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PPM UNIT 1 - Lecture notes 1

business (Uttarakhand Technical University)

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PRINCIPLES & PRACTICES OF MANAGEMENT (MBAT 101)

UNIT 1
Introduction
Management is a vital aspect of the economic life of man, which is an organised group activity. A central directing
and controlling agency is indispensable for a business concern. The productive resources material, labour, capital
etc. are entrusted to the organising skill, administrative ability and enterprising initiative of the management. Thus,
management provides leadership to a business enterprise. Without able managers and effective managerial
leadership the resources of production remain merely resources and never become production. Under competitive
economy and ever-changing environment the quality and performance of managers determine both the survival as
well as success of any business enterprise. Management occupies such an important place in the modern world that
the welfare of the people and the destiny of the country are very much influenced by it.

Definition of Management
Management may be defined in many different ways. Many eminent authors on the subject have defined the term
“management”, some of these definitions are reproduced below:
According to Lawrence A Appley, “Management is the development of people and not the direction of things”.
According to Joseph Massie, “Management is defined as the process by which a co-operative group directs action
towards common goals”.
In the words of George R Terry, “Management is a distinct process consisting of planning, organising, actuating
and controlling performed to determine and accomplish the objectives by the use of people and resources”.
According to James L Lundy, “Management is principally the task of planning, co-ordinating, motivating and
controlling the efforts of others towards a specific objective”.
In the words of Henry Fayol, “To manage is to forecast and to plan, to organise, to command, to co-ordinate and
to control”.
According to Peter F Drucker, “Management is a multi-purpose organ that manages a business and manages
managers and manages worker and work”.
In the words of J.N. Schulze, “Management is the force which leads, guides and directs an organisation in the
accomplishment of a pre-determined object”.
In the words of Koontz and O’Donnel, “Management is defined as the creation and maintenance of an internal
environment in an enterprise where individuals working together in groups can perform efficiently and effectively
towards the attainment of group goals”.

Nature of Management
An analysis of the various definitions of management indicates that management has certain characteristics. The
following are the salient characteristics of management.
1. Management aims at reaping rich results in economic terms: Manager’s primary task is to secure the
productive performance through planning, direction and control. It is expected of the management to bring into
being the desired results. Rational utilisation of available resources to maximise the profit is the economic function
of a manager. Professional manager can prove his administrative talent only by economising the resources and

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enhancing profit. According to Kimball, “management is the art of applying the economic principles that underlie
the control of men and materials in the enterprise under consideration”.
2. Management also implies skill and experience in getting things done through people: Management involves
doing the job through people. The economic function of earning profitable return cannot be performed without
enlisting co-operation and securing positive response from “people”. Getting the suitable type of people to execute
the operations is the significant aspect of management. In the words of Koontz and O’Donnell, “Management is the
art of getting things done through people in formally organised groups”.
3. Management is a process: Management is a process, function or activity. This process continues till the
objectives set by administration are actually achieved. “Management is a social process involving co-ordination of
human and material resources through the functions of planning, organising, staffing, leading and controlling in
order to accomplish stated objectives”.
4. Management is a universal activity: Management is not applicable to business undertakings only. It is
applicable to political, social, religious and educational institutions also. Management is necessary when group
effort is required.
5. Management is a science as well as an art: Management is an art because there are definite principles of
management. It is also a science because by the application of these principles predetermined objectives can be
achieved.
6. Management is a profession: Management is gradually becoming a profession because there are established
principles of management which are being applied in practice, and it involves specialised training and is governed
by ethical code arising out of its social obligations.
7. Management is an endeavour to achieve pre-determined objectives: Management is concerned with directing
and controlling of the various activities of the organisation to attain the pre-determined objectives. Every
managerial activity has certain objectives. In fact, management deals particularly with the actual directing of
human efforts.
8. Management is a group activity: Management comes into existence only when there is an group activity
towards a common objective. Management is always concerned with group efforts and not individual efforts. To
achieve the goals of an organisation management plans, organises, co-ordinates, directs and controls the group
effort.
9. Management is a system of authority: Authority means power to make others act in a predetermined manner.
Management formalises a standard set of rules and procedure to be followed by the subordinates and ensures their
compliance with the rules and regulations. Since management is a process of directing men to perform a task,
authority to extract the work from others is implied in the very concept of management.
10. Management involves decision-making: Management implies making decisions regarding the organisation and
operation of business in its different dimensions. The success or failure of an organisation can be judged by the
quality of decisions taken by the managers. Therefore, decisions are the key to the performance of a manager.
11. Management implies good leadership: A manager must have the ability to lead and get the desired course of
action from the subordinates. According to R. C. Davis, “management is the function of executive leadership
everywhere”. Management of the high order implies the capacity of managers to influence the behaviour of their
subordinates.

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12. Management is dynamic and not static: The principles of management are dynamic and not static. It has to
adopt itself according to social changes.
13. Management draws ideas and concepts from various disciplines: Management is an interdisciplinary study. It
draws ideas and concepts from various disciplines like economics, statistics, mathematics, psychology, sociology,
anthropology etc.
14. Management is goal oriented: Management is a purposeful activity. It is concerned with Notes the
achievement of pre-determined objectives of an organisation.
15. Different levels of management: Management is needed at different levels of an organisation namely top level,
middle level and lower level.
16. Need of organisation: There is the need of an organisation for the success of management. Management uses
the organisation for achieving pre-determined objectives.
17. Management need not be owners: It is not necessary that managers are owners of the enterprise. In joint stock
companies, management and owners (capital) are different entities.
18. Management is intangible: It cannot be seen with the eyes. It is evidenced only by the quality of the
organisation and the results, i.e., profits, increased productivity etc.

