Subject: Principles of Management

Books Recommended:

1) Management:
Koontz & Weihrich

2) STONER & Gilbirt

3) Ricky W. Griffin

Syllabus:
1. Introductory Issues
2. Organization and Environment
3. Planning and Decision Making
4. Organizing
5. Leading (Directing, Motivating)
6. Controlling.
 INTRODUCTION (MANAGING AND MANAGERS)
What is Management:
It is the process of getting things done through oilier
people by utilizing human and non-human resources in an
organization in order to attain some pre-determined goals.
This is done through the process of planning, organizing,
leading and controlling.

The Process of Management:

Planning is the process of establishing goals and suitable
course of action to attain those goals.

Organizing is the process of arranging and allocating

work, authority arid resources among the organization's
members to attain goals.

Leading is the act of directing and influencing the

activities of the people to attainment of goals.

Controlling is the act of ensuring actual activities to

planned activities and to take necessary corrective action.

Levels of Management:
(1) Top Level
(2) Mid Level
(3) Lower Level
Skills of Management:
(1) Technical Skills
(2) Social Skills
(3) Conceptual Skills.

Roles of management:

1) Interpersonal Roles:

(a) Figure Head

(b) Leader
(c) Liaison

2) Informational Roles:

(a) Monitor
(b) Disseminator
(c) Spokes Person

3) Decisional Roles:
(a) Entrepreneur
(b) Disturbance Handler
(c) Negotiator
The Principles of Management

(I) Division of work

(2) Authority
(3) Discipline
(4) Unity of command
(5) Unity of direction
(6) Subordination of individual interest to common goals
(7) Remuneration
(8) Centralization
(9) The hierarchy
(10) Order
(11) Equity
(12) Stability of tenure
(13) Initiative
(14) Spirit de corps.

The Challenges of Management:

(1) The need for vision

(2) The need for ethics
(3) The need for responsiveness to cultural diversity

Managerial Efficiency Vs Managerial Effectiveness

The Universal Nature of Management:

1 Profit Seeking organizations:

(a) Large business (b) Small business (c) International business.
2. Non-Profit organizations:
(a) Govt. organizations, (b) Educational Institutions, (c) Health
care, (d) Non-traditional settings including NGO’s.
 ORGANISATION AND ITS ENVIRONMENT

Organization As a System:

Takes input from environment, transforms them into

goods/services and sends them back as output to the external
environment.

Importance of the Study of Environment for Management:

(1) The rapid changes is brought by forces that are external to

the organization.
(2) Intensified market condition.
(3) Tremendous technological development.
(4) Growing public activism (abortion, animal research, human
rights etc.).
(5) Concern about environmental balance.

Organizational Environment:

Two types: (a) External Environment

(b) Internal Environment
(a) External Environment: All elements outside an
organization but are relevant to operations of an organization,

(b) Internal Environment: Elements that are inside the

organization and under management control.
 Elements of External Environment

1. Direct Action Elements

2. Indirect Action Elements.

1. Direct Action Elements: These are the elements of the

environment that directly influence an organization’s activities.
They are called stakeholders.

There are two types of stakeholders:

(a) Internal Stakeholders:

(i) Employees, (ii) Shareholders, (iii) Board of Directors.

(b) External Stakeholders:

(i) Unions
(ii) Suppliers,
(iii) Competitors,
(iv) Customers
(v) Financial institutions
(vi) Special interest Groups (use political lobby to come with
issues like abortion, prayer in a public place etc.)

2. Indirect Action Elements: Elements of the internal

environment that do not affect directly but affect the climate in
which an organization’s activities take place.
Elements of Indirect Action External Environment
of Organizations
(A) Socio cultural variables:

(1) Ecology group (Chemical pollution)

(2) Consumer activists (CAB)
(3) The Media (creates awareness of a product)
(4) Education group (Equal right opportunities, no use of child
labor, no discrimination against color, creed, religion, women in
higher position etc.).

(B) Technological Variables:

1) Research and Development

2) Development in other industries

C) Political Variables:

1) Legislation. ,
2) Political pressure group (NGO's Autonomy vs. full control
etc.)

