Management Meaning

Management is a universal phenomenon. It is a very popular and widely used term. All
organizations - business, political, cultural or social are involved in management because it is
the management which helps and directs the various efforts towards a definite purpose.
According to Harold Koontz, “Management is an art of getting things done through and with
the people in formally organized groups. It is an art of creating an environment in which
people can perform and individuals and can co-operate towards attainment of group goals”.
According to F.W. Taylor, “Management is an art of knowing what to do, when to do and see
that it is done in the best and cheapest way”.

Management involves creating an internal environment: - It is the management which puts

into use the various factors of production. Therefore, it is the responsibility of management to
create such conditions which are conducive to maximum efforts so that people are able to
perform their task efficiently and effectively. It includes ensuring availability of raw
materials, determination of wages and salaries, formulation of rules & regulations etc.

Therefore, we can say that good management includes both being effective and efficient.
Being effective means doing the appropriate task i.e, fitting the square pegs in square holes
and round pegs in round holes. Being efficient means doing the task correctly, at least
possible cost with minimum wastage of resources.

Management can be defined in detail in following categories:

1. Management as a Process
2. Management as an Activity
3. Management as a Discipline
4. Management as a Group
5. Management as a Science
6. Management as an Art
7. Management as a Profession

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 Importance of Management
1. It helps in Achieving Group Goals - It arranges the factors of production, assembles
and organizes the resources, integrates the resources in effective manner to achieve
goals. It directs group efforts towards achievement of pre-determined goals. By
defining objective of organization clearly there would be no wastage of time, money
and effort. Management converts disorganized resources of men, machines, money
etc. into useful enterprise. These resources are coordinated, directed and controlled in
such a manner that enterprise work towards attainment of goals.
2. Optimum Utilization of Resources -Management utilizes all the physical & human
resources productively. This leads to efficacy in management. Management provides
maximum utilization of scarce resources by selecting its best possible alternate use in
industry from out of various uses. It makes use of experts, professional and these
services leads to use of their skills, knowledge, and proper utilization and avoids
wastage. If employees and machines are producing its maximum there is no under
employment of any resources.
3. Reduces Costs - It gets maximum results through minimum input by proper planning
and by using minimum input & getting maximum output. Management uses physical,
human and financial resources in such a manner which results in best combination.
This helps in cost reduction.
4. Establishes Sound Organization - No overlapping of efforts (smooth and
coordinated functions). To establish sound organizational structure is one of the
objective of management which is in tune with objective of organization and for
fulfillment of this, it establishes effective authority & responsibility relationship i.e.
who is accountable to whom, who can give instructions to whom, who are superiors &
who are subordinates. Management fills up various positions with right persons,
having right skills, training and qualification. All jobs should be cleared to everyone.
5. Establishes Equilibrium - It enables the organization to survive in changing
environment. It keeps in touch with the changing environment. With the change is
external environment, the initial co-ordination of organization must be changed. So it
adapts organization to changing demand of market / changing needs of societies. It is
responsible for growth and survival of organization.
6. Essentials for Prosperity of Society - Efficient management leads to better
economical production which helps in turn to increase the welfare of people. Good
management makes a difficult task easier by avoiding wastage of scarce resource. It

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 improves standard of living. It increases the profit which is beneficial to business and
society will get maximum output at minimum cost by creating employment
opportunities which generate income in hands. Organization comes with new products
and researches beneficial for society.

Functions of Management

Management has been described as a social process involving responsibility for economical
and effective planning & regulation of operation of an enterprise in the fulfillment of given
purposes. It is a dynamic process consisting of various elements and activities. These
activities are different from operative functions like marketing, finance, purchase etc. Rather
these activities are common to each and every manger irrespective of his level or status.

Different experts have classified functions of management. According to George & Jerry,
“There are four fundamental functions of management i.e. planning, organizing, actuating
and controlling”.

According to Henry Fayol, “To manage is to forecast and plan, to organize, to command, &
to control”. Whereas Luther Gullick has given a keyword ’POSDCORB’ where P stands for
Planning, O for Organizing, S for Staffing, D for Directing, Co for Co-ordination, R for
reporting & B for Budgeting. But the most widely accepted are functions of management
given by KOONTZ and O’DONNEL i.e. Planning,
Organizing, Staffing, Directing and Controlling.

For theoretical purposes, it may be convenient to separate the function of management but
practically these functions are overlapping in nature i.e. they are highly inseparable. Each
function blends into the other & each affects the performance of others.

