Management Principle and Application Unit 1:

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Management Principle and Application

B.com (Hons) 3rd Semester

Unit 1: Introduction
 Content

Concept: Need for Study, Managerial Functions - An overview: Co-ordination: Essence of

Managership
Evolution of the Management Thought, Classical Approach : Taylor, Fayol.Neo-Classical
and Human Relations Approaches - Mayo, Hawthorne Experiments, Behavioural Approach,
Systems Approach, Contingency Approach - Lawerence & Lorsch, MBO- Peter F. Drucker, Re-
engineering Hammer and Champy, Michael Porter Five-force analysis, Three generic
strategies and value- chain, analysis, Senge's Learning Organisation, 'Fortune at the Bottom of
the Pyramid' - C.K. Prahalad.

SHORT TYPE QUESTIONS & ANSWERS

1. Define Management.

Ans: "Management is the process of working with and through others

to effectively achieve organizational objectives by efficiently utilising
the limited resources in the changing environment.

2.Management is all pervasive comment.

Ans: Management is all pervasive or universal because management

is essential for effective performance of any organised activity. The
principles and techniques of management have universal application.
They can be applied to all types of organised activities - business,
social, educational etc. Thus, it is all pervasive in nature.

3. Is management a goal oriented process?

Ans: Yes, management is goal-oriented process because the purpose of

management is to achieve the goals of the organisation. The success of
management is judged by the extent to which organisational goals are
achieved.

4. Management is an art or science or both.

Ans: Management is both science and an art, management is science

because it has developed certain principles which are of universal
application. But the results of management depend upon the personal
skills of managers and in this sense management is art.

5.Management is multi dimensional. Write one dimension.

Ans: Management can be defined as multidimensional as because it

has many dimensions which can be classified mainly into three
categories, such as management of work, management of people and
management of operations.

6. Do you think management is a continuous process? Comment.

Ans: Management is a continuous process because it is started right

from the time of establishment of the business till its dissolution. So,
everymanagement system is to be done in continuous mode.

7.Earning profit is not the objective of management. Say Yes or No

Ans: No, profit earning is also the objective of management because

profit is the reward for risk bearing by a businessman and profit is
also essential for survival, growth and expansion.

8. Is management a dynamic function?

Ans: Yes, management is a dynamic function because according to

changing of inputs the process of management will be also changed.

10. Why is it said management principles are universal?

Ans: The principles of management are universal in nature because

they are applicable to all kinds of organisations and situations.

11. Planing eliminates changes and uncertainties. Do you agree?

Give reason.
Ans: Yes, I agree with this statement, because planning involves
forecasting or anticipation of future events and this helps to reduce or
eliminates changes and uncertainties.

12. At which level business policy is framed?

Ans: At top level business policies are framed .

13. Do you think co-ordination is not the functions of •

management?

Ans: No, coordination is not a separate function of management, but it

is the essence of management.

14. "Anything minus management is nothing". What does this

statement tell?

Ans: This statement tells that nothing is possible without

management.

15. Management of any organisation strives to attain different

objectives. Mention any two such objectives.

Ans: (a) Supply of quality goods at reasonable prices.(b) The basic

objective of any business is survival.

16. Name the level of management the following posts belong to:
(i) Purchase Manager (ii) Superintendent

Ans: (i) Top management, (ii) Middle management.

17. What do you mean by "efficiency".

Ans: Efficiency means achieving the predetermined goals at the

minimum cost (i.e. optimum use of resources).
18. Which function of management ensures that actual activities
conform to planned activities?

Ans: Controlling.

19. Who are regarded as middle management in a business

organisation?

Ans: Divisional heads regional managers, production or operation

managers, plant superintendents etc. are regarded as middle
manageme in a business organisation.

20.List two social objectives of management.

Ans: Supply of quality goods at reasonable projects (b) Generation of

employment opportunities

21. What is management?

Ans: Management is a process of planning, organizing, staffing, dedi

co-ordinating and controlling of activities. It is function of man people.
Sometime, it is defined as a body of knowledge and techni leadership
also.

22. What is process of management?

Ans: Process of management implies setting objectives and taking

different steps for doing the various functions of management such
planning, organizing, staffing, directing and controlling. As a process
management can be defined as a distinct process of its various
functions which are performed by managers to make the efficient use
of the available material and human resources so as to achieve the
desired objectives.

23. Define management as a social process?

Ans: Management can be defined as a social process because the
activities involved in the achievement of goals are related to people.
So Koontz and O'Donnel define management as the establishing an
effective environment for people operating in formal organizational
groups. Management performs such types of activities, which are
carried out when employees interact with one another. Management
is a social process by which a co-operative group directs actions of
others towards common goals.

24. Give the concept of management as a group?

Ans: Management is a group activities, because of the fact that it refers

to the totality of all those persons, who are entrusted with the
responsibility of managing a particular enterprise. So, management
can be also defined as a class or section of people who together carry
out various managerial ac vities. That is why, the management of a
particular company in this se, implies the management body or board
of directors or management mittee etc. As a group, management
covers all personnel occupying agerial positions from Chief Executive
to first line supervisors.

25.What is Scalar Chain?

Ans: This principle states that the chain of Superiors ranging from
ultimate authority to the lowest level in the organization. The
communication is to be faster and affective in the line. Under scalar
chain communication should follow through in established chain of
command. However, passing the established line of authority, to
facilitate quick communication, may create a gangplank. But the
gangplank should not be a normal practice as it underlines the
established line of authority.

26. What is Esprit de corps?

Ans: This is a French word which means 'union is strength. This
principle wants harmonious human relations in the organization so
that the employees are loyal to the organization. Harmony promotes
strength in the organization. Literally speaking Esprit de corps means
the spirit of loyalty and devotion to the group to which one belongs.

CONTENTS

Unit - 1 Introduction

Unit - 2 Planing

Unit - 3 Organising

Unit - 4 Staffing and Leading

Unit - 5 Controlling

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27. What is work-study?

Ans: Work study means an organized objective, systematic analytical

and critical assessment of the efficiency of various operations in an
organization. It is a generic term, which is applied to all techniques,
which are used in the analysis of human work. This will facilitate the
investigation of all factors, which influence efficiency, and the
economy of operations.

28. What is Differential Piece Rate System?

Ans: Piece Rate System is type of wage payment. In piece rate the
payment of wages the worker who produced the maximum output are
rewarded. Under this system, a worker who met the 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. This system has been adopted with
the hope that it would motivate workers to produce more and thus
help the organization perform better.

29. What is functional foremanship?

Ans: The object of this concept is to segregate planning and

performance on the shop floor and to introduce specialization. F.W.
Taylor recommended the appointment of eight foremen in all to
control the various aspects of production, Four need to be in the
planning department, such as rule clerk,instruction card clerk, time
and cost clerk and shop disciplinarian Remaining four are for shop
level, such as Gang Boss, Speed Boss, Repair Boss and inspector.

30. What is Human Relation Approach?

Ans: This approach focuses on human aspect of industry. Elton Mayo,

Fritz Roethlisberger, TN. Whitehead and William Dickson advocated
this approach. They modified the classical theory by emphasizing the
fact that organization is a social system and the human factor is the
most important element within it. Elton Mayo is generally recognized
as the father of Human Relations Approach.

Management Principle and Application Unit 1: Introduction Notes For

B.com 3rd Semester

LONG TYPE QUESTIONS & ANSWERS

1. Explain the Features of Management by Objectives MBO.

2. Ans: Features Of Management By Objectives MBO are explained

below:

(i) Superior-subordinate participation: MBO requires the superior

and the subordinate to recognize that the development of objectives is
a joint project/activity. They must be jointly agree and write out their
duties and areas of responsibility in their respective jobs.

