are several diversities in cultures of various regions within the country. Culture is a wider concept which
includes value systems, beliefs, likes and dislikes, attitudes and perceptions.
 If the products or service of a firm are not in-line with the culture of the place, they may not be accepted by the
society.
 For example, in India, 'Miss' brand cigarette targeted at the women was a failure brand because it is against the
cultural echoes of the society
 Organizations must be to respond effectively and adapt to environmental changes in order to survive and attain
their objectives.
TRENDS AND CHALLENGES OF MANAGEMENT IN GLOBAL SCENARIO
 Changes in socio-economic and political conditions are bound to bring the changes in the environment within the
organizations.
 The mangers should update their knowledge and skills to attain the needs and objectives of organization
1. Workforce Diversity
 Workers in the organizations, come with their differing cultural values and life style preferences.
 Therefore, the challenge for organizations is to make them accommodating to diverse groups of people at the
work place by considering their different life styles, family needs, and work styles.
 If diversity is managed properly, it can increase the creativity and innovations
2. Changing Employee Expectations
 Employee's expectations and aspirations have changed from traditional allurement, such as job security, good and
attractive remunerations to empowerment, equality and quality work life
 The manager has to redraw new methods of motivation, such as job design.

3. International Environment
 Creating an environment which is responsive to external changes, providing satisfaction to members of the
organizations and sustaining through culture, useful traditions, practices, and even systems will become an another
important dimension of managing personnel.
3. Building Organizational Capabilities
 The functions managers include not only assisting them to acquire new skills and knowledge and to evaluate
environmental changes but also to love in a psychological state of readiness to continually change
4. Job Design and Organizational Structure
 In designing an organization with foreign concepts, such as quality circles, TQM, etc. instead of these
organizational structure and design, it will primarily be based on
(i) task approach
(ii) people approach
5. Changing Psycho-Social System
 In the traditional bureaucratic mode, the management was designed to perform its work functions.
 But in future, human participation will be required to the management
6. Technological Advance
 In technological advancement, new jobs will be created and many old jobs will become redundant.
 The resulting unemployment overcome by properly assessing manpower needs and training of redundant
employees in alternate skills.
7. Management of human relations
 The new generation of workforce comprising educated and conscious workers will ask for higher degree of
participation and avenues for self-fulfillment
8. Changes in legal environment
 To meet the increasing changes in the legal environment, necessary adjustments will have to be made so that
greater utilization of human resources can be achieved.
9. Expanding Globalization
 Globalization is the process of transformation of local or regional phenomena into global ones. It can be described
as process by which the people of the world are unified into a single society and function together.
 Economic globalization is, integration of national economies into the international economy through trade, foreign
direct investment, capital flows, migration, and the spread of technology
 Business has crossed the national boundaries and thus, it has become a global popularly known as multinational
business.
 Globalization of business posed at least two major challenges for managers
o First in case of multinational companies, the managers are frequently transferred to another country. In a
new country, the managers have to manage a workforce that is different in needs, aspirations and
attitudes
o Second even in their own country, the managers have to work with superiors, subordinates and people are
different in culture. In order to manage the employees effectively, the managers need to understand the
varying culture accurately and then learn to adapt their management styles accordingly
 Indian Business in the Globalization:
 Globalization announced the New Industrial Policy (NIP) in 1991. According to NIP, liberalization of Foreign
investment was one of the features which attempted to remove restrictions on foreign investment in Indian
business
 The advance technology in telecommunication, transportation and information technology have made possible
the globalization business.
 Indian companies have started participating in the global business. For example, Ford-Escort, Maruthi-Suzuki
Cars, Hero Honda motor cycle. The following list provides the Indian companies which participate in global
business:
1. Textiles
Arvind Mills, Raymonds, Crazim, Vimal have got good will for men's suiting throughout the world
2. Pharmaceuticals
Cipla, Orchid, Ranbaxy have manufacturing and marketing networks in many countries in the world.
3. Software
HCL, TCS, Infosys, Wipro are world popular companies.
4. Automobiles
Maruthi Cars and Hero-Honda in motorcycles are two important globally famous companies.

