C H A P T E R 1 - FUNDAMENTALS OF MANAGEMENT

Objectives
At the end of the chapter, you will be able to understand meaning and definitions,
functions and importance of management and you will start giving a serious
thought to becoming a good manager.

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Structure
1.1 My dear students, a warm and hearty welcome to all of you!
1.2 Introduction to Management
1.3 Meanings and Definitions of Management
1.4 Management as a Process, coordination, and function
1.5 Five M’s in the business
1.6 Activities for the students
1.7 Necessity of Management and SMART Goals
1.8 Activities for the students
1.9 Functions of Management
1.10 Importance of Management
1.11 Conclusion of the chapter
1.12 Summary
1.13 Self-Assessment Questions
1.14 Multiple Choice Questions

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1.1 My dear students, a warm and hearty Welcome to all of you!

According to Peter F. Drucker, the emergence of Management as an essential, a

distinct and leading social institution is a pivotal event in social history. Rarely has
a new basic institution, a new leading group, emerged as fast as Management since
the turn of this century. Rarely in human history has a new institution proved
indispensable so quickly and even less often has a new institution arrived with so
little opposition, so little disturbance and so little controversy.

PETER F. DRUCKER,
American Management
Consultant, Educator, and Author

My young friends, you are welcome to this institution of Management, the career
in which will certainly prove not only fruitful in your personal as well as
professional life, but also will enhance the meaningfulness and joy of living the life.
Management is an art. It is in the sense of possessing managing skill by an
individual. Management is science too. It involves developing certain principles or
laws applicable in a place where a group of activities are coordinated.
All of you would certainly like to master this art as well as science of
Management. Further, leadership qualities are developed in the persons who are
working in the top-level management. According to Ralph C. Davis, Management
is the function of executive leadership everywhere. I am sure, all of you would be
dreaming to become a successful leader.
Management has been developed as a career par excellence. It is focused on certain
specialization. Specialists are appointed in key posts of top management. I am
sure you would like to be one of them.
Therefore, come one, come all, and let us roam around in this wonderful garden
of Management!

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1.2 Introduction to Management

The subject of Principles of Management is the backbone of your course.

Application of these principles into action in your life as well as on your
workplace, every day, correlating these principles with your personal life situations
is called internalization. The best way to learn any subject is to internalize it.
This subject has a tremendous self-development potential. Learn this subject, put
it into your system, convert the concept into experience, convert abstract into
concrete by systematic approach. It will improve your thinking process. You should
ask yourself, “Am I managing my life daily?”, “Have I added values to myself ?”,
“Have I set up any goals for me to achieve?” This thinking process will take you a
long way. You will put your learning into action; utilize your resources in the best
possible way. Those who have consciously applied this learning in their lives have
benefitted tremendously and have made major changes in their lives.
Management involves a set of processes that come into play whenever we want to
achieve something, that is, our preset goal, by thinking process and utilizing the
inputs such as man, machine, materials, money etc. in a coordinated fashion.
Our life is full of activities through which we constantly try to achieve something.
Some people want to get admission to school for their children, some people want
to get into a better job, and some people want to find their life partner. While
doing this, due to lack of systematic approach, they are in a chaotic situation. This
is because principles of management are not the part of their life. Once you start
practicing these principles, your life rocks. We can solve complex problems by
systematic approach. Every input from principles of management helps us to have
a relook at our life.
Before we dream to become a manager, we have to learn to self-manage our
personal life situations. Convert learning into thoughts and action by systematic
approach, internalization, focusing on the goals to begin with.
Every activity becomes meaningful when it has a purpose, direction and GOAL.
For example, if we are managing an event like marriage ceremony, while
performing various activities like booking of hall, sending invitations, receiving
guests and putting them into hotels etc., we must ensure that proper time table,
schedule, allocation of work to various persons are done systematically and in
time. Otherwise, we will be stressed and then will make mistakes because of
leakage of energy.

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The advantages of learning Principles of Management are:
• Our life gets focus and direction
• We know better how to plan and organize our life
• We have clarity of thinking and action
• Our stresses get reduced tremendously
• Our life becomes purposeful and joyous
• We start assuming responsibility and accountability for whatever we do.
• Our behavior towards others and the world improves drastically
• We are not scared of taking decisions
• By applying what we learn into skills and actions we grow in our career
• We know methods of correcting our mistakes
• By knowing, internalizing, becoming a role model we take our people to
achieve our goals.
Let us make a commitment to learn and instantly apply this learning first into our
personal life situations.