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1. Planning

It is the basic function of management. It deals with chalking out a future course of
action & deciding in advance the most appropriate course of actions for achievement
of pre-determined goals. According to KOONTZ, “Planning is deciding in advance -
what to do, when to do & how to do. It bridges the gap from where we are & where
we want to be”. A plan is a future course of actions. It is an exercise in problem
solving & decision making. Planning is determination of courses of action to achieve
desired goals. Thus, planning is a systematic thinking about ways & means for
accomplishment of pre-determined goals. Planning is necessary to ensure proper
utilization of human & non-human resources. It is all pervasive, it is an intellectual
activity and it also helps in avoiding confusion, uncertainties, risks, wastages etc.

2. Organizing

It is the process of bringing together physical, financial and human resources and
developing productive relationship amongst them for achievement of organizational
goals. According to Henry Fayol, “To organize a business is to provide it with
everything useful or its functioning i.e. raw material, tools, capital and personnel’s”.
To organize a business involves determining & providing human and non-human
resources to the organizational structure. Organizing as a process involves:

 Identification of activities.
 Classification of grouping of activities.

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  Assignment of duties.
 Delegation of authority and creation of responsibility.
 Coordinating authority and responsibility relationships.
3. Staffing

It is the function of manning the organization structure and keeping it manned.

Staffing has assumed greater importance in the recent years due to advancement of
technology, increase in size of business, complexity of human behavior etc. The main
purpose o staffing is to put right man on right job i.e. square pegs in square holes and
round pegs in round holes. According to Kootz & O’Donell, “Managerial function of
staffing involves manning the organization structure through proper and effective
selection, appraisal & development of personnel to fill the roles designed un the
structure”. Staffing involves:

 Manpower Planning (estimating man power in terms of searching, choose the

person and giving the right place).
 Recruitment, Selection & Placement.
 Training & Development.
 Remuneration.
 Performance Appraisal.
 Promotions & Transfer.
4. Directing

It is that part of managerial function which actuates the organizational methods to

work efficiently for achievement of organizational purposes. It is considered life-
spark of the enterprise which sets it in motion the action of people because planning,
organizing and staffing are the mere preparations for doing the work. Direction is that
inert-personnel aspect of management which deals directly with influencing, guiding,
supervising, motivating sub-ordinate for the achievement of organizational goals.
Direction has following elements:

 Supervision
 Motivation
 Leadership
 Communication

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 Supervision- implies overseeing the work of subordinates by their superiors. It is the
act of watching & directing work & workers.

Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal

to work. Positive, negative, monetary, non-monetary incentives may be used for this
purpose.

Leadership- may be defined as a process by which manager guides and influences

the work of subordinates in desired direction.

Communications- is the process of passing information, experience, opinion etc from

one person to another. It is a bridge of understanding.

5. Controlling

It implies measurement of accomplishment against the standards and correction of

deviation if any to ensure achievement of organizational goals. The purpose of
controlling is to ensure that everything occurs in conformities with the standards. An
efficient system of control helps to predict deviations before they actually occur.
According to Theo Haimann, “Controlling is the process of checking whether or not
proper progress is being made towards the objectives and goals and acting if
necessary, to correct any deviation”. According to Koontz & O’Donell “Controlling is
the measurement & correction of performance activities of subordinates in order to
make sure that the enterprise objectives and plans desired to obtain them as being
accomplished”. Therefore controlling has following steps:

 Establishment of standard performance.

 Measurement of actual performance.
 Comparison of actual performance with the standards and finding out
deviation if any.
 Corrective action.

Henri Fayols 14 Principles of Management

A principle refers to a fundamental truth. It establishes cause and effect relationship between
two or more variables under given situation. They serve as a guide to thought & actions.
Therefore, management principles are the statements of fundamental truth based on logic
which provides guidelines for managerial decision making and actions. These principles are
derived: -

a. On the basis of observation and analysis i.e. practical experience of managers.

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 b. By conducting experimental studies.

There are 14 Principles of Management described by Henri Fayol.

