PRINCIPLES AND PRACTICES OF MANAGEMENT

1. PRINCIPLES AND PRACTICES OF MANAGEMENT

2. Nature of Management What is Management: # Management is vast and extensive # Concerned with human beings who are highly unpredictable ! ! ! # Young developing discipline – concepts are continuously changing.

3. Some definitions : Lawrence A. Appley – Management is accomplishment of results through the efforts of the other people. H. Koontz – Management is art of getting things done through and with people in formally organized groups. G. Terry – Management is process of planning, organizing, actuating and controlling to determine and accomplish the objectives by the use of people and resources. Mc. Farland – Management is process by which managers create, direct, maintain and operate purposive organizations through systematic, coordinated, cooperative human effort.

4. Sisk – It is the coordination of all resources through the process of planning, organizing, directing and controlling in order to attain stated objectives.

5. Importance of Management # Optimum use of resources - Ensures optimum utilization of resources at command. Creates right climate for employees to put their best # Effective leadership and motivation. # Establish sound employee relations. # Achievement of Organizational goals and objectives. # Change and growth. # Improves standard of Living.

6. # Joseph A. Schumpeter – referred to Management and entrepreneurs as engine of growth. # Drucker – Management ‘the life blood’ of an enterprise. Management is crucial factor in economic and social factors.

7. Management vs. Administration # Administration is broader than management: Administration: Overall determination of policies, setting of major objectives and laying out of broad programs as described by Haimann. Administration is policy making function. Management is carrying out the policies. Spriegal – Administrative is largely determinative and management is essentially executive. American thought : Administrators think Managers act.

8. # Administration is part of management: According to English school of thought - Management is a wider concept than administration. Administration handles the current problems arising in carrying out policies laid down by management. Management is the rule making and rule enforcing body and is all encompassing. Administration is part of it and an implementing agency This thought is represented by EFL Brech, Henry Fayol and Kimball

9. # Management and Administration are identical: William Newman, Harold Koontz, Dalton E. McFarland, Earnest Dale – Hardly maintain any distinction. Any effort to stretch the matter too far may be self defeating and thoroughly misleading. Compartmentalization hardly serves any useful purpose. To resolve the controversy – Druckersuggested that “Management” is applicable in business enterprise while as “Administration” is applicable in government offices, military organizations, social and cultural institutions.

10. # Management as Science: Science is - Systematic body of knowledge Scientific inquiry and Observation Experimentation Universal truths Management is also body of knowledge – has no. of principles studied and put to application. It is a social science– deals with Human beings and their behavior, which is unpredictable and defies experimentation. It is not exact science like physics, chemistry and biology. Therefore offers only guidelines for solving problems.

11. Manager vs scientist – scientist can afford to wait till complete information is available. Manager cannot afford. He has to decide based on whatever information available. “Scientific Management” – When Taylor used the term, he was aware experimentation and verification of facts is not possible. He used this as an organized body of knowledge. # Management asan art: Art is application of knowledge and personal skills ! ! ! How to do things creatively and skillfully. Management uses Knowledge of management theory to achieve results. Management is also creative like other art.

12. Personalized : Like art it is also a personalized activity. Every manager has his own way of managing people and things based on his knowledge and experience. Constant practice: Managers learn from mistakes . They develop their skills through constant practice. Therefore management is science as well as art.

13. Management as a Profession Characteristics of a profession – • Well defined body of knowledge • Formal education and training • Minimum qualification • Representative body • Service above self • Ethical code of conduct. Management as a profession – 1.Management has a well defined body of knowledge 2. Management education through training is possible now. 3. Minimum qualification is required to be a manager.

14. 4. Representative body – there is no such body as of now. 5. There is no universal code of conduct at present. Although certain trade associations and management associations formulated ethical code for managers. 6. Service motto – In absence of a regulating body and code of conduct managers often indulge in practices aimed at maximizing their personal wealth. Professionalization of management – Now it is gaining importance slowly in India. Public sector is professionally managed – in private sector it is happening now.

