CHAPTER

02
PRINCIPLES OF
MANAGEMENT
Concept of Management Principles
Management principles are the statements of fundamental truth, which serve Chapter Checklist
as guidelines for decisions and actions of managers. These principles, lay down Concept of Management Principles
the general guidelines, so that a
manager can take valuable decisions or
appropriate steps to accomplish desired goals. Fayol's Principles of Management
Management Principles vs Values Taylor's Scientific Management
) Values are desirable and have moral connotations whereas principles are Fayol vs Taylor
the statements of truth or guidelines for behaviour.
(ii) Management principles are technical whereas values are ethical.
(ii) Values are formed through common practice whereas principles are
formed through research and experimentation.

Management Principles vs Techniques of Management

While principles of management provide guidelines for
decision-making,
techniques refer to methods or procedures to achieve organisational goals.
Management Principles vs Principles of Pure Science
Management principles are not rigid as principles of pure science, as
as
they deal with human behaviour and are applied as per the prevailing
situation.
) Management principles are not valid universally, as they do not produce
the same results everytime, when applied in different situations.
 Allinone BUSINESS STUDIES Class 12th
36
Nature of ManagemetPrinciples Significance of Management Principles
with
Following points characterise the nature of Management principles have gained importance
management principles: increasing professionalisation of management.
Universal applicability These principles are Following points summarise the significance of principles of
universal and can be applied in all types of
management:
organisations whether it is profit making or into reality
Providing: anagers with useful insights
non-profit making, small or large, private or Principles help managers to improve the knowledge and
government and manufacturing or service sector. understanding of managerial situations. These principles
They are equally applicable in a school, enable managers to learn from past mistakes and
government oftice, military organisation, a gonserve time by solving recurring problems quickly.
Jimited company, etc.
) Optimum utilisation of resources and effective
i ) General guidelines Management principles are administration Optimum utilisation of resources
general guidelines, as they cannot be applied emphasise that resources should be utilised in such a
blindly in all the situations.
They do not provide manner that it should give maximum benefit with
solutions to all managerial problems, but only give minimum cost. These principles help managers to
thesolution of a given problem. adopt
a systematic and logical approach to overcome the
) Formed by practice and experimentation The problems and discard hit and trial approaches.
principles of management are developed after deep (ih) Scientific decisions Management principles help in
and thorough research work. Proper observations
and experinments are conducted under different thoughtful decision-making because they are based on
logic rather than blind faith. Such decisions are free
conditions by leaders and scholars of management Srom bias and prejudice.
thoughts to develop them.
j Flexible The management principles are dynamic )Meeting changing environment requirements Modern
and not static or rigid prescriptions, which are to business environment is complex and ever-changing. In
order to be successful, organisations have to adapt to
be followed absolutely. They are flexible
in these changes. Principles are
dynamic, flexible and
nature and can be modified by the manager as frequently adapt to changes, which are favourable and
per the given situation. profitable for the business.
Mainly behavioural Management principles aim (uFulfilling social responsibilities
at influencing human behaviour, for better Management principles
evolved or developed to serve the demands of
are
utilisation of resources in the organisation. The society
These principles establish certain ethics in to
management principles do not pertain to response
material things and are therefore called
social responsibility towards society.
Kehavioural. (Management training, education and research
Management principles act as a base of doing research
Cause-and-effect relationship These principles and
establish cause-and-eftfect relationship between
development in
management studies. These
principles provide basic groundwork for the
two variables. It indicates the consequences of
implementing a particular principle over a given
development of managers. Therefore, professional
courses like MBA and BBA teach these
sityation. Though the results may not be same, part of their curriculum. principles as a

they produce similar results everytime.

(vi Contingent The application of principles of
management is contingent or dependent upon
CHECK POINT 1
1. How are management principles different from techniques of
the prevailing situation. Therefore, principles
have to be applied as per the requirements of a management?
2. Where does a
given situation, leading to professionalisation of management principle find application?
3. How do management
management. principles tulfil social respensibility?
4. Why do professional courses like MBA
teach principles in their
Curriculum?
 Principles of Management

