BASICS OF MANAGEMENT

FOUNDATION COURSE: EGMF003

Structure
1.0 Learning Objectives
1.1 Introduction
1.2 Meaning of Management
1.3 Role of a Manager
1.3.1 Levels of Management and Managerial Role
1.3.2 Functional Approach to Managerial Role
1.3.3 Management Roles Approach
1.3.4 Managerial Efficiency and Effectiveness
1.4 Management Functions
1.4.1 Planning
1.4.2 Organising
1.4.3 Leading
1.4.4 Controlling
1.5 Management Theories
1.5.1. Pre-scientific Management Period
1.5.2. Classical Management Period
1.5.3. Neo-classical Management Period
1.5.4. Modern Management Period
1.6 Let Us Sum Up
1.7 Key Words
1.8 References
1.9 Suggested Additional Readings

1.0 LEARNING OBJECTIVE

Competence of a workplace depends on how the managers direct/guide the employees and
effectively coordinate, to meet the goals of the team and mission of the organization. This
introductory course on management will make you conversant with the role of a manager and
management functions in Section 1.3 and 1.4 respectively. Contribution of thinkers in the
evolution of management theories shall be discussed in Section 1.5.
After completion of this course you should be able to:
• Comprehend the role of a manager
• Understand the significance of management functions
• Draw inferences from the management theories
• Apply suitable management theory to effectively perform managerial role
1.1 INTRODUCTION
You must have quite often heard that successful organisations are well managed. They are
guided by able leaders and the management functions, in such organisations, are performed
effectively at all levels. With increasing competition and complexity of business environment
management decision-making requires professionalism. Many organisations appoint,
management consultants to make key decisions and professionals for conduct of different
functions. Professionalism in management has gained greater relevance since the decade of
2000s. One of the reasons for this renewed importance is global recognition to conduct of
business in socially responsible manner.
1.2 MEANING OF MANAGEMENT
Management is generally referred to the group of people in an organization who direct the use
of resources to achieve the defined mission. It is the process of planning, organizing, leading
and controlling the resources to achieve goals of the organization.
Diverse views on management have been put forward by thinkers and management
professionals. Some important features of management based on these views are listed below.
• Management is a group activity -. Management is described as group of people who
manage the activities of the organization. “Management is a multi-purpose organ that
manages a business, manages managers and manages workers and work”
(Drucker,1954).

• Management is a managerial process – Management is a distinct process consisting

of planning, organizing, activating and controlling performed to determine and
accomplish the objectives by use of the people and resource’ (Terry, 1953). ‘To manage
is to forecast and to plan, to organize, to command, to coordinate and to control’ (Fayol,
1949). It is an unseen force whose result in shown in the performance of the
organization.

• Management is goal-oriented – ‘Management is the art of knowing what you want to

do in the best and cheapest way’ (Taylor, 1911). It aims to achieve defined economic
and non-economic goals of the organisation. The primary objective of an organization
is to convert input into final output for sale to generate profit (Taylor,1911).

• Management is team-work – ‘Management is the art of getting things done through

and with the people in formally organized groups. It is the art of creating an
environment in which people can perform as individuals and yet co-operate towards
attainment of group goals. It is the art of removing blocks to such performances, a way
of optimizing efficiency in reaching goals’ (Koontz, 1961). Employees of the
organization work in groups/teams to fulfil the goals of the group. Managers make the
rules and enforce them along with the team leaders. Management is the skill set of
managing people and processes in an organization.

• Management is dynamic – Management involves adapting to the ever-changing

business environment. It involves agility to pre-conceive future trends and aligning the
processes to them. ‘Managers do not wait for the future; they make the future’ (Drucker,
1954). ‘To manage is to forecast and to plan, to organize, to command, to coordinate
and to control’ (Fayol, 1949).

• Management is universal – Management is relevant for all types of organization.

Principles of management are applied to achieve organizational goals basis the
prevailing situation.
Considering the explanation given by different management gurus it can be concluded that
management is a universal and a dynamic process, of managerial functions performed by a
group of employees, to achieve organisational goals.
1.3 ROLE OF A MANAGER
You shall now focus on the following questions.
• Who is a manager?
• What does a manager do?
In common parlance a manager is someone who coordinates and examines the work of other
people to meet the goals of the organization. An effective manager is believed to have skills to
plan, communicate, organize and lead the team. He should be able to achieve goals of the
organisation.
Responsibilities of a manager are discussed here basis the levels of management, managerial
functions and managerial roles.
1.3.1 Levels of Management and Managerial Role

You may have observed that organisations hire employees for different positions. This is so
because organisations tend to operate effectively by creation of levels of management. The
relative importance of design, human, conceptual and technical skills may differ at various
levels of hierarchy. Role of a manager changes with his position in the business hierarchy.
Generally, following levels of hierarchy are observed in majority of organisations. Exhibit 1
gives a brief description of the levels of management and their assigned roles.
• Top Level Managers - Chief Executive Officer (CEO) supported by C-suite -
executives who report to him, like Chief Financial Officer (CFO), Chief Information
Officer (CIO), Chief Operations Officer (COO) and Chief Technology Officer (CTO)
constitute the top level of management. Vice Presidents and Chairman may report to
the C-suite. Top level managers are responsible for framing corporate policies, setting
the goals of the organization and formulate plan to achieve these goals. They should
have design skills, the ability to find resolution to a problem for the benefit of the
organization. Strategic planning is undertaken at this level to frame organizational
purpose.
Exhibit 1: Levels of Management and Managerial Role

Level of Management Managerial role

Top Level Frame corporate policies, set goals of the

Managers organization and formulate plan to
achieve these goals

Middle Level Create business plan basis the policies

Managers framed by the top management and make
operating decisions

Lower Level Assign jobs to workers and plan routine

Managers activities. Supervise and control work
 • Middle Level Managers - Middle level managers are functional heads like General
Manager/Plant Manager, Regional Manager/Divisional Manager and immediate
subordinates. They manage the first-line managers. They are connecting link between
the top and lower level of management. Middle level managers create tactical plan for
execution of policies framed by the top management and make operating decisions.

