SECTION – 1 Chapter – 1 Concepts of Management

1. SECTION – 1 Chapter – 1 Concepts of Management By: Vishal Doshi

2. Introduction • Some companies like Reliance Industries,Procter and Gamble, Hindustan Unilever, ITC, Dr. Reddy’s Labs, HDFC bank, Tata, etc., are most successful companies. • On other side companies like Agrifural chemicals Ltd., Binny mills, LML, etc. belong to the unsuccessful category. • Why do companies perform differently when they operate under the same environmental conditions, serve the same customer, use the same raw material and technology and employ the people with similar skills? • The answer for this question is Management Practices. • Thus ‘Management’ makes remarkable difference between the companies performance in terms of Productivity, Products, Sales Profitability, Service to customer, Employees welfare, etc.

3. What Management is? • In this subject we shall discuss the meaning of the term “Management”. Definition of Management: Mary Parker defines the term management as “the art of getting things done through others.” but research studies concluded that management is a field of effort that combines art and science.

4. Conti… According to Koontz, Heinz and Weihrich, Management is “the process of designing and maintaining an environment in which individuals, working together in groups, efficiently to accomplish selected aims.” According to Peter F. Drucker “Management is a multipurpose organ that manages a business And manages managers and mangaes worker and work”

5. Need and Scope of Management • Management purpose is to formulate effective organizational strategies and efficiently based on the missions objectives and goals. • It deals with both internal and external environment. • It concerned with all kinds of sources i.e. Human, Financial, Material, Machines, Technology and Technical. • Management functions include: Planning, Organizing, Directing, Staffing and Controlling. • Managers should possess varied skills in order to play a variety of roles. • It applies to managers at all levels in an organization.

6. Conti… • It is applicable to all kinds of organization i.e. both Profit and Non-profit oriented business. • Management is both an Art and a Science in order to create a surplus. • Management needs to be a profession to achieve goals continuously with an incremental efficiency.

7. Nature of Management • Multidisciplinary: • It freely draws ideas and concepts from such disciplines as Psychology, Sociology, Anthropology, Economics, Ecology. Statistics, Operations Research, etc. • Dynamic Nature of Principles: • Principle is a fundamental truth which establishes cause and effect relationships of a function. Because of the continuous development in the field, many older principles are being changed by new principles. • Relative, not Absolute Principles: • Management principles are relative not absolute, and they should be applied according to the need of the organization.

8. Conti… • Management as Profession: • Management has been regarded as a profession by many ways, i.e. Existence of Knowledge, Acquisition of Knowledge, Professional Association, Ethical Codes, Service Motives. • Universality of Management: • Management is a universal phenomenon. However, management principles are not universally applicable but are to be modified according to the needs of the situation. • Management: Science or Art: • There is a controversy whether management is Science or Art. However, management is both.

9. Management: A Science or Art • First we should know what is science and what is an art before discussing whether management is a science or an art? • What is a Science? • Science is a body of knowledge developed systematically, based on observation, measurement, experimentations and drawing conclusion based on data. • The knowledge provides principles, theory and laws. • Management is a developing science. Most of the managerial activities like Decision-making, Planning, Organizing and Directing cannot be an exact science

10. Conti… • What is an Art? • Art can be acquired by conscious Effort and Practice. • Management is getting things done by and through other people. They have to continuously analyze the environment and formulate the plans and strategies. • Managers have to modify the strategies based on environmental changes. • The principles of management and theories of management cannot be implemented as learnt, in the real world. • They are to be applied after making necessary modifications based on the real life situations. • Thus, management is both a Science and an Art as it acquires the characteristics of both.

11. Management Functions Planning Company mission is the basis for planning, planning is deciding in advance what should be done. Managers think logically to achieve goals. Organizing Organizing is the process of linking and arranging activities in a sequence. It includes allocating work, authority and resources. Staffing Staffing is acquiring, developing, utilizing and compensating human resources necessarily to achieve organizational goals. HR helps the process of converting inputs into output and achieving customer satisfaction Directing Directing involves leading, influencing and motivating the people to perform organizational tasks & to convert input into output. It includes: Motivation, Leadership, Communication. Controlling Controlling is to make sure that the organization is moving towards its mission and objectives.

12. Managerial Skills • According to Robert L. Katz, there are three types of managerial skills, i.e. Technical Skills, Human Skills and Conceptual Skills. Top Level Manager More Conceptual Skills Middle Level Manager More Human Skills Lower Level Manager More Technical Skills

14. Classical Approach 1(a). Scientific Management • Scientific management became increasingly popular in the early 1900s. • In the early 19th century, scientific management was defined as ”that kind of management which conducts a business or affairs by standards established, by facts or truths gained through systematic observation, experiment, or reasoning.” • In other words, it is a classical management approach that emphasizes the scientific study of work methods to improve the efficiency of the workers. • With the growth of the industrial revolution, managers became concerned with increasing efficiency.

