ESSENTIAL OF MANAGEMENT UNIT-I
NATURE OF MANAGEMENT
1.
Universal
process: Wherever
there is human activity, there is management. Without efficient management,
objectives of the company cannot be achieved.
2.
Factor
of production: Qualified
and efficient managers are essential to utilization of labor and capital.
3.
Goal
oriented: The
most important goal of all management activity is to accomplish the objectives
of an enterprise. The goals should be realistic and attainable.
4.
Supreme
in thought and action: Managers
set realizable objectives and then mastermind action on all fronts to
accomplish them. For this, they require full support form middle and lower
levels of management.
5.
Group
activity: All
human and physical resources should be efficiently coordinated to attain
maximum levels of combined productivity. Without coordination, no work would
accomplish and there would be chaos and retention.
6.
Dynamic
function: Management
should be equipped to face the changes in business environment brought about by
economic, social, political, technological or human factors. They must be
adequate training so that can enable them to perform well even in critical
situations.
7.
Social
science: All
individuals that a manager deals with have different levels of sensitivity,
understanding and dynamism.
8.
Important
organ of society: Society
influences managerial action and managerial actions influence society.
Its managers responsibility that they should also
contribute towards the society by organizing charity functions, sports
competition, donation to NGO’s etc.
9.
Profession: Managers need to possess
managerial knowledge and training, and have to conform to a recognized code of
conduct and remain conscious of their social and human obligations.
10. Process: The management process
comprises a series of actions or operations conducted towards an end.
Scope of Management
Although it is
difficult to precisely define the scope of management, yet the following areas
are included in it:
1. Subject-matter
of management: Planning, organizing, directing, coordinating and controlling
are the activities included in the subject matter of management.
2. Functional
areas of management: These include:
·
Financial management includes
accounting, budgetary control, quality control, financial planning and managing
the overall finances of an organization.
·
Personnel management includes
recruitment, training, transfer promotion, demotion, retirement, termination,
labor-welfare and social security industrial relations.
·
Purchasing management includes
inviting tenders for raw materials, placing orders, entering into contracts and
materials control.
·
Production management includes
production planning, production control techniques, quality control and inspection
and time and motion studies.
·
Maintenance management involves
proper care and maintenance of the buildings, plant and machinery.
·
Transport management includes
packing, warehousing and transportation by rail, road and air.
·
Distribution
management includes
marketing, market research, price-determination, taking market risk and advertising, publicity and sales promotion.
·
Office
Management includes
activities to properly manage the layout, staffing and equipment of the office.
·
Development
management involves
experimentation and research of production techniques, markets, etc.
3. Management is an
inter-disciplinary approach: For
the correct implementation of the management, it is important to have knowledge
of commerce, economics, sociology, psychology and mathematics.
4. Universal application: The principles of management can be applied to
all types of organizations irrespective of the nature of tasks that they
perform.
Nature of
Management: Art Vs Science
According to the nature of management, there is a controversy that whether management is a science or an art. This controversy is very old & is yet to be settled. It should be noted that, learning process of science is different from that of art. Learning of science includes principles while learning of art involves its continuous practice.
Ø Management as a Science
Science is a systematic body of knowledge
relating to a specific field of study that contains general facts which
explains a phenomenon. It establishes cause and effect relationship between two
or more variables and underlines the principles governing their relationship.
These principles are developed through scientific method of observation and
verification through testing.
Science
is characterized by following main features:
1. Universally accepted principles – Scientific principles represents basic truth about a particular field of enquiry. These principles may be applied in all situations, at all time & at all places. E.g. – law of gravitation which can be applied in all countries irrespective of the time.
Management also contains some fundamental principles which can be applied universally like the Principle of Unity of Command i.e. one man, one boss. This principle is applicable to all type of organization – business or non business.
2. Experimentation & Observation – Scientific principles are derived through scientific investigation & researching i.e. they are based on logic.