• Lower Level Managers - Lower level managers or First-line managers are in direct
contact with the non-managerial employees and manage their work. Section Head/
Office Manager, Shift Supervisor, Department Manager and First Line manager
constitute this level. They assign jobs to workers and plan routine activities. They
supervise and control work performed by the employees. The lower level managers are
responsible for availability of material and equipment for seamless operations.
Operational plans are framed at this level.
According to Robert Katz (1974) managers at the top, middle and lower level should have
interpersonal skills, conceptual skills and technical skills respectively to perform their roles
effectively.
1.3.2 Functional Approach to Managerial Role
Functional approach was adopted by Peter Drucker (1954) to outline the responsibilities of
managers. The five basic tasks of a manager put forward by him are given below.
(1) Sets objectives – Goals of the group in alignment with organizational direction are set by
the manager.
(2) Organises – Division of the work in activities is done by the manager. He assigns tasks to
the employee basis their competence.
(3) Motivates and communicates – He creates his team of people and ‘integrates’ their
operations through communication. He motivates and guides them to perform to their potential.
(4) Measures – He sets targets and yardsticks. Analysis, appraisal and interpretation of
performance is undertaken by him.
(5) Develops people – Appropriate steps are taken by the manager to develop skills of his team
people. Training of the employees is undertaken to adopt the emerging best practices.

1.3.3 Management Roles Approach

Basis his close observation of five American CEOs Henry Mintzberg (1973) stated that a
manager plays multiple roles to perform management functions. He put forward three roles of
a manager as described below. Exhibit 2 outlines these roles.
(1) Interpersonal role – As a leader and able communicator manager is responsible for smooth
running of the organization.
• As a part of figurehead role the manager performs the ceremonial role of attending to
the visitors, awarding merit certificates, etc.
• Hiring, training and motivating the team members are a component of leadership role
of the manager.
• Liaisoning role includes coordinating with the other teams of the organization and
external parties.
(2) Informational role – Market intelligence related to the industry is gathered by the manager
and relevant information shared with the team members.
• As a monitor a manager is expected to keep himself abreast of the new practices in the
industry. He should be aware of the changes in consumer preferences.
• A major contribution of the manager is the role as a disseminator. Significant
information about the organization is shared by the manager with his subordinates.
• He acts as a spokesperson when he shares relevant information with the people outside
the organisation.
(3) Decisional role – Crucial decisions related to the growth of the organization and handling
unforeseen events is made by the manager.
• As an entrepreneur a manager adopts strategies for the growth of the organization. He
is responsible to decide whether to compete basis product differentiation or cost
leadership.
• He is a disturbance handler. Internal disturbances like strikes, employee attrition,
employee grievances are addressed by the manager. Corrective actions in case of
external disturbances like COVID-19 pandemic, floods, cyclones, earthquakes are
taken by the manager.
• As a resource allocator the manager allocates material and human resources.
• It is the responsibility of the manager to act as a negotiator in case of conflict and
provide a resolution.
Exhibit 2: Managerial Roles by Mintzberg

Interpersonal role
• Figurehead role
• Leadership role
• Liaisoning role
Informational role
• Monitor
•Disseminator
•Spokesperson
Decision roles
•Entrepreneur
•Disturbance handler
•Negotiator

1.3.4 Managerial Efficiency and Effectiveness

In management difference is made between efficiency and effectiveness. The concepts
emerged in early twentieth century in the era of industrial age. According to Lon Roberts (1994)
efficiency is “the degree of economy with which the process consumes resources - especially
time and money” while effectiveness is “how well the process actually accomplishes its
intended purpose, here again from the customer’s point of view.”
Efficiency is described as delivering more benefits with same resources or same benefits with
less resources, wastage and spending. Effectiveness refers to achievement of end-result. As a
salesforce personnel if you convert leads into sales in lesser time then it means that you are
efficient. However, if you handle the concern of the prospective clients more diligently after
research then you are effective. It is often said “efficiency is doing things right” and
“effectiveness is doing the right things.” Sending mass emails to prospective clients can be
called efficiency but customized mails with research of the leads can be effective.

Student Activity: Outline the responsibilities performed by you in your organization. Compare
them with the role description given by Katz, Drucker and Mintzberg.
Student Activity: Read the articles and describe the role of a manager in future.
https://www.business-standard.com/article/pti-stories/69-of-routine-work-currently-done-by-
managers-will-be-120012300465_1.html
https://www.business-standard.com/article/pti-stories/millennials-more-focussed-on-
personal-skills-than-managerial-116111700661_1.html

1.4 MANAGEMENT FUNCTIONS

Management process comprises of interrelated functions to achieve goals of the organization.
You will now be made conversant with these functions of management. Consider Exhibit 3
that shows the essential management functions performed in an organization.
Exhibit 3: Management Functions
PLANNING ORGANISING LEADING CONTROLLING