Is Management a Science or an Art?

A question often arises whether management is a science or art. It is said that “management is the oldest of arts and
the youngest of sciences”. This explains the changing nature of management but does not exactly answer what
management is? To have an exact answer to the question it is necessary to know the meanings of the terms
“Science” and “Art”.
What is “Science”?
Science may be described, “as a systematic body of knowledge pertaining to an area of study and contains some
general truths explaining past events or phenomena”. The above definition contains three important characteristics
of science. They are:
1. It is a systematized body of knowledge and uses scientific methods for observation,
2. Its principles are evolved on the basis of continued observation and experiment, and
3. Its principles are exact and have universal applicability without any limitation.
Judging from the above characteristics of science, it may be observed that:
1. Management is a systematized body of knowledge and its principles have evolved on the basis of observation.
2. The kind of experimentation (as in natural sciences) cannot be accompanied in the area of management since
management deals with the human element.
3. In management, it is not possible to define, analyse and measure phenomena by repeating the same conditions
over and over again to obtain a proof.
The above observation puts a limitation on management as a science. Management like other social sciences can be
called as “inexact science”.
What is “Art”?
‘Art’ refers to “the way of doing specific things; it indicates how an objective is to be achieved.”
Management like any other operational activity has to be an art. Most of the managerial acts have to be cultivated
as arts of attaining mastery to secure action and results.

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The above definition contains three important characteristics of art. They are:
1. Art is the application of science. It is putting principle into practice.
2. 2. After knowing a particular art, practice is needed to reach the level of perfection.
3. 3. It is undertaken for accomplishing an end through deliberate efforts.
Judging from the above characteristics of art, it may be observed that :
1. Management while performing the activities of getting things done by others is required to apply
the knowledge of certain underlying principles which are necessary for every art.
2. Management gets perfection in the art of managing only through continuous practice.
3. Management implies capacity to apply accurately the knowledge to solve the problems, to face the
situation and to realise the objectives fully and timely.
The above observation makes management an art and that to a fine art.
Management is both a Science as well as an Art
Management is both a science as well as an art. The science of management provides certain
general principles which can guide the managers in their professional effort. The art of
managementconsists in tackling every situation in an effective manner. As a matter of fact, neither
science should be over-emphasised nor should be the art discounted; the science and the art of
management go together and are both mutually interdependent and complimentary. Management is
thus a science as well as an art. It can be said that-”the art of management is as old as human history,
but the science of management is an event of the recent past.”

Scope of Management
The scope of management is too wide to be covered in a few pages. Herbison and Myres have yet
tried to restrict it under three broad groups, viz.
1. Economic Resource
2. System of Authority
3. Class or Elite
Let us understand each of them one by one.
1. Economic Resource: Business Economics classifies the factors of production into four basic inputs, viz. land,
labour, capital and entrepreneur. By the use of all these four, basic production can be done. But to turn that into a
profitable venture, an effective utilization of man, money, material, machinery and methods of production has to be
ensured. This is guaranteed by application of management fundamentals and practices. The better is the
management of an enterprise, the higher is its growth rate in terms of profit, sales, production and distribution.
Thus management itself serves as an economic resource.
2. System of Authority: As already discussed, management is a system of authority. It formalises a standard set of
rules and procedure to be followed by the subordinates and ensures their compliance with the rules and regulations.
Since management is a process of directing men to perform a task, authority to extract the work from others is
implied in the very concept of management.
3. Class or Elite: Management is considered to be a distinct class that has its own value system. Managerial class,
often referred to as a collective group of those individuals that perform managerial activities is essential component

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of each organisation. The importance of the class has become so huge that the entire group of mangers is known as
“management” in every organisation.

Purpose of Management
The purpose of management can be understood as following:
1. Reducing ambiguity in methods of working,
2. Keeping costs down, and motivating others to do the same.
3. Taking calculated risks
4. Managing prospective risk
5. Exercise good judgement

Characteristics of Management
Management is a distinct activity having the following salient features or characteristics:
1. Economic Resource: Management is an important economic resource together with land, labour and capital. As
industrialization grows, the need for managers increases. Efficient management is the most critical input in the
success of any organised group activity as it is the force which assembles and integrates other factors of production,
namely, labour, capital and materials.
2. Goal Oriented: Management is a purposeful activity. It coordinates the efforts of workers
to achieve the goals of the organisation. The success of management is measured by the extent to which the
organisational goals are achieved.
3. Distinct Process: Management is a distinct process consisting of such functions as planning, organising, staffing,
directing, and controlling. These functions are so interwoven that it is not possible to lay down exactly the
sequence of various functions or their relative significance.
4. Integrative Force: The essence of management is integration of human and other resourcesto achieve the
desired objectives. Managers seek to harmonize the individuals goals with the organisational goals for the smooth
working of the organisation.
5. Intangible Force: Management has been called an unseen force. Its presence is evidenced by the result of its
efforts – orderliness, informed employees, buoyant spirit and adequate work output. Thus, feeling of management
is result-oriented.
6. Results through Others: The managers cannot do everything themselves. They must have the necessary ability
and skills to get work accomplished through the efforts of others. They must motivate the subordinates for the
accomplishment of the tasks assigned to them.
7. A Science and an Art: Management has an organised body of knowledge consisting of well defined concepts,
principles and techniques which have wide applications. So it is treated as a science. The application of these
concepts, principles and techniques requires specialized knowledge and skills on the part of the manager. Since the
skills acquired by a manager are his personal possession, management is viewed as an art.