E.g. the principle that earth goes round the sun has been scientifically proved. Management principles are also based on scientific enquiry & observation and not only on the opinion of Henry Fayol. They have been developed through experiments & practical experiences of large no. of managers.
E.g. it is observed that fair remuneration to personal helps in creating a satisfied work force.
3. Cause & Effect Relationship – Principles of science lay down cause and effect relationship between various variables. E.g. when metals are heated, they are expanded. The cause is heating & result is expansion.
The same is true for management; therefore it also establishes cause and effect relationship. E.g. lack of parity (balance) between authority & responsibility will lead to ineffectiveness. If you know the cause i.e. lack of balance, the effect can be ascertained easily i.e. ineffectiveness. Similarly if workers are given bonuses, fair wages they will work hard but when not treated in fair and just manner, reduces productivity of organization.
4. Test of Validity & Predictability – Validity of scientific principles can be tested at any time or any number of times i.e. they stand the time of test. Each time these tests will give same result. Moreover future events can be predicted with reasonable accuracy by using scientific principles.E.g. H2 & O2 will always give H2O.
Principles of management can also be tested for validity. E.g. principle of unity of command can be tested by comparing two persons – one having single boss and one having 2 bosses. The performance of 1st person will be better than 2nd.
It cannot be denied that management has a systematic body of knowledge but it is not as exact as that of other physical sciences like biology, physics, and chemistry etc. The main reason for the inexactness of science of management is that it deals with human beings and it is very difficult to predict their behaviour accurately. Since it is a social process, therefore it falls in the area of social sciences. It is a flexible science & that is why its theories and principles may produce different results at different times and therefore it is a behaviour science.
Ø Management as an Art
Art means application of knowledge & skill to get the desired results. An art may be defined as personalized application of general theoretical principles for achieving best possible results. Art has the following characters –
Practical Knowledge: Every art requires practical knowledge therefore learning of theory is not sufficient. It is very important to know practical application of theoretical principles.
E.g. to become a good painter, the person not only should know about the different colour and brushes but different designs, dimensions, situations etc to use them appropriately. A manager can never be successful just by obtaining degree or diploma in management; he must have also known how to apply various principles in real situations, by functioning as a manager.
Personal Skill: Although theoretical base may be same for every artist, but each one has his own style and approach towards his job. That is why the level of success and quality of performance differs from one person to another.
E.g. there are several qualified painters but M.F. Hussain is recognized for his style. Similarly management as an art is also personalized. Every manager has his own way of managing things based on his knowledge, experience and personality, that is why some managers are known as good managers (like Aditya Birla, Rahul Bajaj) whereas others as bad.
Creativity: Every artist has an element of creativity in line. That is why he aims at producing something that has never existed before which requires combination of intelligence & imagination. Management is also creative in nature like any other art. It combines human and non-human resources in an useful way so as to achieve desired results. It tries to produce sweet music by combining chords in an efficient manner.
Perfection through practice: Practice makes a man perfect. Every artist becomes more and more proficient through constant practice. Similarly managers learn through an art of trial and error initially but application of management principles over the years makes them perfect in the job of managing.
Goal-Oriented: Every art is result oriented as it seeks to achieve concrete results. In the same manner, management is also directed towards accomplishment of pre-determined goals. Managers use various resources like men, money, material, machinery & methods to help in the growth of an organization.
Thus, we can say that management is an art therefore it requires application of certain principles rather it is an art of highest order because it deals with shaping the attitude and behaviour of people at work towards the desired goals.
Ø Management as both Science and Art
Management is both an art and a science. The above mentioned points clearly reveal that management combines features of both science as well as art. It is considered as a science because it has an organized body of knowledge which contains certain universal truth. It is called an art because managing requires certain skills which are personal possessions of managers. Science provides the knowledge & art deals with the application of knowledge and skills.