• Motivating, • Monitoring the

• Setting vision, • Defining, activities and
mission, goals and leading and
classifying and supervising other taking corrective
objectives. delegating tasks people action as required
Framing strategy to achieve the
and developing goals as planned
plans to achieve
organisational
goals

Primary functions of management are planning, organizing, leading and controlling. It is

generally called as P-O-L-C framework. Henry Fayol classified the activities performed by a
manager in five functions as planning, organizing, coordinating, commanding and controlling.
In current context commanding is now referred to as leading and coordinating is not taken as a
separate function.
1.4.1 Planning
Following set of questions may be asked in your organization, to define organizational goals
and frame plans to achieve them.
• Where are we now?
• What do we want to achieve?
• How it is to be done?
Planning is the process of:
• deciding the goals and objectives of the organization,
• establishing the strategy to achieve these objectives, and
• developing actions to be taken to achieve the goals
It is the foundation for other managerial functions and affects the performance of the
organization. “No manager can organize, actuate and control successfully over a period of time,
unless he has planned” (Terry). Planning is an essential management function that should be
done with futuristic a perspective to address the changes in the business environment. It is an
ongoing activity. It provides stability to the organization and results in value creation in the
long run. Exhibit 4 highlights the benefits of planning.
Types of Plans
Goals (desired outcomes for individuals, groups or organisations) are set and plans (documents
that specify how to achieve goals) are framed to achieve them. Financial goals are set for
financial performance while strategic goals for overall performance of the organization.

A good plan has clear goal and should be simple, flexible, balanced and provide optimum use
of resources. It should be amenable for proper analysis and classification of actions. Plans are
framed basis different levels of management, time period, specificity, frequency of use and
scope of the plan as shown in Exhibit 5.
Exhibit 4: Benefits of Planning

Provides direction
Benefits of
Planning

Intensifies unified efforts among

the employees

Minimises uncertainty and waste

Sets standards for controlling

Strategic plan framed at the top management level, outlines the organizational purpose. Vision,
mission and values of the organization are defined at this level. The focus of strategic plan is
on defining strategic goal and attaining competitive advantage. It is generally for a long time
period of more than three years.
Tactical plan framed at the middle management level, aims to execute policies designed by the
top management. It relates to the operating decisions. Allocation of resources of the company
and use of budget is undertaken under a tactical plan. Management by objectives (MBO)
(Drucker,1954) can be used to develop and implement the tactical plan. It involves four steps:
(1) discuss possible goals
(2) employees and managers collectively select challenging and attainable goals
(3) jointly develop tactical plan to achieve the goals and objectives, and
(4) meet regularly to review the progress.
Operational plans are developed at the lower level of management and are framed for a time
period of one year or less. They may be:
- single use plans that are carried out once for a unique situation, or
- standing plans are used for repeated activities. They are framed to carry out routine
activities of the organization. Standing plans are in form of (a) policies (b) procedures
and (c) rules and regulations.

• Policy refers to a general course of action that a manager may take in a specific
situation.
• Procedures indicates the series of steps that should be taken by a manager in a particular
situation, in future.
• Rules and regulation give a precise description of performing a specific action.
Specific plans are defined clearly and have specified course of action. While directional plans
are flexible in nature. They are general guidelines that provide a focus.
Functional plan relates to a part and has micro-perspective. It may be related to production or
marketing or human resource. Corporate plan is holistic and has both micro and macro
perspective. It has focus on organizational performance.
Exhibit 5: Types of Plan

TYPES OF PLANS

Level of Time Frequency Scope of

Specificity
Management Period of Use plan

Strategic Long Term Directional Single Use Functional

Operatioal Short Term Specific Standing Corporate

Approaches of Planning
In section 1.3.1 you have been introduced to the levels of management. Considering these
levels any of the following approaches can be adopted for planning.
Top-down Approach – Strategic plans comprising of mission, strategies and action plans are
framed by the top management. All directions are given by the top management. Middle level
managers follow the guidelines to achieve the targets through tactical plans. Operational plan
is framed by the lower level of management.
Bottom-up Approach – The lower level managers are involved in framing of plans and their
implementation. Since decisions are taken by all the team members it encourages loyalty and
creativity.
Composite Approach – It is a combination of above two approaches. The top management
provides guidelines and the middle and lower level managers prepare the action plans.
Generally, organisations use top-down approach to planning.
You will learn more about the planning process in the core course of ‘Strategic
Management.’
1.4.2 Organising
At this stage your organisation should aim to answer the questions of:
• What tasks are to be performed?
• Who will perform them?
Once the plans are framed ‘organising’ is done to implement them. Organising refers to
division of work, assigning of responsibility to people with formal lines of authority and
allocation of resources for smooth operations of the organisation. To execute the business plan
tasks are:
• defined
• classified
• delegated
Division and specialization of work is undertaken to assign responsibility of a specific task to
an expert. Managers design the structure of the organization to achieve the goals of the
organization. Organising function becomes more important with the expansion in size of an
organization. It has a major impact on the productivity of the organization.
Following dimensions are involved in designing organizational structure.
• Specialisation of work – Degree to which tasks are divided in separate activity and the
level of specialization required to perform the task.
• Departmentalisation – Refers to grouping of tasks basis, functions performed, product
line, process, customer segments and geographic region.
• Standardisation - The degree to which performance of activities is in a routine manner.
• Hierarchy of authority – Reporting relationships from top to bottom and span of control
i.e. the number of employees that are supervised by manager. The line of authority from
upper to lower level of management.
• Centralisation – Whether there is concentration of decision-making authority to top
management or decision-making rests with the managers who are closest to action.
There may be delegation of decision-making authority to employees.
• Formalisation – Extent to which role of an employee is defined by formal
documentation like job description, manual and regulations.
Common organizational structures are vertical, horizontal or spatial structures. Organizational
charts are usually employed to depict the structure of the organization.
A. Traditional Approach
Traditionally organizational structures have been vertical or horizontal.
(1) Vertical Structure - A tall or vertical structure comprises of levels of top management,
executives and staff. It can be simple, functional, divisional or matrix.
• Simple structure has low departmentalization and formalization. There is wide span of
control and centralised decision-making. There is clear accountability and flexibility in
decision-making. This structure is cost saving and more effective during emergency
situations. However, it may adversely impact creativity among the middle and lower
level employees. In specific instances dependence on single person may be harmful.
Exhibit 6: Functional Organisational Structure