1. Division of Labor
a. Henri Fayol has stressed on the specialization of jobs.
b. He recommended that work of all kinds must be divided & subdivided and
allotted to various persons according to their expertise in a particular area.
c. Subdivision of work makes it simpler and results in efficiency.
d. It also helps the individual in acquiring speed, accuracy in his performance.
e. Specialization leads to efficiency & economy in spheres of business.
2. Party of Authority & Responsibility
a. Authority & responsibility are co-existing.
b. If authority is given to a person, he should also be made responsible.
c. In a same way, if anyone is made responsible for any job, he should also have
concerned authority.
d. Authority refers to the right of superiors to get exactness from their sub-
ordinates whereas responsibility means obligation for the performance of the
job assigned.
e. There should be a balance between the two i.e. they must go hand in hand.
f. Authority without responsibility leads to irresponsible behavior whereas
responsibility without authority makes the person ineffective.
3. Principle of One Boss
a. A sub-ordinate should receive orders and be accountable to one and only one
boss at a time.
b. In other words, a sub-ordinate should not receive instructions from more than
one person because -

- It undermines authority
- Weakens discipline
- Divides loyalty
- Creates confusion
- Delays and chaos
- Escaping responsibilities
- Duplication of work
- Overlapping of efforts

c. Therefore, dual sub-ordination should be avoided unless and until it is

absolutely essential.
d. Unity of command provides the enterprise a disciplined, stable & orderly
existence.
e. It creates harmonious relationship between superiors and sub-ordinates.
4. Unity of Direction
a. Fayol advocates one head one plan which means that there should be one plan
for a group of activities having similar objectives.
b. Related activities should be grouped together. There should be one plan of
action for them and they should be under the charge of a particular manager.
c. According to this principle, efforts of all the members of the organization
should be directed towards common goal.
d. Without unity of direction, unity of action cannot be achieved.

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 e. In fact, unity of command is not possible without unity of direction.

Basis Unity of command Unity of direction

Meaning It implies that a sub-ordinate should It means one head, one plan for a
receive orders & instructions from only group of activities having similar
one boss. objectives.

Nature It is related to the functioning of It is related to the functioning of

personnel’s. departments, or organization as a
whole.

Necessity It is necessary for fixing responsibility It is necessary for sound

of each subordinates. organization.

Advantage It avoids conflicts, confusion & chaos. It avoids duplication of efforts and
wastage of resources.

Result It leads to better superior sub-ordinate It leads to smooth running of the

relationship. enterprise.

Therefore it is obvious that they are different from each other but they are dependent on each
other i.e. unity of direction is a pre-requisite for unity of command. But it does not
automatically comes from the unity of direction.

5. Equity
a. Equity means combination of fairness, kindness & justice.
b. The employees should be treated with kindness & equity if devotion is
expected of them.
c. It implies that managers should be fair and impartial while dealing with the
subordinates.
d. They should give similar treatment to people of similar position.
e. They should not discriminate with respect to age, caste, sex, religion, relation
etc.
f. Equity is essential to create and maintain cordial relations between the
managers and sub-ordinate.
g. But equity does not mean total absence of harshness.
h. Fayol was of opinion that, “at times force and harshness might become
necessary for the sake of equity”.
6. Order
a. This principle is concerned with proper & systematic arrangement of things
and people.

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 b. Arrangement of things is called material order and placement of people is
called social order.
c. Material order- There should be safe, appropriate and specific place for every
article and every place to be effectively used for specific activity and
commodity.
d. Social order- Selection and appointment of most suitable person on the
suitable job. There should be a specific place for every one and everyone
should have a specific place so that they can easily be contacted whenever
need arises.
7. Discipline
a. According to Fayol, “Discipline means sincerity, obedience, respect of
authority & observance of rules and regulations of the enterprise”.
b. This principle applies that subordinate should respect their superiors and obey
their order.
c. It is an important requisite for smooth running of the enterprise.
d. Discipline is not only required on path of subordinates but also on the part of
management.
e. Discipline can be enforced if -

- There are good superiors at all levels.

- There are clear & fair agreements with workers.
- Sanctions (punishments) are judiciously applied.

8. Initiative
a. Workers should be encouraged to take initiative in the work assigned to them.
b. It means eagerness to initiate actions without being asked to do so.
c. Fayol advised that management should provide opportunity to its employees to
suggest ideas, experiences& new method of work.
d. It helps in developing an atmosphere of trust and understanding.
e. People then enjoy working in the organization because it adds to their zeal and
energy.
f. To suggest improvement in formulation & implementation of place.
g. They can be encouraged with the help of monetary & non-monetary
incentives.
9. Fair Remuneration
a. The quantum and method of remuneration to be paid to the workers should be
fair, reasonable, satisfactory & rewarding of the efforts.
b. As far as possible it should accord satisfaction to both employer and the
employees.
c. Wages should be determined on the basis of cost of living, work assigned,
financial position of the business, wage rate prevailing etc.
d. Logical & appropriate wage rates and methods of their payment reduce
tension & differences between workers & management creates harmonious
relationship and pleasing atmosphere of work.
e. Fayol also recommended provision of other benefits such as free education,
medical & residential facilities to workers.
10. Stability of Tenure
a. Fayol emphasized that employees should not be moved frequently from one
job position to another i.e. the period of service in a job should be fixed.