1.3 Meanings and Definitions of Management

1.3.1 Meanings:

Management is the art of getting things done by a group of people with the
effective utilization of available resources.
It is the group of activities, which drafts plans, prepares policies, and arranges
men, money, machines and materials required to achieve the objectives.
Management is the activity of man who struggles for better living in the
complex and competitive world.
Management is the process consisting of the functions of planning,
organizing, staffing, directing and controlling the operations to achieve
specified objectives. It rewards those who are engaged in this process to
ensure an excellent performance with continual improvement.

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1.3.2 Various definitions:
There are many definitions of management but most perceptive managers
are convinced that it is an organized effort of people whose purpose is to
achieve the Objectives and Goals of an organization.

According to F.W.Taylor, Management is the art of knowing what you want

to do, and then seeing that it is done in the best and the cheapest way.

F.W.TAYLOR HENRY FAYOL

According to Henry Fayol, to manage is to forecast and to plan, to organize,

to command, to coordinate and to control.
Peter F. Drucker defines Management as the substitution of thought for
brawn and muscle (physical strength), substitution of knowledge for folklore
and superstition, and substitution of cooperation for force. He also defines
Management as an organ; organs can be described and defined only through
their functions.
As per Donald J. Clough, Management is the art and science of decision
making and leadership.
As per James D. Mooney and Alan C.Reiley, Management is the art of
directing and inspiring people.

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In mid 1940s, academic people from various business schools in the United
States gathered together with the sole purpose of deciding whether a
definition of Management could be written that businessmen would accept
and practice and Academicians would teach. Ultimately, they came up with
the following definition. No individual is identified with this definition. The
definition reads:

“Management is guiding human and physical resources into dynamic

organization Units that attain their objectives to the satisfaction of those
served and with the high degree of morale and sense of attainment on the
part of those rendering the services”

After detailed thinking on various definitions, we have adopted the following

definition:

Management is:
Optimum utilization of
Available Resources
To attain certain pre-set GOALS/Objectives

What is the meaning of the word “Optimum utilization”? It means best possible
utilization under given circumstances.
We will explain this definition by taking an example from our kitchen. We want to
make a cup of tea, and we have all the resources such as one jarful of sugar, one
jarful of tea leaves, one glass of milk, gas cylinder full of LPG, gas stove, kettle,
filter etc.
However, we use the raw material only in required proportion, e.g. two spoons of
sugar, one spoon of tea leaves etc. and make a proper mix of all the ingredients.
We do not put more sugar than required, do we?
We will take another example. You are normally getting a pocket money of Rs.
500 for a day, and you are able to spend your day comfortably. One day, you get
only Rs. 200 and you have to manage the whole day. You neither have your tiffin
nor are you fasting today. In this case, your entire consciousness is on this small
amount. You decide the proper course of action and you spend the money very
judiciously. E.g., you travel in a crowded train instead of auto; you eat only a rice
plate instead of Punjabi dishes and so on. To your surprise, at the end of the day,

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there is an amount of Rs. 40 left in your pocket. You have managed your day by
better thinking process, putting it into actions and achieved your goal of reaching
home without any cash crunch.
However, if you have Rs. 200 and you have spent Rs. 350 by borrowing from your
friend, it is mismanagement.
We learn best when resources are minimum and scarce. We have saved money
when our earnings were meager. Some companies are cash rich but they incur
wasteful expenditure, such as heavy transportation cost, travelling expenses etc.
and ultimately land in a mess.
We must convert our learning/knowledge into skills by utilizing scarce resources to
the optimum, and strive to achieve our preset GOALS.

1.4 Management as a Process, coordination, and function

Management as a “Process”:
McFarland defines management as “A process by which managers create,
direct, maintain and operate purposive organization through systematic,
coordinated, cooperative human efforts”.

An important term in this definition is “Process”. This term emphasizes the

dynamic or ongoing nature of management, an activity over varying span of
time. The dynamic nature implies that change is reality of organizational life.
In managing organizations, managers create changes, adopt organizations to
changes and implement changes successfully in their organizations. Businesses
fail and become bankrupt because managers fail in their attempt to cope with
the change.

Management as “coordination”:
Donally, Gibson and Ivancevich also support the view of management as a
Process but their stress in more on co-ordination. According to them,
“Management is a process by which individual and group effort is
coordinated towards group goals”. In order to achieve goals, coordination is
essential and management involves securing and maintaining this
coordination. This coordination effort is also stressed in the definition of
Koontz and O’Donnell. According to them, “Management is a process of

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designing and maintaining an environment in which, individuals, working
together in groups efficiently and effectively accomplish group goals”.