Who is a Manager?
A Manager is the person responsible for planning and directing the work of a group of individuals, monitoring their
work, and taking corrective action when necessary. For many people, this is their first step into a management

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career. Managers may direct workers directly or they may direct several supervisors who direct the workers. They
are the individuals charged with examining the workflow, coordinating efforts, meeting goals and providing
leadership. Thus a manager must be familiar with the work of all the groups he/she supervises, but need not be the
best in any or all of the areas. It is more important for a manager to know how to manage the workers than to know
how to do their work well.
A manager’s title reflects what he/she is responsible for.

Roles of a Manager
To achieve results, they shift gears and restructure and reorganise things continually. The diverse roles played by
managers in discharging their duties have been summarised by Henry Mintzberg in the late 1960s, under three
broad headings: interpersonal roles, informational roles and decisional roles. Let us understand them one by one.

1. Interpersonal roles: Three interpersonal roles help the manager keep the organisation running smoothly.
Managers play the figurehead role when they perform duties that are ceremonial and symbolic in nature. These
include greeting the visitors, attending social functions involving their subordinates (like weddings, funerals),
handing out merit certificates to workers showing promise etc. The leadership role includes hiring, training,
motivating and disciplining employees. Managers play the liaison role when they serve as a connecting link
between their organisation and others or between their units and other organisational units. Mintzberg described
this activity as contacting outsiders who provide the manager with information. Such activities like
acknowledgements of mail, external board work, etc., are included in this category.
2. Informational roles: Mintzberg mentioned that receiving and communicating information are perhaps the most
important aspects of a manager’s job. In order to make the right decisions, managers need information from various
sources. Typically, this activity is done through reading magazines and talking with others to learn about changes in
the customers’ tastes, competitors’ moves and the like. Mintzberg called this the monitor role. In the disseminator
role, the manager distributes important information to subordinates that would otherwise be inaccessible to them.
Managers also perform the spokesperson role when they represent the organisation to outsiders.

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3. Decisional roles: There are four decision roles that the manager adopts. In the role of entrepreneur, the manager
tries to improve the unit. He initiates planned changes to adapt to environmental challenges. As disturbance
handlers, managers respond tosituations that are beyond their control such as strikes, shortages of materials,
complaints, grievances, etc. In the role of a resource allocator, managers are responsible for allocating human,
physical and monetary resources. As negotiators, managers not only mediate in internal conflicts but also carry out
negotiations with other units to gain advantages for their own unit.

Functions of a Manager
More popular and widely accepted is the classification given by Henry Fayol. According to him, the managerial
functions may be broadly classified into five categories: planning, organising, directing, staffing and controlling.
Managers perform these functions within the limits established by the external environment and must consider the
interests of such diverse groups as government, employees, unions, customers, shareholders, competitors and the
public. For theoretical purposes, it may be convenient to separate the management functions and study
them independently but practically speaking, they defy such categorisations. They are highly inseparable.
Each function blends into the other and each can be performed in any order or sequence, not necessarily in the
order shown above, but tend to be performed (normally) in the planning, organising, leading and controlling
sequence. A brief discussion of the five basic functions is presented under:

1. Planning: Planning is the process of making decisions about future. It is the process of determining enterprise
objectives and selecting future courses of actions necessary for their accomplishment. It is the process of deciding
in advance what is to be done, when and where it is to be done, how it is to be done and by whom. Planning
provides direction to enterprise activities. It helps managers cope with change. It enables managers to measure
progress toward the objectives so that corrective action can be taken if progress is not satisfactory. Planning is a
fundamental function of management and all other functions of management are influenced by the planning
process.
2. Organising: Organising is concerned with the arrangement of an organisation’s resources - people, materials,
technology and finance in order to achieve enterprise objectives. It involves decisions about the division of work,
allocation of authority and responsibility and the coordination of tasks. The function increases in importance as a
firm grows. A structure is created to cope with problems created by growth. Through this formal structure, the
various work activities are defined, classified, arranged and coordinated. Thus, organising refers to certain dynamic
aspects: What tasks are to be done? Who is to do them? How the tasks are to be grouped? Who is to report to
whom? Where the decisions have to be made?
3. Staffing: Staffing is the function of employing suitable persons for the enterprise. It may be defined as an
activity where people are recruited, selected, trained, developed, motivated and compensated for manning various
positions. It includes not only the movement of individuals into an organisation, but also their movement through
(promotion, job rotation, transfer) and out (termination, retirement) of the organisation.
4. Directing: The function of guiding and supervising the activities of the subordinates is known as directing.
Acquiring physical and human assets and suitably placing them on jobs does not suffice; what is more important is
that people must be directed towards organisational goals. This work involves four important elements:

