Unit i principles of management

Management & Entrepreneurship

(Course Code:10AL51)

Department of IE & M

JSS Academy of Technical Education, Bengaluru-560060

TEXT BOOKS:

1. Principles of Management – P.C.Tripathi, P.N.Reddy – Tata McGraw Hill.

2. Dynamics of Entrepreneurial Development & Management – Vasant Desai – Himalaya Publishing House.

3. Entrepreneurship Development – Poornima.M.Charantimath – Small Business Enterprises – Pearson Education – 2006.

4. Management & Enterpreneruship -N V R Naidu, IK Internatioal, 2008

REFERENCE BOOKS:

1. Management Fundamentals – Concepts, Application, Skill Development – Robers Lusier – Thomson.

2. Entrepreneurship Development – S.S.Khanka – S.Chand & Co.

3. Management – Stephen Robbins – Pearson Education/PHI – 17 Edition, 2003.

COURSE OUTCOMES

CO# Course Outcomes

CO1 Explain the importance of management and its approaches.

CO2 Explain the roles and responsibilities of staff towards organization.

CO3 Outline the quality and characteristics of an entrepreneur.

CO4 Explain the importance of Small scale industries in economic development.

CO5 Design, plan and prepare project proposals and reports.

At the end of this course, students will be able to,

Principles of Management

CHAPTER 1: Definition ,Principles and Basics of Management

• Introduction – Meaning – nature and characteristics of Management.

• Scope and Functional areas of management.

• Management as a science, art of profession.

• Management & Administration – Roles of Management.

• Levels of Management.

• Development of Management Thought – early management approaches.

• Modern management approaches.

Course outline

Definition

Management is the process of achieving goals and

objectives effectively and efficiently through and with the

people.

Management Defined

"Management is a process of designing and maintaining

an environment in which individuals work together in

groups to effectively and efficiently accomplish selected

aims".

1

2

Management Defined Cont’d

Management is the process of achieving organizational goals and

objectives effectively and efficiently by using management functions

i.e. (Five Essential Functions)

– Planning

– Organizing

– Staffing

– Directing (Leading)

– Controlling (POSDC)

3

Management is a set of activities directed at an organization's

resources with the aim of achieving organizational goals in an

efficient and effective manner.

4

Planning

Organising

StaffingDirecting

Controlling

Management Cycle

Functions of management

Planning1Planning is the process of setting goals, and charting the best way of action for achieving the

goals.

Organizing2Organizing is the process of allocating and arranging work, authority and resources, to the

members of the organization so that they can successfully execute the plans.

Staffing3Staffing is the process of recruiting /selecting the right person for the right job at the right time in

the right place.

Leading/Directing4 Leading involves directing, influencing and motivating employees to perform essential tasks.

Controlling5Controlling is the process of devising various checks to ensure that planned performance is

actually achieved. It involves ensuring that actual activities conform to the planned activities.

These definitions when expanded have these implications:

• Management is thus a continuous effort aimed at shaping an organization and

contributing to its overall growth.

• The functions of managers include planning, organizing, staffing, leading and

controlling.

• These functions are essential to any kind of organization.

• It applies to managers at all hierarchical levels.

• The aim of managers is to increase productivity, effectiveness and efficiency.

Elements of definition

• Process - represents ongoing functions or primary activities engaged in by managers.

• Efficiency - getting the most output from the least amount of inputs.

• “doing things right”.

• concerned with means.

• Achieving the objectives in time.

• Effectiveness - completing activities so that organizational goals are attained

• “doing the right things” .

• concerned with ends.

• Achieving the objectives on time.

Efficiency and Effectiveness

Management: Science or Art?

• Science is a collection of systematic knowledge, collection of truths and

inferences after continuous study and experiments. It has fundamental

principles discovered.

• Art uses the known rules and principles and uses the skill, expertise, wisdom,

experience to achieve the desired result.

Management is both Art and Science.

Management has got scientific principles which constitute the elements of Science.

Skills and talent which are attributes of Art.

Principles of Management

Fayol’s Principles of Management

Henri Fayol (1841-1925)

He has proposed that, there are six primary functions of

management and 14 principles of management, Forecasting,

Planning, Organizing, Commanding, Coordinating, Controlling.