Management as a “Function”:
There are those who view management as a function rather than a process.
Dunn, Stephens and Kelly contend that “Management is a role which
includes a set of duties, responsibilities, and relationships-involved in work
organizations”. These duties and responsibilities constitute the function a
manager performs. The duties and responsibilities a manager performs are
quite different from those performed by managerial employees.

Management is getting things done through other people:

A simple definition of management that is often quoted and it sounds very
simple. According to this definition, managers do not do things; they get
other people to do things. If managing is an individual ability to get things
done, then it is not a problem. We can plan and perform things according to
our own convenience and interests. When somebody else is involved and we
want to get things done through him, there is a difficulty. All sorts of
problems arise; personalities come into contact and conflict. Interpersonal
problems crop up. We have to understand the behavior of other people and
must have knowledge as to how to motivate them in order to get things done
through them. We have to consider the conveniences and interest of others
also in planning and implementing things. In getting things done through
others, people have to be coaxed, they have to be shown, they have to
inspired, they have to be motivated and this is what management means.
These activities are performed not only by the people at the top but also from
the chairman of the board to the front line supervisors and foremen. They
use the above-mentioned methods to get things done through other people.

Example of a Sandwich Seller:

All businesses start small and simple and eventually they grow big and
become complex. Take an example of a sandwich seller on street. He starts
his business on a street, on a small space, without any approval, creates a stall,
gets raw material, makes sandwiches and sells them. It is a one-man show. He
is sincere, works hard, and goes home late. Since people like his sandwiches,
his demand increases, so the stress increases and he is hassled. He is not able
to manage. His situation becomes complex. His business goes haywire and he
abandons it.

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Business needs some skills, discipline, systematic approach and clarity of
thinking, so that one can achieve his goals/objectives. When the business
grows, along with systematic approach and discipline, we need to maintain
harmony among the people who work for you and we must be effective in our
actions. We must ask ourselves:

What are our objectives?

What is our direction? Where do we want to go?
What is the purpose of our business?
Are we clear about our goals?

The thinking process and internalization must be continuous activity.

1.5 Five M’s in the business

Efficient management is the lifeboat of any developed business. There are five
M’s in the business, which can be called as the resources of the business, viz.
Man, machines, materials and money as tangible ones and Method as
intangible one.
1. Man:
As said earlier, Management is the art of getting things done by a group of people.
Therefore, the availability of qualified, trained, skilled, experienced and
competent people is the most important factor in any management, anywhere.
2. Machines:
Management is the art of knowing what you want to do, and then seeing that it is
done in the best and the cheapest way. It is needless to say that availability of
capable machines and equipment is a must to do the things in the best and the
cheapest way.
3. Materials:
Quality, quantity, availability, cost/market price and transportation of raw
materials, semi-finished goods and finished goods need no emphasis. It is a clearly
a very vital factor in success of management.

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4. Money:
Financial capital is money used by entrepreneurs and businesses to buy what they
need to make their products or to provide their services to the sector of the
economy upon which their operation is based.
Availability of funds for running the business is extremely important particularly
for procuring capital goods, raw materials, tools and consumables, and availability
of working capital.
5. Method:
If we have to do things in the best and cheapest way, it is also important how the
things are processed. That is, by which method the things are processed. The
proper method will ensure required quality, quantity and in-time delivery. It will
ensure the accomplishment of management objectives.
Methods form the competitive edge. For example, in our kitchen, two girls
are told to prepare a cup of tea each. Same raw materials such as milk, sugar, tea
powder etc. are given to both of them. Girl A prepares the tea as follows:
Puts a cup of milk in the utensil and boils it. Then puts the water and sugar (1
teaspoon) and tea powder (1 teaspoon) and boils it again.
Girl B prepares the tea as follows:
Puts water and sugar in the utensil. After the mixture starts boiling, she puts the
tea powder in it and lastly puts milk.
The two cups of tea have different tastes in spite of all four factors (M’s) same.
However, the method makes the difference.
If one standardized method is used by any person any time, the taste will always
be the same.
That is why the quality of idli sambar in an Udipi restaurant is always the same.
Mc Donald’s restaurant offers same taste of French Fries all over the world.
Standardization of methods is the reason why they are able to do it. It is also an
answer to all our problems.
Shampoo produced by Company A and B are different in quality in spite of same
raw materials. The Shampoo of Company A is in great demand. So, the company
B does detailed research as to what exactly company A is doing to attract
customers, then implements a better method, in addition, company B adds some
extra benefits to customer to improve the market share of their shampoo.