(ii) Joint goal-setting: MBO emphasizes joint goal-setting that are

tangible, verifiable and measurable. The subordinate in consultation
with his superior sets his own short-term goals. However, it is
examined both. by the superior and the subordinate that goals are
realistic and attainable. In brief, the goals are to be decided jointly
through the participation of all

(iii) Joint decision on methodology: MBO focuses special attention

on what must be accomplished (goals) rather than how it is to be
accomplished (methods). The superior and the subordinate mutually
devise methodology to be followed in the attainment of objectives.
They also mutually set standards and establish norms for evaluating
performance.

(iv) Makes way to attain maximum result: MBO is a systematic re

and rational technique that allows management to attain maximum
results from available resources by focussing on attainable goals. It
permits lot of freedom to subordinate to make creative decisions on
his own. This motivates subordinates and ensures good performance
from them.

(v) Support from superior: When the subordinate makes efforts to

achieve his goals, superior's helping hand is always available. The
superior acts as a coach and provides his valuable advice and
guidance to the subordinate. This is how MBO facilitates effective
communication between superior and subordinates for achieving the
objectives/targets set.

2.What are the features of bureaucracy?

Ans: Bureaucracy is an administrative system designed to accomplish

large scale administrative tasks by systematically co-ordinating the
work of many individuals. Following are the features of bureaucracy.

(i) Division of work: Work of the organisation is divided on the basis

of specialisation to take the advantages of division of labour. Each
office in the bureaucratic organisation has specific sphere of
competence. Thus division of labour ensures that each office has its
clear defined area of competence and no work is left uncovered.

(ii) Administrative class: Bureaucratic organisations generally have

administrative class responsibility for maintaining coordinative
activities of the members.

(iii) Official Rules: In bureaucratic structure, administrative process

is continuous and governed by official rules.

(iv) Impersonal relationships: Official positions in bureaucracy are

free from personal involvement, they are governed through of system
of official authority and rules.

(v) Official Record: Another feature of bureaucracy is maintenance of

proper official records.

3. Explain in brief importance of management.

Ans: The importance or benefits of management are :

(i) Helps in achieving business objectives: Management brings
human and material resources together and mobilises people to help
in reaching business goals.

(ii)Management increases efficiency: The aim of a manager is to

reduce costs and increases productivity through better planning,
organising, staffing and controlling the activities of the organisation.

(iii) Management helps in achieving personal objectives: A

manager motivates and lead his team in such a manner that
individual member are able to achieve personal goals while
contributing to the organisation.

(iv) Better quality goods: A good management helps in producing

better quality goods at minimum of cost.

(v) Social benefits: Management help in raising standard of living of

the people by providing them with quality goods and services at the
lowest possible cost.

(vi) Minimising the element of risk: Risk is an integral part of every

business but an efficient management always tries to control or
minimise it.

4.What are the objectives of management? Explain in details..

Ans: Objectives are the goals or ends toward which the activities of a
business are directed. From the point of view of management,
objectives may be grouped under three heading namely
(i)organisational (ii) social.and (iii) individual.(i)Organisational
objectives: The main purpose of any organisation is to utilise human
and material resources to fulfill its economic objectives. The economic
objectives of a business are survival, profit and growth as discussed
below:
(a) Survival: The basic objective of any business is survival. In order
to survive an organisation must earn enough revenues to cover cost of
operation.

(b) Profit: Mere survival is not enough for business.The management

must earn sufficient profit to meet the various cost of business and
also cover the various business risks.

(c) Growth: It is very important for the business to grow. To remain in

the market, management must exploit fully the growth potential of the
organisation.

(ii) Social objectives: Management is an organ of the society so it

must have social objectives.

Social objectives include the following:

(a) Supply of quality goods at reasonable prices.

(b) Generation of employment opportunities.

(c) Providing financial support to community projects.

(d) Controlling environment pollution.

(e)Using environment friendly methods of production.

(iii) Personal objectives: Personal objectives relate to the employees.

Every employee has some aspirations when he joins a job.

-He expects these aspirations to be fulfilled by the organisation :

(a) Good salary and other benefit.

(b)Opportunities for training, promotion etc.

(c) Good and healthy conditions

(d) Recognition of meritorious work.

(e) Treat employees as a part of business.

5. What are the characteristics of management? Explain in details.

Ans: To understand the nature of management, it is essential to know

the features or characteristics of management.

The basic features or characteristics of management are as

follows:

(i) Management is goal-oriented : Management is always goal

oriented. In the first function of management i.e. planning. The
desired goal of the business is determined. Thereafter, through proper
organising. staffing, directing and controlling the goal are achieved.

(ii) Group activity Management is an essential part of a group activity.

Whenever, there is an organised group of people working towards a
common goal, some type of management becomes essential.
Management makes the people realise the objectives of the group and
directs their effects towards the achievement of these activities.

(iii) Management is universal in character: Management is applicable

in all types of organisation. The basic principles of management are of
universal application and can be applied in all organisation whether
they are business, social, religious, cultural, sports etc.

(iv) Multidimensional Management can be defined as

multidimensional as because it has many dimensions which can be
classified mainly into three categories, such as management of work,
management of people and management of operations.
(v)Management is a continuous process Management is a continuous
process i.e. its functions are repeated time and again. Management
does not stop anywhere. It is started right from the time of
establishment of the business till its dissolution.

(vi) Dynamic function: Management is a dynamic function. According

to changing of inputs the process of management will be also changed.
So, management is called dynamic function.

6. Explain the basic functions of Management.

Ans: Regardless of size, nature and type of organization, all the

managers have to perform some basic functions which are as follows:

(a) Planning: Planning is always the first function performed by

every manager. Planning refers to "deciding in advance what to do,
how to do, when to do, and who is going to do it. Planning bridges the
gap between where we stand today and where we want to reach".
Every manager starts with deciding in advance the objectives of an
enterprise and how to accomplish these objectives. Planning is the
base of all other functions of management.

(b) Organising: After setting up of plans next function of every

manager is to organise the activities and establishing an organisation
structure to execute the plan. Setting up organisational structure
means deciding the framework of working how many units and sub-
units or departments are needed, how many posts or designations are
needed in each department, how to distribute the authority and
responsibility among different people. Once these decisions are taken
an organisational structure gets set up.

(e) Staffing: Staffing is the third step or function of a manager. It

refers to recruiting, selecting, appointing the employees, assigning
them duties, maintaining cordial relations and taking care of
grievances of employees. It also includes training and developing the
employees, deciding their remuneration, promotion, increments, etc.,
evaluating the performance, maintaining personal records of
employees.

(d) Directing: Once the employees are appointed there is need to

instruct them and get the work done. Directing refers to giving
directions or instructions to employees by motivating them,
supervising the activities of employees, communicating with them.
Managers act as leaders and guide them to right direction, so directing
function includes, supervising, motivating, communicating and
leadership.

(e)Controlling: This is the last function of managers. In this function

managers try to match the actual performance with the planned
performance and if there is no match between both then managers try
to find out the reasons of deviation and suggest corrective measures to
come on the path of plan. Controlling functions refer to all the
performance measurements and follow up actions that keep the actual
performance on the path of plan.

(f) Co-ordination: Co-ordination is concerned with harmonious and

unified action directed toward a common objective. It ensures that all
groups and persons work efficiently, economically and in harmony. Co
ordination requires effective channels of communication. Person-to-
person communication is most effective for coordination.

(g)Communication: It means transfer of information and under

standing from person to person. Communication also leads to sharing
of information, ideas and knowledge.

All managers at all levels of every organization perform these

functions, but the amount of time a manager spends on each one
depends on both the level of management and the specific
organization.

7. Explain the Importance of Coordination.

Ans: The need and importance of coordination can be judged from

three points__

(a)Coordination encourages team spirit: There exists many conflicts

and rivalries between individuals, departments, between a line and
staff, etc. Similarly, conflicts are also between individual objectives
and organizational objectives. Coordination arranges the work and
the objectives in such a way that there are minimum conflicts and
rivalries. It encourages the employees to work as a team and achieve
the common objectives of the organization. This increases the team
spirit of the employees.