(FPOCCC)

• There are 14 Principles of Management described by Henri Fayol.

1. Division of Labor

• Work of all kinds must be divided & subdivided and allotted to

various persons according to their expertise in a particular area.

2. Authority & Responsibility

• Authority refers to the right of superiors to get exactness

from their sub-ordinates.

• Responsibility means obligation for the performance of the

job assigned.

Note that responsibility arises wherever authority is exercised

14 Principles of Henri Fayol

3. Unity of Command

• A sub-ordinate should receive orders and be accountable to one and only

one boss at a time.

• He should not receive instructions from more than one person

4. Unity of Direction

• People engaged in the same kind of business or same kind of activities must

have the same objectives in a single plan.

• Without unity of direction, unity of action cannot be achieved.



5. Equity

• Equity means combination of fairness, kindness & justice.

• The employees should be treated with kindness & equity if devotion is

expected of them.

6. Order

• This principle is concerned with proper & systematic arrangement of things

and people.

• Arrangement of things is called material order and placement of people is

called social order.

7. Discipline

• Discipline means sincerity, obedience, respect of authority & observance of

rules and regulations of the enterprise.

• Subordinate should respect their superiors and obey their order.

8. Initiative

• Initiative means eagerness to initiate actions without being asked to do so.

• Management should provide opportunity to its employees to suggest ideas,

experiences & new method of work.



9. Remuneration

• Remuneration to be paid to the workers should be fair, reasonable,

satisfactory & rewarding of the efforts.

• It should accord satisfaction to both employer and the employees.

• Employees should not be moved frequently from one job position to another

i.e. the period of service in a job should be fixed.

10. Stability of Tenure

14 Principles of Henri Fayol11. Scalar Chain

• Scalar chain is the chain of superiors ranging from the ultimate authority to the

lowest.

• Communications should follow this chain. However, if following the chain

creates delays, cross-communications can be allowed if agreed to by all

parties and superiors are kept informed.

12. Sub-ordination of Individual Interest to common goal

• An organization is much bigger than the individual.

• The interests of any one employee or group of employees should not take

precedence over the interests of the organization as a whole.


13. Espirit De’ Corps

• It refers to team spirit i.e. harmony in the work groups and mutual

understanding among the members.

Espirit De’ Corps inspires workers to work harder.

14. Centralization

• Centralization refers to the degree to which subordinates are involved in

decision making.

• Whether decision making is centralized (to management) or decentralized (to

subordinates) is a question of proper proportion.

The task is to find the optimum degree of centralization for each situation.

Theory X

• Average worker is lazy

• Dislikes work

• Will try to do as little as possible

• Have little ambition and avoid

responsibility

Theory Y

• Workers are not inherently lazy

• Do not naturally dislike work

• If given the opportunity, will do what is

good for the organization.

Theory X and Y Douglas McGregor

Scope & Characteristics of Management

Scope of Management

The management is a must for every organization.

• The existence of management ensures proper function and running of an enterprise.

• Management plans the activities, coordinates and utilizes the available resources

effectively and efficiently at minimum cost.

It should be stable.

It should be applicable to all kinds of organization.

It should be transparent.

Its approaches are to be clear and objective oriented.

It should be simple yet effective.

Characteristics of Management

Basics of Management

Organization

Organizations are groups of people, with ideas and resources, working toward

common goals.OR

A systematic arrangement of people brought together to accomplish some

specific purpose is called organization.

People

DeliberateStructureDistinct Purpose

Characteristics of Organization

Manager

• A manager is someone whose primary responsibility is to

carry out the management process within an organization to

achieve the organizational goals.

Managerial Skills

Primary Skills• Conceptual Skill

• Technical Skill

• Human Skill

Secondary Skills• Design Skill

• Communication Skill

• Leadership Skill

Managerial skills

Managerial skills

• Communication skills

• Team skills

• Diversity skills

• Power, political, negotiation, and networking skills

• Motivation skills

• Conflict management skills

• Ethics skills

Familiarity and competence in the use of business skills required for success on the job.

