NOTES OF BUSINESS STUDIES CBSE CLASS XII
2. Principles of Management
SummaryMeaning of Principles of ManagementThe practice of management requires the knowledge of certain guidelines which provide the basis for managerial decision-making and action. These guidelines are known as principles of management.
Nature of Principles of Management
• The principles of management are universal in nature as they are used by managers within organisations of varying size and types.
• They are flexible in nature as they are applied in different situations with modifications.
• They help to bring about desired change in the employees in terms of change in their outlook, efficiency and attitude, necessary to achieve the organizational goals.
• The principles of management determine the cause-and-effect relationships between different factors and thus help managers to foresee the consequences of their actions and decisions.
• The principles of management are evolved on the basis of personal observation and experiences of the experts.
• The scope of application of principles of management may sometimes be limited due to human, physical or structural constraints.
• The principles of management have to be relatively applied in the light of given conditions. Need and Importance of Principles of Management
• The principles of management help to make the managers aware of the various aspects of management. This helps them to deal with the actual situations in a better way.
• They are useful in training old and new managers, as the existence of some theoretical knowledge is necessary to impart education in any field.
• The principles of management facilitate sound administration by clearly indicating the role and responsibilities of managers.
• They serve as a guide to research in management by indicating the areas in which research should be undertaken to make the practice of management more useful.
• The principles of management also lead to optimum utilisation of resources through effective management. Fayol’s Principles of Management
• The principle of division of work suggests that both the operative and managerial work should be sub divided and allocated to a number of persons in an organisation. Division of labour facilitates specialization and efficiency.
• The principle of authority and responsibility suggests that there should be a balance between authority given and responsibility entrusted to a subordinate for doing a particular job.
• The principle of discipline states that both managers and workers should abide by the rules and regulations of the organisation and observe proper code of conduct towards each other and among themselves.
• The principle of unity of command states that in order to avoid conflicts and confusions at the workplace a subordinate should receive orders and be accountable to one and only one superior.
• The principle of unity of direction states that for a group of activities with similar objectives there should be only one plan and one head.
• The principle of subordination of individual interest to general interest states that if the need be the interest of the organisation should be considered and given priority before individual interest.
• The principle of fair remuneration to personnel states that fair and reasonable wages should be paid to workers. Provisions for special allowance should also be made to compensate them regularly for increasing cost of living.
• The principle of centralization and decentralization states that the top-level management is generally centralized and the middle-and lower-level managements may be decentralized.
• The principle of scalar chain suggests that the flow of authority and communication process within an organisation should be regulated by a well-defined chain of command and communication which binds together all people in the organisation from highest to lowest levels.
• The principle of order states that both material order (function of place from availability of materials) and social order (allotment of specific place to each individual in an organisation) should be maintained for smooth functioning of an organisation.
• The principle of equity states that the people at the same level in an organisation should be treated equally.
• The principles of management are universal in nature as they are used by managers within organisations of varying size and types.
• They are flexible in nature as they are applied in different situations with modifications.
• They help to bring about desired change in the employees in terms of change in their outlook, efficiency and attitude, necessary to achieve the organizational goals.
• The principles of management determine the cause-and-effect relationships between different factors and thus help managers to foresee the consequences of their actions and decisions.
• The principles of management are evolved on the basis of personal observation and experiences of the experts.
• The scope of application of principles of management may sometimes be limited due to human, physical or structural constraints.
• The principles of management have to be relatively applied in the light of given conditions. Need and Importance of Principles of Management
• The principles of management help to make the managers aware of the various aspects of management. This helps them to deal with the actual situations in a better way.
• They are useful in training old and new managers, as the existence of some theoretical knowledge is necessary to impart education in any field.
• The principles of management facilitate sound administration by clearly indicating the role and responsibilities of managers.
• They serve as a guide to research in management by indicating the areas in which research should be undertaken to make the practice of management more useful.
• The principles of management also lead to optimum utilisation of resources through effective management. Fayol’s Principles of Management
• The principle of division of work suggests that both the operative and managerial work should be sub divided and allocated to a number of persons in an organisation. Division of labour facilitates specialization and efficiency.
• The principle of authority and responsibility suggests that there should be a balance between authority given and responsibility entrusted to a subordinate for doing a particular job.
• The principle of discipline states that both managers and workers should abide by the rules and regulations of the organisation and observe proper code of conduct towards each other and among themselves.
• The principle of unity of command states that in order to avoid conflicts and confusions at the workplace a subordinate should receive orders and be accountable to one and only one superior.
• The principle of unity of direction states that for a group of activities with similar objectives there should be only one plan and one head.
• The principle of subordination of individual interest to general interest states that if the need be the interest of the organisation should be considered and given priority before individual interest.
• The principle of fair remuneration to personnel states that fair and reasonable wages should be paid to workers. Provisions for special allowance should also be made to compensate them regularly for increasing cost of living.
• The principle of centralization and decentralization states that the top-level management is generally centralized and the middle-and lower-level managements may be decentralized.
• The principle of scalar chain suggests that the flow of authority and communication process within an organisation should be regulated by a well-defined chain of command and communication which binds together all people in the organisation from highest to lowest levels.
• The principle of order states that both material order (function of place from availability of materials) and social order (allotment of specific place to each individual in an organisation) should be maintained for smooth functioning of an organisation.
• The principle of equity states that the people at the same level in an organisation should be treated equally.
• The principle of stability of tenure of personnel suggests that an employee should not be moved too frequently from one job to another as it takes considerable time to become familiar with the work.
• The principle of initiative states that employees in the organisation should be encouraged to take initiative in their work-related methods, as increased involvement motivates them towards higher efficiency.