(b) Coordination gives proper direction: There are many

departments in the organization. Each department performs different
activities. Coordination integrates (bring together) these activities for
achieving the common goals or objectives of the organization. Thus,
coordination gives proper direction to all the departments of the
organization.

(c)Coordination facilitates motivation: Coordination gives complete

freedom to the employees. It encourages the employees to show
initiative. It also gives them many financial and non-financial
incentives Therefore, the employees get job satisfaction, and they are
motivated to perform better.

(d)Coordination makes optimum utilization of resources:

Coordination helps to bring together the human and material
resources of the organization. It helps to make optimum utilization of
resources. These resources are used to achieve the objectives of the
organization. Coordination also minimizes the wastage of resources in
the organization.

(e) Coordination helps to achieve objectives quickly : Coordination

helps to minimize the conflicts, rivalries, wastages, delays and other
organizational problems. It ensures smooth working of the
organization. Therefore, with the help of coordination an organization
can achieve its objectives easily and quickly.

(f) Coordination improves relations in the organization: The Top

Level Managers coordinates the activities of the Middle Level
Managers and develop good relations with them. Similarly, the Middle
Level Managers coordinate the activities of the Lower Level Managers
and develop good relations with them. Also, the Lower Level
Managers coordinate the activities of the workers and develop good
relations with them. Thus, coordination, overall improves the
relations in the organization.

(g) Coordination leads to higher efficiency: Efficiency is the

relationship between Returns and Cost. There will be higher efficiency
when the returns are more and the cost is less. Since coordination
leads to optimum utilization of resources it results in more returns
and low cost. Thus, coordination leads to higher efficiency.

(h) Coordination improves goodwill of the organization :

Coordination helps an organization to sell high quality goods and
services at lower prices. This improves the goodwill of the
organization and helps it earn a good name and image in the market
and corporate world.

8. Why Coordination is called the Essence of Management ?

Ans: "Co-ordination is the Essence of Management." The meaning of

this sentence implies, Co-ordination affects all the functions of
management. In other words, Co-ordination affects Planning,
Organising, Staffing, Directing, Communication, Leading, Motivating
and Controlling.

(a) Planning and Coordination: According to Harold Koontz and

Cyril O'Donnell, "Planning is deciding in advance what to do, how to
do it, when to do it and who is to do it."

There are many departmental plans in a business. These include,

Purchase Plan, Sales Plan, Production Plan, Finance Plan, etc. All these
plans must be coordinated (brought together) and one Master Plan
must be made for the full business. Therefore, Planning is affected by
Coordination.

(b) Organising and Coordination: There are many steps in

Organising. All these steps must be coordinated, for achieving the
objectives of the business. The Top Level Managers must coordinate
the efforts of the Middle Level Managers. Similarly, the Middle Level
Managers must coordinate the efforts of the Lower Level Managers.
Furthermore, the Lower Level Managers must also coordinate the
efforts of the workers. Therefore, Organisation is affected by
Coordination.

(c) Staffing and Coordination : Staffing involves Recruitment and

Selection, Training, Placement, Promotion, Transfer, etc. All these
steps must be properly coordinated. Similarly, the efforts of all the
individuals, groups and departments must be coordinated for
achieving the objectives of the business. Therefore, Staffing is affected
by Coordination.

(d) Directing and Coordination : Directing means giving necessary

information, proper instructions and guidance to sub-ordinates. This
results in coordination. Therefore, Direction is affected by
Coordination.
(e) Communicating and Coordination: Many types of
communication methods are used in a business. These methods
include, Formal communication, Informal Communication, Upward
Communication, Downward Communication, Oral Communication,
Written Communication, etc. It is important to note that, all these
types of communication must be properly coordinated. Lack of proper
coordination will hinder the smooth functioning of the
communication process. Furthermore, it will also restrict the
important information flow and cause many economic problems to
the business. Thus, Communication is affected by Coordination.

f) Motivating and Coordination: There are many types of Motivation.

These are, Positive Motivation, Negative Motivation, Financial
Motivation, and Non-Financial Motivation. All these types of
Motivation must be properly coordinated. Therefore, Motivation is
affected by Coordination.

(g) Leading and Coordination : Every manager must be a good

leader. He must coordinate the efforts of his subordinates for
achieving the objectives. That is, he must coordinate the human
resource. He must also coordinate the material and financial
resources of the organisation. In short, a leader cannot survive
without coordination. In other words, leadership cannot be performed
without coordination. Therefore, Leadership is affected by
Coordination.

(h) Controlling and Coordination : In Controlling the standards are

first fixed. Then the performances are measured. Performances are
compared with the standards, and the deviations are found out. Then
the deviations are corrected. So, controlling involves many steps. All
these steps must be properly coordinated. If coordination is not
proper, Control will surely fail. Therefore, Control is also affected by
Coordination.
Now we can conclude that all the functions of management are
affected by coordination. Hence coordination is essential for achieving
the objectives of the organisation. It is also required for the survival,
growth and profitability of the organisation. Coordination encourages
team spirit, gives right direction, motivates employees, and makes
proper utilisation" of resources. Therefore, Coordination is rightly
called the "Essence of Management".

9. Explain the Evolution of Management Thought with diagram.

Or

Briefly discuss the various theories of management.

Ans: Management and organization theory may be defined as the

study of structure, functioning and performance of organization and
the behavior of groups and individuals working in the organization.
These theories provide the ground for management activities. Various
theories of management and organization have been evolved. They
may be broadly grouped into three categories, namely

(i) O Classical Theory (upto 1930)

(ii) Neo-Classical Theory (1930-1950)

(iii) Modern Theory (1950 onward) Each of them are discussed below:

(a) Classical Theory: The term "Classical" means something long

established and traditionally accepted. The classical theories are the
beginning of systematic study of management. The classical
management thinkers view an organization as a machine and human
being as different components of that machine. Therefore, this theory
has been termed as machine theory. It is also called the Traditional
Theory of Management. The classical theory is based upon
contributions from a number of sources including
(1) Scientific management of F.W. Taylor.

(ii) Administrative management theory of Henry Fayol.

(iii) Bureaucratic model of Max Weber.

(iv) Micro economics

(v) Public administration

(a) Division of Labor: It is the corner stone among the four elements.

(b) Scalar and Functional Process: They deal with vertical and
horizontal growth of the organization.

(c) Structure: It is the logical relationship of functions in an

organization.

(d) Span of Control: This concept relates to the number of

subordinates that a manager can effectively supervise.The classical
concept represents an important part of management theory. Many of
the classical concepts hold valid even today and provide guidance for
designing of an organization. Criticism of the theory:

However, the points of criticism put forward against this theory are as
follows:

(i) Goal Structure: This was a very narrow approach as it

concentrated more on line and staff structure. It have not expressly
mentioned about the goal structure.

(ii) Decision Making Process: Little attention was paid to the decision
making process.

(iii) Economic concept of Motivation: They have ignored the socio

psychological and motivational aspect of human behavior. For
example, Taylor recognized that workers could be motivated by
money.

(iv) Role structure: Role structure refers to organizational positions

and their interrelationship. Classical theorists have viewed
organizations having no interaction with environment. This
assumption is totally unrealistic.

(b) Neo-classical Theory: Neo-classical management theory has

started its development from the findings of the famous Hawthorne
Experiments. Afterwards, many contributions have been added to this
field. Beside Prof. Elton Mayo, this theory is based on contributions of
behavioral scientists and social scientists as M. P. Follet, C.I. Barnard,
Rensis Likert, A.H. Maslow, Douglas Mc. Gregor and many others.
Rensis Likert, A.H. Maslow, Douglas Mc. Gregor and many others.