CEO

Marketing Human Finance

Dept. Resource Dept. Dept.

Finance
Marketing Manager HR Manager Manager

Senior Manager Senior Manager Senior Manager

Assistant Manager Assistant Manager

Assistant Manager

Staff Staff
Staff

• Functional Structure has standardization of work with hierarchical reporting.

Employees performing similar tasks are grouped in a specific department basis
specialization and report directly to their manager. The department heads or senior
managers report to the chief officer in the organization. There may be departments like
R&D, marketing, production, finance and human resource. The top management
coordinates the departments as shown in Exhibit 6.
Cost saving is from specialization and minimal duplication of task. Since
responsibilities are fixed there is accountability for work. In case of lack of coordination
between the departments, there would be less of teamwork and thereby low
performance of the organization.
• Divisional Structure has separate business units or divisions basis products, markets
and regions. The division managers are accountable for performance of their divisions.
This structure is appropriate in organisations where there is centralized decision-
making. Duplication of tasks is a major limitation of this structure that may increase
cost and reduce efficiency. Microsoft, Tesla, Google, Pepsico and McDonalds have
divisional structure. Exhibit 7 shows divisional structure of Microsoft.
• Matrix Structure is a combination of functional and divisional structure. It was first
applied in the aerospace industry in the USA in the 1950s. Reporting of employees is
to two managers who are jointly responsible for the performance of employees. There
is one manager from the administrative function like HR, finance and marketing. The
other may be related to service, product and geographic region. An individual maybe
reporting for luxury product line along with the finance department. Coca-Cola has
 hybrid structure that is a combination of different structures. Exhibit 8 denotes a matrix
structure.
Exhibit 7: Organisational Structure of Microsoft

Source:
https://www.google.com/search?q=organisational+structureof+microsoft&sa=X&rlz=1C1O
KWM_enIN853IN853&nfpr=1&sxsrf=ALeKk01HDLVDBVEh-
QvbdrC0phowkLXhpw:1595492467541&tbm=isch&source=iu&ictx=1&fir=Q8122_kLb96i
wM%252CtD_mVOqmE3-qsM%252C_&vet=1&usg=AI4_-kQYD6LdA
Exhibit 8: Matrix Organisational Structure

Source: http://ronpalinkas.com/matrix-management-not-a-structure-a-frame-of-mind/
(2) Horizontal Structure – In a flat or horizontal organization there is no or few levels between
the executive and staff. Employees have the authority to make decisions. There may not be any
need to take approval of managers. Emphasis is on teamwork and collaboration between the
employees. Decision-making in such organisations is quick.
B. Contemporary Approach
Globalisation and information technology has led to evolution of Boundaryless Structures. In
current context organisations may not follow the defined boundaries as put forward by the
traditional approach. Some of the modern structures are described here.
 • Virtual organization is an association of individuals, groups, or organisational units in
different geographic locations that are connected electronically. They may not exist
physically but operate effectively remotely with the help of information technology.
There can be links with suppliers (upstream) or customers (downstream). Amazon is
regarded as the first virtual organization. Physical infrastructure cost is saved by the
virtual operations. The e-business solutions used by such organisations creates
efficiency.
• Hollow organisations are highly dependent on outsourcing. They have minimal staff
and work with partner organisations in an effective manner. For instance, Nike sub-
contracts a number of production activities, but maintains control over design and
quality specifications.
• Modular organisations outsource a module of production process. External
organization is responsible for a designated module of production process. For instance,
Boeing has outsourced manufacturing of components to assemble an aircraft to external
organisations that are responsible to manufacture specific component.
• Shared services organization refers to a provision of a set of services, across the
organization, by a dedicated unit that is within the organization. For instance, provision
of personality grooming training across the departments on regional or multinational
basis.
You will learn more about this management function in the core course of ‘Strategic
Management.’
1.4.3 Leading (Directing)
The managerial function of leading is the process of directing the people to work towards the
goals of the organization. It involves:
• Communication - Issuing instructions to the team members/subordinates.
• Leadership - Guiding and helping the team members/subordinates in following best
practices.
• Motivation - Motivating the employees to work towards the goals of the organization
through incentives and better work culture.
• Supervision – Supervising the team members/subordinates to comply with the plans.
You will learn more about this management function in the core course of ‘Organisational
Behaviour’ or ‘Developing Effective Leaders and Organisation.’
1.4.4 Controlling
Controlling involves monitoring of the execution of the business plan to achieve goals and
make corrective action as required. It is most closely related to the planning function. This
function leads to focusing on performance targets and avoids wastage of resources. It comprises
of following steps:
(a) setting up of standards (established levels of quality and quantity to measure
performance) to judge whether performance is as per requirement
(b) measurement of progress of work
(c) comparing the actual performance with the standards
(d) taking corrective actions for deviations, if any.
Types of control basis the time at which it is applied
• Feedback control is undertaken after the activity is completed.
• Concurrent control is gathering of deficiencies as they occur.
• Predictive of feedforward control is gathering of performance deficiency before it may
occur.
You will learn about controlling techniques like balanced scorecard, Gantt chart, Milestone
chart, PERT, CPM and Kaizen in the core course on ‘Managing Quality and Supply Chain
Management’. Course related to Finance will provide you details of budgetary control
methods.