15. Conti… • A few managers who were mostly mechanical engineers by training examined the causes of inefficiency and tried experiments to find more efficient methods and procedures for control. • From these basic experiments, a system of management thought came into being, which is referred to as scientific management. • Scientific management was a system that investigated and developed ways of increasing the output by determining the ‘best way’ to solve or rating problems.

16. Frederick Winslow Taylor • Frederick Winslow Taylor, considered “Father of Scientific Management”, wrote the Principles of Scientific Management in 1911. • Taylor first began to experiment with new managerial concepts n 1878 while employed at the Midvale Steel Co. • At Midvale, he rise from laborer to chief engineer within 6 year gave him the opportunity to tackle a serious issue faced by the organization – the soldiering problem. • ‘Soldiering’ refers to the practice of employees deliberately (intentionally) working at a pace slower trap their capabilities.

17. Conti… • According to Taylor, workers indulge in soldiering for three main reasons: • Workers feared that if they increased their productivity, other workers would lose their jobs. • Faulty wage systems employed by the organization encouraged them to work at a slow pace. • Outdated methods of working handed down from generation to generation led to a great deal of wasted efforts. • Taylor felt that the soldiering problem could be eliminated by developing a science of management. • The scientific management approach involved using scientific methods to determine how a task should be done instead of depending on the previous experiences of the concerned worker.

18. Conti… • On the bases of previous experiences Taylor emphasizes scientific management. • Need for developing a scientific way of performing each job. • Training and preparing workers to perform that particular job. • Establishing harmonious relations between management and workers so that the job is performed in the desired way. • The two major managerial practices that emerged from Taylor’s approach to management are the Piece-rate incentive system and the Time-and-motion study. • Piece-rate Incentive System: • Taylor felt that the wage system was one of the major reasons for soldiering. To resolve this problem, he advocated the use of a piece-rate incentive system.

19. Conti… • The aim of this system was to reward the worker who established standards of performance would earn the basic wage rate set by management. • If the worker’s output exceeded the set target, his-wages would increase proportionately. • The piece-rate system, according to Taylor, would motivate workers to produce more and thus help the organization perform better. • Time-and-motion Study: • Taylor tried to determine the best way to perform each and every job. • In a “time-and-motion” study, jobs are broken down into various small tasks or activity and unnecessary activity are removed to find out the best way of doing a job. • The objective of a TMS analysis is to ascertain a simpler, easier and better way of performing a work or job.

20. Frank Gilbreth and Lillian Gilbreth • Frank and Lillian Gilbreth made their contribution to the scientifice management movement as a husband and wife team. • The Gilbreths turned motion study into a exact science. They used motion pictures for studying and streamlin-ing work motions. • They catalogued seventeen different hand motions such as ‘Grasp’, ‘Hold’ there by paving the way for work simplification.

21. 1(b). Administrative Theory • While the scientific management movement concentrated on specific tasks to be performed by the workers, • Administrative management focused on the development of broad administrative principles applicable to general and higher managerial levels. • Henri Fayol: • French industrialist Henri Fayol (1841-1925), a prominent European management theorist, developed a general theory of management. • Fayol believed that “with scientific forecasting and proper methods of management, satisfactory results were inevitable.” • He emphasized that all activities that occur in business organizations could be divided into six main groups:

22. Conti… • Technical (production, manufacturing) • Commercial (buying, selling, exchange) • Financial (obtaining and using capital) • Security (protection of property and persons) • Accounting (balance sheet, stocktaking, statistics, costing) • Managerial (planning, organizing, commanding, coordinating, controlling). • Fayol focused on the last activity, managerial activity. Within this, he identified five major functions: Planning, Organizing, Commanding, Coordinating and Controlling. • Fayol’s five management functions are clearly similar to the modern management functions – Planning, Organizing, Staffing, Leading and Controlling.

23. Conti… • Fayol set series of Fourteen Administrative Principles. • Division of labour • Authority and Responsibility • Discipline • Unity of command • Unity of direction • Subordination of individual • Remuneration

24. Conti… • Centralization • Scalar chain • Order – everybody & everthing should be in the right place at right time. • Equity – equality of fair treatment. Managers should be friendly & fair. • Stability of tenure of personnel – job security is necessary to motivate • Initiative – freedom to conceive and execute a plan by subordinates. • Espirit de corps – “a sense of union.” team spirit.

25. 1(c). Bureaucratic Management • Bureaucratic management, one of the schools of classical management, emphasizes the need for organizations to function on a rational basis. • Max Weber observed that nepotism (Favoritism) was common in most organizations. • Weber felt that nepotism was grossly unjust and stuck the progress of individuals. • Thus he identified the ideal bureaucracy to organizations that operated on a rational basis. • According to Weber, “a bureaucracy is a highly structured, formalized, and impersonal organization.” In other words, it is a formal organization structure with a set of rules and regulations.