The essence of neo-classical theory is contained in two points:

(i) An organization should be viewed in social as well as in economic

and technical terms.

(ii) The social process of group behavior can be understood in terms of

clinical method.

The main propositions of the neo-classical theory are as follows -

(i) The organization is a social system. The social environment of the

job affects people and is also affected by them.

(iii) Informal organization also exists within the formal organization.

(iv) Human being has diverse motivational pattern and try to fulfill
different types of needs.
(v) Communication is necessary as it conveys the feelings and
sentiments of people who work in the organization.

(vi) Team work is essential for co-operation among people.

Neo-classical theory has given a new dimension to the design and

management of the organization. It has recognized such important
factors, which were almost ignored by the classical theory like
informal organization, informal leader, non-economic motivation and
so on. Thus, neo-classical theory has tried to overcome many of the
deficiencies of the classical theory.

This theory is more humanistic. The neo-classicalist has introduced

behavior science in the study of management. The theory laid to the
organizational design and management in the following ways___

(i)This theory suggests flat structure as against tall structure suggested

by classical theory.

(ii) This theory suggests decentralization in organization structure.

(iii) It points out the importance of informal organization. However,

neo-classical theory is not free from its shortcomings. It suffers from
lace of united approach. In fact, it is not a new theory at all. It is mere
modification and extension of the classical model.

(c) Modern Theory: Modern management theories made further

refinement and extension of the classical and neo-classical approaches
to management. These trends started after 1950. Modern management
has made use of various mathematical formulae, statistical tools,
economic models and engineering knowledge to find out solutions to
managerial and decision-making problems. It has also emphasized the
need for study of socio psychological aspects in understanding human
behavior.There are three streams under modern management theory.
(i) Quantitative Approach: The quantitative school of management is
also called "Operation Research" or management science. New
mathematical and statistical tools are being applied in the field of
management, particularly in decision-making on complex problems.
The more commonly used techniques are linear programming, game
theory, simulation and probability. Computer is used to find out
solutions to complex management problems.

(ii) System Approach: It considers an organization as a dynamic

concept. A system approach acknowledges environmental influences,
which were denied by the classical theory. Rigid rules cannot deal
with uncertain and uncontrollable events. An organization influences
the environment or is influenced by it. System approach lays emphasis
on interrelationship and interdependence of all components. It
considers all organization as an open, adaptive system, which has to
adjust to changes in its environment. System approach includes
operation research (OR), behavior sciences, social technical system,
management information system (MIS) and industrial dynamics.

(iii) Contingency Approach: Contingency approach points out that all

types of organization and all types of leadership can work under
certain circumstances. Situational factors play an important role in
designing of an appropriate organization structure and suitable
managerial style. The following factors affect organization structure
and managerial style.

(a) Environment

(b) Technology

(c) People

(d) Size of the organization

Thus, contingency approach suggests that the organization structure,
which integrates the above forces, will be more effective. There is no
"One best way to manage and organize. The successful managerial
decisions depend upon the situations and circumstances in which
such decisions are made. Depending on the type of situation and
contingency, the management would devise appropriate strategies to
adequately handle the situation.

10. Explain the feature and limitations of Classical Approach.

Ans: Classical approach signifies from the following features:

(i) Classical theory concentrate on anatomy of formal organisation

through division of labour, specialization, structure, scalar,
functionalprocesses and span of control.

(ii) Management is the study of managerial experiences. If the

experiences are studied and certain generalizations are deducted
there from, these will help the practicing managers.

(iii) Classical Approach treats organisation as a closed system.

(iv) Formal organisation structure coordinates the activities of the

organisation. They ignored the element of human beings.

(v) Principles and functions of management have universal

application.

(vi) Scientific management emphasized efficiency of lower levels of

organisations.

(vii) Work force were supposed to be rational economic force, they

could be motivated through economic incentives.

(viii) Classical approach emphasized on 'centralization of authority".

The classical approach suffers from several limitations :

(i)The classical ignored the human relations aspects and undermines

the role of human factor.

(ii)Classical viewed organisation as a closed system, i.e., having no

interaction with external environment.

(iii) Economic rewards assumed as the main motivator of work force.

They have ignored non-monetary factors.

(iv) The classical principles are based on managerial experiences and

their limited observations. These are not empirical.

(v) Classical approach is based on oversimplified assumptions. Its

principles are ambiguous and contradictory.

(vi) This school emphasized on strict adherence to rules and

regulations. The scope for individual initiative is thus limited.

11. What is the philosophy of Taylor's Scientific Management?

Ans: The philosophy or principles of Taylor's scientific management

is/are discussed as follows:

(i) Develop a science to replace rules of thumb: Taylor wanted to

term management as a science. He, therefore, recommended that
every activity of an organization must rest on well-organized, clearly
defined principles instead of depending on more or less hazy ideas.
Every manager must develop and use scientific methods rather than
intuition and expertise to find out the best way of doing every activity
in an organization.

(ii) Labor-management co-operation: Taylor regarded co-operation

between workers and management as the heart of scientific
management. Through co-operation of all, managers can get the things
done in the best and cheapest way. This will ultimately contribute to
the welfare of the society as a whole.

(iii) Maximization of output or production: Taylor believed in

maximum output instead of restricted output. It is because the
prosperity for both employer and employees could be achieved only
through maximizing productivity.

(iv) Equal division of responsibility: There should be equal division

of responsibility between managers and workers. Managers must
fulfill their responsibility of planning and organizing effectively. On
the other hand, workers must fulfill their responsibility by executing
the work as per the directions of the bosses.

(v) Job specialization: Taylor believed that each worker should be

specialist in his job. At the same time, different specialist supervisors
must supervise each worker. For this, Taylor introduced the concept of
functional foremanship.

(vi) Scientific selection, training and development of workers:

Taylor realized the importance of right person for the right job to
attain highest efficiency. He, therefore, stressed the need for proper
selection and training of the workers. He suggested that tests should
be used to determine the suitability of a person for a particular job.

(vii) Planning and scheduling of work: Taylor believed that

everything in the organization should be done by plan. Therefore
daily as well as yearly plans should be prepared. Plans must be
prepared for individual worker as well for the organization as a
whole. Moreover, scheduling for getting people and the materials at
the right place, right time, and proper condition should be done.
(viii) Standardization: Taylor believed standardization of methods,
tools, time, materials etc. for each activity is very important.
Therefore, standardsshould be fixed for each of them.

(ix) Wage incentives: Taylor believed that wage incentives should be

integral part of each job. Taylor suggested the differential wage rates
for different jobs. According to these rates workers to receive a bonus
in addition to normal wages if they did their job before the standard
time fixed for the job.

(x) Mental revolution: Taylor firmly believed that the principles of

scientific management could succeed only when there is a complete
mental revolution on the part of management and worker. In other
words, both the parties should change their mental attitudes. For this,
he suggested the following three things:

(i)They must create a spirit of mutual trust and confidence.

(ii)Both must make efforts to increase production and productivity.

(iii)Both must develop a scientific attitude towards the work and

should not leave their arbitrary approach. Thus the mental revolution
requires change in the attitudes of both. Management must create
congenial working conditions and develop best methods and looks for
optimum efficiency of the workers. On the other hand, workers should
also the review the working habits as well as the attitude towards the
management and problems of the organization. They should not
indulge in strikes and wastage of resources. Both should trust each
other. This will result in increased production, productivity and
profitability with which both will be benefited.

12. Discuss the various Techniques of Scientific Management.

Ans: In order to blend philosophy and principles of scientific
management into practice, Taylor developed the following techniques
or mechanism :

(a) Scientific task setting: Taylor suggested that the task of every
worker for every day should be determined through scientific
investigation. Taylor called it "a fair day's work". Every manager must
know in advance the fair day's work for each worker. The day's work
should neither be higher than the average capacity of the workers nor
lower than the capacity of the worker for whom work is determined.