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 b. Therefore employees should be appointed after keeping in view principles of
recruitment & selection but once they are appointed their services should be
served.
c. According to Fayol. “Time is required for an employee to get used to a new
work & succeed to doing it well but if he is removed before that he will not be
able to render worthwhile services”.
d. As a result, the time, effort and money spent on training the worker will go
waste.
e. Stability of job creates team spirit and a sense of belongingness among
workers which ultimately increase the quality as well as quantity of work.
11. Scalar Chain
a. Fayol defines scalar chain as ’The chain of superiors ranging from the ultimate
authority to the lowest”.
b. Every orders, instructions, messages, requests, explanation etc. has to pass
through Scalar chain.
c. But, for the sake of convenience & urgency, this path can be cut shirt and this
short cut is known as Gang Plank.
d. A Gang Plank is a temporary arrangement between two different points to
facilitate quick & easy communication as explained below:

In the figure given, if D has to communicate with G he will first send the
communication upwards with the help of C, B to A and then downwards with
the help of E and F to G which will take quite some time and by that time, it
may not be worth therefore a gang plank has been developed between the two.

e. Gang Plank clarifies that management principles are not rigid rather they are
very flexible. They can be moulded and modified as per the requirements of
situations
12. Sub-Ordination of Individual Interest to General Interest
a. An organization is much bigger than the individual it constitutes therefore
interest of the undertaking should prevail in all circumstances.
b. As far as possible, reconciliation should be achieved between individual and
group interests.
c. But in case of conflict, individual must sacrifice for bigger interests.
d. In order to achieve this attitude, it is essential that -

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 - Employees should be honest & sincere.
- Proper & regular supervision of work.
- Reconciliation of mutual differences and clashes by mutual
agreement. For example, for change of location of plant, for change of
profit sharing ratio, etc.

13. Espirit De’ Corps (can be achieved through unity of command)

a. It refers to team spirit i.e. harmony in the work groups and mutual
understanding among the members.
b. Spirit De’ Corps inspires workers to work harder.
c. Fayol cautioned the managers against dividing the employees into competing
groups because it might damage the moral of the workers and interest of the
undertaking in the long run.
d. To inculcate Espirit De’ Corps following steps should be undertaken -
 There should be proper co-ordination of work at all levels
 Subordinates should be encouraged to develop informal relations
among themselves.
 Efforts should be made to create enthusiasm and keenness among
subordinates so that they can work to the maximum ability.
 Efficient employees should be rewarded and those who are not up to
the mark should be given a chance to improve their performance.
 Subordinates should be made conscious of that whatever they are
doing is of great importance to the business & society.
e. He also cautioned against the more use of Britain communication to the
subordinates i.e. face to face communication should be developed. The
managers should infuse team spirit & belongingness. There should be no place
for misunderstanding. People then enjoy working in the organization & offer
their best towards the organization.
14. Centralization & De-Centralization
a. Centralization means concentration of authority at the top level. In other
words, centralization is a situation in which top management retains most of
the decision making authority.
b. Decentralization means disposal of decision making authority to all the levels
of the organization. In other words, sharing authority downwards is
decentralization.
c. According to Fayol, “Degree of centralization or decentralization depends on
no. of factors like size of business, experience of superiors, dependability &
ability of subordinates etc.
d. Anything which increases the role of subordinate is decentralization &
anything which decreases it is centralization.
e. Fayol suggested that absolute centralization or decentralization is not feasible.
An organization should strike to achieve a lot between the two.

Levels of Management
Many managers work in an organisation. However, these managers do not work at the same
level. They work and operate at different positions. Hierarchy of these managerial positions is
called Levels of Management.

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Three Levels of Management

Generally, there are Three Levels of Management, viz.,

1. Administrative or Top Level of Management.

2. Executive or Middle Level of Management.
3. Supervisory or Lower Level of Management.

At each level, individual manager has to carry out different roles and functions.

Diagram of Levels of Management

Top Level of Management

The Top Level Management consists of the Board of Directors (BOD) and the Chief
Executive Officer (CEO). The Chief Executive Officer is also called General Manager (GM)
or Managing Director (MD) or President. The Board of Directors are the representatives of
the Shareholders, i.e. they are selected by the Shareholders of the company. Similarly, the
Chief Executive Officer is selected by the Board of Directors of an organisation.