1.13.1. Multinational Companies (MNC)

 A MNC is defined as "An enterprise which own or control production or service facilities outside the country
in which they are based".
 Modern industries are moving towards international management because of globalization. International
management involves conducting business and industrial operations in foreign countries and is affected by cultural
and national influence. It involves free flow of ideas, technology, goods, information and management talent.
 Multinational companies (MNC) are companies that manufacture and market products or services in several
countries. The management of MNC adopts international management. Typically, a MNC operates a number of
plants abroad and markets products through a large network.
Characteristics of multinational corporations:
1. The MNC top manager regards the entire world as the relevant frame of reference for making the kinds of resource
acquisition, production and market identified
2. MNC is reduction of unit costs through producing more units.
3. MNC the parent company and its foreign affiliates act in close alliance and cooperation with one another.
Advantages of MNC:
1. The economy benefits from multiplier and linkage effects resulting from a better use of technology.
2. MNC can promote quality products at lower cost. It is the most benefit to consumers.
3. MNC helps to expand the markets. MNC has access to a much larger market for their product.
4. MNC leads to increase in production exports and imports of the required inputs.
5. MNC is paying taxes, their operations increase governments revenues.
6. MNC provides lower labour costs.
Disadvantages of MNC
1. Competition from MNC affects local industry.
2. MNC discourages competition among their subsidiaries.
3. MNC utilizes local labour with low cost while obtaining high profits
4. MNC's involvement results in the lack of development of local R&D.
5. MNC employs transfer prices in transfers between subsidiaries that minimize total taxes for the MNC andincreases
their global profit
QUESTION BANK
Part A
1. What is Management?
Management is the process of giving direction and controlling the various activities of the people to achieve the
objectives of an organization.
2. Define: Management.
According to Knootz and Weihrich “Management is the process of designing and maintaining of an environment in
which individuals working together in groups efficiently accomplish selected aims”.
3. Write some characteristics of Management?
Management is a continuous process. Manager use the resources of organization both physical as well as human
achieve the goal. Management aims act achieving the organization goals by ensuring effective use of resources.
 4. Write any two points favor for management as a science
Management principle should be verified. Reliable basis for predicting future.
5. What is time study?
The movement which takes minimum time is the best one
6. What is motion study?
Taylor suggested the eliminating wasteful movements and performing only necessary movement.
7. What is authority?
It is the power given to a person to get work from his subordinates.
8. What is responsibility?
It is the amount of work from a man by his superior
9. Comment: Management is both –A science and an art
Management is a science because it contains general principles. It is also an art because it requires certain personal
skills achieve desired result
10. What is centralization?
The organization is centralized when the power is concentrated with one person.
11. What is decentralization?
If the power is fully distributed to the subordinates of the organization.
12. What is Esprit-de-corps?
This means union is strength. In organization employees should be harmony and unity.
13. Write some important functions of top level management?
1) Top level management.
2) Middle level management.
3) Lower level management.
14. Write some important functions of top level management?
1) To formulate goals and policies of the company.
2) To formulate budgets.
3) To appoint top executives.
15. Write the functions of management?
1) Planning.
2) Organizing.
3) Staffing.
4) Coordinating.
5) Controlling.
16. Define sole trade?
The sole proprietorship is that form of business organization which owned and controlled by a single individual.
17. What is partnership?
A partnership is an association of two or more persons to carry on business and to share its profit and losses.
18. What is Joint Stock Company?
Joint Stock Company is association of many persons who contribute money worth to common stock and explaining
source trade and also share the profit and losses.
19. What is private limited company?
A private limited company is a company which has a minimum paid up capital dory be prescribed.
20. White is a co-operative society?
It is a voluntary association of persons for mutual benefit and it aims is accomplished through self heap and collective
effort.
21. What is a social responsibility?
Society is the part of the management to interact actions withers to protect social interest a society.
Part B
1. Explain briefly about the various functions of Management. (8)
2. Discuss about the contribution of Taylor and Fayol (16)
3. Explain the overall development of management thought. (16) (or)
Explain the evolution of management thought by different experts in management (16)
4. Management: Science or Art – Discuss. (8)
5. What are the different responsibilities (roles) of managers in effective management? Explain. (8)
6. Write the characteristics and limitations of classical approach. (16)
7. Explain briefly about the different factors affecting the organizational environment (8)
8. Discuss in detail about the recent trends in management concepts. (16)
9. Compare Management and administration. (8)
10. Explain about the levels of management (8)
11. Explain in detail about the different types of business organization. (16)