Fayol's Principles of 3. Discipline

It is the sincerity and obedience towards
Management organisational rules and regulations, necessary for the
Henry Fayol is known as the 'Father of General smooth functioning of an organisation. According to
Management, as he was the first.one to identify four Fayol, good superiors at all levels, fair agreements and
functions of management: planning, organising, directing judicious application of penalties are helpful in
and controlling
maintaining discipline.
Fayol developed his own concept of administration. He S.No, Positive effects Negative effects
has given 14 principles of management which are S.No. (f followed) (lf violated)
described below: () It helps in smooth Unhealthy relation
working in the between workers and
1. Division ofWork organisation managers
According to Fayol, if work is divided into small tasks (i) It helps to improve Smooth performance of
and assigned to trained specialists, then it will efficiency, as work is work will be adversely
help in
done as per the rules and affected
taking the advantage of specialisation., Because of thi_ standards
principle, an organisation is divided into separate
(ii) Orderliness in the Chaos in the
departments viz production, sales, finance, marketing, organisation organisation
etc.
4. Unity of Command
S.No.ositiveeffects Negative effects
S.NO. (If followed) The principle of unity of command states that each
(lf violated)
participant in a formal organisation should receive
) Repeated performance by Lack of specialisation
an individual leads to orders and is answerable to only one superior.
specialisation. It in any case, employee gets orders from two

i) Less wastage of resources. Wastage of resources superiors at the same time, it will result in confusion
and ineficient operations. and chaos.
(ii) Efficiency and This,
effectiveness of work.
principle resembles military organisation.
S.No.ositive effects
S.No. (f followed) Negative effects
2. Authority and Responsibility No confusion regarding
(If violated)
Confusion among
Authority meansthe rightto give orders and obtain work to be done workers regarding
obedience. On the other hand, responsibility means work to be done
obligation to complete the assigned task on time. ) No conflict among Conflict among the
According to Fayol, there must be a balance between Superiors superiors
authority and responsibility. Excess ofauthority (un) The subordinate is Order and discipline
without matching responsibility may result in misuse answerable to one person gets disturbed
only.
of authority, whereas excess.responsibility without
adequate authority may lead to failure of 5. Unity of Direction
organisational goals. It implies that there should be one head and one
plan
S.No. for a group of activities having the same
S.No. Pos/tive effects Negative effects objective. All
(If followed) (t violated) the related activities should be put under one
group.
It may lead to misuse of and they should be in the control of one
) With proper respon manager.
sibility, there will be no authority. S.No. ositive effects
misuse of authority. S.NO. (1t tollowed) Negative effects
(f violated)
(i) With proper authority, Subordinate will not be It ensures unity of action Duplication of efforts and
there will be timely able to complete the task among various groups wastage of resources
Completion of tasks. effectively (within time) (i) It helps in coordination Lack of coordination
(tri) Quick decision-making It may lead to delay in (ii) Facilitates achievement Failure in achievement of
decision-making of goals goals
 Class 12th
Allinone BUSINESS STUDIES
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Negative effects
Positive effects
(If violated)
6. Subordination of Individual Interest to S.No. (1f followed)
General Interest Decentralisation facilitates Complete centralisation
leads to delay in
Sometimes, an individual starts giving priority to his quick decision-making,
avoiding delays in decision-making and
own interest, but according to Fayol,
in all situations action.
operations.
company's interest should supersede the interest of
Avoids misuse of Complete
the individual. (ii) decentralisation leacs
authority. misuse of authority
Thus, the interests of various stakeholders, i.e.
owners, shareholders, creditors, financers and
the Centralisation ensures
(ii)
cannot be sacrificed for opé individual.
society optimal decision-making
in core matters.
S.No.
Positive effects Wegative effects
(f followed) (lIf violated) 9. Scalar Chain
There is a coordination Achievement of
between organisational organisational goals According to Fayol, fcalar chain
refers to the chain of
becomes difficult. runs from top to
and personal goals.
authority and communication)xhat
(i) It facilitates achievement Employees may be adve- bottom and should be followed by managers and
of organisational goals. rsely affected later on.
their subordinates.
Gii) Employees are more
focussed towards group
goals, in order to get
personal benefits.

D Gang Plank
7. Remuneration of Employees
According to Fayol, the quantum and methods of
remuneration payable to employees should be fair and gang plank reters to an arrangement in which rwo
reasonable. It should be satisfactory to both employers managers working at the same level can communicate
and employees, which gives them a reasonable with each other directly for quick communication.
standard of living and should be within the paying Positive effects Negative effects
capacity of the company. S.No. (f followed) (If violated)
S.NoPositive effects Negative effects ) It facilitates smooth Multiplicity of commanc
(If violated) flowof may create confusion in

Absence of adequate/fair communication. operations.