The main role of the top level management is summarized as follows:-

1. The top level management determines the objectives, policies and plans of the
organisation.
2. They mobilises (assemble and bring together) available resources.
3. The top level management does mostly the work of thinking, planning and deciding.
Therefore, they are also called as the Administrators and the Brain of the organisation.
4. They spend more time in planning and organising.
5. They prepare long-term plans of the organisation which are generally made for 5 to 20
years.
6. The top level management has maximum authority and responsibility. They are the
top or final authority in the organisation. They are directly responsible to the
Shareholders, Government and the General Public. The success or failure of the
organisation largely depends on their efficiency and decision making.
7. They require more conceptual skills and less technical Skills.

Middle Level of Management

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The Middle Level Management consists of the Departmental Heads (HOD), Branch
Managers, and the Junior Executives. The Departmental heads are Finance Managers,
Purchase Managers, etc. The Branch Managers are the head of a branch or local unit. The
Junior Executives are Assistant Finance Managers, Assistant Purchase Managers, etc. The
Middle level Management is selected by the Top Level Management.

The middle level management emphasize more on following tasks :-

1. Middle level management gives recommendations (advice) to the top level

management.
2. It executes (implements) the policies and plans which are made by the top level
management.
3. It co-ordinate the activities of all the departments.
4. They also have to communicate with the top level Management and the lower level
management.
5. They spend more time in co-ordinating and communicating.
6. They prepare short-term plans of their departments which are generally made for 1 to
5 years.
7. The middle Level Management has limited authority and responsibility. They are
intermediary between top and lower management. They are directly responsible to the
chief executive officer and board of directors.
8. Require more managerial and technical skills and less conceptual skills.

Lower Level of Management

The lower level management consists of the Foremen and the Supervisors. They are selected
by the middle level management. It is also called Operative / Supervisory level or First Line
of Management.

The lower level management performs following activities:-

1. Lower level management directs the workers / employees.

2. They develops morale in the workers.
3. It maintains a link between workers and the middle level management.
4. The lower level management informs the workers about the decisions which are taken
by the management. They also inform the management about the performance,
difficulties, feelings, demands, etc., of the workers.
5. They spend more time in directing and controlling.
6. The lower level managers make daily, weekly and monthly plans.
7. They have limited authority but important responsibility of getting the work done
from the workers. They regularly report and are directly responsible to the middle
level management.
8. Along with the experience and basic management skills, they also require more
technical and communication skills.

Qualities and Skills of Managers

Qualities of Managers

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An excellent manager taps into talents and resources in order to support and bring out the best
in others. An outstanding manager evokes possibility in others.
1. Creativity
Creativity is what separates competence from excellence. Creativity is the spark that propels
projects forward and that captures peoples' attention. Creativity is the ingredient that pulls the
different pieces together into a cohesive whole, adding zest and appeal in the process.
2. Structure
The context and structure we work within always have a set of parameters, limitations and
guidelines. A stellar manager knows how to work within the structure and not let the structure
impinge upon the process or the project. Know the structure intimately, so as to guide others
to effectively work within the given parameters. Do this to expand beyond the boundaries.
3. Intuition
Intuition is the capacity of knowing without the use of rational processes; it's the cornerstone
of emotional intelligence. People with keen insight are often able to sense what others are
feeling and thinking; consequently, they're able to respond perfectly to another through their
deeper understanding. The stronger one's intuition, the stronger manager one will be.
4. Knowledge
A thorough knowledge base is essential. The knowledge base must be so ingrained and
integrated into their being that they become transparent, focusing on the employee and what
s/he needs to learn, versus focusing on the knowledge base. The excellent manager lives from
a knowledge base, without having to draw attention to it.
5. Commitment
A manager is committed to the success of the project and of all team members. S/he holds the
vision for the collective team and moves the team closer to the end result. It's the manager's
commitment that pulls the team forward during trying times.
6. Being Human
Employees value leaders who are human and who don't hide behind their authority. The best
leaders are those who aren't afraid to be themselves. Managers who respect and connect with
others on a human level inspire great loyalty.

7. Versatility
Flexibility and versatility are valuable qualities in a manager. Beneath the flexibility and
versatility is an ability to be both non-reactive and not attached to how things have to be.

