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Chapter -2
Principles of Management

Meaning: - Management principles are the statements of fundamental truth which act as
guidelines for taking managerial action and decisions.
Management principles are broad and general guidelines for decision making and
behaviour.

Characteristics of Principles of Management: -

1. Universal applicability – The principle of management are universal in nature that

means they can be applied to all type of organisation irrespective of their size and
nature. Their result may vary and application maybe modified but these are suitable for
all kinds of organisations.

2. General guidelines – They are general guidelines to action and decision making
however they do not provide readymade solution as the business environment is ever
changing or dynamic

3. Formed by practice and experimentation – The principles of management are formed

by experience and collective wisdom of managers as well as experimentation.

4. Flexible – Management principles can be applied differently under different conditions.

Some changes can be made in application of principles according to the requirement of
the company. These are not set of rigid statements. These can be modified by the
managers who are using them.

5. Mainly behavioural – Management principles are formed to guide and influence the
behaviour of employees. These principles insist on improving relationship between
superior, subordinates and all the members of organisation. They also establish relations
between human and material resources.

6. Cause and effect relationship – These principles tell us if a particular principle is applied
in a situation, what might be the effect. Although these principles cannot state perfectly
absolute result because these are applied on human being but it helps in knowing some
idea about the effect. When principles are applied in similar situation in different
organisations then their effects can be known with more perfection.

7. Contingent – The application of principles of management is contingent or dependent

upon the prevailing situation at a particular point of time. The application of principles
has to be exchanged as per requirements

Importance of principles of management: -

• Providing managers with useful insights into reality – Management principles act as
guidelines for the managers. These principles improve knowledge, ability and understanding
of managers under various managerial situations. The effects of these principles help the
managers to learn from their mistakes. These principles guide managers to take right
decision at the right time.

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• Optimum utilization of resources and effective administration – Management principles

facilitate optimum use of resources by coordinating the physical, financial and human
resources. They also help in better administration by discouraging personal prejudices and
adopting an objective approach.
• Scientific decisions – Decisions based on management principles tend to be more realistic,
balanced and free from personal bias. The result must be measurable and subject to
evaluation.

• Meeting changing environment requirements –Management principles provide an effective

& dynamic leadership & help the organisation to implement the changes.

• Fulfilling social responsibility - Principles of management not only help in achieving

organisational goals but also guide managers in performing social responsibilities.

• Management training, education and research – Principles of management are at the core
of management theories. These act as base for management training & education.
Professional courses such as BBA, MBA also teach these principles as part of their
curriculum. The entire management institute takes aptitude test & these tests are based on
management principles only.

F. W. Taylor

Principles of scientific management

1. Science not rule of thumb

▪ This principle states that management is not static i.e. there is no fixed
rule or rule of thumb.
▪ Management principles must be developed through repeated
experimentation to find out the best method that maximizes efficiency.
▪ The method developed as above should substitute the rule of thumb
and become a standard method to be followed throughout the
organisation.
▪ It helps in saving human energy & wastage of resources.

2. harmony not discord – This Principle state i.e.

▪ There must be harmony i.e. unanimity among the objectives of worker

& managers
▪ If it is not done there may be class conflict between worker & managers
where both try to achieve their individual objective
▪ Both worker & managers must realize i.e. each one is important. There
must be mental revolution where management and workers both
should work for each other. Management should share gain of the
company while workers should work hard and change for the good of
the company.

3. Cooperation not individualism

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▪ This principle is an extension of harmony not discord

▪ Competition should be replaced by cooperation between worker &
managers i.e. both should realize the need of each other
▪ Management must invite constructing suggestion and reward them if it
leads to cost reduction.
▪ Worker must be part of management and their suggestion must also be
taken
▪ Worker must also try to desist from going on strike and making
unreasonable demands on the management.

4. Development of each & every person to his or her greatest efficiency and
prosperity – This principle state i.e.

▪ Worker must be develop in such a way that he works to his best

efficiency
▪ This can be done with the help of training and giving work to employees
according to their competence.
▪ Hence, each person must be scientifically selected as per his/ her
physical mental & intellectual capability.
▪ It ensures efficiency & prosperity for company as well as workers

Techniques of scientific management: -

• Functional foremanship

o It is one the technique of scientific management according to which the function of

management must be divided to the lowest level among eight foremen.
o Foremen are the manager with lowest ranking who directly interact with the
workers. Single foremen could not do all the work. Hence function of management
must be performed through eight person
o A factory manager had to managers under him – planning in-charge & production
incharge.

