Class 12

Business Studies
Chapter 2

Principles of

Management
 Principles of Management
Principles refers to a statement which reflects
the fundamental truth about some
phenomenon

Management principles are derived on the basis of

observation and analysis of events which managers have
to face in actual practice
 Principles of Management
“Principles of management are the guiding
rules or laws for managerial action”
– H.G. Hicks
 Nature of
Management Principles
 Nature of Management Principles
1 Universal Applicability
Management principles have universal application in
all types of organizations and in all places like
business organizations, police force, sports clubs,
family etc.
 Nature of Management Principles
2 General Guidelines
Management principles are derived from
experience and analysis and they are in the form of
mere statements

These statements are guidelines for action but not

provide solution to all managerial problems
 Nature of Management Principles
3 Formed by practice and experimentation
Management principles are formed by practice and
experimentation of previous managers
 Nature of Management Principles
4 Flexible
Management principles never remain static; they are
applied in given situations
 Nature of Management Principles
5 Mainly behavioural
Human behaviour is unpredictable and it is often
situational

Eg: Team work as a principle is good for attainment of

organizational goals, but it is a personalized intellectual task
like painting a picture, individual contribution is more valid
than team work
 Nature of Management Principles
6 Cause and effect relationship
Cause and effect relationship is indicated by
management principles

Eg: “Unity of Command” states that presence of a

single boss avoids confusion
Here the presence of Unity of Command is the cause and
avoidance of confusion is the effect
 Nature of Management Principles
7 Contingent
Management Principles are to be applied in
accordance with the situation and organizational
requirements, then only it will be successful
 Nature of Management Principles
1.Universal Applicability
2.General Guidelines
3.Formed by Practice and Experimentation
4.Flexible
5.Mainly Behavioral
6.Cause and Effect Relationship
7.Contingent
 Significance of
Management Principles
 Significance of Management Principles
1
Providing Managers with useful insights
into reality
Adherence to the principles of management will add to
their knowledge, ability and understanding of
managerial situations
 Significance of Management Principles
2 Optimum Utilization of Resources
Principles of Management point out how time,
money, materials and human efforts can be used
economically to improve productivity

This fact can be seen in the principles of division of

work, delegation of authority etc.
 Significance of Management Principles
3 Scientific Decisions
With the help of Management Principles, managers can
take appropriate decisions in right time
Significance of Management Principles
4
Meeting changing environment
requirements
Management principles are highly flexible and
therefore can be modified to meet changing
requirements of environment
 Significance of Management Principles
5 Fulfilling social responsibility
Good quality products to the customers, care for
environment, opportunities for employment, education
for the children of employees etc. are some of the
examples for social responsibilities
Significance of Management Principles
6
Management training, education and
research
A well organized and systematic body of knowledge
(management principles) is essential for imparting
training and education to managers for functioning
efficiently
Significance of Management Principles
1.Providing useful insight
2.Optimum Utilization of Resources
3.Scientific Decisions
4.To Meet the Changing Environment
5.Fulfilling Social Responsibility
6.Useful for Training, Education etc.
Fayols's Principles of
Management
 Henry Fayol

1841 - 1925

French Engineer in a mining company.

Became the M D of that company.
Author of “General and Industrial management”
Father of modern management
He has propounded 14 Principles of
Management
14 Principles of Management by Henry Fayol
 14 Principles of Management by Henry Fayol
1 Division of Work
A complex work should be divided into small tasks,
and each task should be assigned to a particular
employee

It increases the efficiency because by doing a small part of work

repeatedly, the employee acquires speed and perfection
 14 Principles of Management by Henry Fayol
2 Authority and Responsibility
Authority is the right to give orders to the
subordinates

Responsibility means the obligation to perform the work in the manner desired and
directed by
authority

If authority is given to a person, he should

also be made responsible
 14 Principles of Management by Henry Fayol
3 Discipline
It means obedience, respect for authority and
observation of established rules