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Versatility implies an openness - this openness allows the leader to quickly change on a dime
when necessary. Flexibility and versatility are the pathways to speedy responsiveness.
8. Lightness
A stellar manager doesn't just produce outstanding results; s/he has fun in the process!
Lightness doesn't impede results but rather, helps to move the team forward. Lightness
complements the seriousness of the task at hand as well as the resolve of the team, therefore
contributing to strong team results and retention.
9. Discipline/Focus
Discipline is the ability to choose and live from what one pays attention to. Discipline as self-
mastery can be exhilarating! Role model the ability to live from your intention consistently
and you'll role model an important leadership quality.
10. Big Picture, Small Actions
Excellent managers see the big picture concurrent with managing the details. Small actions
lead to the big picture; the excellent manager is skilful at doing both: think big while also
paying attention to the details.

Skills of Managers
In order to handle their jobs effectively supervisors require a combination of five key
managerial skills. These are classified as technical, human, conceptual, diagnostic and
political. The first three have been recognized for many years. Diagnostic and political skills
have also now received attention as organizations have become more complex.
Technical skill
Technical skill is proficiency in a specific activity that involves methods, processes,
procedures or techniques. Individual performers expect their supervisor to be able to help
them with technical problems.
Human skill
Human skill is the ability to work with, understand, motivate, and communicate with
individuals and groups. Human skill also includes the ability to communicate with people, to
resolve conflict, and to discipline. Since the supervisor’s job involves constant interaction
with people, human skills are essential.

Conceptual skill
Conceptual skill is the ability to understand abstract or general ideas and apply them to
specific situations. Conceptual skill usually means understanding how the total organization

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can be affected by a specific activity. Although it may not always be apparent, every action
taken in an organization has ramifications elsewhere.
Diagnostic skill
Diagnostic skill is the ability to analyze the nature of a problem with people, ideas, things or
events. A good diagnosis precedes a recommended solution to a problem (like in medicine or
automotive repair or management). Supervisors are frequently called on to size up a problem
in order to take appropriate corrective action.
Diagnostic skill overlaps with the other four managerial skills. This occurs because
supervisors usually need to use technical, human, conceptual or political skills to make their
diagnosis.
Many supervisors regard diagnostic skill as the most exciting part of their jobs. An
experienced supervisor expressed it this way: “Figuring out what’s wrong is why I am here. If
all problems had a ready solution, you wouldn’t need a supervisor.”
Political skill
Political skill is the ability to acquire the power needed to achieve one’s objective. Specific
political skills include being able to win others over to your cause.

Corporate Ethics
Definition
Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that
examines ethical principles and moral or ethical problems that arise in a business
environment. It applies to all aspects of business conduct and is relevant to the conduct of
individuals and entire organizations.
The reasons for having high ethical standards include:
 A higher moral within your employees and the organization
 It helps to attract new customers
 It builds higher customer loyalty
 It reduces the risk of negative press or backlash caused by doing “the wrong” things
 It helps to make a positive impact on the community
Here are 12 principles that form the basis of business ethics, and are what you need to hold
yourself accountable to:
Honesty

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You need to be honest in all of your actions, and every communication you make. When
people see you making honest decisions, they start to trust your company because you’re
not only being truthful, you’re being upfront and candid. People appreciate the fact they can
take you at your word, as customers only ever do business with those they trust. Being an
ethical executive means you do not deceive others by misrepresenting the facts, overstating
and exaggerating or only giving partial truths. If you’ve inadvertently given the wrong
impression, provide the relevant information to your customers and correct their
misunderstanding as soon as possible.
Integrity
Being ethical in business means maintaining a high level of personal integrity. This is how
you earn the trust of others, whether they are your customers, team or your superiors. In
this definition integrity means having a consistent character that is demonstrated by an
alignment of your thoughts, words and action. Sometimes it requires you to have moral
courage to do the right thing, and it takes inner strength to live up to mistakes and admit
when a fault has been made. Despite a great pressure to do otherwise, ethical business
managers live by a moral code they believe in, principles to maintain and they fight for
their beliefs – without sacrificing their honor for the sake of just getting a job done.
Keeping Your Promises
Your word is one of the most important tools in your arsenal as a business manager. Keep
every promise that you make, and always fulfill a commitment. The trust you build as an
ethical executive means people like doing business with you, as you take every reasonable
effort to fulfill not only the letter, but the spirit of the promises and commitments you have
made.
Loyalty
You need to be loyal to both your company, your team and yourself, while operating within
a strong moral compass. If you demonstrate your loyalty it builds trust, and shows that you
place a high value on advancing the interests of both the company and your colleagues.
You should not ever place loyalty above your other principles, or use it as an excuse for
unethical behavior. Demonstrate your loyalty but always make an independent judgment,
and never use information that you have gained in confidence for your own personal
advancement. Steer clear of conflicts of interest, and if you ever decide to leave your
company do it on the best of terms. Give reasonable notice, respect any information that
was gained in your former employer, and never engage in activities that take advantage of a
previous position that was held.