(D) Economic Variables:

1) Other business groups,
2) Economic policy

How a manager cun relate an organisation to environment

(1) Managers must pay attention to the key aspects of
environment,
(2) Developing interaction with different agencies,
(3) Negotiating &. lobbying with powerful agencies.
(4) Organizational design and planning are based on
environment. If ’'necessary, there should be change in the formal
structure of organizations.
 SOCIAL RESPONSIBILITY AND ETHICS

Corporate Social Responsibility:

The activities that an organization will carry on to influence the

society in which it operates.

Ethics: Ethics is the code of morals of a person or a group that

sets standards as to what is good or bad or right or wrong in
one's conduct.

Management Ethics: arc Principles that guide the actions and

decisions and determines if they are good or bad in a moral
sense.

Ethical Behavior:- Legal behavior + something else Ethics also

deals with peoples1 right and duties, the moral rules that people
apply in making decision and the nature of relationship among
people.

Changing Concepts of Social Responsibility:

Andrew Carnegie and the Gospel of Wealth 1899, Founder of U

S. Steel published the book, the Gospel of Wealth.

Charity Principles: More fortunate members of society should

assist:
- Less fortunate, unemployed,
- Handicapped sick, elderly
- Through institutes or directly
Stewardship Principle:
This states that wealthy individuals should view themselves as
caretakers/ste wards of their property. They hold the money for
the rest of the society and use it for any purpose that the society
deems legitimate.

Milton Freedman’s Argument:

There is only one social responsibility of business to use its

resources and energies to increase its profits as long as it stays
within the rules of game.
- Society is complex,
- Some other organs must do social work.

Enlightened self-interest:

This states that those who do not use their power in manner that
society considers responsible, will tend to loose it in the future.
So, organizations must act in the way the society wants.

Corporate Social Responsiveness:

- How companies should respond to social issues.
- The forces that determine the social issues to which
business should respond.
 PLANNING AND DECISION MAKING
Planning:
It is the establishment of goals and designing suitable course of
action for attaining those goals. In general, plans are the guides
by which the organization obtains and commits the resources
required to reach its objectives, catty out activities that are
consistent with the selected objectives.

Basic Steps in Planning:

1) Establish a goal or set of goals:- Planning begins with

decisions about what the organization wants. Identifying
priorities and becoming specific about their resources
effectively.

2) Define the present situation: Current state of affairs must be

analyzed for drawing plans.

* How far is the organization from its goals?

* What resources are available for reaching goals?

3) Identify the aids and barriers to goals:

* What internal and external factors can help the organization to

reach its goals?
* What factors might create problems?
4) Develop a plan for reaching the goals:

* Develop various alternative courses of actions for reaching the

desired goal.
* Evaluate those alternatives.
* Select the most suitable one.

Types of plans:

1) Strategic plans: Strategic plans are those plans that are

designed to meet the broad objectives and implement the
mission for the existence of the organization.
2) Operational plans: Operational plans are those plans that are
taken for the smooth accomplishment of strategic plans.

Types of Operational Plans:

(a) Single use plans: These are developed to attain specific

purpose and dissolved when these have been accomplished. EX-
Building a warehouse, bridge etc.

(b) Standing Plans: These are the plans that are used by
managers in repeated situations in standard forms in order to
save time and money.

Types of Single Use:

(i)Programs (it) Projects (iii) Budgets

Types of Standing Plans:

(i) Policies (ii) Standard Procedure (iii)Rules
Barriers to Effective Planning:
1) Formal planning not accepted by all managers of
organization.
2) Some aspects of planning not fully understood by planners.
3) Non-involvement of all managers at planning process.
4) Long range plans are considered unchangeable.
5) Inadequacy of available information,
6) Unwillingness to give up alternatives.
7) Lack of organizational knowledge.
8) Lack, of knowledge about the environment.

How to Overcome Barriers:

1) To create a result oriented atmosphere in the organization.
2) To establish clear-cut flow of communication.
3) Involve key executives and their subordinates in planning
process.
4) Be realistic about the resources and needs of the organization.
5) Determine the need for right information and supply it.
6) Develop more and more social skills.
7) To monitor the environment.
S) To study about the organization.