A manager to be successful in his profession must acquire the knowledge of science & the art of applying it. Therefore management is a well-judged combination of science as well as an art because it proves the principles and the way these principles are applied is a matter of art. Science teaches to ’know’ and art teaches to ’do’. E.g. a person cannot become a good singer unless he has knowledge about various ragas & he also applies his personal skill in the art of singing. Same way it is not sufficient for manager to first know the principles but he must also apply them in solving various managerial problems that is why, science and art are not mutually exclusive but they are complementary to each other (like tea and biscuit, bread and butter etc.). To conclude, we can say that science is the root and art is the fruit.
Evolution of Management
Thought
The origin of Evolution management can be traced back to the days when man started living in groups. History reveals that strong men organized the masses into groups according to their intelligence, physical and mental capabilities. Evidence of the use of the well recognized principles of management is to be found in the organization of public life in ancient Greece, the organization of the Roman Catholic Church and the organization of military forces. Thus management in some form or the other has been practiced in the various parts of the world since the dawn of civilization. With the onset of Industrial Revolution, however, the position underwent a radical change. The structure of industry became extremely complex. At this stage, the development of a formal theory of management became absolutely necessary. It was against this background that the pioneers of modern management thought laid the foundations of modern management theory and practice.
Evolution of management thought may be divided into four stages
1. Pre-scientific management period.
2. Classical Theory
a. Scientific Management of Taylor
b. Administrative Management of Fayol
c. Bureaucratic Model of Max Weber
3. Neo-classical Theory or Behaviour Approach
4. Modern Theory or Systems Approach
1. Pre-scientific Management Period
The advent of industrial revolution in the middle of the 18th century had its impact on management. Industrial revolution brought about a complete change in the methods of production, tools and equipments, organization of labour and methods of raising capital.
Employees went to their work instead of receiving it, and so, the factory system, as it is known today, become a dominant feature of the economy. Under this system, land and buildings, hired labour, and capital are made available to the entrepreneur, who strives to combine these factors in the efficient achievement of a particular goal. All these changes, in turn, brought about changes in the field of management. Traditional, conventional or customary ideas of management were slowly given up and management came to be based on scientific principles. In the words of L. F. Urwick- "Modern management has thrown open a new branch of human knowledge, a fresh universe of discourse". During the period following the industrial revolution, certain pioneers tried to challenge the traditional character of management by introducing new ideas and character of management by introducing new ideas and approaches. The notable contributors of this period are:
a. Professor Charles Babbage (UK 1729 -1871): He was a Professor of Mathematics at Cambridge University. Prof Babbage found that manufacturers made little use of science and mathematics, and that they (manufacturers) relied upon opinions instead of investigations and accurate knowledge. He felt that the methods of science and mathematics could be applied to the solution of methods in the place of guess work for the solution of business problems. He advocated the use of accurate observations, measurement and precise knowledge for taking business decisions. He urged the management of an enterprise, on the basis of accurate data obtained through rigid investigation, the desirability of finding out the number of times each operation is repeated each hour, the dividing of work into mental and physical efforts, the determining of the precise cost for every process and the paying of a bonus to the workers in proportion to his own efficiency and the success of enterprise.
b. James Watt Junior (UK 1796 - 1848) and Mathew Robinson Boulton(1770 - 1842): James Watt Junior and Mathew Robinson Boulton contributed to the development of management thought by following certain management techniques in their engineering factory at Soho in Birmingham. They are:-
c. Robert Owens (UK 1771 - 1858): Robert Owens, the promoter of co-operative and trade union movement in England, emphasized the recognition of human element in industry. He firmly believed that workers' performance in industry was influenced by the working conditions and treatment of workers. He introduced new ideas of human relations - shorter working hours, housing facilities, training of workers in hygiene, education of their children, provision of canteen etc. Robert Owen, managed a group of textile mills in Lanark, Scotland, where he used his ideas of human relations. Though his approach was paternalistic, he came to be regarded as the father of Personnel Management.