Under the planning incharge –There were 4 foremen

1. Instruction card clerk – draft instruction for the workers
2. Route clerk – specify route of production
3. Time & cost clerk – prepares time & cost sheet
4. Disciplinarian – ensures discipline among workers

Under the production incharge – There are following foremen

1. Speed boss – ensures timely & accurate completion of job.
2. Gang boss – keeping machine & tool etc ready for workers
3. Repair boss – ensures proper working condition of machine & tools
4. Inspection – checks quality of works

Each worker takes command from foremen regarding their respective function

❖ Standardization & specification of work –

Standardization –

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• There must be one best method of production that should be developed with the help of
work – study technique throughout the organisation like time study, motion study, fatigue
study & method study.
• Business process, reengineering, kaizen (continuous improvement) & benchmarking are
done for work standardization
• Standardization meant setting standard every business activity like raw material, product,
method of working etc.

Objectives of standardization are –

▪ Reduce a given line or product to fixed types, sizes and characteristics
▪ Establish interchange ability of manufactured parts and product
▪ Establish standards of excellence and quality
▪ Establish standards of performance

Simplification – It means eliminating unnecessary diversity of products. It helps in saving cost of

labour machine.

Method study: -

• According to this technique of scientific management there is only one best method of doing
a job.
• To find the best way there are various method of analyzing the different methods of doing
the job
• Its objective is to minimize cost, maximize quality customer satisfaction.

Motion study: - It means study of each & every movement of the employees with an object to
minimize and eliminate unnecessary movement.
• It helps in doing the job in less time and with efficiency
• Three kind of motion were identified & marked with the help of different symbols.
i. Productive motion
ii. Incidental motion (performed along with productive motion & cannot be eliminated)
iii. Unproductive motion

Time study: -
• It is method to determine the standard time to be taken for performing a well defined job
• Average time for performing each task is measured using various devices.
• Its objective is to determine the no. of workers to be employed, frame incentives scheme
and determine labor cost

Fatigue study: -

• Every employee feels tired physically & mentally.

• Hence, appropriate rest must be given at appropriate interval otherwise the productivity of
employees may decline.
• Its objective is to determine the amount and frequency of rest intervals in completing a task
• Long working hours or unsuitable work or bad working condition increase the fatigue of
employees hence, such hindrances must be removed.

Differential piece wage system: -

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• As per this method efficient & inefficient worker must be differentiated. Efficient worker
must be rewarded more than inefficient ones
• To decide efficient or inefficient worker, standard time must be fixed for performing a
particular job.
• Those who perform within the standard time are efficient & those who do not are
inefficient.

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Mental revolution –

• It mean a change in attitude of workers and management towards each other

• Both should realize each other needs and work for increasing organisational profit.
• Management must share the profits to motivate workers and ensure there well being.

Henry Fayol: -
1) Division of work
• As per this principle work must be divided into small task/ jobs.
• Specialised worker must be trained for each job. It helps in creating specialization in
job
• It increases the efficiency and effectiveness of organisation.
• Hence, there must be separate department for every function like human resource,
finance, marketing etc.

2) Authority & Responsibility

• Authority means the right to give orders obtain obedience.
• Responsibility is an obligation for performing a task that comes along with authority.
• There must be balance between authority and responsibility.
• Excess authority but lower responsibility leads to misuse of power and unthoughtful
decisions by managers.
• Excess responsibility but no authority makes it difficult for the managers to perform
their task.

3) Discipline
• As per this principle both worker and management must obey organisational rules
and terms of employment agreement.
• For applying this principle terms of agreement must be clear and penalties must be
imposed if discipline is not maintained.
• Discipline basically means doing the work in the pre decided manner.

4) Unity of command
• There should be one and only one boss for every individual employee.
• If an employee gets orders from two superiors at the same time the principle of
unity of command is violated.
• Each employee should receive orders from and be responsible to only one superior.
• This is to prevent confusion regarding tasks to be done.
• Receiving orders from more than one superior may also create ego clashes

5) Unity of direction
• As per this principle all the units of an organisation should have the same objective
and that must be the organizational objectives.
• The efforts must be coordinated in one direction for achieving organisational goal.
• The work of two units must not overlap.

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6) Subordination of individual interest to general interest

• As per this principle organisational objective must be given priority over individual
objective.
• The worker and managers may have different objectives; the manager must try to
bring a balance between both these objectives. In any case when there is a conflict
in organisational and individual objective, organisational objective must supersede.
7) Remuneration of employees
• The overall pay and compensation should be fair to both employees and the
organisation.
• The employees should be paid fair wages, which should give them at least a
reasonable standard of living.
• At the same time it should be within the paying capacity of the company. In other
words the remuneration should be just and equitable.

8) Centralization and decentralization

• The concentration of decision making authority is called centralization whereas its
dispersal among more than one person is known as decentralization.
• Since a manager cannot perform all the work himself hence, it must be
decentralized to subordinates. Also, the final authority and responsibility must be
with a superior manager through centralization.
• The degree of centralization will depend upon the circumstances in which the
company is working.