(b) Experimentation or work-study: The work for each worker must

be determined through proper experiments or work-study. Work
study means organized, systematic and objective analysis and
assessment of the operational efficiency of all the elements connected
with the work The main areas of work-study are as follows:

(i) Method Study: It is a survey of production process. It aims

toevolve the best method of doing a particular job by simplifying the
productionprocess, methods, tools etc.

(ii)Motion Study: Motion study relates to the study of movements ofa

worker or a machine in doing a job. It aims at eliminating
unnecessarymotions and to find out the best method of doing a job
efficiently. Thisresults in conservation of energy and increased
efficiency and productivityof the resources.

(iii) Time Study: Time study is the process of recording the exact time
taken for doing a job with a view to find out a standard time for doing
the job.

(iv) Fatigue Study: Fatigue study is the study of the reduction of

human energy or capacity in doing his job. Fatigue is caused by over-
work without rest, poor working conditions, stress, strain etc.
(c) Planning: Taylor advocated that planning function should
beseparate from the doing function. Planning department should
decide aboutthe type, shape and quality of the goods to be produced
and the timeschedule for delivery of the products. It should also
prepare detailedinstructions for the workers as to quality, quantity
and shape of productsand time schedule of production. Nothing
should be left for workers toplan.

(d) Scientific selection and training of workers: Taylor realizedthe

importance of the right person on the right job. Therefore, he advised
for proper selection of the workers and their training. Tests and
interview should be used to judge the suitable person on the job.
Scientifically selected persons should be trained to use scientific
methods of doing jobs.

(e) Specialization: Taylor suggested that scientifically selected and

trained workers should be allocated the tasks according to their
specialization. Moreover, different functional bosses must supervise
each worker.

(f) Standardization: Taylor advocated for standardization of

materials, tools, equipments, methods etc. Standardized working
environment should also be provided to the workers. Standardization
will increase efficiency.

Management Principle and Application Unit 1: Introduction Notes For

B.com 3rd Semester

13. What are benefits and limitations of Scientific management?

Ans: Taylor's scientific management has been regarded very

important contributions on the following grounds or benefits
(i) It promotes the use of scientific methods in place of traditional rule
of thumb method. It promotes co-operation between management and
workers.

(iii) It encourages having right persons on the right job through

scientific selection and training.

(iv) It promotes standardization of products through standardized

material, tools, techniques, methods etc.

(v) It promotes better utilization of resources through proper

planning, scheduling, cost accounting etc.production.

(vi) It helps maximizing production and productivity in place of

restricted (vii) It motivates people to work by using the incentive wage
payment systems.

(viii) It helps to provide goods at lower prices by eliminating or

minimizing wastage and inefficiency.

(ix) People get better quality of products. Owners get more profits.

(xi) As a resuit of all the above facts, the society and nation as a whole
is benefited.

_Criticism : Taylor's scientific management or Taylor's contribution

has been criticised by some of the employers, workers and
academicians. It is due to the following limitations of the scientific
management:

(i) Production-Centered: Scientific management is production

centered management. It lays emphasis on production aspect of
management. It ignores almost all other areas of management such as
finance, marketing, accounting etc. Peter Drucker, March and Simon
have also criticised it on the ground that it neglects highly important
areas of problem solving.

(ii) Neglect of human aspect: Workers, trade owners, psychologists

usually criticise this that it neglects human aspect or lacks human
face. They allege that it forces the worker to over speed the work.
Moreover, it renders the work monotonous. Even the wages of the
workers do not increase in proportion of increase in production. It,
therefore, leads to loss of worker's initiative and skills.

(iii) Wrong assumptions: Behavioural scientists have criticised

scientific management for its wrong assumptions. Scientific
management assumes that workers are rational economic beings and
cannot plan. This is not fair. One expert has gone to the extent of
saying that "Taylor has deduced a God-given right of planning".
Behaviour scientists argue that workers are human beings and can
effectively plan their activities.

(iv) Over-specialization: Scientific management is also criticised for

over-specialization. Allocation of work is made on the principle of
division of labour. Moreover, supervision system under this
management is based on the principle of specialization i.e. functional
foremanship. This leaves little freedom to workers in their job.

(v) Theoretical: Scientific management is more theoretical than

applied science. For instance, it suggests for separation of planning
function from 'doing' or execution function. Thus, scientific
management does not expect and allow workers to think.

(vi) Restricted application: Scientific management techniques can be

applied to production activities at the supervisory level. These cannot
be successfully applied to the activities at higher level of management.
Moreover, these techniques cannot be applied the activities of service
sector.
(vii) Anti-social: Dr Myers regards that scientific management is anti
social because it aims at excluding as for as possible the average man

(viii) It is an approach only: Some academicians' object to call it

scientific management. They say it is simply a scientific approach to
management..

In the light of above stated facts for and against scientific

management, it may be concluded that it can be useful approach for
managing shop floor level activities.

14. Describe the contribution of Fayol to management?

Ans: Henry Fayol (1841-1925) was a French mining engineer and chief
executive officer of a coal mine company. He propounded the
administrative or functional theory of management. He first expressed
his views in 1900 at the international mining and metallurgical
congress. Then he presented his theory in a book entitled
Administration Industrially it General in French language in 1915.
Later, it was translated into English as General and Industrial
Management in 1929. Fayol's contribution may be discussed under the
following heads.

(a) Classification of business activities: Fayol classified all activator

of a business organization into the following six groups:

(i) Technical activities consisting of production or manufacturing.

(ii) Commercial activities consisting of buying, selling and exchange.

(iii) Financial activities relating to search for and optimum use of

capital.

(iv) Security activities relating to protection of property and persons.

(v)Accounting activities relating to maintenance of accounts,caves
hantion not and statistics.

(vi) Administrative activities relating to the planning organizing,

commanding, co-ordinating and controlling.

(b) Elements of administration or management functions: Fayol

costing described five elements of administration or management
functions.

Theyare as follows:

(i) Planning, consisting of activities for making plans to achieve goal

of the organization. This function includes forecasting and decision-
making.

(ii) Organizing, consisting of activities necessary for mobilizing

human and other resources of the organization to implement the
plans.

(iii) Commanding which consists activities relating to directing,

leading, motivating and communicating for getting things done.

(iv) Co-ordinating, which is concerned with activities necessary for

harmonizing the efforts of all in order to achieve a common goal.

(v) Controlling which is concerned with ensuring performance in

accordance with plans.

(c) Principles of management: Fayol proposed fourteen principle.of

management. He believed that these principles should guide the
thinking of managers in doing their job.

The principles are as follows: (i) Division of labour.(ii)Authority and

Responsibility.(iii) Discipline.(iv) Unity of Command.(v) Unity of
direction.(vi) Subordination of Individual interest to the common
interest.(vii) Remuneration. (viii) Centralization.(ix) Scalar chain.
(x)Order.(xi) Equity.(xii) Stability of tenure of personnel.(xiii) Initiative
and(xiv) Esprit de corps.

(d) Flexible and adaptable principles: Fayol made it clear that the
principles of management are flexible and adaptable to every need.
The managers must be flexible in applying them because these
principles are hardly ever used twice in the same way due to the
changing conditions

(e)Universal Principles: He believed that principles of management

are universally applicable. The principles are applicable in all
organizations large or small, industrial, commercial, political,
religions, or any other. Moreover, he assumed that all the managers
perform the same basic functions. This was the basic assumption of
Fayol's work.