Formal Steps in Strategic Planning:

1)Goal formulation:
(a) Management values (b) Social responsibilities,
2) Identification of current objectives and strategy:

a. To know original objectives and strategy.

b. To make substantial change in objectives and strategy if
necessary.
c. To communicate objectives throughout the organization

3. Environmental Analysis:

a. To identify the ways in which elements of environment like

economic, social, cultural, political and legal systems affect the
organization.
b. To develop mechanisms to adjust with the changes in the
elements of environment.

4. Resource Analysis: It is necessary to identify organizational

strengths and weaknesses.

a. To make a profile of skills and resources like financial,

technical, human and physical.
b. To determine the key success requirement of the product/
market segments of the organization.
c. To compare the resource profile to the Key success
requirements to determine the strengths and weaknesses.
d. To compare the organization's strengths and weakness with
those of its competitors to have a comparative advantage.
5. Identification of Strategic Opportunities and Threats:
a. It may develop from the alternative uses of existing resources.
b. It may develop from the advancement of technology.
c. It may develop from changes in economic system.
d. It may develop from war or natural calamities.

6. Gap Analysis:
a. To determine the extent of changes required in current
strategy,
b. To determine the persons or institutions that may be of
helping hands,

7. Strategic Decision Making:

a. Identification of strategic alternatives.
b. Evaluation of strategic alternatives, c* Selection of strategic
alternatives.

8. Strategy Implementation:
a. Strategy must be incorporated into daily operations.
b. It must be translated Into appropriate tactical plans, programs
and budgets.

9. Measurement and Control of Progress:

a. Could the strategy been implemented as per plans?
b. Did the strategy attain the intended results?

The Nature of Managerial Decision:

a. Programmed Decision: These are the decisions where
solutions to routine problems are determined by "rules,
procedure or habits.
b. Non Programmed Decision - These are the decisions that
deal with unusual or exceptional problems.

c. Decision Making under Certainty: - This is a situation

where managers have accurate, measurable outcome of various
alternative courses of action.

d. Decision Making under Uncertainty: - This is a situation

where little is known about the alternatives and their outcomes.
It arises from external condition or from lack of information,

e. Decision Making under Risk: - This is a situation where we

cannot predict outcomes with certainty, but do have enough
information to say something with the help of probability.

Steps in Rational Decision Making Process:

1. Investigate the Situation:

a. Define the problem;
b. Diagnose the causes:
c. Identify the decision objectives,

2. Develop Alternatives:
a. There must not be only one solution of a problem,
b. There must be brainstorming sessions to develop
alternatives.

3. Evaluate the Alternatives and Select the Best One:

a. Is this alternative feasible?
b. Is this alternative a satisfactory solution?
 c. What would be- the possible consequences for the
organization and society?
d. Select the best one.

4. Implement and Monitor the Decision:

a. Managers must allocate necessary resources.
b. Must make schedule. ' .
C. Must identify probable threats.
d. Must deal with potential threats and reach its goal.
 ORGANISING
Organizing means designing and developing a structure of the
organization that will help management to attain pre-determined
goals or objectives in an effective and efficient way. It also
includes recruitment and placement of people at different levels
of the structure.

Organizational Design: It is the art of determining the most

appropriate, practical and appealing structure of the organization
from the viewpoints of its people, technology, objectives and
strategies for attaining those objectives by taking into
consideration the micro and macro environment of the
organization.

Organizational Structure: It is the skeleton that clearly shows

the art of dividing organizational activities in a planned and
coordinated way, indicating the formal relationship of people in
an organization.

Four Buildings Blocks or Organization:

1. Division of labor: Dividing the total work load into task that
that can be comfortably and logically performed by individuals
or groups.
2. Departmentation: The art o grouping the employees and task
into different groups.
3. Hierarchy: It shows the working relationship of people in an
organization within departments and as a whole within the
organization.
4. Co-ordination: Developing a mechanism in order to integrate
the activities of different departments to attain common
objectives of the organization. •»
Approaches of Organizational Design:
1. Classical approach
2. The task-technology approach.
3. The environmental approach.
4. Downsizing.

L Classical Approach: Early manager’s one best way of doing

thing has helped the development of classical approach. This is
based on baste principles of Henri Fayol. Hierarchical or tall
structures were considered to be most efficient.