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Fair
In all of your actions, you must strive to be fair and just. An ethical executive is committed
to fairness in all that they do, and do not seek to exercise their power for an unfair
advantage or use indecent methods to gain a competitive edge. They also never take undue
advantage of another person’s difficulties and mistakes. Being an ethical executive means
that you are committed to being fair, employ justice in your decisions and treat all people
equally, with tolerance and acceptance of diversity. Being fair also means being open
minded, admitting when they have made a mistake, and adjusting their beliefs and positions
when it is appropriate.
Caring
This involves having a genuine concern for others, as well as a sense of compassion. An
ethical business manager is caring, benevolent and kind to both customers and staff, and
seeks to reach their goals while causing the least amount of harm and the greatest amount
of good. Being caring means understanding that there will be an impact on every
stakeholder following a decision, and they always consider the financial, emotional and
long term business consequences of an action. They don’t simply discount the needs of
others.
Respect
Being ethical means treating everyone with respect, demonstrating this by being courteous
and having an equal treatment of people regardless of who they are. Respect is given
because everyone deserves dignity, privacy and rights, and they adhere to the rule that you
must strive to treat others the way you would like to be treated.
Obeying the law
An ethical executive always obeys the law, and never breaks the rules, regulations or laws
surrounding their business activities.
Excellence
Being ethical in business is also about pursuing excellence in everything that you do.
Delivering the highest quality of service or products makes business sense, especially if
there is a constant endeavour to always improve.

Being a Leader
You need to demonstrate the principles and ethics you want your team to live by, and take
an active role as a leader to be a positive role model. The best way you can enforce an

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ethical mentality is to lead by example, and creating an environment within your business
that values decisions made on principles and standards of ethics.
Morale
Ethical business managers enhance the good reputation of a company, which at the same
time boosts the morale if its employees. The company reputation is very important, as well
as the pride and morale of their employees. As an ethical business manager you need to
avoid taking actions that undermine this respect, and they take action to correct any
inappropriate behaviour of others.
Accountable
Being ethical means holding yourself accountable and acknowledging and accepting
personal accountability for their decisions, and any consequences. Not just personally, but
an ethical manager will stand up and take accountability in front of their colleagues, their
company, and the community.
Holding yourself and your business to these standards will ensure you’re not only covered
against any wrongdoings, (if you follow these principles you can’t do anything wrong), but
you’ll impress customers and staff alike, and build a strong sense of trust with all of your
stakeholders. This is the foundation that takes your company to the success that it deserves
to reach!

Social Responsibilities of Business

Definition:
The obligation of any business to protect and serve public interest is known as social
responsibility of business.
We all know that people engage in business to earn profit. However, profit making is
not the sole function of business. It performs a number of social functions, as it is a part of
the society. It takes care of those who are instrumental in securing its existence and survival
like- the owners, investors, employees, consumers and government in particular and the
society and community in general. So, every business must contribute in some way or the
other for their benefit. For example, every business must ensure a satisfactory rate of return
to investors, provide good salary, security and proper working condition to its employees,
make available quality products at reasonable price to its consumers, maintain the
environment properly etc.

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Why should business be socially responsible?
Social responsibility is a voluntary effort on the part of business to take various steps to
satisfy the expectation of the different interest groups. As you have already learnt, the interest
groups may be owners, investors, employees, consumers, government and society or
community. But the question arises, why should the business come forward and be
responsible towards these interest groups. Let us consider the following points:
i. Public Image - The activities of business towards the welfare of the society earn goodwill
and reputation for the business. The earnings of business also depend upon the public image
of its activities. People prefer to buy products of a company that engages itself in various
social welfare programmes. Again, good public image also attracts honest and competent
employees to work with such employers.
ii. Government Regulation - To avoid government regulations businessmen should
discharge their duties voluntarily. For example, if any business firm pollutes the environment
it will naturally come under strict government regulation, which may ultimately force the
firm to close down its business. Instead, the business firm should engage itself in maintaining
a pollution free environment.
iii. Survival and Growth -Every business is a part of the society. So for its survival and
growth, support from the society is very much essential. Business utilizes the available
resources like power, water, land, roads, etc. of the society. So it should be the responsibility
of every business to spend a part of its profit for the welfare of the society.
iv. Employee satisfaction - Besides getting good salary and working in a healthy
atmosphere, employees also expect other facilities like proper accommodation,
transportation, education and training. The employers should try to fulfill all the expectation
of the employees because employee satisfaction is directly related to productivity and it is
also required for the long-term prosperity of the organisation. For example, if business spends
money on training of the employees, it will have more efficient people to work and thus, earn
more profit.
v. Consumer Awareness - Now-a-days consumers have become very conscious about their
rights. They protest against the supply of inferior and harmful products by forming different
groups. This has made it obligatory for the business to protect the interest of the consumers
by providing quality products at the most competitive price.
Responsibility towards Different Interest Groups
After getting some idea about the concept and importance of social responsibility of business
let us look into the various responsibilities that a business has towards different groups with

