Delhi Public School, Daulatpur

Subject: Business Studies

Class – 12
Ch- 2 Principles of Management

PRINCIPLES OF MANAGEMENT
Principle
A principle is a fundamental truth or proposition that serves as the foundation for a system of belief
or behaviour or for a chain of reasoning
Principles of Management
Principles of management are broad and general guidelines for managerial decision-making and
behaviour. Management principles are not as rigid as principles of science as these deals with
human behaviour and thus are to be applied creatively given the demands of the situation.

Nature of Principles of Management

The nature of principles of management is as follows:

Nature of
Principles of
management

universal general practice &

flexible behavioral contingent cause & effect
applicability guidelines experimentation

1. Universal applicability: Principles of management is applicable in all types of organizations,

business as well as non-business, small as well as large enterprises depending on the nature
of the organisation.
2. General Guidelines: They are general guidelines to action but do not provide straight
solution to all managerial problems, as the business situations are complex and dynamic.
3. Formed by practice and experimentation: They are formed from the knowledge,
experiences and experiments of the managers.
4. Flexible: These principles are not rigid and can be adapted and modified by the practicing
managers depending upon the situation.
5. Mainly Behavioural: Since the principles aim at influencing complex human behaviour they
are behavioural in nature.
6. Cause and Effect relationship: They are intend to establish relationship between cause &
effect so that they can be used in various situations.
7. Contingent: Their applicability depends upon the prevailing situation at a particular point of
time. The application has to be changed as per the situation.

Significance of the Principles of Management

1. Providing managers with useful insights into reality: Principles of management guide
managers with useful insights into real world situations, adherence to these principles will
improve their knowledge, ability and understanding of various managerial situations and
circumstances.
2. Optimum utilization of resources and effective administration: The resources with the
company are limited. Management principles equip the managers to see the cause and
 effect of their decisions and actions and thus reduce wastage. Optimum utilization of
resources means maximum benefit with minimum cost.
3. Scientific decisions: Decisions must be based on facts, thoughtful and justifiable in terms of
intended purpose. Management principles must be timely, realistic and subject to
measurement and evaluation. Principles are free from bias and prejudice.
4. Meeting the changing environmental requirements: Management principles are effective
and dynamic and thus help the organization to meet the changing requirements of the
environment.
5. Fulfilling social responsibility: Due to the increased awareness of the public forces all
companies are required to fulfill social responsibilities. Principles of management not only
help in achieving organizational goals but also guide managers in performing social
responsibilities.
6. Management training, education and research: Management principles are the core of
management and are helpful in increasing knowledge, which forms the basis for
management training and research.

Taylor’s Scientific Management Principles

Meaning: It implies conducting of business activities according to standardized tools, methods and
trained personal in order to increase output improve its quality and reduce costs and wastes through
effective and optimum utilization of resources. Hence, it stresses that there is always one best
method to maximize efficiency. This method can be developed through study and analysis.

Science not rule of

Thumb

Principles of development of
each and every
Harmony not
discord scientific individual
according to his hr
greatest efficiency

Management and prosperity

Cooperation not
Individualism

(1) Science, not rule of Thumb: There should be scientific study and analysis of each element of a
job in order to replace the old rule of thumb approach or hit and miss method. Taylor insisted on
introduction of scientific enquiry into the domain of management practice. He believed that there is
only one best method to maximise efficiency and this method can be develop through work, study
and analysis.

(2) Harmony, Not discord: There should be complete harmony between management and workers I
achieving organizational goals. It implies that there should be mental revolution on part of managers
and workers in order to respect each other’s role and eliminate any class conflict to realize
organizational objectives.
(3) Cooperation not individualism: It is an extension of the Principle of Harmony not discord, there
should be complete cooperation between the labour and management instead of individualism.
Constructive suggestions from employees must be encouraged and desist workers from going on
strike and making unreasonable demands.

(4) Development of each and every person to his or her greatest Efficiency and Prosperity: It
implies taking actions for the development of competencies of all persons of an organization after
their scientific selection and assigning work suited to their temperament and abilities. This will
increase the productivity by utilizing the skills of the workers fully.

Techniques of Scientific Management

Functional
foremanship

standardisation
Mental and
revolution simplification of
work
techniques of
scientific
management

diffrential
piece wage work study
system

1. Functional Foreman-ship: Functional foreman-ship is a technique in which planning and execution

are separate.

• Supervision is divided into several specialized functions and each function is to be entrusted to a
foreman.
• There are eight foremen in the related process or function of production.
• Four each under planning and execution who keep a watch on all workers performance.
 2. Standardization and Simplification of work: Standardization refers to developing standards for
every business activities to maximize output. Whereas simplification refers to eliminating
unnecessary varieties, sizes and grades of products or services. It results in savings of cost of
labour, machines and tools. It leads to fuller utilization of equipment and increase in turnover.