It ensures the smooth running of the organization and

applicable for workers and management
 14 Principles of Management by Henry Fayol
4 Unity of Command
This principle states that each employee should receive orders from
one superior only

More than one superior at a time leads to confusion

 14 Principles of Management by Henry Fayol
5 Unity of Direction
The activities, which have a common objective
must be grouped together and under one head

All the operations and departments in the organization

should be directed towards the common goal
Differences: Unity of Command Vs. Unity of Direction
Basis Unity of Unity of
Command Direction
Meaning One superior at a time One head and one
plan
It prevents
Aim It prevents dual overlapping of
subordination activities

Implication It affects an individual It affects the entire

employee organization
 14 Principles of Management by Henry Fayol
6 Subordination of Individual Interest
to General Interest
The business enterprise is superior to individuals

The interest of the business must prevail over

personal interests of the individuals
 14 Principles of Management by Henry Fayol
7 Remuneration of Employees
The remuneration for work done must be
fair and reasonable

It must inspire the employees to work hard so that the

organization earns more profit
 14 Principles of Management by Henry Fayol
8 Centralization and Decentralization
Centralization refers to concentration of authority to the top management

Decentralization means dispersal of authority to lower

levels

Utmost centralization or decentralization is not good, but

there must be a balance between them
 14 Principles of Management by Henry Fayol
9 Scalar Chain
It refers to the line of authority or the chain of
superiors starting from the highest and moving
towards the lowest rank

Communication should pass through this

chain of command
 Scalar Chain and Gang Plank
In case of urgency the established chains can be violated and
Gang Plank (direct contact) between two concerned authorities
may be established

Short-circuiting the chain of command where

emergency decisions are to be taken is known as
Gang Plank
 14 Principles of Management by Henry Fayol
10 Order
“Have a place for everything and keep everything
in its place”

Material Order
All materials are to be kept in proper place
Social Order
The right man is to be assigned the right job
 14 Principles of Management by Henry Fayol
1 Equity – (Equality)
1
Superiors should be impartial while dealing with
their subordinates
 14 Principles of Management by Henry Fayol
12 Stability of Personnel
Managers and workers should not be shifted from
their positions frequently

A person needs time to adjust himself to new work

environment
 14 Principles of Management by Henry Fayol
13 Initiative
The creativity of an individual must be utilized for
the development of the organization
 14 Principles of Management by Henry Fayol
14 Esprit de Corps (Union is Strength)
The contribution of a team is more significant than
that of an individual

Team spirit helps in developing an atmosphere of

mutual trust and understanding
14 Principles of Management by Henry Fayol

INDIVIDUAL INTEREST &

GROUP INTEREST
 Taylor'
s
Scientific
Management
 F W Taylor

1856-1915

Father of Scientific Management

American Mechanical Engineer
Author of “The Principles of
Scientific Management”
 Scientific Management
Scientific Management refers to the application
of science in management practices

F W Taylor advocated a detailed scientific study of

each job to determine the best way of doing it
 Scientific Management
“Scientific Management means knowing exactly what
you want men to do and seeing that they do it in the
best and cheapest way”

- F.W.Taylor.
 Scientific Management
Aims & Objectives
a) Increasing production – by the use of
standardized tools, methods and devices.

b)Improved quality – by using quality control

and research.

c)Reducing cost – by using scientific techniques of

production.
 Scientific Management
Aims & Objectives
d)Selection of right person for right work – by
scientific selection and training to workers.
e)Reduction of wastages – by proper handling
of resources.
f)Provision of incentive wages – by applying
differential piece wage system.
Principles of
Scientific
Management
 Principles of Scientific Management
1 Science, not rule of thumb
Rule of thumb means application of traditional methods or the methods
decided by the managers based on their past experience

Traditional method of Scientific method of

threading a needle threading a needle

All these methods are often untested and unscientific; they do not
guarantee success
 Science, not rule of thumb
The rule of thumb can be seen as ‘the dictatorship of the manager’ which
should be avoided