(f) Qualities of manager: Fayol also stressed the need for learning
and developing certain skills by managers. According to him a
manager should possess the following qualities:

(i) Physical qualities i.e. good health, vigor and vitality. (ii) Mental
qualities i.e., ability to learn, and to apply the knowledge.(iii) Moral
qualities i.e., energy, firmness to accept responsibility, ability to take
initiative, loyal etc.(iv) Educational qualities i.e., general education and
knowledge ofmatters not belonging to his job. (v) Technical or
professional qualities i.e., ability to perform his job efficiently. (vi)
Experience, i.e. knowledge arising from doing the job over the time.(g)
Management education and training: Fayol realised the need for
management education and training. He strongly pleaded for
introducing management education and training in schools and
universities. He also suggested for conducting organizational "in
house' training programmes... He preferred it over on the job
experience method of learning and training

15.Discuss the principles of management given by Fayol? Henry

Fayol, who is recognized as the father of modern theory o agement
formulated a set of 14 principles. They are as follows:

(i) Division of Work or specialization: Fayol's first principle related

to division of work. Taylor and some economists call it the principle of
specialization.

The principle of division of work states that the total work should be
sub divided into small components/parts and each part of the work
should be allocated to the worker who specializes in that part of the
work.

(ii) Authority and responsibility: Authority creates responsibility.

Whenever, a person exercise authority, responsibility arises.
Responsibility is the essential counter part of authority. Therefore, this
principle states that authority and responsibility must go together.
Moreover, there must be parity of authority and responsibility.

(iii) Discipline: According to Fayol, discipline is absolutely essential of

the smooth running of business. Without it no business can prosper.
He believed that discipline results from these things:

(a) Good leadership at all levels of the organization.

(b) Fair agreement between the firm and its employees.

(c) Fairness in the application of penalties. He also believed that

punishment should be rarely awarded.

(iv) Unity of Command: The principle of unity of command states

that each subordinate should receive orders from only one boss or
superior. It is because an individual cannot serve two bosses at the
same time. When an employee gets orders and instructions from more
than one boss, confusion and conflict tend to arise.

(v) Unity of direction: The principle of unity of direction states that

there should be "one head and one plan" for a group of similar
activities having the same objective. It means that only one manager
must direct similar activities under a particular plan. This will ensure
unity of action and result in sound organization structure.

(vi) Subordination of individual interest to general interest: This

principle states that the interest of one employee or a group of
employees should not prevail over the interest of the organization as a
whole.

(vii) Remuneration: Fayol stressed that the remuneration or

compensation for work done should be fair to both employees and the
firm. It should neither be low nor high. The mode of payment day-
rate,piece-rate, profit sharing etc. should depend on the specific
circumstances but it should satisfy both the employees and employers.

(viii) Centralization: Decreasing the role of subordinates in decision

making is centralization of authority and increasing their role in it is
decentralization of authority. Fayol believed that managers should
retain final responsibility but should at the same time give their
subordinates enough authority to do their job properly. Thus, a
balance between centralization and decentralization should be
maintained.

(ix) Scalar chain or hierarchy of authority: Scalar chain refers to

the unbroken chain or line of authority running from the top
management to the lowest levels of the organization. This is also
known as hierarchy of authority.
Fayol realized that sometimes it becomes absolutely essential to short
circuit the chain of command or to depart from the prescribed route
with a view to ensure communication fast and effective. In such a
case, gang plank should be used. Fayol's gang-plank allows two
individuals to deal directly with each other without weakening the
chain of command. Fayol's gang-plank concept is shown in Figure.

16. Describe the Bureaucratic Model of Max Webber.

Ans: Bureaucratic organization, in Webber's views, is the most

efficient form of organization. He names it as rational legal. It is
rational because specific objectives of the organization are laid down
and organization is designed to achieve them and it is legal because
authority stemmed from a clearly defined set of rules, procedures and
roles. According to Webber, "a bureaucracy is a highly structured,
formalized, and impersonal organization."

Webber's bureaucratic model included the following:

(i) There is clear separation between superior and subordinate.

(ii)There is a division of labour based upon compliance and functional

specialization.

(iii)There is a clear divorce between pe. onal and official matters.

(iv)There is a system of rules, regulations and rocedures.

(v) There is a hierarchy in positions based on legal authority and

power. Webber's model will be preferred in those organizations
where change is not anticipated or where rate of change can be
predicted. Large business houses and government departments use
this type of organization. Webber is credited for attempting
classification of organization for the first time Of course, Webber's
model suffers from certain limitations. It has rigidity, impersonality,
excessive cost of control, and excessive dependence on superiors,
tendency to ignore organizational goals. Some critics say that this
approach destroys individual creativity and the flexibility to respond
to compels changes in the global environment. Inspite of certain
limitations this model is very useful in large organizations. The
principal characteristics of bureaucracy are strict division of labour,
adherence to formal rules and regulations, and impersonal
application of rules and controls.

17. Write an essay on Hawthorne Experiments.

Ans: Harvard university research team conducted a series of studies.

George Elton Mayo, F.J Roethlisberger, W.J. Diction and other were the
conducted at Hawthorne plant of the Western Electric Company,
Chicago (USA) between 1924 and 1932. In all, the following four
studies were conducted at the Hawthorne plant -

(i) Illumination or test room study: The illumination study was

conducted to determine the relationship between light intensity and
productivity or efficiency of workers. For this purpose, three different
experiments were conducted in which researchers changed light
intensity. Researchers were surprised to note that productivity of
select group of employees tended to improve inspsite of the change in
their physical surroundings. Productivity increased even when the
lights were dimmed to moonlight intensity. Therefore, they concluded
that lighting was a minor factor affecting the productivity of workers.

(ii) The relay assembly test room study: The relay assembly test
room study was conducted to ascertain the factors other than the light
intensity, affecting the productivity. In this study six persons (five girl
assemblers and a layout operator) were placed in a room. In addition,
the researchers put an observer with them in the room. The observer
was to record everything that happened in the room and to maintain
friendly atmosphere therein. The researchers changed working
conditions such as rest periods, length or workdays, refreshments,
temperature, wage rates etc. during the study. In addition, girls were
allowed to talk more freely among themselves. With the introduction
of each change, productivity increased. Then researchers decided to
return to the original conditions of work. They were surprised to note
that productivity continued to rise. Therefore, they concluded that
most likely cause of higher productivity was the change in social
situations on the work group. They also noted that the test room
observer had become de Facto supervisor who created a more relaxed
social environment. Therefore, in order to ascertain the true factors
involved in the productivity, a massive interviewing study programme
was initiated.

(iii) Mass interviewing study: The third study was the mass
interviewing programme. Under this programme over 21,000
employees at the Hawthorne plant were interviewed over a period of
three years. Initially, employees were directly asked about the
supervision, company policies, the work environment i general etc.
But employees often gave guarded and stereo typed answ... Thus, it
became quickly clear that the employees do not want to answer such
questions.

The researchers, therefore, switched indirect questioning. Under this

approach, the employees were allowed to talk about what they felt
important. The interviewers patiently heard their views.
Consequently, a plethora of useful information could be gathered. The
researchers reached to the conclusion that work performance and
individuals status in the organization are determined not by the
person himself but by his group members as well. His peer also affects
his performance. Moreover, personal problem also have an effect on
the feelings about his job.
(iv) Bank wiring observation room study: In order to observe and
analyse informal group behaviour more accurately, bank wiring
observation room study was undertaken. This study was conducted in
a room of the bank-wiring department. In this room, 14 employees
performing three interrelated jobs of the department were placed. An
observer was also deputed in the room for watching and recording the
activities and behaviour of the group. Without interacting with the
group. The observation and recording continued for six months.

18. Explain the conclusions and limitations of Hawthorns studies.

Ans: The main conclusions or contributions of Hawthorne studies are

as follows:

(i) Work is a group activity: Mayo concluded that work is a group

activity workers work better in groups.Informal groups: Workers form
internal informal social groups.Such groups may not be based on their
occupation.

(iii) Influence of social groups: The informal social groups within the
work place greatly affect the behaviour and productivity of individual
worker.