• Conceptual skills

• Diagnostic, analytical, and critical-thinking skills

• Quantitative reasoning skills

• Time management skills

Managerial skills Cont’d

Conceptual skills

Human / interpersonal

skills

• Ability to think and conceptualize abstract situations.

• Mental capacity to develop plans, strategies and vision.

• Ability to understand other people and interact effectively with them.

• Ability to work with other people in teams.

Technical skills

• Ability to use the knowledge or techniques of a particular

discipline to attain ends.


Design skills• These skills enable a manager to handle and solve any kind of unforeseen or

actual problems, that may crop up in the organization.

• Problem solving skill.

Communication skills

• Ability of exchanging ideas and information effectively.

• To understand others and let others understand comprehensively.


Leadership skills • Ability to influence other people to achieve the common goal.

Skill distribution at various management levels

Roles of manager Role: a set of expectation for one’s behavior.

• In 1960, Henry Mintzberg conducted a study to understand about the managerial roles. • He identified 10 managerial roles that are common to all managers. • These 10 managerial roles are grouped under: Interpersonal, decisional, and informational roles.

Roles of Manager

Interpersonal • Figurehead• Leader• Liaison

Informational• Monitor• Disseminator• Spokesperson

Decisional• Entrepreneur• Disturbance handler• Resource allocator• Negotiator

Management Skills, Functions, and Roles

Roles of manager Cont’d

FigureheadRole: Represents the company on social occasions. E.g. Attending the flag hosting ceremony, receiving visitors or taking visitors for dinner etc.

Inter-personal Role

Leader Role: The manager motivates, encourages, and builds enthusiasm among the employees. Training subordinates to work under pressure.

Liaison• Relating to others outside the group or organization.• Serves as a link between people, groups or organizationE.g. Negotiation of prices with the suppliers regarding raw materials.


Entrepreneur • Act as an initiator and designer and encourage changes and innovation, identify new ideas, delegate idea and responsibility to others.

Decision Role

Disturbance handler

• Take corrective action during disputes or crises; resolves conflicts among subordinates; adapt to environmental crisis.

Resource allocator

• Decides distribution of resources among various individuals and groups in the organization.

Negotiator• Negotiates with subordinates, groups or organizations- both internal and

external.E.g. Represents department during negotiation of union contracts, sales, purchases, budgets; represent departmental interests.


Monitor • Emerges as nerve center of internal and external information about Information.

Informational Role

Disseminator • Transmits information received from other employees to members of the organization.

Spokesperson

• Transmits information to the people who are external to the organization, i.e., government, media etc.

E.g., manager addresses a press conference announcing a new product launch or other major deal.

Levels of Management

First-Line ManagementForeman, Supervisors, Office Managers

Middle ManagementPlant Managers, Division Managers,

Department Managers

TopManagement

President, CEO,Executive

Vice Presidents

Non- Managerial Employees

Top Level

• Sets the Vision, mission and goals, develop policies.

• Evaluates the overall performance of various departments.

• Responsible for the business as a whole and is concerned mainly with long-term planning.

Levels of Management

Middle Level• Develops departmental goals.

• Executes the policies, plans and strategies determined by top level management.

• Develops medium- term plans and supervises and coordinates lower-level managers’ activities.

Lower Level• Takes charge of day-to-day operations.

• Involved in preparing detailed short-range plans.

• executes plans of middle management.

Skills/Functions performed at the different Management levels

Importance of management functions to managers in each level

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TopManagers

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LeastImportant

MostImportant

Management & Administration

• Administration involves “thinking”, it is a top level function.

• Management involves “doing” and is a lower level function.

Management & Administration

Characteristics Administration ManagementMain Function Planning ,Organising and staffing Leading & Controlling

Status Act as owner Act as an agency

Skills Good Administrative skills More technical skills

Level in the organization Top level Middle/Lower level

Position MD, Owner, CEO Manager , Supervisor, foremen etc…

Objective Makes the polices & objective to be achieved

Implements the plans and policies

Involvement No direct involvement in production or service

Directly involves in the execution of plans and achieving objectives

Evolution of Management

Major Approaches to Management

Historical Background

The Egyptian pyramids and the Great Wall of China are proof that projects of tremendous scope, employing tens of thousands of people, were completed in ancient times. It took more than 100,000 workers some 20 years to construct a single pyramid. Who told each worker what to do? The answer is managers.