3.Work study: it ensures maximum production at minimum cost and getting best contribution
from every factor. It includes:
a) Method Study: The objective of method study is to find out one best way of doing the job
to maximize efficiency in the use of resources and to reduce cost of production and to
maximizing quality and satisfaction of customers.
b) Motion Study: Refers to the study of productive movements. It is the science of identifying
and eliminating wasteful movements resulting from unnecessary, incidental and
unproductive motions of the workers so that it takes less time to complete the job
efficiently.
c) Time study: It determines the standard time taken to perform a well-defined job. The
objective of time study is to determine the number of workers to be employed, frame
suitable incentive schemes & determine labour costs.
d) Fatigue study: Fatigue study seeks to determine time and frequency of rest intervals in
completing a task. The rest interval will enable workers to regain their lost stamina thereby
avoiding accidents, rejections and industrial sickness.
4. Differential piece wage system: This differentiates efficient and inefficient workers and links
wages and productivity. The standard output per day is established and two-piece rates are used:
higher for those who achieve upto and more than standard output i.e. efficient workers and lower
for inefficient and slow workers. Thus, efficient workers will be rewarded & inefficient will be
motivated to improve their performance.

5. Mental Revolution: the objectives of mental revolution are:

• Change in mental attitudes of workers and management towards each other.
• Co-operation between workers and management.
• Ruling out feeling of suspicion and prejudice from the minds of workers and
management to adapt systematic thinking.

Fayol’s Principles of Management

According to Henri Fayol’s specialization promotes efficiency of the workforce and increases
productivity. In addition, the specialization of the workforce increases their accuracy and speed. This
14 principles of management is applicable to both technical and managerial activities

General management principles developed by Fayol

1. Division of work: Work is divided in small tasks/job and a trained specialist who is competent
enough to perform that job does each work. Thus it leads to greater efficiency, specialization,
increased productivity.

2. Authority and Responsibility: Authority means power to take decisions and responsibility means
obligation to complete the job assigned on time. There should be a balance between authority and
responsibility. Mere responsibility without authority makes an executive less interested in
discharging duties. Similarly, giving authority without assigning responsibility makes him arrogant
and there is fear of misuse of power.

3. Discipline: Is the obedience to organizational rules and employment agreement, which are
necessary for the working of the organisation. Discipline requires good supervisors at all levels, clear
and fair agreements and judicious application of penalties.

4. Unity of Command: According to Fayol there should be one and only one boss for every individual
employee. It implies that every worker should receive orders from one superior only, otherwise it
will create confusion, conflict and duplication of work.

5. Unity of Direction: All the units of an organisation should move towards the same objectives
through coordinated and focused efforts. Each group of activities having the same objective must
have one head and one plan. This ensures unity of action and coordination.

6. Subordination of Individual Interest to general interest: The interest of an organization should

take priority over the interest of any individual employee. In simple words the organisation interest
to be prioritized over individual interest.

7. Remuneration of Employees: The overall pay and compensation should be, fair to both
employees and the organization. The employees should be given fair wages so that they can have a
reasonable standard of living. Wages should be within the paying capacity of the organisation.
8. Centralization and Decentralization: Centralization means concentration of decisions making
authority with some, whereas its dispersal among more than one person is Decentralization. Both
should be balanced, as no organization can be completely centralized or completely decentralized.

9. Scalar Chain: The formal lines of authority and communication between superiors and
subordinates from the highest to the lowest ranks is known as scalar chain. This chain should not be
violated but in case of emergency employees at same level can contact through Gang Plank by
informing their immediate superiors.

10. Order: According to Fayol “ People and material should be in suitable places at appropriate time
for maximum efficiency”. A place for everything and everyone and everything and everyone should
be in its designated place

11. Equity: Good sense and experience are needed to ensure fairness to all employees who should
be treated as fairly as possible. The working environment of any organization should be free from all
forms of and principles of justice and fair play should be followed. No worker should be unduly
favoured or punished.

12. Stability of Personnel: Employee turnover should be minimized to maintain organizational

efficiency. A personnel should be selected and appointed after rigorous procedure and the selected
person should be kept at the post for a minimum tenure to show results.

13. Initiative: Workers should be encouraged to develop and carry out their plan for improvements.
Initiative means taking the first step with self-motivation. It is thinking out and executing the plan.

14. Espirit De Corps: Management should promote team spirit, unity and harmony among
employees. This will bring coordination and cooperation in an organisation. A manager should
replace ‘I’ with ‘We’. This will give rise to mutual trust and belongingness among team members.

*Difference between Taylor and Fayol: Refer to the table given in NCERT.
* Differnce between Unity of Command and Unity of Direction: Refer to the table given in
NCERT.