(iv) Norms by social groups: The social group determines informal

'norms' or standards of work, which are lower than the official norms.
The members of the group usually follow the same. Thus informal
groups exert strong control over the workers at work.

(v) Group co-operation is planned: Group cooperation or

collaboration does not occur accidentally. It must be planned and
developed.

(vi) Worker is not only relational economic being: A worker is not

only a rational economic being. He is not motivated solely by
monetary means. His social needs have a powerful influence on his
behaviour and productivity. Therefore, satisfaction of social needs
plays a crucial role in motivating workers.

(vii) Role of supervisor's behaviour: The behaviour of supervisors

does affect the behaviour of workers, when supervisors provide a
more relaxed work environment, by paying special attention to the
workers social situation changes. That change increases productivity.
Thus situation was labeled as "Hawthorne effect."

(viii) Communication: Free flow of communication affects the

attitude of workers towards work. It ultimatums results in greater
cooperation and participation of workers in decision-making.

(ix) Complaints may not be statements of facts: Complaints are not

always objective statements of facts. They are often symptoms of deep-
seated discontent and dissatisfaction.

(x) Birth of human relations movement: The most important

contribution of the Hawthorne studies is that it gave rise to the
'Human Relations Movement'. Human relations movement caused
managers to lay more and more emphasis on social needs of the
workers.

19. Write about the implications of Hawthorne Experiments?

Ans. Following are the implications of Hawthorne experiments:

(i)Social factors in output: An organisation, according to Hawthorne

experiments is basically influenced by social factors. Since people are
social beings, their social characteristics determine the output and
efficiency in the organisation.

(ii) Group influence: Workers being social beings, they create groups
which may be different from their official group. In fact, groups are
formed to overcome the shortcomings of formal relationship. So, there
is group. influence in an organisation

(iii) Conflicts:-The informal relations of workers create groups

andhere may be conflict between organisations and groups so created.

(iv) Leadership: Leadership is important for directing group

behaviour and this is one of the most important aspects of managerial
functions. In accordance with this approach, a superior is more
acceptable as a leader.

(v) Supervision: Supervision is an important aspect in determining

efficiency and output. Friendly to the workers, attentive, genuinely
concerned supervision affects the productivity favourably.

(vi) Communication: A better understanding and communication is

essential between management and workers. It can be developed by
identifying their attitudes, opinions and methods of working and
suitable actions on these.

20. What is System Approach to Management? Write its features.

Ans: In the 1960, an approach to management appeared which try to

unify the prior schools of thought. This approach is commonly known
as *Systems Approach'. Its early contributors include Ludwing Von
Bertalanfty, Lawrence J. Henderson, W.G. Scott, Deniel Katz, Robert L.
Kahn, W. Buckley and J.D. Thompson.

They viewed organisation as an organic and open system, which is

composed of interacting and interdependent parts, called subsystems.
The system approach is top took upon management as a system or as
"an organised whole" made up of sub- systems integrated into a unity
or orderly totality.
Systems approach is based on the generalization that everything is
inter related and inter-dependent. A system is composed of related
and dependent element which when in interaction, forms a unitary
whole. A system is simply an assemblage or combination of things or
parts forming a complex whole.

One its most important characteristic is that it is composed of

hierarchy of sub-systems. That is the parts forming the major system
and so on. For example, the world can be considered-to be a system in
which various national economies are sub-systems.

In turn, each national economy is composed of its various industries,

each industry is composed of firms' and of course a firm can be
considered a system composed of sub-systems as production,
marketing, finance, accounting and so on.

Features of Systems Approach:

(i) A system consists of interacting elements. It is set of inter-related

and inter-dependent parts arranged in a manner that produces a
unified whole.

(ii) The various sub-systems should be studied in their inter-

relationships rather, than in isolation from each other.

(iii) An organisational system has a boundary that determines which

parts are internal and which are external.

(iv) A system does not exist in a vacuum. It receives information,

material and energy from other systems as inputs. These inputs
undergo a transformation process within a system and leave the
system as output to other systems.

(v) An organisation is a dynamic system as it is responsive to its

environment. It is vulnerable to change in its environment.
(vi) In the systems approach, attention is paid towards the overall
effectiveness of the system rather than the effectiveness of the sub
systems.

(vii) Systems theory is useful to management because it aims at

achieving the objectives and it views organisation as an open system..
Chester Barnard was the first person to utilize the systems approach
in the field of management.

21. Write the Steps In Management By Objectives.

Ans: Steps In Management By Objectives are :

(i) Goal setting: The first phase in the MBO process is to define the
organizational objectives. These are determined by the top
management and usually in consultation with other managers. Once
these goals are established, they should be made known to all the
members. In setting objectives, it is necessary to identify "Key-Result
Areas' (KRA).

(ii)Manager-Subordinate involvement: After the organizational

goals are defined, the subordinates work with the managers to
determine their individual goals. In this way, everyone gets involved
in the goal setting.

(iii) Matching goals and resources: Management must ensure that

the subordinates are provided with necessary tools and materials to
achieve these goals. Allocation of resources should also be done in
consultation with the subordinates.

(iv) Implementation of plan: After objectives are established and

resources are allocated, the subordinates can implement the plan. If
any guidance or clarification is required, they can contact their
superiors.
(v) Review and appraisal of performance: This step involves
periodic review of progress between manager and the subordinates.
Such reviews would determine if the progress is satisfactory or the
subordinate is facing some problems. Performance appraisal at these
reviews should be conducted, based on fair and measurable
standards.:

(vi) Goal setting: The first phase in the MBO process is to define the
organizational objectives. These are determined by the top
management and usually in consultation with other managers. Once
these goals are established, they should be made known to all the
members. In setting objectives, it is necessary to identify "Key-Result
Areas' (KRA).

(vii) Manager-Subordinate involvement: After the organizational

goals are defined, the subordinates work with the managers to
determine their individual goals. In this way, everyone gets involved
in the goal setting.

(viii) Matching goals and resources: Management must ensure that

the subordinates are provided with necessary tools and materials to
achieve these goals. Allocation of resources should also be done in
consultation with the subordinates.

(ix) Implementation of plan: After objectives are established and

resources are allocated, the subordinates can implement the plan. If
any guidance or clarification is required, they can contact their
superiors.

(x) Review and appraisal of performance: This step involves

periodic review of progress between manager and the subordinates.
Such reviews would determine if the progress is satisfactory or the
subordinate is facing some problems. Performance appraisal at these
reviews should be conducted, based on fair and measurable
standards.

Management Principle and Application Unit 1: Introduction Notes For

B.com 3rd Semester

22. Explain the Advantages of Management By Objectives MBO.

Ans: Advantages of Management By Objectives MBO :

(i) Develops result-oriented philosophy: MBO is a result-oriented

philosophy. It does not favor management by crisis. Managers are
expected to develop specific individual and group goals, develop
appropriate action plans, properly allocate resources and establish
control standards. It provides opportunities and motivation to staff to
develop and make positive contribution in achieving the goals of an
Organisation.

(ii) Formulation of dearer goals: Goal-setting is typically an annual

feature. MBO produces goals that identify desired/expected results.
Goals are made verifiable and measurable which encourage high level
of performance. They highlight problem areas and are limited in
number. The meeting is of minds between the superior and the
subordinates. Participation encourages commitment. This facilitates
rapid progress of an Organisation. In brief, formulation of realistic
objectives is me benefit of MBO.

(iii) Facilitates objective appraisal: MBO provides a basis for

evaluating a person's performance since goals are jointly set by
superior and subordinates. The individual is given adequate freedom
to appraise his own activities. Individuals are trained to exercise
discipline and self control. Management by self-control replaces
management by domination in the MBO process. Appraisal becomes
more objective and impartial.
(iv) Raises employee morale: Participative decision-making and two
way communication encourage the subordinate to communicate
freely and honestly. Participation, clearer goals and improved
communication will go a long way in improving morale of employees.