Student Activity: Read the article “The New Boundaries of the ‘Boundaryless’ Company” by
Larry Hirschhorn & Thomas Gilmore (HBR May–June 1992) and outline the challenges of
working in a traditional organisation structure

https://hbr.org/1992/05/the-new-boundaries-of-the-boundaryless-company
1.5 MANAGEMENT THEORIES
Now you will learn about the major theories of management. In the quest for a structured way
of conducting business, management theories have been put forward by thinkers since the
nineteenth century. These are concepts and principles that provide a guideline for efficient
operations of the modern organisation. As a manager you should judiciously select the best
possible theory considering the prevailing situation and the company culture. Exhibit 9 shows
that evolution of management thought categorised in four phases.
1.5.1. Pre-scientific Management Period (before 1880)
Management practice can be traced back to the period in history when human settlements began
and farming started on a large scale. Ancient civilisations of Indus Valley, Mesopotamia,
Greece and Rome flourished due to able management of the leaders. With industrial revolution
in 1700s and establishment of large-scale companies, management gained relevance. Till the
second half of 19th century management got recognition as a separate discipline, when owners
and managers of the organization increasingly became separate entities.
1.5.2. Classical Management Period (1880-1930)
Formal thoughts on management put forward between 1880 to 1930 are referred as components
of classical approach. They lay emphasis on managing work in organisations to improve
efficiency.
(1) Scientific Management
Frederick Winslow Taylor (1856-1915) is called as the father of scientific management. He
worked mostly in Midvale Steel Company and Bethlehem Steel Company. He rose from the
position of an operator to chief engineer. Due to shortage of skilled labour in United States in
the beginning of the 20th century, Taylor focused on identifying the ‘one best way’ to improve
productivity. Basis his experiments at the Steel Companies in Pennsylvania, United States, he
developed the theory of scientific management. He was able to increase productivity by
assigning the job to workers basis their ability, with right tools/machines and monetary
incentives for motivation. His thoughts have been put forward in his publications ‘Shop
Management’ and ‘The Principles of Scientific Management.’
Principles of scientific approach put forward by Taylor (1911) are shown in Exhibit 10. The
concepts of scientific management theory are described below.
(i) Scientific Planning – The core of the theory is application of scientific principles to identify
tasks that involve operational efficiency. It is an art of knowing exactly what you want your
men to do and seeing that they do it in the best and cheapest way. The standard task that an
average worker can do during a day under normal working hours is defined by Taylor as “a
fair day’s work.”
Exhibit 9: Evolution of Management Thought

Pre-scientific Scientific
Management
Management
(F. W.Taylor)
Period (before 1880)
Bureaucratic
Management (M.
Classical Management Weber)
Period (1880-1930)
Administrative
Management (H.
Management Neo-classical Fayol)
Theories Management
Period (1930-1950)
Quantitative
Management

Systems
Management
Modern Management
Period (since 1950)
Contingency
Management

Theory Z

Selection of workers should be done basis a scientifically designed procedure as per physical
and mental requirement. They should be trained for each job and made fit for it. Development
of each employee should be to his greatest efficiency and prosperity. Each member of the
organisastion should be given the opportunity to achieve maximum efficiency.
Organisation should work at full potential to maximise the output level with optimal use of
resources. This will increase the productivity and thereby the profitability of the organization.
The gains should be distributed between the employers and employees.
(ii) Standardisation of work – According to Taylor standards should be set for the task to be
performed, basis the Time and Motion Studies. Time study was developed by Taylor to specify
the average time required to do a job. He advocated the Motion Study put forward by Frank
and Lillian Gilbreth (1916/17) that aimed at identifying the best sequence to do a job. Motion
study emphasised on (a) use of human body (b) workplace arrangement and (c) tools and
equipment to be used efficiently to perform a specific task. Fatigue study done by Gilbreths
defined the duration and frequency of rest interval to complete a task. Performance standards
fixed by time, cost and quality of work would simplify the production process and avoid
wastage of resources.
Exhibit 10: Taylor's Principle of Scientific Management
Taylor's Science, not rule of thumb – Work should be assigned to the
employees after observation and analysis of each part and time
Principles of involved, rather than rule of thumb. Decisions should be made in a
Scientific scientific manner after proper investigation and analysis.
Management Harmony, not discord – Management and workers shall operate in
harmony and have positive attitude towards each other.
Employees should be selected after assessing the physical, mental
and other requirement for each job. Training should be given to
them to make them fit for the job.
Cooperation, not individualism – The employees should work in
cooperation to achieve the goals of the organization.
Equitable division of responsibility – Roles at different levels of
management should be assigned for execution of the business
plans