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whom it interacts. The business generally interacts with owners, investors, employees,
suppliers, customers, competitors, government and society. They are called as interest groups
because by each and every activity of business, the interest of these groups is affected directly
or indirectly.
i. Responsibility towards owners
Owners are the persons who own the business. They contribute capital and bear the business
risks. The primary responsibilities of business towards its owners are to:
a. Run the business efficiently.
b. Proper utilisation of capital and other resources.
c. Growth and appreciation of capital.
d. Regular and fair return on capital invested.
ii. Responsibility towards investors
Investors are those who provide finance by way of investment in debentures, bonds, deposits
etc. Banks, financial institutions, and investing public are all included in this category. The
responsibilities of business towards its investors are :
a. Ensuring safety of their investment,
b. Regular payment of interest,
c. Timely repayment of principal amount.
iii. Responsibility towards employees
Business needs employees or workers to work for it. These employees put their best effort for
the benefit of the business. So it is the prime responsibility of every business to take care of
the interest of their employees. If the employees are satisfied and efficient, then the only
business can be successful. The responsibilities of business towards its employees include:
a. Timely and regular payment of wages and salaries.
b. Proper working conditions and welfare amenities.
d. Opportunity for better career prospects.
e. Job security as well as social security like facilities of provident fund, group
insurance, pension, retirement benefits, etc.
f. Better living conditions like housing, transport, canteen, crèches etc.
g. Timely training and development.

iv. Responsibility towards suppliers

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Suppliers are businessmen who supply raw materials and other items required by
manufacturers and traders. Certain suppliers, called distributors, supply finished products to
the consumers. The responsibilities of business towards these suppliers are:
a. Giving regular orders for purchase of goods.
b. Dealing on fair terms and conditions.
c. Availing reasonable credit period.
d. Timely payment of dues.
v. Responsibility towards customers
No business can survive without the support of customers. As a part of the responsibility of
business towards them the business should provide the following facilities:
a. Products and services must be able to take care of the needs of the customers.
b. Products and services must be qualitative
c. There must be regularity in supply of goods and services
d. Price of the goods and services should be reasonable and affordable.
e. All the advantages and disadvantages of the product as well as procedure to use the
products must be informed do the customers.
f. There must be proper after-sales service.
g. Grievances of the consumers, if any, must be settled quickly.
h. Unfair means like under weighing the product, adulteration, etc. must be avoided.
vi. Responsibility towards competitors
Competitors are the other businessmen or organizations involved in a similar type of
business. Existence of competition helps the business in becoming more dynamic and
innovative so as to make itself better than its competitors. It also sometimes encourages the
business to indulge in negative activities like resorting to unfair trade practices. The
responsibilities of business towards its competitors are
i. not to offer exceptionally high sales commission to distributers, agents etc.
ii. not to offer to customers heavy discounts and /or free products in every sale.
iii. not to defame competitors through false or ambiguous advertisements.
vii. Responsibility towards government
Business activities are governed by the rules and regulations framed by the government. The
various responsibilities of business towards government are:
a. Setting up units as per guidelines of government
b. Payment of fees, duties and taxes regularly as well as honestly.
c. Not to indulge in monopolistic and restrictive trade practices.

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d. Conforming to pollution control norms set up by government.
h. Not to indulge in corruption through bribing and other unlawful activities.
viii. Responsibility towards society
A society consists of individuals, groups, organizations, families etc. They all are the
members of the society. They interact with each other and are also dependent on each other in
almost all activities. There exists a relationship among them, which may be direct or indirect.
Business, being a part of the society, also maintains its relationship with all other members of
the society. Thus, it has certain responsibilities towards society, which may be as follows:
a. to help the weaker and backward sections of the society
b. to preserve and promote social and cultural values
c. to generate employment
d. to protect the environment
e. to conserve natural resources and wildlife
f. to promote sports and culture
g. to provide assistance in the field of developmental research on education, medical
science, technology etc.

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