It motivates the
employees and keeps remuneration creates (i) Unity of command is No clarity about
them satisfied. dissatisfaction among ollowed.
employees.
authority-responsibility
relationships
i) It reduces labour Increased labour turnover (ii) No confusion on Miscommunication or gaps
absenteeism and and cost of recruitment. account of dual in communication.
turnover. subordination.
It helps to improve Unhealthy relations
relations between between managers and 10.Order
managers and workers. workers.
According to this principle, there should be an
8. Centralisation and Decentralisation orderly arrangement and specific place for everythin
The concentration of decision-making authority is
(material order) and everyone (social order) in the
called centralisation whereas its dispersal among more
organisation.
than one person is known as decentralisation. VS.No.Positive eftfects Négative effects
According to Fayol, an organisation should strive to (Iffollowed) (If violated)
achieve a proper balance berween centralisation and () No wastage of time and Obstacle in smooth
efforts in search of men
decentralisation according to size of organisation,
or material
working.
ability of superiors, ability of subordinates, etc.
(i) No obstacle in smooth
Wastage of time and
In general, large organisations have more running of operations. efforts unnecessarily
decentralisation than small organisations. (i) Increased efficiency
and productivity.
 Principles of Management
39
11. Equity 14. Esprit De Corps
This principle emphasises kindliness and justice in It means union is strength. Fayol emphasised on team
the behaviour of managers towards workers. This spirit brings harmony in the groups and
There should be no discrimination
work.
they strive to work hard to achieve the targets of an
on account of sex,
against anyone
religion, language, caste or belief organisation. For this, managers should replace T with
and equal opportunities should e available for all. We' in all his conversations.
S.Noositive effects Wegative effects S.No. POsitive effects Megative effects
(f followed) (if violated) (Iffollowed) (If violated)
(0 It ensures loyalty
among Dissatisfaction among Helps in developing Failure in achievement of
the workers. feeling of trust and
employees leading to goals
greater turnover. belongingness among
() Cordial relation between Poor relations between
employees.
workers and managers. workers and managers () Easy achievement of Lack of coordination in
goals. the organisation.
(ii) Congenial atmosphere
within the organisation.

12. Stability of Personnel CHECK POINT 2)

According to this principle, Fayol insisted that an 1. What does
principle of 'order' emphasise?
employee must be kept at a post for a minimum 2. Violation of which
principle of management lead to confusion
fixed tenure. This would help him to regarding work amongst employees.
produce
effective results, ensure stability and prove his 3. Why is 'Equity' important in the organisation?
ability. 4. Define Initiative.
5.
Positive effects Negative effects
1should be replaced with 'we'. To which principle of
S.No. management is this related?
(iffollowed) (lf violated)
0 Encourages job security Increase in labour
in the organisation turnover. Taylor's Scientific Management
() Increased motivation of Increase in job insecurity Taylor is known as the 'Father of Scientific Management'.
employees. and employees tend to He made
leavejobs frequently.
significant contribution to the management of
a

factory system of production. Scientific management means

(in) Reduction in labour Increased cost of applying the standardised methods and tools to increase the
turnover and expenses recruitment.
onrecruitment, selection output, its quality and to reduce costs and wastages. In the
and training. words of Taylor, 'Scientific
management
exactly what you want men to do and seeing thatknowing
means

13. Initiative in the best and the they do it

cheapest
of 'rule of thumb, i.e.
way. It emphasises replacement
Initiative means taking the first step with personal judgement, by scientific
self-motivation. Fayol suggested that employees at selegted methods and tools.
all levels should take initiatives or actions without
any force or boundations. They should be Principles of Scientific Management
encouraged to develop and carry out plans for The philosophy of scientific is based upon the
management
improvements. following principles:
Positive effects Negative effects 1. Science not Rule
S.No.
(If followed) (If violated) of Thumb
) Motivationof Frustration and According to Taylor, each job should be performed in
employees. dissatisfaction among an
organisation as per the scientific approach, as there
employees. is always one best method to
maximise efficiency. This
Increased efficiency No motivation for method can be developed
through study and
and productivity. improvements. Selectingone best method' for activities analysis. can result in
ii) Improvements in saving time, effort, money and resources.
operations.
 Class 12th
Allinone BUSINESS STUDIES
40
be expected to be
single worker or supervisor cannot
2. Harmony, not Discord Thus, he advocated the
an expert in all aspects.

According to this principle, Taylor emphasised that foremen to guide workers,

appointment of eight
there should be complete harmony between the underplanning and production
departments.
management and workers
and there should be there are four
transformation in thinking of both parties, called Under the planning incharge,
mental revolution. It implies that management personnel:
should share the gains with workers and workers ( Route clerk He is responsible to specify the
should work hard for the betterment of the business. route of production.
It also emphasises that prosperity of the employer (i) Instruction He is
card clerk responsible to give
cannot exist for long if it is not accompanied by the Tnstructions to the workers.