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(a) Leadership: Leadership is the process of influencing the actions of a person or a group to attain desired
objectives. A manager has to get the work done with and through people. The success of an organisation depends
upon the quality of leadership shown by its managers.
(b) Motivation: Motivation is the work a manager performs to inspire, encourage and impel people to take required
action. It is the process of stimulating people to take desired courses of action. In order to motivate employees,
manager must provide a congenial working atmosphere coupled with attractive incentives.
(c) Communication: Communication is the transfer of information and understanding from one person to another. It
is a way of reaching others with ideas, facts, and thoughts. Significantly, communication always involves two
people: a sender and a receiver. Effective communication is important in organisations because managers can
accomplish very little without it.
(d) Supervision: In getting the work done it is not enough for managers to tell the subordinates what they are
required to do. They have also to watch and control the activities of the subordinates. Supervision is seeing that
subordinates do their work and do it as directed. It involves overseeing employees at work.
5. Controlling: The objective of controlling is to ensure that actions contribute to goal accomplishment. It helps in
keeping the organisational activities on the right path and aligned with plans and goals. In controlling,
performances are observed, measured and compared with what had been planned. If the measured performance is
found wanting, the manager must find reasons and take corrective actions. If the performance is not found wanting,
some planning decisions must be made, altering the original plans. If the controlling function is to be effective, it
must be preceded by proper planning. Thus, controlling includes four things:
(a) Setting standards of performance,
(b) Measuring actual performance,
(c) Comparing actual performance against the standard and
(d) Taking corrective actions to ensure goal accomplishment.
Successful management involves active participation by managers in the above basic managerial functions. These
functions are interrelated and most managers use a combination of the all of them simultaneously to solve the
problems facing their companies.

Evolution of Management Thought

Introduction
The origin of management can be traced back to the days when man started living in groups. One can argue that
management took the form of leadership which was essential to coordinate the efforts of the group members in
order to arrange the necessities of life. History reveals that strong men organised the masses into groups according
to their intelligence, physical and mental capabilities. According to Egyptian literature of 1300 B.C., the art of
management was being practiced in different forms by different people. The literature clearly indicates the
recognition of the importance of organisation and administration in the bureaucratic set up. Similar records exist for
ancient China. According to L.S. Hsu, Confucius’s parables include practical suggestions for proper public
administration and admonitions to choose honest, unselfish and capable public officers
We will discuss a few major theories in this unit.
Classical Theory:-

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It is often called the traditional theory. It can be traced historically to the 19th century prototype industrial
and military organisations. Several writers contributed to the classical thought in the early years of the
20th century. They include Taylor, Fayol, Weber, Luther Gulick, Urwick, Mooney and Reiley and may
others.
The classical theory incorporates three viewpoints: (1) Taylor’s Scientific Management (2) Fayol’s
Administrative Management; and (3) Weber’s Ideal Bureaucracy (an organisation based on rules and
regulations, formal relations, specialization, etc.). All the three concentrated on the structure of
organisation for greater efficiency.
1. The classical theory laid emphasis on division of labour and specialization, structure, scalar and
functional processes and span of control. Thus, they concentrated on the anatomy of formal organisation.
2. The classical theorists emphasis organisation structure for co-ordination of various activities. They
ignored the role of human element.
3. The classical theory ignored the impact of external environment on the working of the organisation.
Thus, it treated organisations as closed systems.
4. The efficiency of the organisation can be increased by making each individual efficient.
5. The integration of the organisation is achieved through the authority and control of the central
mechanism. Thus, it is based on centralization of authority.
6. There is no conflict between the individuals and the organisation. In case of any conflict, the interests
of the organisation should prevail.
7. The people at work could be motivated by the economic rewards as they were supposed to be ‘rational
economic persons’.
(A) Scientific Management Approach(F.W. TAYLOR):-
F.W. Taylor (1865-1915) was the first person who insisted on the introduction of scientific methods in
management. He launched a new movement during the last decade of 19th century which is known as
‘Scientific Management’. That is why, Taylor is regarded as the father of scientific management.
Scientific management means application of scientific methods to the problems of management. Taylor
advocated scientific task setting based on time and motion study, standardization of materials, tools and
working conditions, scientific selection and training of workers and so on. It is to be noted that Taylor’s
thinking was confined to management at the shop level. However, he demonstrated the possibility and
significance of the scientific analysis of the various aspects of management. To sum up, he laid emphasis
on the following principles:
1. Science, not rule of thumb.
2. Harmony in group action, rather than discord.
3. Maximum output in place of restricted output.
4. Scientific selection, training and placement of the workers.
5. Almost equal division of work and responsibility between workers and managers.

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The basic idea behind the principles of scientific management is to change the mental attitudes of the
workers and the management towards each other. Taylor called it ‘Mental Revolution’ which has three
implications:
a) all out efforts for increase in production;
b) creation of the spirit of mutual trust and confidence; and
c) inculcating and developing the scientific attitude towards problems.
To put the philosophy of scientific management into practice, Taylor and his associates suggested the
following techniques:
1. Scientific task setting to determine a fair days; work.
2. Work study to simplify work and increase efficiency. This involves methods study, time study and
motion study.
3. Standardization of materials, tools equipment, costing system, etc.
4. Scientific selection and training of workers.
5. Differential piece-wage plan to reward the highly efficient workers.
6. Specialization in planning and operations through ‘functional foremanship’. Foremen in the planning
department include: route clerk, instruction card clear, time and cost clerk and shop disciplinarian and
those in the operations department include: gang boss, speed boss, repair boss and inspector.
7. Elimination of wastes and rationalization of system of control.
Criticism of Scientific Management
Taylor’s scientific management was criticized not only by the workers and managers but also by the
psychologists and the general public. The main grounds of criticism are given below:
1. The use of the word ‘Scientific’ before ‘Management’ was objected because what is actually meant by
scientific management is nothing but a scientific approach to management.
2. Taylor advocated the concept of functional foremanship to bring about specialization in the
organisation. But this is not feasible in practice as a worker can’t carry out instructions from eight
foremen.
3. Scientific management is production-centered as it concentrates too much on the technical aspects of
work and undermines the human factor in industry.
4. Scientific Management ignores social and psychological needs of workers as it treats them as extension
of machines devoid of any feelings and emotions.
5. Trade unionists regarded the principles of scientific management as the means to exploit labour
because the wages of the workers were not increased in direct proportion to productivity increases.