2. The Task-Technology Approach: It refers to different kinds

of production technology involved in making different kinds of
products.
a. Unit and small batch production.
b. Large batch and mass production. ,
c. Process production

3. The Environmental Approach:

a. Mechanistic.
b. Organic.

4. Downsizing: It refers to restructuring of the organization that

may result in decreasing the size of the organization by flatter
structure.

Types of Organizational Structure:

1. Line organization.
2. Functional organization.
3. Product / Market organization.
4. Matrix organization.

1. Line Organization Structure: Here the authority flows

directly from top to bottom and it is relatively taller.

2. Functional Structure: An organization designed on the basts

of functions performed by different unites within the
organization.

3. Product / Market Structure: An organization structure that

brings together in one work unit all those activities that is related
to:
 a product .
 a group of products
 a certain geographical area
 a certain type of customers

4, Matrix organization Structure: It is a multiple command

systems of organization structure where employees may have
two bosses. One chain of command is functional and another
one is horizontal.
 DELEGATION OF AUTHORITY

It is the assignment of format authority to another person for

carrying out specific action.

Need for Delegation:

1. To ensure efficient and effective functioning within an
organization.
2. To assume more powerful responsibilities from higher
authority.
3. To enhance employees’ accountability and judgment.
4. To help management in taking better decision.
5. To speed up decision making process.

Barriers to Delegation:
1. Reluctance to delegate by managers.
2. Insecurity and confusion about ultimate responsibility,
3. Lack of confidence on subordinates.
4. Difficulties in determining the task to be delegated.

Guidelines for Effective Delegation:

1. Willingness of top management is a must.
2. There should be open communication between managers and
subordinates.
3. Managers should be able to analyze organizational goals, the
task requirements and employees’ capacities and capabilities.
 CENTRALIZATION AND DECENTRALIZATION

Centralization: When power authority and accountability

remains at the hands of few top executives of an organization, it
is called centralization.

Decentralization: When decision making power, task and

responsibility arc passed through hierarchy at different lower
levels of an organization, it is called decentralization.

Advantages of Decentralization:

1. Delegation of authority can take place.

2. Training can be provided at lower levels.
3. On the spot, quick decision is possible.
4. Environmental adjustment becomes easier.
5. All modem management theories presuppose decentralization.
6. Close relationship with clients or customers becomes
possible.
7. It helps to take the advantage of proximity to market and local
knowledge and culture.
8. Dealers' comfort can be enhanced.

Disadvantages:
1. Co-ordination of task sometimes becomes difficult.
2. Formulating strategic planning is difficult.
3. Efficient integration of sub-units may not be possible.
4. Distribution of talents and technology may not be
economically possible on various locations.
5. Number of personnel and overhead expenses may increase.
6. Low-cost production may not be possible.

Factors influencing Decentralization:

1. Environmental influences such as market characteristics,
competitive pressure, availability of materials etc.
2. Organizational size and growth rate:
3. Other characteristics of the organization like:

 Top management's preference.

 Organization’s culture.
 Abilities of lower level managers.
 Style of management and its philosophy.
 Risk-benefit associated with .the decisions.
 LEADERSHIP
Leadership is the process of using power to obtain interpersonal
influence. This influence is used for directing task-related
activities of group members. In organization, leadership occurs
in two ways:

(a) Formal (with power and authority)

(b) Informal (becomes influential by virtue of skills)

FOUR COM PONE NTS OF THIS DEFINITION:

(a) Leadership involves other people i.e. the followers or

employees, who are ready to accept direction.
(b) It involves unequal distribution of power between leader and
group members.

There arc five bases of power

l. Reward, 2.Coercivc, 3. Legitimate 4. Referent and 5. Expert
power.

(1) Reward: When power is related to providing reward to

someone to influence him\her to carry out orders or to supervise
to attain promotion.

(2) Coercive: Based on the ability to punish someone if

requirements are not met.

(3) Legitimate power: It arises from formal authority.

Ex. Prime Minister over all ministers.
(4) Referent power: Based on the desire of the follower to be
identified and associated with the influence.
(5) Expert power: It stems from the belief that the person is
having some knowledge which others don't have. What doctors
tell us, we believe because we do not have that knowledge.