9) Scalar chain
• An organisation consists of superiors and subordinates. The formal lines of authority
from highest to lowest ranks are known as scalar chain.
• Organisations should have a chain of authority and communication that runs from
top to bottom and should be followed by managers and the subordinates.
• According to Fayol this chain should not be violated in the normal course of formal
communication.
• The scalar chain can be violated in case of emergency. Gang plank is the line of
communication between workers of same level; gang plank can be used for
communication in case of emergency.
10) Order
• As per this principle people & material must be in suitable places at appropriate
time for maximum efficiency.
• Order means a fixed place for everything, present at the right time so that there is
no hindrances in activities.
• It helps in increasing productivity & efficiency.
11) Equity
• As per this principle there must be not biasness discrimination against anyone on
account of sex, religion, language, caste belief or nationality etc.

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• Each & every employee must be treated as fairly as possible and must be given
equal opportunities.
12) Stability of personnel
• As per this principle, employee turnover should be minimized to maintain
organisational efficiency.
• Personnel should be appointed after following rigorous and should be, kept
appointed for a minimum period of time.
• They must have stability of tenure so that it creates feeling of security among the
employees
13) Initiative
• Worker must be encouraged to take initiative & suggest measures for improvement
of business activities.
• Organisation must welcome initiatives from workers, it is not necessary to adopted.
14) Espirit de Corps
• Management must promote a team spirit of unity in harmony among employees.
• Management should promote team work especially in large organisation because
otherwise objectives would be difficult to realize.
• This will give rise to a spirit of mutual trust and belongingness among team
members. It will also minimize the need for using penalties.

Difference between Time Study and Motion Study

Basis Time Study Motion Study

1. Meaning Time study is conducted Motion study is conducted to find out

to find out the standard total movements of workers while
time for performing a task they are performing the task.

2. Purpose The purpose of time study The purpose of motion study is to

is to find out standard eliminate wasteful and unproductive
time to fix a fairs day’s movements of workers to increase
work for the workers their efficiency level.

3. Method of conducting It is conducted with the It is conducted with the help of a

help of a stop watch. movie camera which keeps eye on
worker’s movements.

Difference between unity of command and unity of direction

S. No. Basis Unity of command Unity of direction

1) Meaning One subordinate should Each group of activities

receive orders from and having same objective

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should be responsible to must have one head and

only one superior one plan.

2) Aim It prevents dual It prevents overlapping of

subordination activities

3) Implications It affects an individual It affects the entire

employee organization.

Background and History of Fayol

Henry Fayol was born in France in 1841. He got degree in mining engineering in 1860 and started
working as engineer in a coal mining company. In 1888, he was promoted as the managing director
of the company. At the same time the company was in the situation of insolvency. He accepted the
challenge and applied his managerial techniques to bring out the company from this situation and he
succeeded. When he retired after 30 years the company was a leading coal-steel company with
financial background.

Background and history of F.W. Taylor

F.W. Taylor was born in 1856 in USA. In 1878 joined Midval Steel Company as a mechanical engineer.
Using his engineering background Taylor set out scientific studies and techniques. He was primarily
concerned about the efficiency of workers and optimum utilization of resources. Taylor’s principles
and techniques were based on the observations he concluded in factories where methods of
production lack planning and working methods were haphazard.

Fayol versus Taylor – A comparison

S. No Basis of difference Henry Fayol F.W. Taylor

1. Perspective Top level of management Shop floor level of a factory

2. Unity of command Staunch proponent Did not feel that it is important as under
functional foremanship a worker received or
from eight specialists.

3. Applicability Applicable universally Applicable to specialized situations

4. Basis of formation Personal experience Observations and experimentations

5. Focus Improving overall administration Increasing productivity

6. Personally Practitioner Scientist

7. Expression General theory of administration Scientific Management

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Similarities between Taylor and Fayol

Taylor and Fayol’s principles are complementary to each other because both have relevance in the
business due to following reasons.

1) The main aim of Taylor’s as well as Fayol’s principle is maximizing the efficiency.
2) Both insist on cooperation between employees and employers.
3) Both give more importance to organizational interest over the individual interest.
4) Both suggested division of work for specialization.
5) The principles of both are used as basis for research in the field of management studies.

Advantages of Scientific Management

Scientific management bring following benefits:

(a) Improves efficiency of business through simplification and specialization.

(b) Helps in reducing cost of production by eliminating all types of wastages.
(c) Due to decrease in price firm is enable to capture a bigger share in the market.
(d) Mutual understanding and cooperation brings workers and management closer.
(e) More trainings to improve the skill of workers.

Enables the workers to earn more with the introduction of differential piece wage system.

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