26. Max Weber • Weber was a German sociologist who developed the bureaucratic model of organization. • Weber’s rational bureaucracy states that employees performing a large variety of tasks in any organization must follow established rules and regulations in order to ensure uniformity and rationality of output. • Administrative Management characteristics of an Ideal Organization: • Division of labour – authority and responsibility given. • Hierarchy of authority – hierarchical manner. • Formal selection – technical skill, examinations or by training. • Formal rules – rules and controls of official duties of administrators.

27. Behavioral Approach • The behavioral school of management emphasized what the classical theorists ignored – the human element. • Classical theorists viewed the organization from a production point of view, the behavioral theorists viewed it from the individual’s point of view. • The behavioral approach of management emphasized individual attitudes, behaviors, group processes and recognized processes at the work place.

28. 2(a). Theory X and Theory Y • Theory X and Theory Y, created and developed by Douglas McGregor at the MIT Sloan School of Management in the 1960s. • This theory pertain to employee motivation and have been used in human resource management, organizational behavior analysis, and organizational development. • They describe two very different attitudes towards workforce motivation. McGregor felt that companies followed either one of these approaches. • McGregor viewed the typical employee as an energetic and creative individual who could achieve great things if given the opportunity. • This theory is also known as behavioral approach of management.

29. Douglas McGregor – Theory X • In this theory management assumes employees are inherently lazy and will avoid work if they can. • Because of this, workers need to be closely supervised and comprehensive systems of control put in place. • A hierarchical structure is needed, with narrow span of control at each level, for effective management. • Therefore employees will show little ambition without an enticing incentive program and will avoid responsibility whenever they can. • The managers influenced by Theory X believe that everything must end in blaming someone.

30. Conti… • They think most employees are only out for themselves and their sole interest in the job is to earn money. • They tend to blame employees in most situations, without questioning the systems, policy, or lack of training which could be the real cause of failures. • Managers that subscribe to Theory X tend to take a rather pessimistic view of their employees. • A Theory X manager believes that it is the manager's job to structure the work and energize the employee. • The result of Theory X is, managers naturally adopt a more authoritarian style based on the threat of punishment.

31. Douglas McGregor – Theory Y • Management influenced by this theory assumes that employees are ambitious, self-motivated, anxious to accept greater responsibility and exercise self-control, self-direction, autonomy and empowerment. • Management believes that employees enjoy their work. They also believe that, given a chance, employees have the desire to be creative at their work place and become forward looking. • There is a chance for greater productivity by giving employees the freedom to perform to the best of their abilities, without being bogged down by rules. • They believe that the satisfaction of doing a good job is a strong motivation in itself. • A Theory Y manager will try to remove the barriers that prevent workers from fully actualizing themselves .

32. Conti… • The Human Side of Enterprise reveals that McGregor simply argues for managers to be open to a more positive view of workers and the possibilities that create enthusiasm.

33. Difference between theory X and Y

34. 2(b). Maslow’s Need Hierarchy • Maslow's hierarchy of needs is a theory in psychology, proposed by Abraham Maslow in his 1943 paper A Theory of Human Motivation. Maslow subsequently extended the idea to include his observations of humans' innate curiosity. • Maslow had studied exemplary people such as Albert Einstein, Jane Addams, Eleanor Roosevelt, and Frederick Douglass. • The lower four layers of the pyramid contain what Maslow called "deficiency needs" or "d-needs": physiological, security of position, friendship and love, and esteem. • With the exception of the lowest (physiological) needs, if these "deficiency needs" are not met, the body gives no physical indication but the individual feels anxious and tense.

35. Conti…

36. a. Physiological needs • For the most part, physiological needs are obvious—they are the literal requirements for human survival. If these requirements are not met (with the exception of clothing and shelter), the human body simply cannot continue to function. • Physiological needs include: • Breathing • Food • Water • Shelter • Clothing

37. b. Safety needs • With their physical needs relatively satisfied, the individual's safety needs take precedence and dominate behavior. These needs have to do with people's yearning for a predictable. • In the world of work, these safety needs manifest themselves in such things as a preference for job security, grievance procedures for protecting the individual from savings accounts, insurance policies, and the like. • Safety and Security needs include: • Personal security • Financial security • Health and well-being • Safety net against accidents/illness and their adverse impacts

38. c. Social needs • After physiological and safety needs are fulfilled, the third layer of human needs are social and involve feelings of belongingness. This aspect of Maslow's hierarchy involves emotionally-based relationships in general, such as: • Friendship • Intimacy • Family • Humans need to feel a sense of belonging and acceptance, whether it comes from a large social group, such as clubs, office culture, religious groups, professional organizations, sports teams, or small social connections (family members, intimate partners, mentors, close colleagues, confidants). • They need to love and be loved by others. In the absence of these elements, many people become susceptible to loneliness, social anxiety, and clinical depression. • This need for belonging can often overcome the physiological and security needs.