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(B) Management Process or Administrative Management Approach(HENRY

FAYOL)
The advocates of this school perceive management as a process involving certain functions such as planning,
organising, directing and controlling. That is why, it is also called the ‘functional’ in terms of certain functions and
then laid down fourteen principles of management which according to him have universal applicability.
Principles of Management (Contribution of Henry Fayol)
Henry Fayol was born in 1941 at Constantinople in France. He graduated as a mining engineer in 1860 from the
National School of Mining. After his graduation, he joined a French Coal Mining Company as an Engineer. After a
couple of years, he was promoted as manager. He was appointed as General Manager of his company in 1888. At
that time, the company suffered heavy losses and was nearly bankrupt. Henry Fayol succeeded in converting his
company from near bankruptcy to a strong financial position and a record of profits and dividends over a long
period.
Fayol’s Principles of Management: The principles of management are given below:
1. Division of work: Division of work or specialization alone can give maximum productivity and efficiency. Both
technical and managerial activities can be performed in the best manner only through division of labour and
specialization
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 honoured by each member
of an organisation. There must be clear and fair agreement on the rules and objectives, on the policies and
procedures. There must be penalties (punishment) for non-obedience or indiscipline. No organisation can work
smoothly without discipline - preferably voluntary discipline.
4. Unity of Command: In order to avoid any possible confusion and conflict, each member of an organisation must
received orders and instructions only from one superior (boss).
5. Unity of Direction: All members of an organisation must work together to accomplish common objectives.
6. Emphasis on Subordination of Personal Interest to General or Common Interest: This is also called principle
of co-operation. Each shall work for all and all for each. General or common interest must be supreme in any joint
enterprise.
7. Remuneration: Fair pay with non-financial rewards can act as the best incentive ormotivator for good
performance. Exploitation of employees in any manner must be eliminated. Sound scheme of remuneration
includes adequate financial and non-financial 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: The unity of command brings about a chain or hierarchy of command linking all members of the
organisation from the top to the bottom. Scalar denotes steps.
10. Order: Fayol suggested that there is a place for everything. Order or system alone can create a sound
organisation and efficient management.
11. Equity: An organisation consists of a group of people involved in joint effort. Hence, equity (i.e., justice) must
be there. Without equity, we cannot have sustained and adequate joint collaboration.

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12. Stability of Tenure: A person needs time to adjust himself with the new work and demonstrate efficiency in due
course. Hence, employees and managers must have job security. Security of income and employment is a pre-
requisite of sound organisation and management.
13. Esprit of Co-operation: Esprit de corps is the foundation of a sound organisation. Union is strength. But unity
demands co-operation. Pride, loyalty and sense of belonging are responsible for good performance.
14. Initiative: Creative thinking and capacity to take initiative can give us sound managerial planning and
execution of predetermined plans.

Criticism of Process of Functional Approach

Though the proponents of management process approach have made significant contribution to the development of
thought, their work suffers from the following limitations:
1. There is no single classification of managerial functions acceptable to all the functional theorists. There is also
lack of unanimity about the various terms such as management and administration, commanding and directing, etc.
2. The functionalists considered their principles to be universal in nature. But many of the Notes principles have
failed to deliver the desired results in certain situations.
3. The functional theorists did not consider the external environment of business.
4. Fayol overemphasized the intellectual side of management. He felt that management should be formally taught,
but he did not elaborate the nature and contents of management education.

(C) Bureaucracy
Max Weber (1864-1920), a German sociologist contributed his views on bureaucracy to the management thought.
His primary contribution includes his theory of authority structure and his description of organisations based on the
nature of authority relations within them. Essentially, it was Weber’s contention that there are three types of
legitimate authority which are as follows:
1. Rational-legal authority: Obedience is owed to a legally established position or rank within the hierarchy of a
business, military unit, government, and so on.
2. Traditional authority: People obey a person because he belongs to certain class or occupies a position
traditionally recognized as possessing authority, such as a real family.
3. Charismatic authority: Obedience is based on the followers belief that a person has some special power or
appeal.
Weber’s theory ‘bureaucracy’ recognizes rational-legal authority as the most important type in organisations. Under
traditional authority, leaders are not chosen for their competence, an charismatic authority is too emotional and
irrational. A bureaucratic organisation which is based on rational-legal authority display the following features:
1. Division of Work: There is a high degree of division of work at both the operative and administrative levels. This
leads to specialization of work.
2. Hierarchy of Positions: There is a hierarchy of authority in the organisation. Each lower position is under the
control of a higher one. Thus, there is unity of command. The bureaucratic structure is hierarchical in nature. It is
like a pyramid in which quantity of authority increases as one moves up the ladder in the organisation.
3. Rules and Regulations: The rules, regulations and procedures are clearly laid down by the top administration.
Their benefits are as under:

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(a) They standardize operations and decisions.