(iii) Differential Piece Rate System – To incentivize the efficient workers a differential piece
(unit) rate system was devised by Taylor. Under this system a standard output was fixed and
then two wage rates were fixed as given below:
• Lower wages were fixed for workers who did not produce the standard output.
• Higher wage rate was fixed for workers who produced equal to or more than standard
output.
(iv) Functional Foremanship –Taylor stated that specialist foreman should be employed to
supervise the work. At the office or planning level, organization should appoint:
• Time and cost clerk – He should prepare the standard time of completion of a task and
cost of doing it.
• Route clerk - He should decide the precise sequence in which a task should be
performed.
• Discipline clerk – He should maintain discipline and monitor the employees.
• Instruction card clerk – He should give instructions of how a task should be performed.
 Supervision of work at the doing or factory level can be improved by:
• Gang boss – Placement of machines and tools is decided by him along with the direct
supervision of the workers.
• Speed boss – Proper speed of work should be maintained by him.
• Repair Boss – Repair and maintenance of machine should be done by repair boss.
• Inspector boss – Quality of production is maintained by the inspector boss.
(2) Bureaucratic Management
Max Weber (1864—1920), a German sociologist put forward Bureaucratic Management
theory in 1920. Basis his observations of the monarchical rule in Germany and study of
enterprises of United States he developed the theory of bureaucratic management. Main
features of the theory are stated below.
(i) Hierarchy of management structure – There should be top to bottom ranking of positions in
the organization with each level being controlled by the level above. Bureaucracy leads to
logical structuring of activities of the organization.
(ii) Division of work – Work should be divided in specialized tasks that are assigned to each
employee. Authority and responsibility should be clearly defined that results in proper
execution of the assigned tasks.
(iii) Qualification based hiring – Selection of employees should be based on their technical
experience that is tested or basis educational qualification. There should be a formal selection
process and favouritism should be avoided.
(iv) Formal rules and procedures – Rules and procedures should be documented and applicable
to all employees in an objective manner. There should be proper maintenance of records of the
decisions and activities in the organization.
(v) Separation of managers and owners – The owners of the organization should be separate
from the managers who are career oriented.
(vi) Impersonal relationships – All tasks should be performed according to the rules and
procedures. Personal factors should not be considered in their execution. All employees should
be treated in an impartial manner.
(3) Administrative Management
Henry Fayol (1841-1925) joined as a junior executive at Commentry-Fourchambault, a French
vertically integrated company, in 1860 and rose to the position of director in 1918. He
developed the administrative theory based on his experience as CEO while making the
company a strong financial organization from bankruptcy faced in 1880s. He is called as a
founder of classical management thought because he presented a general management theory
in a systematic manner. He stated that “success of an enterprise generally depends much more
on the administrative ability of its leaders than on their technical ability.”
In 1949 Fayol put forward five managerial functions that are still relevant today – planning,
organizing, coordinating, commanding and controlling. He observed that managers should
apply the 14 Principles of Management as shown in Table No. 1. They are applicable to all
types, functions, levels and sizes of organization.
Table No. 1: Fayol’s 14 Principles of Management
1. Division of Work – Increase production by dividing work according to skills of the person
that leads to specialization and therefore increase in productivity.
2. Authority and Responsibility – Managers “right to give orders” is accompanied by the
responsibility of consequences. Authority and responsibility go hand in hand, but authority
should not be abused.
3. Discipline – Organisations should have defined rules and procedures and employees should
obey and respect them. This ensures cordial relations between the employees and management.
4. Unity of Command – Each employee should have one reporting boss and receive orders from
him. Confusion and conflict is avoided by enforcing this principle.
5. Unity of Direction – There should be ‘one manager for one plan’ for all related activities
with one objective. This facilitates coordination due to unity of action.
6. Subordination of Individual Interest – Interest and goals of the organization should be given
importance over personal interests.
7. Remuneration – Employees and employers of the organization should be given fair and
satisfactory compensation.
8. Centralisation – Final decision-making authority should be with the top managers and the
subordinates should be given authority to perform their function properly. A balance should be
maintained between centralization and decentralization.
9. Scalar Chain – It refers to a vertical chain of authority from top to bottom. Each position in
the chain has clear line of authority linking managers at all levels.
10. Order – There should be ‘a place for everything and everything in its place’ and ‘a place
for everyone and everyone in his place.’ This would avoid overlapping of responsibilities and
possibility of conflict.
11. Equity – Managers should be kind, fair and just with employees. This will bring loyalty
from the subordinates.
12. Stability of Tenure – Employees should not be changed from positions frequently.
Performance of employees increases when adequate time is given to learn new work and give
better performance.
13. Initiative – Managers should be encouraged to take initiatives to think and implement plan
of action. This gives rise to new ideas and improves performance of the organization.
14. Espirit de Corps – Promotion of team spirit gives strength to the organization and helps in
coordinated efforts in the organization.

1.5.3. Neo-classical Management Period (1930-1950)

The scientific management theory, bureaucratic theory and administrative theory focused on
management of workers and give importance to the role of managers. These theories
emphasized on individual performance and ignored the role of group relationships. Human
relations and socio-cultural factors also influence the performance of employees. The
behavioural approach emphasizes on this aspect of an organisation. Neo-classical management
theories laid stress on the importance of human relations. A successful organization considers
the psychological factors and motivates the employees by caring for their social well-being.
Elton Mayo, Abraham Maslow, Frederick Herzberg and Douglas McGregor are the main
proponents of this viewpoint. Mayo’s tenets are stated in Exhibit 11 in detail.
Exhibit 11: Mayo's Tenets of Human Relations

Mayo's Creation of sound human relations has a positive influence on the

Tenets of employees - An organization is a social unit. Healthy social environment
coupled with better working conditions in the organization can motivate
Human the workers. Taking care of the social well-being of the employees and
Relations creation of a pleasant environment boosts the morale of the workers.
Group behavior can dominate the individual attitudes and beliefs to
improve organizational performance - Productivity of workers can be
increased when they work as a member of social group and have cordial
relations with the supervisor. Financial incentives cannot be regarded as
the prime motive to enhance efficiency of the organization. Healthy
inter-group and interpersonal relations are equally important.