(v) Facilitates effective planning: MBO programmes sharpen the

planning process in an Organisation. It compels managers to think of
planning by results. Developing action plans, providing resources for
goal attainment and discussing and removing obstacles demand
careful planning. In brief, MBO provides better management and
better results.

(vi) Acts as motivational force: MBO gives an individual or group,

opportunity to use imagination and creativity to accomplish the
mission. Managers devote time for planning results. Both appraiser
and appraise are committed to the same objective. Since MBO aims at
providing clear targets and their order of priority, employees are
motivated.

(vii) Facilitates effective control: Continuous monitoring is an

essential feature of MBO. This is useful for achieving better results.
Actual performance can be measured against the standards laid down
for measurement of performance and deviations are corrected in
time. A clear set of verifiable goals provides an outstanding guarantee
for exercising better control.

(viii) Facilitates personal leadership: MBO helps individual

manager to develop personal leadership and skills useful for efficient
management of activities of a business unit. Such a manager enjoys
better chances to climb promotional ladder than a non-MBO type.

23. Explain the Limitations of Management By Objectives MBO

Ans: Limitations of Management By Objectives MBO :

(i) Time-consuming: MBO is time-consuming process. Objectives, at
all levels of the Organisation, are set carefully after considering pros
and cons which consumes lot of time. The superiors are required to
hold frequent meetings in order to acquaint subordinates with the
new system. The formal, periodic progress and final review sessions
also consume time.

(ii) Reward-punishment approach: MBO is pressure-oriented

programme. It is based on reward-punishment psychology. It tries to
indiscriminately force improvement on all employees. At times, it may
penalize the people whose performance remains below the goal. This
puts mental pressure on staff. Reward is provided only for superior
performance.

(iii) Increases paper-work: MBO programmes introduce ocean of

paper-work such as training manuals, newsletters, instruction
booklets, questionnaires, performance data and report into the
Organisation. Managers need information feedback, in order to know
what is exactly going on in the Organisation. The employees are
expected to fill in a number of forms thus increasing paper-work. In
the words of Howell, "MBO effectiveness is inversely related to the
number of MBO forms.

(iv) Creates organizational problems: MBO is far from a panacea for

all organizational problems. Often MBO creates more problems than it
can solve. An incident of tug-of-war is not uncommon. The
subordinates try to set the lowest possible targets and superior the
highest. When objectives cannot be restricted in number, it leads to
obscure priorities and creates a sense of fear among subordinates.
Added this, the programme is used as a 'whip' to control employee
performance.
(v) Develops conflicting objectives: Sometimes, an individual's goal
may come in conflict with those of another e.g., marketing manager's
goal for high sales turnover may find no support from the production
manager's goal for production with least cost. Under such
circumstances, individuals follow paths that are best in their own
interest but which are detrimental to the company.

(vi) Problem of co-ordination: Considerable difficulties may be

encountered while coordinating objectives of the Organisation with
those of the individual and the department. Managers may face
problems of measuring objectives when the objectives are not clear
and realistic.

(vii) Lacks durability: The first few go-around of MBO are

motivating. Later it tends to become old hat. The marginal benefits
often decrease with each cycle. Moreover, the programme is
deceptively simple. New opportunities are lost because individuals
adhere too rigidly to established goals.

(viii) Problems related to goal-setting: MBO can function

successfully provided measurable objectives are jointly set and it is
agreed upon by all. Problems arise when: (a) verifiable goals are
difficult to set (b) goals are inflexible and rigid (c) goals tend to take
precedence over the people who use it (d) greater emphasis on
quantifiable and easily measurable results instead of important
results and (e) over-emphasis on short-term goals at the cost of long-
term goals.

(ix) Lack of appreciation: Lack of appreciation of MBO is observed at

different levels of the Organisation. This may be due to the failure of
the top management to communicate the philosophy of MBO to entire
staff and all departments. Similarly, managers may not delegate
adequately to their subordinates or managers may not motivate their
subordinates properly. This creates new difficulties in the execution of
MBO programme MBO.

24. Give some Suggestions for Improving the Effectiveness of MBO

Ans :Inspite of having the above problems, the MBO may be improved
subject to maintaining the following suggestions.

(i) Top Management Support: It important to secure top

management support and commitment. Without this commitment,
MBO can never really be a success. The top managers and their
subordinates should all consider themselves as players of the same
team. This means that the superiors must be willing to relinquish and
share the necessary authority with subordinates.

(ii) Objectives should be Clearly Formulated: The objectives should

be clearly formulated should be realistic and achievable. For example,
it is not realistic for the R & D department of an organisation to set a
goal of, say 10 inventions per year. These goals should be set with the
participation of the subordinates. They must be properly
communicated, clearly understood and accepted by all MBO works
best when goals are accepted.

(iii) Should be an Overall Philosophy of Management: MBO should

be an overall philosophy of management and the entire organisation,
rather than simply a divisional process or a performance appraisal
technique, MBO is a major undertaking and should replace old
systems rather than just being added to it. Felix M. Lopex has
observed, "when an organisation is managed be objectives, it becomes
performance oriented. It grows and it develops and it becomes socially
useful."

(iv) Continuously Reviewed: The goals must be continuously

reviewed and modified as the changed conditions require. The review
technique should be such that any deviations are caught early and
corrected.

(v) Formal Training: All personnel involved should be given formal

training in understanding the basis as well as the contents of the
program such education should include as to how to set goals, the
methods to achieve these goals, methods of reviews and evaluation of
performance and provisions to include any feedback that may be
given.

(vi) Organisational and Psychological Principles: MBO system is a

major undertaking based upon sound organisational and
psychological principles. Hence it should be totally accepted as a style
of managing and should be totally synthesized with the organisational
climate. All personnel involved must e a clear understanding of their
role authority and their expectations. The system should be absorbed
totally be all members of the organisation.

25. Explain Business Process Reengineering (BPR) by Michael

Hammer & James Champy.

Ans: Continuous improvement had been around for a long time. And
that simply built on generations of work to improve the way
businesses do things, going back to the Gilbreths and Taylor. But in
1990, a Harvard

Business Review article exploded the idea of incremental change, with

its provocative title: Reengineering Work: Don't Automate, Obliterate.
It was written by an MIT engineer called Michael Hammer. And three
years later, the revolution was well underway, with a book he wrote
with top management consultant, James Champy. Reengineering the
Corporation: A Manifesto for Business Revolution was as much a
rallying cry for the consulting industry as anything else. But in the few
years that followed, hundreds of companies employed thousands of
consultants to reengineer their processes and, in so-doing, remove
tens of thousands from their workforces.A company can get
competitive advantage if it can improve its customer service or reduce
its operating costs. Continuous improvement methodologies like time
and motion studies, and the Japanese Kaizen, had done this for years.
But reengineering is a methodology for rebuilding the way a company
does things - its business processes - from scratch.

In particular, it emphasizes removing whole processes that do not

deliver value. The result of this radicalism was obvious in hindsight,
though not what Hammer and Champy intended. Companies not only
reduced the scope of processes and found significant shortcuts; they
removed whole cadres of staff who had previously carried out the
tasks that were no longer needed.

The two principle effects of the 1990s' obsession with reengineering

were substantial layoffs and redundancies (described by the now-
infamous euphemism 'downsizing') and a bean-feast of highly paid
work for armies of recently graduated consulting analysts at all of the
big consultancies.

By the end of the 1990s, the reengineering bubble had burst, to be

replaced by a second wave of technology enhanced cost-saving under
the guise of another three letter acronym (TLA): Enterprise Resource
Planning, or ERP.

-00000-

CONTENTS

Unit - 1 Introduction

Unit - 2 Planing
Unit - 3 Organising

Unit - 4 Staffing and Leading

Unit - 5 Controlling

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