Taylor suggested ‘thinking before doing’

“Trial and Error Method’ should be avoided and a scientific study must be
done before solving any problem or doing a work
 Principles of Scientific Management
2 Harmony, not discord (conflict)
There should be complete harmony between
management and the workers

This can be achieved through a change in the attitude of workers and the management.
Taylor called it as “Mental Revolution”
 Harmony, not discord
Management should share the gains with workers
and the workers should work hard and accept
changes for achievement of goals
 Principles of Scientific Management
3 Co-operation, not individualism
There should be complete cooperation between
management and workers instead of individualism

Management should take workers into confidence and

give them participation in decision making
 Co-operation, not individualism
Workers should not indulge in unnecessary
strikes and raise unreasonable demands

Taylor suggested that there should be equal

division of work and responsibility between the
workers and the management
 Principles of Scientific Management
4 Development of each and every
person to their greatest efficiency
and prosperity
Efficiency of all workers is a must for which they
have to be provided with maximum prosperity

Taylor advocated scientific methods for selection,

training and development of workers
 Development of each and every
person to their greatest efficiency
and prosperity
If workers put in their best efforts, it ensures maximum
prosperity not only to workers but also to the
organization
 Principles of Scientific
Management
1.Science, not rule of thumb

2.Harmony, not discord

3.Co-operation, not individualism

4.Greatest efficiency and prosperity of

workers
Techniques of
Scientific
Management
 Techniques of Scientific Management
1 Standardization and simplification
of work
It refers to the process of setting standards for
every business activity
 Techniques of Scientific Management
2 Method Study

It is conducted to know the best method of

doing a job
 Techniques of Scientific Management
3 Motion Study
It helps to eliminate unnecessary movements of
men and material while doing a job
 Techniques of Scientific Management
4 Time Study
The minimum time required for each element
of work is determined

It helps in fixing a standard time for the job which

will save cost, time and effort
 Techniques of Scientific Management
5 Fatigue Study
It seeks to determine the amount and frequency of rest
intervals in doing a job

Intervals should be scientifically determined

This would help to recoup the energy lost in continuous
work
 Techniques of Scientific Management
6 Differential piece wage system
It refers to a wage system in which dual wage
rates are fixed to differentiate between efficient
and inefficient workers

Taylor recommended that this system will be enough to

motivate the inefficient worker to perform well
 Techniques of Scientific Management
7 Functional Foremanship
Specialization must be introduced in the
organization

Functional foremanship is a form of organization which

involves supervision of a worker by several specialist
foremen
Functional Foremanship
 Functional Foremanship
a Instruction Card Clerk

To lay down the exact method of doing a work, use of

tools and equipments etc.
 Functional Foremanship
b Route Clerk
To lay down the sequence of operation and direct the
workers to follow the same
 Functional Foremanship
c Time and Cost Clerk
To lay down the time table for doing various jobs
and maintain the records of the cost of work
 Functional Foremanship
d Disciplinarian
To enforce rules and regulations and maintain
discipline among workers
 Functional Foremanship
e Speed Boss
Ensures that machines are run at their optimum
speed
 Functional Foremanship
f Gang Boss
To assemble and set up various equipments and tools
to enable the workers begin their work immediately
after entering the shop
 Functional Foremanship
g Repair Boss
Ensures regular cleaning, servicing and repair of
machines to keep them in efficient working order
 Functional Foremanship
h Inspector
To ensure that the workers do their work to the
desired quality and that the jobs are executed as per
specifications
 Functional Foremanship

Factory Manager

Planning in Charge Production in Charge

Foremen / Specialists Foremen / Specialists

Worker
Techniques of Scientific Management
1.Standardization of work
2.Method Study
3.Motion Study
4.Time Study
5.Fatigue Study
6.Differential piece wage system
7.Functional Foremanship