In 1776, Adam Smith published The Wealth of Nations, in which he argued the economic advantages that organizations and society would gain from the division of labor (or job specialization)—that is, breaking down jobs into narrow and repetitive tasks. Using the pin industry as an example, Smith claimed that 10 individuals, each doing a specialized task, could produce about 48,000 pinsa day among them.

Late 18 century when machine power was substituted for human power, a point in history known as the industrial revolution, it became more economical to manufacture goods in factories. Large efficient factories needed someone to forecast demand, ensure that enough material was on hand to make products, assign tasks to people, direct daily activities, and so forth. That “someone” was a manager.

Classical Approaches

• The first studies of management, often called the classical approach.

• Based on the belief that employees have only economical and physical needs.

• Social needs and need for job satisfaction does not exists/unimportant.

• Mainly concerned with increasing efficiency of workers.

• Classical approach includes scientific, administrative & bureaucratic management.

Scientific Management Focuses on the ‘One Best Way” to do a job.

Administrative Management Focuses on the Manager & Basic Managerial Functions.

BureaucraticManagement Focuses on how to structure the organization better.

Scientific Management Theories

Classical Approach

General Administrative Theories

F.W. Taylor

Frank & Lillian Gilbreth

Henry Gantt

Henri Fayol

Max Weber

Scientific Management

Frederick Winslow Taylor (Contribution to Modern Management Theory-1911)

Frederick Winslow Taylor(1856-1915)

1911- Frederick Winslow Taylor’s “Principles of Scientific

Management” was published.

Its contents were widely embraced by managers around the world.

Taylor’s book described the theory of scientific management:

Use of scientific methods to define the “one best way” for a job to be done.

Background

• Frederick Winslow Taylor (20 march 1856 - 21 March 1915) known as F.W.

Taylor, was an American Mechanical Engineer.

• He sought to improve Industrial Efficiency.

• He is regarded as the father of Scientific Management, and was one of the

first Management consultants.

• Published principles of scientific management in 1911.



Frederick W. Taylor’s - Pig-Iron Experiment

Bethlehem Steel Company Shop Floor

Pig-Iron Experiment

Bethlehem Experiments – Pig-Iron Handling

• Taylor was hired by the Bethlehem Steel Company to increase the output of one of the larger

machine shops which had been a serious production bottleneck.

• In this experiment, workers used to loaded “pigs” of iron (each weighing 12.5 tons)

onto rail cars.

• Their daily average output was 12.5 tons.

• Taylor believed that by scientifically analyzing the job to determine the “one best

way” to load pig iron.

• Taylor went down to the yard, offered a few of the best workers double wage for the day if they

would participate in his experiment.

• Excited about the money, the workers loaded a whopping 16.5 tons in 45 minutes.

• He had to adjust for rest and breaks, so he made a 40% cut.

• Each worker should load 47.5 tons of pig iron per day with extra pay for reaching the goal and

penalties for failing.

• Unfortunately, the workers were not excited about needing to work 4x harder.

• To prove it was possible, Taylor hired a new man with a 60% rise in wages. After an intense

day, the new man loaded 45.75 tons, almost hitting the quota.

• Taylor decided he had succeeded.

Pig-Iron Experiment

The Story

Pig-Iron Experiment

The main things Taylor noticed for inefficiency;

1. The lack of standard tools or techniques.

2. There is no match between skill and job.

3. No motivation from the management.


1. Taking breaks key to productivity.

Periodic rests enabled a worker to produce more than continuous work.

By a systematic resting time and improved methods average productivity was raised from 12.5

tons to 47.5 tons per day.

2. Workers should be selected according to job fit.

By putting the right person on the job with the correct tools and equipment, having

the worker follow his instructions exactly, and motivating the worker with an

economic incentive.

Outcome of Pig-Iron Experiment

Taylor’s 4 principles of Scientific Management


1. Develop a science for each element of an individual’s work to replace

the old rule-of thumb method.

2. Scientifically select, then train and develop the worker.

3. Heartily cooperate with the workers so as to ensure that all work is

done in accordance with the principles of the science that has been

developed.