16. Levels of Management # Top Management – • Determines objectives and policies • Designs the basic operating and financial structure of an organization • Provides guidelines and directions • Lays down the standards of performance • Maintains good public relations # Middle Management – • Interprets and explains the policies framed by the top • Issues detailed instructions • Participates in operating decisions • Trains other managers

17. # Lower Management- • Plan day-to-day operations • Assigns job to workers • Provide supervision and control over work • Arranges material tools and equipment • Maintains discipline Chairman, CEO, President, MD etc Functional Heads and immediate Subordinates Section Head, First Line Managers, Supervisors MMIMIDDLE TOP MIDDLE LOWER

18. Managerial Skills # Technical Skills: The activity to use specific knowledge, methods and techniques in performing work. Exa: Drilling Supervisor in Oil Exploration Company. # Human Skills: Ability to understand, motivate and get along with other people. # Conceptual Skills: Ability to visualize the organization as a whole, discern inter relationships among organization’s parts and understand how the organization fits into the wider context of the industry, community and the world.

19. Levels and Managerial Skills TOP MANAGEMENT MIDDLE MANAGEMENT LOWER MANAGEMENT Robert L. Katz Model CONCEPTUAL SKILLS HUMAN SKILLS TECHNICAL SKILLS

20. Characteristics of a Quality manager: Successful managers have certain characteristics that create a climate for success for themselves and their subordinates. Some of the key traits are – # Knowledge # Decisiveness # Ability to handle conflict # Emotional stability

21. Evolution of Management Development of Management has ancient roots. # Pyramids and Great Wall of china – mega projects needed management. # 200 Years ago – Adam Smith talked about division of labor and specialization and its advantages. # However, study of management as science began recently, especially after industrial revolution. # Only last few decades it attracted attention of psychologists, sociologists, anthropologists, mathematicians, political scientists, economists and so on.

22. # Approaches by these scholars has created “ Confusion and chaos”. No wonder, Koontz described it as “Jungle” # Koontz, O’Donnel and Weihrich suggested 11 approaches In 1966 Stogdill suggested 18 approaches In 1971 Hutchison suggested 5 approaches . . . . . # To facilitate easy understanding – three broad approaches have been identified • Classical Theory • Neo - Classical Theory • Modern theory

23. Classical Theory: Classical means something traditionally accepted or Long-established. Does not mean they are static and outdated. Some of the elements are still existing in one form or other. • Inter-related functions – such as planning, organizing, staffing, directing and controlling – exercised in sequential form and repeated over and over again to bring order. • Guiding principles – in order to crystallize, the increasing knowledge and thinking the writers have developed certain principles based on practical experience.

24. 3. Bureaucratic structure: for maximizing efficiency, work must be logically divided into simple, routine and repetitive tasks. Then grouped according to work characteristics and arranged in the form of departments headed by an executive who has subordinates directly reporting to him. Command should flow from only one individual ; everybody should have only one boss. Work must be allocated to individuals based in job demand and individual’s ability. Organizations are run through rules, regulations and procedures.

25. EELEMENTS • The Hierarchy • Division of Labor and specialization • The scalar principle • Unity of command • Departmentalization • Span of control • Parity of authority and responsibility • Centralization vs Decentralization • Line and staff relationship The whole structure takes the shape of a pyramid Top Management Middle management Supervisory Management Pyramid Structure and elements of classical Theory

26. 4. Reward and punishment nexus: “ Follow the rules, obey the orders, show the results and get the rewards” Emphasis was laid on efficient use of resources while producing results. Branches of Classical Theory: Bureaucracy ( by Weber ) Scientific Management ( by Taylor ) Administrative theory ( by Fayol ) CLSSICAL SCHOOL

27. Bureaucracy : A structure with highly routine operating tasks achieved through - specialization, - very formalized rules, regulations and procedures and impersonal, - tasks that are grouped into functional departments, - centralized and rigid hierarchy of authority - responsibility relations, - narrow spans of control and decision making that follows the chain of command.