d. Henry Robinson Towne (USA 1844 -1924): H.R Towne was the president of the famous lock manufacturing company "Yale and Town". He urged the combination of engineers and economists as industrial managers. This combination of qualities, together with at least some skill as an accountant, is essential to the successful management of industrial workers. He favoured organized exchange of experience among managers and pleaded for an organized effort to pool the great fund of accumulated knowledge in the art of workshop management.
e. Seebohm Rowntree (UK 1871- 1954): Rowntree created a public opinion on the need of labour welfare scheme and improvement in industrial relations. The Industrial Welfare Society, The Management Research Groups and the Oxford Lecture Conferences in the U.K owed their origin and progress to the interest and zeal of Rowntree.
2. Classical Theory
Prof. Charles Babbage, James Watt Junior and Mathew Robinson Boulton, Robert Owen, Henry Robinson Towne and Rowntree were, no doubt, pioneers of management thought. But, the impact of their contributions on the industry as a whole was meagre. The real beginning of the science of management did not occur until the last decade of the 19thcentury. During this period, stalwarts like F.W. Taylor, H.L. Gantt, Emerson, Frank and Lillian Gilberth etc., laid the foundation of management, which in due course, came to be known as scientific management. This epoch in the history of management will be remembered as an era in which traditional ways of managing were challenged, past management experience was scientifically systematized and principles of management were distilled and propagated. The contributions of the pioneers of this age have had a profound impact in furthering the management know-how and enriching the store of management principles.
F.W. Taylor and Henry Fayol
are generally regarded as the founders of scientific management and
administrative management and both provided the bases for science and art of
management.
Features of Management in the Classical Period:
1. It was closely associated with the industrial revolution and the rise of large-scale enterprise.
2. Classical organization and management theory is based on contributions from a number of sources. They are scientific management, Administrative management theory, bureaucratic model, and micro-economics and public administration.
3. Management thought focussed on job content division of labour, standardization, simplification and specialization and scientific approach towards organization.
A. Taylor's Scientific Management: Started as an apprentice machinist in Philadelphia, USA. He rose to be the chief engineer at the Midvale Engineering Works and later on served with the Bethlehem Works where he experimented with his ideas and made the contribution to the management theory for which he is so well known. Frederick Winslow Taylor well-known as the founder of scientific management was the first to recognize and emphasis the need for adopting a scientific approach to the task of managing an enterprise. He tried to diagnose the causes of low efficiency in industry and came to the conclusion that much of waste and inefficiency is due to the lack of order and system in the methods of management. He found that the management was usually ignorant of the amount of work that could be done by a worker in a day as also the best method of doing the job. As a result, it remained largely at the mercy of the workers who deliberately shirked work.
He therefore, suggested that those responsible for management should adopt a scientific approach in their work, and make use of "scientific method" for achieving higher efficiency. The scientific method consists essentially of
a. Observation
b. Measurement
c. Experimentation and
d. Inference.
He advocated a thorough planning of the job by the management and emphasized the necessity of perfect understanding and co-operation between the management and the workers both for the enlargement of profits and the use of scientific investigation and knowledge in industrial work. He summed up his approach in these words:
o Science, not rule of thumb
o Harmony, not discord
o Co-operation, not individualism
o Maximum output, in place of restricted output
o The development of each man to his greatest efficiency and prosperity.
Benefits of Scientific Management: Taylor's ideas, research and recommendations brought into focus technological, human and organizational issues in industrial management. Benefits of Taylor's scientific management included wider scope for specialization, accurate planning, timely delivery, standardized methods, better quality, lesser costs, minimum wastage of materials, time and energy and cordial relations between management and workers. According to Gilbreths, the main benefits of scientificmanagement are "conservation and savings, making an adequate use of every one'senergy of any type that is expended". The benefits of scientific management are:-
· Replacement of traditional rule of thumb method by scientific techniques.
· Proper selection and training of workers.
· Incentive wages to the workers for higher production.
· Elimination of wastes and rationalization of system of control.
· Standardization of tools, equipment, materials and work methods.