(b) They serve as receptacles of past learning.
(c) They protect incumbents and ensure equality of treatment.
4. Impersonal Conduct: There is impersonality of relationships among the organisational members. The decisions
are entirely guided by rules and regulations and are totally impersonal. There is no room for emotions and
sentiments in this type of structure.
5. Staffing: The personnel are employed by a contractual relationship between the employee and employer. The
tenure of service is governed by the rules and regulations of the organisation. The employees get a salary every
months which is based on the job they handle and also the length of service.
6. Technical Competence: The bureaucrats are neither elected not inherited, but they are appointed through
selection and the basis of selection is their technical competence. Promotions in bureaucracies are also based on
technical qualifications and performance
7. Official Records: The administration of a bureaucratic organisation is supported by an efficient system of
record-keeping. The decisions and activities of the organisation are formally recorded and preserved safely for
future reference This is made possible by extensive filing system. The filing system makes the organisation
independent of individuals. The official records serve as the memory of the organisation.
Criticism of Bureaucracy
It is not free of flaws. It may lead to many undesirable consequences such as:
1. The rules may be followed in letter and not in spirit. Thus, instead of providing guidelines, the rules may become
source of inefficiency. The rules may be misused or misinterpreted by the persons concerned with the
implementation of rules. Red tapism and technicalism may follow as a result.
2. Bureaucracy does not consider informal organisation and inter-personal difficulties.
3. Bureaucracy discourages innovation because every employee is supposed to act as per rules and regulations or to
the secondary goals.
4. Goal displacement may take place in a bureaucratic organisation. The bureaucrats may give priority to rules and
regulations or to the secondary goals.
5. The bureaucratic structure is tall consisting of several layers of executives. Thus, communication from the top
level to the lowest level will take a very long time.

2. NEO-CLASSICAL THEORY
(A)Human Relations Approach:- The human relationists argued that achievement of
organisational objectives is impossible without the willing cooperation of people and such cooperation
cannot be automatically secured or ordered. It has to be consciously achieved. The neo-classical approach
advocated peopleoriented organisation structure which will integrate both informal and formal
organisations. The basic tenets of neo-classical theory or human relations approach are as under:
1. The business organisation is a social system.
2. The behaviour of an individual is dominated by the informal group of which he is a member.
3. An individual employee cannot be motivated by economic incentives alone. His social and
psychological needs must be satisfied to improve the level of motivation.

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4. In an organisation, it is ultimately cooperative attitude and not the more command which yields result.
5. Management must aim at developing social and leadership skills in addition to technical skills. It must
take interest in the welfare of workers.
6. Morale and productivity go hand in hand in an organisation.

Hawthrone Studies
In 1927, a group of researchers led by George Elton Mayo and Fritz J. Roethlisberger at the Harvard
Business School were invited to join in the studies at the Hawthorne Works of Western Electric Company,
Chicago. The experiment lasted upto 1932. Earlier, from 1924 to 1927, the Notes National Research
Council made a study in collaboration with the Western Electric Company to determine the effect of
illumination and other conditions upon workers and their productivity.
1. Illumination Experiment: This experiment was conducted to establish relationship between output and
illumination. The output tended to increase every time as the intensity of light was improved. But the
output again showed an upward trend when the illumination was brought down gradually from the normal
level. Thus, it was found that there is no consistent relationship between output of workers and
illumination in the factory. There were some other factors which influenced the productivity of workers
when the intensity of light was increased or decreased.
2. Relay Assembly Room Experiment: In this experiment, a small homogeneous work-group of girls was
constituted. Several new elements were introduced in the work atmosphere of this group. These included
shorter working hours, rest pauses, improved physical conditions, friendly and informal supervision, free
social interaction among group members, etc. Productivity and morale increased considerably during the
period of the experiment. Morale and productivity were maintained even if improvements in working
conditions were withdrawn. The researches concluded that socio psychological factors such as feeling of
being important, recognition, attention, participation, cohesive workgroup, and non-directive supervision
held the key for higher productivity.
3. Bank Wiring Observation Room Experiment: This experiment was conducted to study a group of
workers under conditions which were as close as possible to normal. This group comprised of 14 workers.
After the experiment, the production records of this group were compared with their earlier production
records. There were no significant changes in the two because of the maintenance of ‘normal conditions’.
However, existence of informal cliques in the group and informal production norms were observed by the
researchers. The Bank Wiring Experiment led to the following observations:
(a) Each individual was restricting output.
(b) The group had its own “unofficial” standards of performance.
(c) Individual output remained fairly constant over a period of time.
(d) Departmental records were distorted due to differences between actual and reported output or between
standard and reported working time

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Contributions of Human Relations Approach or Hawthorne Studies