(c) Leadership involves the ability of the leaders to influence

follower’s behaviors in a number of ways.
Example: Hitler could influence his people to kill others.

(d) Leadership is associated with certain value judgment.

 APROACHES TO THE STUDY OF LEADERSHIP

Michigan studies: Michigan University researchers divided

leadership behavior into two groups:

(a) Employee centered (strong emphasis on the welfare and

motivation of subordinates).
(b) Production centered (strong emphasis on getting things done
than on motivation and welfare of employees).

(a) Characteristics of Employee Centered Managers:

(1) They encourage employee participation in goal selling and
other work related decisions,
(2) They ensure high performance by inspiring trust and respect.

(b) Characteristics of Production Centered Managers:

(1) They set rigid work, standards.
(2) Organize the activities on the basis of best possible detailed
breakdown.
(3) They prescribe specific work methods to be followed.
(4) Supervision of employee task is very close and strong.

The Result of Michigan:

 Employee centered leadership was found to be very
effective and productive.
 Most effective leaders have supportive relationship with
their employees.
 High performance goals can be attained by group decisions
and this happens where there is employee participation.
 SPAN OF MANAGEMENT
It can simply be defined as the number of subordinates who
report directly to a given manager so that the supervision task
can become effective and meaningful. The determination of
effective span of management is important in order to have
fruitful communication, co-ordination and efficiency in
organizational activities.

Graicunas Theory: VA Graicunas has developed a formula that

reflects the number of relationship between a manager and his
subordinates in a work setting: It suggests that, in selecting
appropriate span, managers must consider not only direct
relationship, but also cross relationship that may increase w ith
an increase in number of subordinates.

n-1
R - n (2 + n -1)

With 5 subordinates, there are 100 possible relationships and

with 10 subordinates, there can be 5210 relationships,

Factors that may determine the span of management:

1. Factors relating to situation
2. Factors relating to subordinates
3. Factors relating to manager

1 Factors relating to situation:

It can be broad if:

a) the work is fairly routine.
b) the operations are fairly stable.
c) the work of subordinates arc similar.
d) subordinates can generally work independently.
e) procedures and methods are well established and have been
formalized.
f) the work does not require high level of control.

2. Factors relating to subordinates:

It can be broad if:

a) subordinates are well trained for the job.
b) subordinates prefer to work without close supervision,

3. Factors relating to manager:

It can be broad if:

a) the manager is well trained and capable.
b) manager receives assistance in performing his her supervisory
activities.
c) manager does not have many additional non-supervisory-
activities to perform.
d) manager prefers a fairly loose rather that a tight supervisory
style.

Objections of Increasing the Levels of Supervision and

number of Supervisors:
1. Inaccuracy of internal communication.
2. Inflexibility may develop,
3. Danger of layering.
4. Expenses of supervision.
5. Effects on morale.
How to Relieve an Overburdened Executive:
1. To create tire post of an assistant.
2. To appoint £ staff assistant (specialized person).
3. To create the post of an intermediary executive.
 CONTROLLING

Definition; Management control is a systematic effort to set

performance standards with planning objectives, to design
information feedback systems, to compare actual performance
with these predetermined standards, to determine whether there
are any deviations and to measure their significance, and to take
any action required to assure that all Corporate resources are
being used in the moat effective and efficient way possible in
achieving corporate objectives.

Basic steps in controlling -

1) Establish standards and methods for measuring performance.
2) Measure performance.
3) Find out the variance.
4) Identify the reasons.
5) Take corrective action.

The purpose of control:

1) To adapting to environmental change.
2) To create belter quality
3) To create faster cycles
4) To facilitate delegation and teamwork

Characteristics of effective control:

1) Integration with planning.
2) Flexibility. ,
3) Accuracy.
4) Timeliness.
5) Objectivity.
Resistance to control:

1) Over control
2) Inappropriate focus.
3) Rewards for inefficiency.
4) Too much accountability.

Overcoming resistance to control:

1) Encourage employee participation.

2) Develop verification procedure.
3) Follow standard norms at all levels.