4. Divide work and responsibility almost equally between management

and workers.


Frank B Gilbreth & Lillian M Gilbreth

Frank B Gilbreth

• Refused a place in MIT to work as a laborer.

• His first job was apprentice brick layer.

• He was able to lay 2700 bricks/day compared to others who

were laying an average of 1000 bricks/day.

• Motions to lay a brick reduced to 4 from 18. Frank B Gilbreth

(1868-1924)

Gilbreth’s new methods, bricks are arranged to be grabbed easily.

Typical construction site in Boston before Gilbreth’s New method.

Building constructed by Frank at MIT in record time.



• Followers of Taylor

• Frank B Gilbreth (1868-1924) pioneered Time & Motion study.

• His work had great impact on medical surgery, by drastically reducing the

time patients spent on operating table.

• He invented a device – “Micro Chronometer” in order to record workers

movement and the amount of time spent on job.

• He performed experiments that focused on specific motions such as

“Bricklaying experiment”, resulted in a dramatic decrease in the number of

motions required to lay bricks.

• On the basis of their study and experiments he gave shape to 17 principles

known as “THERBLIG”

THERBLIG / 17 principles

• Therbligs are 18 kinds of

elemental motions used in the

study of motion economy in the

workplace.

• A basic motion element is one

of a set of fundamental motions

required for a worker to perform

a manual operation or task

https://en.wiktionary.org/wiki/Workplace



Henri Fayol

Max Weber

General Administrative Theories (Henry Fayol)

Henry Fayol(1841-1925)

• Father of Modern operational management theory.

• French Mining Engineer & Management Theorist.

• Started as an Engineer at a mining company and became Director in 1888.

• Viewed management as profession that can be trained and developed.

• First one to analyze the functions of management.

• Developed 14 principles of management—fundamental rules of management

that could be applied to all organizational situations.

Three major contributions to the theory of management

1. A clear distinction between Technical & Managerial skills.

2. Identified functions constituting the management process (FPOCCC).

3. Developed 14 principles of management.

General Administrative Theories (Henry Fayol)

Henry Fayol(1841-1925)

General Administrative Theories (Max Weber)

• German Theorist and Sociologist

• Follower of General Administrative Theory proposed by Henry Fayol.

• Introduced most of the concepts on bureaucratic organization.

• Weber envisioned organization would be managed on an Impersonal and

Rational basis. This form of organization is known as Bureaucracy.

Max Weber(1864-1920)

Characteristics of Weber's Bureaucracy

Characteristics of Weber's Bureaucracy

Behavioral Approach

Early OB Advocates

Behavioral Approach

Hawthorne Studies

OB

• The field of study that researches the actions (behaviour) of people at work is

called organizational behaviour (OB).

• Much of what managers do today when managing people—

Motivating, leading, building trust, working with a team, managing conflict,

and so forth—outcome of OB research.

Early OB Advocates

• People were the most important asset of the organization and should be managed accordingly.

• It provides the foundation for management practices, like employee selection procedures, motivation programs, and work-teams.

Early OB Advocates

Early OB Advocates

Hawthorne Studies/Experiment

Elton Mayo (left) with Fritz J Roethlisberger

• George Elton Mayo, born December 26, 1880, in Australia.

• In 1926, Mayo became the professor of industrial research at

Harvard University where he met Fritz Roethlisberger.

• Received scholarship to do research at the University of

Pennsylvania’s Wharton school.

• During his time in Pennsylvania, he conducted the experiment

which made him famous, the Hawthorne Experiment.

George Elton Mayo

Hawthorne Studies / Experiment

I. Part I - Illumination Experiments (1924-27)

II. Part II - Relay Assembly Test Room Study (1927-1929)

III. Part III - Mass Interviewing Programme (1928-1930)

IV. Part IV - Bank Wiring Observation Room Experiment (1932)

Hawthorne Studies / Experiment

The Hawthorne experiment consists of four parts

Western Electric Company

Illumination Experiment (1924-1927)

• Funded by General Electric.

• Purpose of the study: To Study The Effect Of Various Lighting Conditions

on The Workers Productivity.

• Divided the workers into two Groups.