• The principle of espirit de corps states that efforts should be made by managers to inculcate the feeling of togetherness and mutual understanding among employees.This will help to develop a healthy work environment.
Meaning of Scientific ManagementThe concept of scientific management was introduced by F W Taylor. He advocated that the process of management should have a scientific approach, i.e., the various elements of a task should be scientifically studied in terms of time, motion and fatigue study. The workers should also be selected and trained in a scientific manner. Moreover, the workers should be subject to multiple accountability to increase supervision on them. The method of scientific management was introduced primarily for the workers at operative level/industrial workers.
Principles of Scientific Management
• The principle of science, not rule of thumb, emphasises the use of scientific approach rather than trial and error method for managerial decision-making and action.
• The principle of harmony, not discord, suggests that workers and management should work in harmony and coordination with one another.
• The principle of cooperation, not individualism, advocates that workers should cooperate with one another and work towards the attainment of common goals, i.e., higher productivity.
• The principle of maximum, not restricted, output suggests that both workers and managers should work with utmost efficiency to reach optimum level of output. The principle of separation of planning and operational work indicates that in an organisation the planning function and operational functions should be performed by two different groups of people.
• The principle of maximum prosperity for employees and employesstresses the need for giving due consideration to the prosperity of the employees besides the increasing profits for the employers.
• The principle of development of a science for each element of a man’s work suggests that application of various techniques of scientific management will enable workers to increase their productivity by eliminating the possible wastage of time, effort and resources.
• The principle of scientific selection, training and development of workmen emphasises the need to match the requirements of a job with the skill and competence of worker through scientific procedure of selection and training.
• The principle of close cooperation between workers and management suggests that since both workers and management share a common interest, i.e., higher wages and higher returns through higher productivity, they should work in close cooperation with one another.
• The principle of division of responsibility between management and worker states that the responsibility of planning should be reserved with the managers and workers should be made responsible for execution of plans.
• The principle of science, not rule of thumb, emphasises the use of scientific approach rather than trial and error method for managerial decision-making and action.
• The principle of harmony, not discord, suggests that workers and management should work in harmony and coordination with one another.
• The principle of cooperation, not individualism, advocates that workers should cooperate with one another and work towards the attainment of common goals, i.e., higher productivity.
• The principle of maximum, not restricted, output suggests that both workers and managers should work with utmost efficiency to reach optimum level of output. The principle of separation of planning and operational work indicates that in an organisation the planning function and operational functions should be performed by two different groups of people.
• The principle of maximum prosperity for employees and employesstresses the need for giving due consideration to the prosperity of the employees besides the increasing profits for the employers.
• The principle of development of a science for each element of a man’s work suggests that application of various techniques of scientific management will enable workers to increase their productivity by eliminating the possible wastage of time, effort and resources.
• The principle of scientific selection, training and development of workmen emphasises the need to match the requirements of a job with the skill and competence of worker through scientific procedure of selection and training.
• The principle of close cooperation between workers and management suggests that since both workers and management share a common interest, i.e., higher wages and higher returns through higher productivity, they should work in close cooperation with one another.
• The principle of division of responsibility between management and worker states that the responsibility of planning should be reserved with the managers and workers should be made responsible for execution of plans.
Techniques of Scientific Management
• The technique of functional foremanship is based on the concept of multiple accountability to increase supervision of workers for higher efficiency. Under this technique each worker is supervised by eight bosses. Also planning function is segregated from operational functions.
• Standardization of work relates to strict adherence to input standards in terms of working conditions, raw material, tools and equipment and output standards in terms of size, quality, variety, etc., for adopting scientific management in practice.
• Simplification refers to the process of cutting down the number,variety,design and quality-related specifications of output to cut down superfluous expenditure on time, effort and machines for producing output with varying features and utility.
• Fatigue study relates to determining the amount and frequency of rest required by workers in between work in order to resume work with full potential towards completion of a task.
• Method study is concerned with determining the best procedure for doing a particular job, to ensure optimum efficiency and control unnecessary wastage of resources.
• Time study is the process of studying the time required by a worker of average skill and ability to perform the various elements of a job and to fix a suitable wage rate for it.
• The technique of functional foremanship is based on the concept of multiple accountability to increase supervision of workers for higher efficiency. Under this technique each worker is supervised by eight bosses. Also planning function is segregated from operational functions.
• Standardization of work relates to strict adherence to input standards in terms of working conditions, raw material, tools and equipment and output standards in terms of size, quality, variety, etc., for adopting scientific management in practice.
• Simplification refers to the process of cutting down the number,variety,design and quality-related specifications of output to cut down superfluous expenditure on time, effort and machines for producing output with varying features and utility.
• Fatigue study relates to determining the amount and frequency of rest required by workers in between work in order to resume work with full potential towards completion of a task.
• Method study is concerned with determining the best procedure for doing a particular job, to ensure optimum efficiency and control unnecessary wastage of resources.
• Time study is the process of studying the time required by a worker of average skill and ability to perform the various elements of a job and to fix a suitable wage rate for it.
• Motion study is a technique which involves close observation and analysis of the movements of workers and machines while doing a job in order to eliminate unnecessary movements and derive the best way of doing a job.
• The technique of mental revolution suggests that a complete change in the outlook of workers and managers with respect to each other and their work is necessary for increasing efficiency and productivity. Instead of fighting for the division of profits they should act as a support mechanism for one another.
• Differential piece rate’ method is an incentive bonus plan under which the wages of efficient and inefficient workers are differentiated on the basis of their output for similar work.
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