39. d. Self – Esteem • All humans have a need to be respected and to have self-esteem and self-respect. Also known as the belonging need, esteem presents the normal human desire to be accepted and valued by others. • Most people have a need for a stable self-respect and self-esteem. Maslow noted two versions of esteem needs, a lower one and a higher one. The lower one is the need for the respect of others, the need for status, recognition, fame, prestige, and attention. The higher one is the need for self-respect, the need for strength, competence, mastery, self-confidence, independence and freedom. Deprivation of these needs can lead to an inferiority complex, weakness and helplessness. • Maslow stresses the dangers associated with self-esteem based on fame and outer recognition instead of inner competence. He sees healthy self-respect as based on earned respect.

40. e. Self-actualization • “What a man can be, he must be”. This forms the basis of the perceived need for self-actualization. This level of need pertains to what a person's full potential is and realizing that potential. Maslow describes this desire as the desire to become more and more what one is, to become everything that one is capable of becoming. • As mentioned before, in order to reach a clear understanding of this level of need one must first not only achieve the previous needs, physiological, safety, love, and esteem, but master these needs. Below are Maslow’s descriptions of a self-actualized person’s different needs and personality traits.

41. David McClelland - Human Motivation Theory • One of McClelland’s most well known theories is that human motivation, is dominated by three needs. • The need for achievement ( N-Ach), • The need for power ( N-Pow) and • The need for affiliation ( N-Affil). • The importance of each of these needs will vary from one person to another. If you can determine the importance of each of these needs to an individual, it will help you decide how to influence that individual. • McClelland asserted that a person’s needs are influenced by their cultural background and life experiences.

42. The need for achievement (N-Ach) • This is the need to achieve, excel and succeed. A person with this type of need, will set goals that are challenging but realistic. • The goals have to be challenging so that the person can feel a sense of achievement. • However the goals also have to be realistic as the person believes that when a goal is unrealistic, its achievement is dependant on chance rather than personal skill or contribution. • This type of person prefers to work alone or with other high achievers. They do not need praise or recognition, achievement of the task is their reward

43. The need for power (N-Pow) • This is the need to lead others and make an impact. • This need can exhibit itself in two ways. The first which is the need for personal power may be viewed as undesirable as the person simply needs to feel that they have “power over others”. They don’t have to be effective or further the objectives of their employer. • The second type of “need for power” is the need for institutional power. People with the need for institutional power; want to direct the efforts of their team, to further the objectives of their organisation.

44. The need for affiliation (N-Affil) • This is the need for friendly relationships and human interaction. • There is a need “to feel liked” and “accepted” by others. A person with a high need for affiliation is likely to be a team player and thrive in a customer services environment. • They will perform best in a co-operative environment. McClelland said that a strong need for affiliation will interfere with a manager’s objectivity. • The “need to be liked” will affect a manager’s decisions, prompting them to make decisions to increase their popularity rather than furthering the interests of the organisation.

45. Modern Approach • SYSTEM APPROACH: • It was first proposed under the name of "General System Theory”. • By a systems approach to management is meant the study of a firm in its totality so that the men and material resources of the firm can be organized to realize the firm's overall objectives as efficiently as possible. • The systems approach to management implies that every manager should be much more precise about decision-making and information flow. For this to be effective, a company should have an overall system of corporate objectives.

46. Conti…

47. Conti… • Feedback is the process of getting comments from customers and clients. • An organization that interacts little with its external environment and because of that it receives little feedback is known as closed system. • In contrast open system interacts continually with its internal environment. Therefore it is well informed about the changes within its surroundings and its position relative to this changes.

48. Conti… • The systems approach is a problem-solving method which helps to: • Define the problem as clearly as possible. • Analyse the problem and identify alternative solutions. • Select from the alternatives and develop the most viable solution mix. • Implement and test the solution. • Evaluate the effectiveness and worth of the solution.

49. Modern Approach • Contingency Approach: (Situational approach) • The contingency approach to management is based on the idea that is to manage and that to be effective, planning, organizing, leading, and controlling must be tailored to the particular circumstances faced by an organization. • Managers have always asked questions such as: • "What is the right thing to do? • Should we have a mechanistic or an organic structure? • A functional or divisional structure? • Wide or narrow spans of management? • Tall or flat organizational structures? • Simple or complex control and coordination mechanisms? • Should we be centralized or decentralized? • Should we use task or people oriented leadership styles? • What motivational approaches and incentive programs should we use?"

50. Conti… • Environmental change and uncertainty • Organizational Size • Customer Diversity • Globalization • Contingency Perspective and Leadership