and vice-versa. Time and clerk He is responsible to

prepare
prosperity of its employees, (iii) cost
sheets.
ime and cost

Mental Revolution (iv) Disciplinarian He is responsible to maintain

discipline among workers.
It involves change in the attitude of workers and
management.
Both should realise the importance of the other and should there four
Under the production incharge, are

cooperate with each other. Both should aim to increase the size
of surplus. Managers should share their gains with workers, personnel
while workers should contribute to increase profits. This () Speed boss He is responsible for timely
attitude will bring prosperity to both, the company as well as the
completion of job.
workers.
(i) Gang boss He is responsible for keeping
machines and tools ready for work.
3. Cooperation, not Individualism
This principle is an extension of principle of (ii) Repair boss He is responsible to keep machines
harmony, not discord. According to this principle, andtools in proper working condition.
Competition should be replaced by cooperation. (iv) Inspector He is responsible to maintain quality
Management and workers both should realise that of work.
they need each other. For this, management should Factory Manager
entertain and reward the constructive suggestions of
employees and follow paternalistic style of
workers should also Planning Incharge Production Incharge
management. At the same time,
cooperate with management, resist from going
on
Route Speed
strikes and making unreasonable demands to the clerk boss
management.
Instruction Gang
4. Development of Each and Every card clerk boss
Person to his/her Greatest Efficiency
Time and Repair
According to this principle, Each person should be COst clerK boss
scientifically selected and then assigned work as per
their specialisation and in any case, if training is Disciplinarian Inspector
to them as efficient
required, impart training
then
employees would produce more and earn more. Workers
Worker training is essential to learn the 'best method'
would
developed as per the scientific approach. This 2. Standardisation and Simplification
workers and the
ensure greatest efficiency for both, of Work
organisation.
Standardisation is the process of
setting standards
Techniques of Scientific Management every business activity, process, raw materials, timc
machinery and methods, to achieve efficiency.
Following techniques were deployed by FW Taylor: Standardisation of product implies that the size,
Functional ForemanshipX design, quality, shape, etc of the product should me
It is an extension of principle of division of labour, the requirements and tastes of consumers.

resulting in specialisation. According to Taylor, a

 Principles of Management
41
Simplification means eliminating superfluous 4. Differential Piece Wage System
sizes, varieties and dimensions
Taylor proposed a system of wage payment on the basis of
Its aim is to: work done. In this system, higher rates were given to
() Eliminate unnecessary diversity of workers producing standard product
and thereby reduce costs.
products efficient
vice-versa.
or more, and

(i) Help in achieving economy in the use of

required machines and tools.
Example
Standard output 100 units/day
=

3. Work Study Techniques Wage rate 1 =7 10/unit for standard output (100 units)
Scientific management requires deep analysis of all or more
the activities performed in an
aim of producing the maximum
organisation with the Wage rate 2 = 7 7/unit for below standard output
possible output with
the minimum possible efforts. It involves method
Worker 1 Output 99 units
Wages = 99 x7 = R 693
study, motion study, time study and fatigue study.
( Method study This technique of scientific Worker 2 = Output 101 units
management is conducted to find out the 'one Wages = 101x 10 = T 1,010
best method or way of
performing a
task. The objective of this study is to particular
Thus, a difference of T317 (1,010 693), for difference
minimise of 2 units is enough to motivate the inefficient worker to
the cost of production and maximise the work for more output.
quality and satisfaction of the customer.
(i) Motion study Motion study refers to an
in-depth study of movements of a worker while
Fayol vs Taylor
doing a task. Taylor recognised three types of While Fayol recommended principles for general management,
movements: Taylor proposed scientific principles which finds application in
(a) Productive factory situations. The following lays down clear distinction
(b) Unproductive between the two
(c) Incidental
The objective of motion study is to eliminate Distinction between views of Fayol and Taylor
unproductive movements in doing a task to Basis Henry Fayol FW Taylor
achieve efficiency and reduce the time required Perspective Top level of Shop floor level of a factory
to do the task. For this, Taylor used
management
stopwatches and various colours and symbols to
identify productive and unproductive Applicability Universally applicable Applicable to specialised
movements of the situations (factory situation)
employees. Basis of Personal experience
ii) Time study It determines the standard time formation
Observations and
taken to perform a well-defined job. Time experimentation
Focus Improving overall
measuring devices were used to conduct this administration
Increasin9 productivity
study. This type of study is helpful in deciding
the time required to perform a job. It also Status Father of General Father of Scientific
Management Management
helps in determining a fair day's work for the
workman and determining incentive schemes Personality Practitioner Scientist
and labour costs.
(v) Fatigue study Fatigue study seeks to find out
CHECK POINT 3
the amount and frequency of rest intervals to
be given to workers in completing a task. This 1. What is the function of a
Disciplinarian?
would help the worker to regain his stamina 2. How does fatigue study
help a worker?
andwork with the same efficiency again. It also 3. Why is workers' training essential
4.
according to Taylor?
aims to reduce various causes of fatigue such as Why is selection of One-best method'
important?
long working hours, doing unsuitable work, 5. Where does scientific management find
bad application?
working conditions, etc. 6. State the status of
Fayol and Taylor in management
theory