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If there are four bhelwalas, many times we see that only one of them is in demand
and is not able to control the rush. This is because, in addition to better method of
preparing bhel, he offers added advantages to the customers such as good
housekeeping, clean workplace, better colors, extra quantity etc. Actually, he offers
better value for money to the customers.

1. 6 Activities for the students

Activity A
In your kitchen, you have to prepare rice and curry for your friend who is going to
visit after a couple of hours. You have only Rs. 200 with you. No other stock of
materials. Make a list of all your Resources: Man, Machine, Materials and Money.
Make a process flow chart of the Method you will adopt to prepare rice and curry.
Explain how you will utilize your resources.
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1.7 Necessity of Management and SMART Goals

1.7.1 Management is an essential activity of all organizational levels:

(Low, middle and upper level)

1.7.2 Management applies to:

• Small and large Organizations.
• Profit and nonprofit Organizations.

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 • Manufacturing Organizations.
• Service rendering Organizations.
Management is everywhere. It is not restricted to only commercial organizations,
but it is also in schools, colleges, religious bodies, just about anywhere.
Housewives are the best managers. Kitchen is the best management school. They
regularly take account of the stock levels of commodities, the moment the stock
reach to the minimum ordering level, they meticulously get the commodity. Have
you ever experienced a shortage of sugar and so no tea for you and your friends?
Your mom has been a great manager. She feeds you with delicious dishes, tolerates
your behavior, and always makes things happen, in whatever situation she is.
Management is there even in Bhendi Bazar. When there were events like twin
tower in USA, flood in Mumbai, terror in Taj Mahal hotel, the concerned people
such as commandos etc. overcame the problem only because they used their
management skills.
Management is art as well as science. What is invisible is understood by
observations, examples etc. through theoretical principles/approaches.
In the movie “Three Idiots”, Chatur knows all fundamentals, and Rancho knows
applications. Management is the combination of Chatur as well as Rancho.
We study management processes scientifically and apply them to convert
complexity to manageable thoughts and actions. We learn Management as science
and put it into action as art.
An art is caught and not taught. You must learn, absorb, and see management in
action, by thought process, practice in a methodical manner. You catch this art.
Management prevents an endeavor from failure and teaches you to quickly correct
your mistakes.
Anybody can do business provided he has discipline of thought, actions, words,
intention and moral character. Then his approach will be systematic and he will
be successful.
If someone asks you, “why have you enrolled on this course?” Then you would
answer, “I want to become a Manager.” But do you know what it takes to become
a good manager? If you are a person who is capable of undertaking the tasks and
functions of managing at any level, in any kind of enterprise, you have leadership
qualities, and you have qualities of an administrator, you will become a good
manager.

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To become a good manager, in addition to housekeeping and cleanliness and
orderliness, your mind also must be clean and clear.
We find people fully tensed, confused, and so they take wrong decisions. They
cannot become good managers.
A good manager is expected to have ability of four skills as given below:
• Technical skills: Technical skills that reflect both an understanding of and a
proficiency in a specialized field. For example, a manager may have technical skills
in accounting, finance, engineering, manufacturing, or computer science.
• Human Skills: Human skills are skills associated with manager’s ability to work
well with others, both as a member of a group and as a leader who gets things
done through other.
• Concept Skills: Conceptual skills related to the ability to visualize the
organization as a whole, discern interrelationships among organizational parts,
and understand how the Organization fits into the wider context of the industry,
community, and world.
Conceptual skills, coupled with technical skills, human skills and knowledge base,
are important ingredients in organizational performance.
• Design Skills: It is the ability to solve the problems in ways that will benefit
the enterprise. Managers must be able to solve the problems.
In order to become a good manager, he must have preset GOALS. Remember:
“No goal--no management”. We must have a direction and purpose for our
business. We must have a goal for everything we do. Goal setting is sign of
maturity.
For example, one wants to buy a blackberry or a smart phone. For that, he should
fix a goal, as to when he would buy it and should buy it only when he needs it. If
one wants to go for higher education, his goal should be:“ I want to achieve Ph.D.
within next four years” or “I want to get admission in IIM during next year”.
Any endeavor starts with end purpose-GOAL. When goal is set, steps towards goal
also become clear. One can become successful only if he has preset goals.
However, the goals must be S-M-A-R-T as explained below:
1. Specific: We should be specific in our goal. E.g. I want to become a manager is
not a goal. What you want to accomplish in an organization is a goal.
2. Measurable: The goal must be measurable. E.g., I want to secure 95% marks.