The human relationists proposed the following points as a result of their findings of the Hawthorne
experiments:
1. Social System: The organisation in general is a social system composed of numerous interacting parts.
The social system defines individual roles and establishes norms that may differ from those of the formal
organisation
2. Social Environment: The social environment on the job affects the workers and is also affected by
them. Management is not the only variable. Social and psychological factors exercise a great influence on
the behaviour of workers. Therefore, every manager should adopt a sound human approach to all
organisational problems.
3. Informal Organisation: The informal organisation does also exist within the frame work of formal
organisation and it affects and is affected by the formal organisation.
4. Group Dynamics: At the workplace, the workers often do not act or react as individuals but as
members of groups. The group determines the norms of behaviour for the group members and thus
exercises a powerful influence on the attitudes and performance of individual workers. The management
should deal with workers as members of work
5. Informal Leader: The informal leader sets and enforces group norms. He helps the workers to function
as a social group and the formal leader is rendered ineffective unless he conforms to the norms of the
group.
6. Communication: Two-way communication is necessary because it carries necessary information
downward for the proper functioning of the organisation and transmits upward the feelings and
sentiments of people who work in the organisation. It will help in securing workers’ cooperation and
participation in the decision-making process. Workers tend to be more productive when they are given the
opportunity to express their feelings, opinions and grievances. This also give them psychological
satisfaction.
7. Non-economic Rewards: Money is only one of the motivators, but not the sole motivator of human
behaviour. The social and psychological needs of the workers are very strong. So non-economic rewards
such as praise, status, interpersonal relations, etc. play an important role in motivating the employees.
Such rewards must be integrated with the wages and fringe benefits of the employees.
8. Conflicts: There may arise conflicts between the organisational goals and group goals. Conflicts will
harm the interest of workers if they are not handled properly. Conflicts can be resolved through
improvement of human relations in the organisation.
Criticism of Human Relations Approach
The human relations approach has been criticized on the following grounds:
1. Lack of Scientific Validity: The human relationists drew conclusions from Hawthorne studies. These
conclusions are based on clinical insight rather than on scientific evidence.

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2. Over-emphasis on Group: The human relations approach over-emphasises the group and group
decision-making.
3. Over-stretching of Human Relations: It is assumed that all organisational problems are amenable to
solutions through human relations.
4. Limited Focus on Work: The human relations approach lacks adequate focus on work.
5. Over-stress on Socio-psychological Factors: The human relations approach undermines the role of
economic incentives in motivation and gives excessive stress on social and psychological factors.
6. Conflict between Organisational and Individual Goals: It view conflict between the goal of the
organisation and those of individuals as destructive.

(B) Behavioural Science Approach:- Under behavioural science approach, the knowledge drawn
from behavioural science, namely, psychology, sociology and anthropology, is applied to explain and
predict human behaviour. It focuses on human behaviour in organisations and seeks to promote verifiable
propositions for scientific understanding of human behaviour in organisations. It lays emphasis on the
study of motivation, leadership, communication, group dynamics, participative management, etc.
The essential characteristics of behavioural science approach are as under:
1. Data must be objectively collected and analyzed.
2. Findings must be presented so that the distinction between cause and effect, as opposed to chance
occurrences, is clear.
3. Facts must be systematically related to one another within a systematic framework. Data collection
alone does not constitute a science.
4. The findings of a study must always be open to further examination and question.

Appraisal of Behavioural Science Approach

1. The study of human behaviour is of great significance in management. Since an individual is a product
of social system, his behaviour is not determined by organisational forces alone, but many forces like
perception, attitudes, habits, and socio-cultural environment also shape his behaviour. Therefore, in
understanding human behaviour in the organisation, all these factors must be taken into account.
2. The behavioural approach suggests how the knowledge of human behaviour can be used in making
people more effective in the organisation.
3. Behaviourists have enriched management theory through their contributions in the areas of group
dynamics, motivation communication and leadership. However, they have failed in developing an
integrated theory of management. Although, study of human behaviour in organisations is extremely
important yet management cannot be confined only to this area.
4. There are other variable such as technology and environment which have an important bearing on the
effectiveness of an organisation.

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5. The behavioural science, refined as they might be, have not achieved the precision of the physical
sciences.
6. Often the complexities of the human factor and the organisational setting make exact predictions
impossible. It is not uncommon for programmes based on sound behavioural principles to have
unexpected results.
7. It should also be noted that the finding of behavioural science research are tentative and require further
investigation. They should not be treated as applicable to all situations.
8. Behavioural guidelines can be helpful and profitable, but are not complete, valid and applicable to all
situations.

(C) Systems Approach:- The systems approach is based on the generalization that an organisation is a
system and its components are inter-related and inter-dependent. “A system is composed of related and
dependent elements which, when in interactions, form a unitary whole. It is simply an assemblage or combination
of things or parts, forming a complex whole. Its important feature is that it is composed of hierarchy of sub-
systems. The world as a whole can be considered to be a systems in which various national economies are sub-
system. In turn, each national economy is composed of its various industries, each industry is composed of firms,
and of course, a firm can be considered a system composed of sub-systems such as production, marketing, finance,
accountingand so on”. Thus, each system may comprise several sub-systems and in turn, each sub-system be
further composed of sub-systems.

An organisation as a system has the following characteristics:

1. A system is goal-oriented.
2. A system consists of several sub-systems which are interdependent and
inter-related.
3. A system is engaged in processing or transformation of inputs into outputs.
4. An organisation is an open and dynamic system. It has continuous interface with the external environment as it
gets inputs from the environment and also supplies its output to the environment. It is sensitive to its environment
such as government policies, competition in the market, technological advancement, tastes of people, etc.

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5. A system has a boundary which separates it from other systems.

Features of Systems Approach
The systems approach is far more superior to classical and neo-classical approach because of the
following features:
1. Interdependent Sub-systems: An organisation is a system consisting of several sub-systems. For example, in a
business enterprise, production, sales and other departments and subsystems. All these sub-systems are functionally
interacting and interdependent. They are used together into an organic whole through goals, authority flows,
resources flows and so on.
2. Whole Organisation: The system approach provides a unified focus to organisational efforts. It gives managers
a way of looking at the organisation as a whole that is greater than the sum of its parts. The stress is laid on
integration of various sub-systems of the organisation to ensure overall effectiveness of the system.
3. Synergy: The output of a system is always more than the combined output of its parts. This is called the law if
synergy. The parts of system become more productive when they interact with each other than when they act in
isolation.
4. Multi-disciplinary: Modern theory of management is enriched by contributions from various disciplines like
psychology, sociology, economics, anthropology, mathematics, operations research and so on.