A friendly supervisor/team leader can motivate the workers -

Performance of the employees can be enhanced with adoption of
democratic decision-making process. “A sense of participation”
generates happiness and positive environment. A sense of
belongingness may boost the morale of the employees and improve
inter-group relations.

Human relations view of management was put forward by Elton Mayo after conducting
experiments at Western Electric factory at Hawthorne between 1924 and 1932. Basis his
Hawthorne Studies, Mayo concluded that people management considering human relations can
stimulate the employees and increase productivity. Productivity of an organization is associated
with employee satisfaction.
The goal of cordial human relations is to motivate the employees that improves productivity,
rather than just making them happier.
For more details please refer:
https://www.yourarticlelibrary.com/management/elton-mayos-human-relations-approach-to-
management/70014
1.5.4. Modern Management Period (since 1950)
(1) Quantitative Management
Scientific and quantitative explanations were employed during the second world war to help
the mangers decide the deployment of resources for seamless supply of products and services.
Mathematical models and information gathering were adopted to support the managerial
decisions. Two main approaches are discussed here.
 • Operations Management – Primary function of an organization is to produce products
and services and ensure continuous supply. Effective decisions can be taken by using
advanced mathematical models and tools that help in inventory management,
increasing productivity, and improving quality. Mathematical tools commonly used are
forecasting techniques, work scheduling, linear programming, queueing theory and
cost-benefit analysis. Production planning, design, location, work scheduling and
quality assurance is achieved basis the quantitative methods.
• Information Management – Introduction of computers led to use of computer-based
information for organization planning and effectiveness.
(2) Systems Management
The Systems Management theory was developed in 1950s and 1960s to explain how to manage
a conglomeration. Modern day companies supply a variety of products and services and work
in a complex environment. Activity in one part can affect the other parts of the organization.
The theory states that the managers should ensure that all parts of the organization are
coordinated internally to achieve the goals of the organization.
Exhibit 12: Systems View of Organisations

Source: Williams, C. & Tripathy, M. R. (2014) Principles of Management. Cengage Learning

Main concepts of the theory are explained below:
(i) System – The Organisation is a system of inter-related and inter-dependent parts. Each part
may have sub-parts called as subsystem with each of them interconnected. Change in one part
may affect other parts of the system. Manager must study each part to understand the system.
Basic function of the organization is to transform the inputs into final products and services.
Human, physical and financial resources are hired from the external environment.
(ii) Synergy – Synergy refers to two or more subsystems or departments lead to higher
productivity when they work together. The whole is greater than the sum of the parts. That is
synergy occurs when 1 + 1 = 3.
(iii) Open and closed system – Open system depends on the outside environment for survival.
A closed system operates without interacting with the outside environment. Most organisations
are open systems therefore the managers should consider the connections between the
subsystems and the outside environment while making decisions.
(iv) System boundary – Each system has a boundary that separates it from its environment. The
system boundary of open system is flexible and rigid for closed system.
(v) Feedback – Feedback helps the system to assess and make corrections wherever necessary.
The system thereby continuously adjusts to the changing environment.
An integrative model put forward by the theory states that organization is an integrated system
of different parts. Managers should think holistically while resolving problems since each part
is inter-related. All departments like administrative, technical/production, marketing and sales
should be given importance in decision-making. Synergy should be created in the organisation
with better communication and cooperation in the organization. The external environment
comprising of technical, politico-legal, sociocultural and economic factors influences the
operations of the organization. Growth and survival of the organization depends on its ability
to satisfy the stakeholders like customers, shareholders, employees, suppliers and society.
(3) Contingency Management
In previous sections you have learnt about various theories of how to manage the organization
effectively. According to contingency approach to management put forward by Fred Fiedler
(1974) the best theory depends on the existing situation and differs with different situations.
Since the tasks and people in the organisation differ the method to manage them should also
differ. Single theory may not be applicable in all situations.
Selection of an appropriate theory should be basis the type of work performed in an
organisation, size of organization, technology employed, capabilities of employees and the
prevailing external environment.
Main contribution of the theory is that there is no universal theory of management applicable
to all organisations. Managers should select the management style based on the internal and
external factors for a specific situation.
For more details please refer:
https://opentextbc.ca/principlesofmanagementopenstax/chapter/situational-contingency-
approaches-to-leadership/
(4) Theory Z
William Ouchi proposed ‘Theory Z’ in 1981. The Theory Z includes the best practices of the
American and Japanese management styles. Organisations that adopt theory Z are social and
have common values, beliefs and objectives. They lay emphasis on moderate work
specialization, formal authority relationships complemented by mutual trust, individual
performance within a group, long-term employment, collective decision-making and holistic
approach.
For more details please refer:
https://www.referenceforbusiness.com/management/Str-Ti/Theory-Z.html
Student Activity: Bajaj Automobiles Limited (BAL) was established in 1945. In 1960 it
started manufacturing scooters with technical collaboration with Piaggio (Italian manufacturer
of Vespa) and three wheelers. By 1966 it became a market leader in two-wheeler market and
maintained its position till early 1990s. It introduced first indigenous scooter brand Chetak in
1972. The company improved output with increase in plant capacity from 20,000 units per
annum in 1970 to 8,00,000 units per annum in 1990. But market share of the company
decreased in the late 1990s. BAL did not tap the change in the market dynamics. Consumer
preferences had shifted to motorcycles.
(For more details read: https://www.businesstoday.in/opinion/columns/bajaj-auto--a-
historical-analysis-hero-honda/story/225472.html)
Read the history of Bajaj Automobiles Ltd. and describe the managerial decisions considering
the Management Theories