• Hypothesis: with higher illumination, productivity would increase.

• Group -1 :- Lighting Condition Improved And The Productivity Went

Up.

• Group-2 :- Lighting Condition Remained Constant And The Productivity

Increased.

• Measured Light Intensity vs. Worker Output.

Illumination Experiment

Result :

– Rejected the hypothesis.

– Higher worker productivity and satisfaction at all light levels.

– Worker productivity was stopped with the light levels reached moonlight intensity.

Conclusions:

– Light intensity has no conclusive effect on output.

– Productivity has a psychological component.

Concept of “Hawthorne Effect” was created.

Relay Assembly Test Room Study (1927-1929)

• Under these test two small groups of six female telephone relay

assemblers were selected. • Each group was kept in separate rooms.

• From time to time, changes were made in working hours, rest

periods, lunch breaks, etc.

• They were allowed to choose their own rest periods and to give

suggestions. • Output increased in both the control rooms.

• It was concluded that, social relationship among workers,

participation in decision-making, etc. had a greater effect on

productivity than working conditions.

Women in the relay test assembly room

http://kalyan-city.blogspot.com/2010/06/decision-making-process-in-management.html

Mass Interviewing Programme (1928-1930)

• Conducted 20,000 interviews.

• Objective was to explore information, which could be used to

improve supervisory training.

• Initially used the method of Direct Questioning and changed to Non

Directive.Results:

Merely giving an opportunity to talk and express grievances would

increase the morale.

Complaints were symptoms of deep-rooted disturbances.

Workers are governed by experience obtained from both inside and

outside the company.

Bank Wiring Observation Room Experiment (1932)

• A group of 14 male workers (9 Wiremen, 3 Soldermen, 2 inspector) in

the bank wiring room were placed under observation for six months.

• A worker's pay depended on the performance of the group as a whole.

• The researchers thought that the efficient workers would put pressure

on the less efficient workers to complete the work.

• However, it was found that the group established its own standards of

output, and social pressure was used to achieve the standards of output.

• The informal relations among workers influence the workers behavior and performance.

• Employees will perform better if they are allowed to participate in decision-making.

• Employees will also work more efficiently, when they believe that the management is interested in

their welfare.

• When employees are treated with respect and dignity, their performance will improve.

• Financial incentives alone cannot increase the performance. Social and Psychological needs must

also be satisfied in order to increase productivity.

• Good communication between the superiors and subordinates can improve the relations and the

productivity of the subordinates.

• Special attention and freedom to express their views will improve the performance of the workers.

CONCLUSIONS OF HAWTHORNE STUDIES / EXPERIMENTS

Quantitative Approach

– Used quantitative techniques to improve decision- making.

– Evolved from mathematical and statistical solutions developed for military

problems during World War II.

– W. Edwards Deming and Joseph M. Duran’s ideas became the basis for total

quality management (TQM).

System Approach

Contemporary Approach

Contingency Approach

Contemporary Approach

The Systems Approach Defines a system as a set of interrelated and interdependent parts

arranged in a manner that produces a unified whole.

• Open system: A system that dynamically interacts with its environment. • Closed system : A system that is not influenced by and does not interact with its environment.

• Stakeholders: Any group that is affected by organizational decisions and policies.

System Approach

System Approach

Open-system Perspective of an OrganizationOpen system: A system that dynamically interacts with its environment.

Contingency Approach / Situational approach

• The contingency approach says that organizations are different, face different situations (contingencies), and require different ways of managing.

• A good way to describe contingency is: “if, then.”

• If, this is the way my situation is; then, this is the best way for me to manage in this situation.

Contingency Variables

Contingency Approach / situational approach

Organization SizeAs size increases, so do the problems of coordination. E.g.: Organization structure appropriate for an organization of 50,000 employees is likely to be inefficient for an organization of 50 employees

Routineness of Task Technology

To achieve its purpose, an organization uses technology.• Routine technologies require organizational structures, leadership styles, and

control systems

Environmental Uncertainty

Degree of uncertainty caused by environmental changes influences the management process.

Individual Differences

Individuals differ in terms of their desire for growth, autonomy, tolerance of ambiguity, and expectations.

End of Module