Appraisal of Systems Approach

The system approach is an attempt to design an overall theory of management. Interdependencyand inter-
relationships between various sub-systems of the organisation is adequately emphasized. A pressure for change in
one sub-system generally has a direct or indirect influence on the other sub-systems also. Thus, the systems
approach acknowledges environmental influences which were ignored by the classical theory.
The systems approach represents a balanced thinking on organisation and management. It stresses that managers
should avoid analyzing problems in isolation and rather develop the ability for integrated thinking. It recognizes the
interaction and interdependence among the different variables of the environment. It provides clues to the to the
complex behaviour of an organisation. It warns against narrow fragmented and piecemeal approach to problems by
stressing inter-relationships. The systems approach is criticized as being too abstract and vague. It cannot easily be
applied to practical problems. It does not offer specific tools and techniques for the practising manager Moreover,
this approach does not recognize differences in systems. It fails to specify the nature of interactions and
interdependencies between an organisation and its external environment.

Concept of Coordination
According to Mooney and Reiley, "Coordination is the orderly arrangement of group efforts to provide unity of
action in the pursuit of a common purpose." According to Henry Fayol, "To coordinate, means to unite and
correlate all activities". According to McFarland, "Coordination is the process whereby an executive develops an
orderly pattern of group efforts among his subordinates and secures unity of action in the pursuit of
common purpose." On the basis of the above stated definitions, we can state the following as the essential elements
of coordination:
1. Coordination implies deliberate efforts to bring fulfillment of goal.

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2. Coordination applies to the synchronised arrangement of the productivity of a group and not any
individual.
3. Coordination is needed only when there is an involvement of a group over a task. It would not be required
if an individual were to work in isolation.
4. Coordination is a continuous effort which begins with the very first action, the process of establishment of
business and runs through until its closure.
5. Coordination is necessary for all managerial functions. In organising work, managers must see that no
activity remains unassigned. In staffing, managers must ensure the availability of competent people to
handle assigned duties. In directing organisational activities, managers must synchronise the efforts of
subordinates and motivate them through adequate rewards. In controlling organisational activities,
managers must see that activities are on the right path, doing right things, at the right time and in the right
manner. Thus, coordination transcends all managerial functions.
Principles of Coordination
Mary Parker Follet has brought forth various principles of coordination in the following fashion:
1. Principle of direct contact: In the first principle, Mary Parker Follet states that coordination can be achieved by
direct contact among the responsible people concerned. She believes, that coordination can be easily obtained by
direct interpersonal relationships and direct personal communications.
2. Early stage: Coordination should start from the very beginning of planning process. At the time of policy
formulation and objective setting, coordination can be sought from organisational participants. Obviously, when
members are involved in goal-setting, coordination problem is ninety percent solved.
3. Reciprocal relationship: As the third principle, Mary Follet states, that all factors in a situation are reciprocally
related. In other words, all the parts influence and are influenced by other parts.
4. Principle of continuity: The fourth principle, advocated by Follet, is that coordination is a continuous and never-
ending process. It is something which must go on all the times in the organisation. Further, coordination is involved
in every managerial function.
5. Principle of self-coordination: In addition to the four principles listed by Follet above, Brown has emphasised
the principle of self-coordination. According to this principle, when a particular department affects other function
or department, it is in turn, affected by the other department or function. This particular department may not be
having control over the other departments

Coordination Process
Coordination cannot be achieved by force or imposed by authority. Achieving coordination through executive
orders is a futile exercise. It can be achieved through person-to-person, sideby- side relationships. Achieving
effective coordination is a sequential process. It is possible only when the following conditions are fulfilled.
1. Clearly defined and understood objectives: Every individual and each department must understand what is
expected of them by the organisation. Top management must clearly state the objectives for the enterprise, as a
whole. As pointed out by Terry, "there must be commonness of purpose, in order to unify efforts". The various
plans formulated in the enterprise must be interrelated and designed to fit together.

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2. Proper division of work: The total work must be divided and assigned to individuals in a proper way. Here, it is
worth noting the principle, 'a place for everything and everything in its place'.
3. Good organisation structure: The various departments in the organisation must be grouped in such a way that
work moves smoothly from one phase to another. Too much specialisation may complicate the coordination work.
4. Clear lines of authority: Authority must be delegated in a clear way. The individual must know, what is
expected of him by his superior(s). Once authority is accepted, the subordinate must be made accountable for
results, in his work area. There should be no room for overlapping of authority and wastage of effort(s).
5. Regular and timely communication: Personal contact is generally considered to be the most effective means of
communication for achieving coordination. Other means ofcommunication such as records, reports, may also be
used in order to supply timely and accurate information to various groups in an organisation. As far as possible,
common nomenclature may be used so that individuals communicate in the 'same language'.
6. Sound leadership: According to McFarland, real coordination can be achieved only through effective leadership.
Top management, to this end, must be able to provide (i) a conducive work environment, (ii) proper allocation of
work, (iii) incentives for good work, etc. It must persuade subordinates, to have identity of interests and to adopt a
common outlook.

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