1.6 LET US SUM UP

Management is a universal and a dynamic process. It refers to the managerial functions

performed by a group of employees to achieve organisational goals.
Responsibilities of a manager change with the levels of management. Peter Drucker outlined
responsibilities of a manager basis managerial functions. Mintzberg defined managerial roles
basis his observations of working of managers in an organization. Generally it is considered
that managers at the top level require more of design and human skills. Middle level managers
should comparatively have more of conceptual skills and human skills. On the other hand,
technical skills have greater relevance at the lower level. Managerial efficiency is doing things
in the best possible manner to save time and resources. While managerial effectiveness is doing
the right things
Primary functions of management are planning, organizing, leading and controlling. It is called
as P-O-L-C framework. Planning is an essential management function that should be done with
futuristic a perspective to address the changes in the business environment. It provides direction
to the organization and minimizes uncertainty and wastage of resources. Employees work with
focus towards meeting the organisational goals as per the strategic plan. To execute the
business plan, organising is undertaken basis division and specialization of work and
responsibility of a specific task is assigned to an expert. Organisational charts are framed to
depict the structure of an organization. Traditionally organizational structures have been
vertical or horizontal. Modern organisations have Boundaryless Structures. They may be
virtual, hollow and modular in structure. The managerial function of leading is the process of
directing the people to work towards the goals of the organization. Controlling involves
monitoring the execution of the business plan with focus on achievement of performance
targets and optimal use of resources.
Management theories put forward by thinkers and professionals provide a guideline for
effective functioning of an organization. Formal theories on management were framed with the
separation of owners and managers of an organization. The classical management theories of
Scientific Management, Bureaucratic Management and Administrative Management lay
emphasis on performing the management functions effectively with division of work basis
ability of the employees and control through laid down rules and procedures. New classical
thought laid greater significance on human relations and interpersonal skills to achieve
organisational goals. Modern management thought has diverse perspectives like Quantitative
Management, Systems Management, Contingency theory and Theory Z.
1.7 KEY WORDS
Manager is someone who coordinates and examines the work of other people to meet the goals
of the organization.
Planning is the process of deciding the goals and objectives of the organization, establishing
the strategy to achieve these objectives, and developing actions to be taken to achieve the goals.
Strategic plan is framed at the top management level to outline the organizational purpose.
Tactical plan framed at the middle management level, aims to execute policies designed by the
top management.
Operational plans are developed at the lower level of management.
Policy refers to a general course of action that a manager may take in a specific situation.
Procedures indicates the series of steps that should be taken by a manager in a specific situation
in future.
Rules and regulation give a precise description of performing a specific action.
Organising refers to division of work, assigning of responsibility to people with formal lines
of authority and allocation of resources.
Span of control refers to the number of employees that are supervised by a manager.
Organizational charts are usually employed to depict the structure of the organization.
Leading is the process of directing the people to work towards the goals of the organization.
Controlling involves monitoring the execution of the business plan to achieve goals and make
corrective action as required.
Time study specifies the average time required to do a job.
Motion study identifies the best sequence to do a job.
Fatigue study defines the duration and frequency of rest interval to complete a task.
Hawthorne Studies refers to a series of experiments conducted by Elton Mayo Western Electric
factory at Hawthorne.
1.8 REFERENCES
1. Drucker, P. F. (1954). The Practice of Management. New York. Harper and Row.
2. Fayol, H. (1949). General and Industrial Management. London. Pittman and Sons
3. Fiedler, F. E. & Chemers, M. M. (1974). Leadership and Effective Management.
Glenview, II: Scott, Foresman.
 4. Gilbreth, F. B. & Gilbreth, L. M. (1916). Fatigue Study, the Elimination of Humanity’s
Greatest Unnecessary Waste: A First Step in Motion Study. Sturgis & Walton Company
5. Gilbreth, F. B. & Gilbreth, L. M. (1917). Applied Motion Study: A Collection of Papers
on the Efficient Method of Industrial Preparedness. Sturgis & Walton Company
6. Katz, R. L. (1974). Skills of an Effective Administrator. Harvard Business Review.
7. Koontz, H. (1961). The Management Theory Jungle. The Journal of the Academy of
Management:4 (3). 174-188
8. Mintzberg, H. (1973) The Nature of Managerial Work. New Work. Harper and Row
9. Ouchi, W. (1981). ‘Theory Z: How American Business Can Meet the Japanese
Challenge. Addison-Wesley, Reading MA
10. Roberts, Lon (1994). Process reengineering: The key to achieving breakthrough
success, Milwaukee, Wis. ASQC Quality Press.
11. Taylor, F. W. (1911). The Principles of Scientific Management. New York. Harper
12. Terry, G. R. (1953). Principles of Management. Homewood. R. D. Irwin.
13. Weber, M. (1947). The Theory of Social and Economic Organisation. New York.
Oxford University Press.
1.9 SUGGESTED ADDITIONAL READINGS
1. ‘What Managers Do’, Marcus Buckingham, March, 2005 issue HBR
(https://hbr.org/2005/03/what-great-managers-do)
2. What Only the CEO Can Do, A. G. Lafley, March, 2009 issue of HBR
( https://hbr.org/2009/05/what-only-the-ceo-can-do)