28. Elements of Bureaucracy: • Hierarchy • Division of work • Rules, regulations and procedures • Records • Impersonal relationships, • Administrative class

29. Advantages: • Specialization • Rationality • Predictability • Democracy Disadvantages: • Rigidity • Impersonal • Displacement of objectives • Compartmentalization of activities • Empire building • Red tape

30. Scientific Management : # An approach that emphasizes the scientific study of work in order to improve worker efficiency. # It arose from the need to increase productivity in US due to shortage of skilled labor in early 20th Century. # To enhance productivity, ways had to be found out – • Work elimination • Combining some parts • Sequencing the tasks • Is there one best way of doing job.

31. Frederick W. Taylor (1890~1930) undertook scientific study at Bethlehem Steel at Pennsylvania to answer these questions. He offered increase in daily pay $ 1.15/day to $1.85/day to a worker to follow his instructions. Taylor experimented with rest periods, walking speed, carrying positions and other variables. After a long period of scientifically trying various combinations of procedures, techniques and tools, Taylor succeeded in finding out “one best way” to perform the task and realized the goals set by him. He trained other workers.

32. Thus by putting the right person on the job with correct tools and equipment, by having workers follow Taylor’s instructions exactly and by motivating workers through economic incentives of higher daily wage – Taylor achieved significant improvements in productivity. Basics of Scientific Management: • Each task must be scientifically designed – to replace old methods. • Workers must be scientifically selected and trained. • Bring scientifically designed job and worker together and match them. • There must be division of labor and cooperation between management and workers.

33. Taylor summed up his approach as following: • Science, not rule of thumb • Harmony, not discord • Cooperation, not individualism • Maximum output in place of restricted output • Develop each man to his greatest efficiency and prosperity • Equitable division of work and responsibility between management and labor.

34. Key Concept: • Scientific task planning: Management should decided in advance as to what work is to be done, how, when, where and by whom. • Time and motion studies: The time study would indicate minimum time required to do a job. Time standards are developed by these studies. • Standardization: Standards have to be set in advance for the task, materials, work methods, quality, time and cost etc. This helps in simplifying the process of production, reducing waste and improving quality. • Differential piece rate system: Taylor advocated differential piece rate system based on actual performance.

35. 5. Functional Foremanship: In order to achieve better production control, Taylor advocated functional foremanship, where the factory is divided into several components, each in charge of a specialist –such as route clerk, instruction card clerk, cost & time clerk, gang boss, inspector , repair boss and disciplinarian etc. These functional specialists plan and give expert advice.

36. Contributions: # Conservation and saving – adequate utilization of every piece of resource. # Specialization and division of labor brought about second Industrial Revolution in America and other developing nations. # American Production Miracle is result of Scientific Management. # Stress on work design encouraged managers to pursue “one best way” philosophy and achieve the tasks with minimum effort and cost.

37. Limitations: • Exploitative device – Has two objectives; increasing workers’ productivity and improve workers economic welfare. While first objective was achieved, the second objective never got realized. • Depersonalized work – Standardized jobs led to straight jacket. Workers made to repeat the same operations everyday. This produced boredom and monotony. • Unpsychological – No accurate information as to how workers’ efficiency to be measured and how wages are to be given. • Undemocratic – Drucker questioned the idea of managers planning and workers loaded with boring and routine work. It overshadows workers independence. Treats workers as unthinking animals.

38. 5. Anti-social – workers are treated as economic tools only. According to Myers it aims at excluding the average workman from field of work as far as possible. 6. Unoriginal – Hoagland questioned the originality. Later research into Bethleham Steel records and other sources indicated that Taylors’ report was almost lie. 7. Unrealistic – Taylor believed that workers are motivated by material benefits. Current research indicates that employees do not work for money alone. They seek job satisfaction, growth opportunities, challenging work, recognition ete.

39. Administrative Theory: Henry Fayol ( 1841~ 1925 ) # About the time when Taylor was developing Scientific Management in US, Henry Fayol was revolutionizing managerial thinking in France. # He was mining engineer with Coal and Iron combine, where he spent his entire working career. # He took over the company when it was near bankruptcy in 1888 and turned into financially strong company. # Based on his own experience, he developed the administrative theory, explained the process of management from top managerial perspective.