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3. Attainable: The goal must be achievable. Our resources are limited. Therefore,
if you want to buy a flat in Mumbai and you have only 10 Lakhs, it is not possible
to buy a flat there.
4. Realistic: The goal must be realistic. We cannot dream to become a prime
minster when you have not yet become a corporator.
5. Time bound: Your goal should have a time limit such as I want to get admission
to a medical college during next year.
Continuous activity towards predetermined goals, set of disciplines with organized
activities, interdependence between customer and us will result in profits, goodwill,
team effort, proper decision making. Management is all-pervasive.

1.8 Activities for the students:

Activity B
Make a list of GOALS in your life.
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1.9 Functions of Management

This book is dedicated to following Functions of Management, which will be

explained in detail in forthcoming chapters:

1. Planning
2. Organizing
3. Staffing
4. Directing
5. Coordinating
6. Motivating
7. Controlling

1.10 Importance of Management

Every business needs a direction. This direction is given by Management.

The resources will be converted into production, which has good quality,
quantity, in time delivery, which will result in customer satisfaction. This book
is dedicated to the following factors for you to study, in order to become good
managers.

1. Management meets the challenge of change:

Only an efficient management can save the business from the dangers
brought in by the challenges of change.

2. Accomplishment of group goals:

The proper planning of available resources, adjusting possibility of
business unit with existing business environment, quality of decision taken
and control made by business unit are the factors responsible for achieving
the objectives/goals.

3. Effective utilization of resources: As explained above.

4. Effective functioning of business:

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 Ability, experience, mutual understanding, coordination, motivation and
supervision are the factors responsible for effective functioning of the
business.

5. Resource development:
The resources viz. men, machines, materials and money have to be
developed by the management.

6. Sound organizational structure:

It clearly defines the authority and responsibility relationship of employees.
Care must be taken to appoint right persons to the right job.

7. Management directs the organization:

Similar to human mind directing and controlling human body,
management directs and controls the organization.

8. It integrates various interests:

Management takes steps to integrate various interests of employees
working in the organization.

9. It stabilizes the fluctuations:

The business always has ups and downs. These fluctuations are stabilized
by the management.

10. It innovates:
New innovative ideas are implemented in the organization.

11. Coordination and team spirit:

Management coordinates the activities of different departments and
establishes team spirit.

12. Tackling and solving problems:

Good management acts as a friend and guide to the employees to solve
the day-to-day problems for effective performance.

13. Management is a tool for personality development:

New methods and techniques are taught to workers. Training facilities
are arranged by the management. Thus, there is personality development
in the employees.

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1.11 Conclusion of the chapter

• We have touched upon the basic understanding of management as a means to

make the organization effective.
• The first step towards management process is setting up SMART goals.
• The methodical and systematic approach ensures lessening of errors/failures
and easy course correction when things go off track.
• Seven functions of management followed diligently leads to disciplined growth.
• The nature of management when followed in daily practice transforms the way
we run organization and our lives.

1.12 Summary

1. The subject of Management is the backbone of our course. Application of

these principles into action in your life as well as on your workplace, every day,
correlating these principles with your personal life situations is called
internalization. The best way to learn any subject is to internalize it.
2. The first step towards management process is setting up SMART goals.
3. We must convert our learning/knowledge into skills by utilizing scarce resources
to the optimum, and strive to achieve our preset GOALS.
4. The methodical and systematic approach ensures lessening of errors/failures
and easy course correction when things go off track.
5. Seven functions of management followed diligently leads to disciplined growth.

1.13 Self-assessment questions

1. Explain the meaning of internalization.

2. Explain the meaning of optimum utilization of resources.
3. How methods form the competitive edge?
4. Explain: Management is everywhere.
5. Management is a tool for personality development: elaborate.
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1.14 Multiple choice questions

1. According to whom, to manage is to forecast and to plan, to organize, to

command, to coordinate and to control?
a. Henry Fayol
b. Peter F. Drucker
c. F.W.Taylor
d. Ralph Davis

2. In SMART goals, S denotes:

a. Simple
b. Special
c. Specific
d. Social

3. A good manager is expected to have ability of four skills :( Find the wrong one):
a. Technical
b. Human
c. Concept
d. Documentation

4. Peter F. Drucker was:

a. American Management Consultant
b. Educator
c. Author
d. All the above

5. Out of five M’s in the business, following is intangible:

a. Man
b. Machine
c. Method
d. Money

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