40. # He is acknowledged as father of classical management school, not because he was first to investigate managerial behavior, but because he was the first to systematize it. # He believes that sound managerial practice falls into certain patterns that can be identified and analyzed. He believed that management can be taught , once its basic principles were understood and general theory of management formulated.

41. Fayol’s Six Activities: Fayol began by classifying business operations into six major activities: # Technical ( Production ) # Commercial ( Buying and Selling ) # Financial ( Use of Capital ) # Security ( Protection of Property ) # Accounting ( Keeping Financial records ) # Managerial Since first five were understood by managers, Fayol focused on the last one.

42. Management Functions : Fayol argued that managers should perform five functions – 1. Planning – Devising a course of action that will help organization to meet its objectives. 2. Organizing – Mobilizing the material and human resources of the organizations to put the plan into effect. 3. Commanding – Giving directions to employees so that they perform the needed tasks. 4. Coordination – Make sure that the resources and activities are working harmoniously. 5. Controlling – Monitoring the plans to ensure that they are being carried out properly.

43. Principles of Management: At the operating level, Fayol asserted that managers should apply fourteen principles. These principles can be applied in all types, functions, levels, and sizes of organizations. • Division of work – Principle of specialization. Applies to all kinds of work. Increases output making employees more efficient. • Authority and Responsibility – Right to give orders and power to obtain obedience. Official and personal authority. • Discipline – Respect to rules and regulations. • Unity of Command – Receiving command fromone supervisor.

44. 5. Unity of direction – “ One manager one plan” One manager to have one direction. 6. Subordination of individual interest to common good – Organizational interest above personal interest. Manager must set an example through his good conduct and behavior. In case of conflict scarify personal interest. 7. Remuneration of personnel – Fair compensation for all. Fayol did not favor profit sharing with workers but advocated for managers. 8. Order – Materials and people should be at right place and right time. 9. centralization – Decision making power should be in right proportion.

45. 10. Scalar chain – The graded chain of authority from top to bottom through communication flow is termed as ‘Scalar Chain’ 11. Equity – Employees must be dealt fairly. Equity is combination of justice and kindness. 12. Stability of tenure- Stability is essential because time is required for an employee to get used to new work to succeed in doing it well. 13. Initiative – Employees must be encouraged to think through to implement a plan, even though some mistakes may result. Opportunity to perform independently is essential component of employee growth and development. 14. Esprit de corps – “Union is strength” Promoting team spirit will give organization a sense of unity.

46. Managerial Skills: Fayol emphasized the need for following skills- • Physical ( Health and vigor ) • Mental ( ability to understand, learn; apply judgment and adapt to different situations ) • Moral ( Energy, initiative, firmness, loyalty, tact and dignity) • Educational ( Acquaintance with matters not related to the function performed) • Technical ( Specialized knowledge relating to one’s area of specialization, especially about machines and work processes) • Experience ( Related to the work carried out )

47. Contribution of Fayol: • All operations in business can be classified into six major heads. • Main elements of Management • Proposed fourteen principles of management which could be applied universally He always believed that managerial ability could be applied to the home, the church, the military, the school, politics as well as to industry.

48. Limitations: • Lack of empirical evidence – The theory is not supported by any data or empirical evidence. • Neglect of human factor – Views human beings as passive and capable of reacting to rules and economic incentives. Human attributes such as emotion, attitude, creativity have been totally ignored. • False assumptions – assumes that all organizations can be managed by the same set of rules and principles. It does not recognize differences. Rules have to be applied carefully looking at the internal and external dynamics of the organization.

49. 4. Pro-management bias – It is more concerned with what managers should know and do rather than with a more general understanding of managerial behavior. 5. Historical Significance – It has only historical significance. It is more appropriate for the past ( environment was stable and predictable) than for the present ( environment is turbulent, competent and continuously changing) .

50. Neo – Classical Theory: Also known as Human Relations theory – # Feeling of incompleteness. # Shortsightedness in Scientific and Administrative theories. # Appeared as if human element is some where neglected. Hawthorne Experiments: Conducted in Western Electric Company at Hawthorn plant near Chicago – during 1920s and early 1930s. 1. Changing intensity of lighting in test group 2. Keeping every thing constant in control group