· Detailed instructions and constant guidance of the workers.
· Establishment of harmonious relationship between the workers.
· Better utilization of various resources.
· Satisfaction of the needs of the customers by providing higher quality products at lower prices.
Criticism
Ø Worker's Criticism:
a) Speeding up of workers: Scientific Management is only a device to speed up the workers without much regard for their health and well-being.
b) Loss of individual worker's initiative: Scientific Management reduces workers to automatic machine by taking away from them the function of thinking.
c) Problem of monotony: By separating the function of planning and thinking from that of doing, Scientific Management reduces work to mere routine.
d) Reduction of Employment: Scientific Management creates unemployment and hits the workers hard.
e) Weakening of Trade Unions: Under Scientific Management, the important issues of wages and working conditions are decided by the management through scientific investigation and the trade unions may have little say in the matter.
f) Exploitation of workers: Scientific Management improves productivity through the agency of workers and yet they are given a very small share of the benefit of such improvement.
Ø Employer's Criticism:
a. Heavy Investment: It requires too heavy an investment. The employer has to meet the extra cost of the planning department though the foreman in this department do not work in the workshop and directly contribute towards higher production.
b. Loss due to re-organization: The introduction of Scientific Management requires a virtual reorganization of the whole set-up of the industrial unit. Work may have to be suspended to complete such re-organization.
c. Unsuitable for small scale firms: various measures like the establishment of a separate personnel department and the conducting of time and motion studies are too expensive for a small or modest size industrial unit.
Contributions of Scientific Management: Chief among these are:
1) Emphasis on rational thinking on the part of management.
2) Focus on the need for better methods of industrial work through systematic study and research.
3) Emphasis on planning and control of production.
4) Development of Cost Accounting.
5) Development of incentive plans of wage payment based on systematic study of work.
6) Focus on need for a separate Personnel Department.
7) Focus on the problem of fatigue and rest in industrial work.
Taylor was the pioneer in introducing scientific reasoning to the discipline of management.Many of the objections raised were later remedied by the other contributors to scientific management like Henry L Gantt, Frank and Lillian Gilbreth and Harrington Emerson.
B. Administrative Management Theory: Henry Fayol was the most important exponent of this theory. The pyramidal form, scalar principle, unity of command, exception principle, span of control and departmentalisation are some of the important concepts set forth by Fayol and his followers like Mooney and Reiley, Simon, Urwick, Gullick etc.
Henry Fayol (France, 1841 - 1925): Henry Fayol was born in 1941 at Constantinople in France. He graduated as a mining engineer in 1860 from the National School of Mining. After his graduation, he joined a French Coal Mining Company as an Engineer. After a couple of years, he was promoted as manager. He was appointed as General Manager of his company in 1888. At that time, the company suffered heavy losses and was nearly bankrupt. Henry Fayol succeeded in converting his company from near bankruptcy to a strong financial position and a record of profits and dividends over a long period.
Concept of Management: Henry Fayol is considered the father of modern theory of general and industrial management. He divided general and industrial management into six groups:
1. Technical activities - Production, manufacture, adaptation.
2. Commercial activities - buying, selling and exchange.
3. Financial activities - search for and optimum use of capital.
4. Security activities - protection of property and persons.
5. Accounting activities - stock-taking, balance sheet, cost, and statistics.
6. Managerial activities - planning, organization, command, co- ordination and control.
These six functions had to be performed to operate successfully any kind of business. He, however, pointed out that the last function i.e., ability to manage, was the most important for upper levels of managers. The process of management as an ongoing managerial cycle involving planning, organizing, directing, co-ordination, and controlling, is actually based on the analysis of general management by Fayol. Hence, it is said that Fayol established the pattern of management thought and practice. Even today, management process has general recognition.
Fayol's Principles of Management: The principles of management are given below:
1. Division of work: Division of work or specialization alone can give maximum productivity and efficiency. Both technical and managerial activities can be performedin the best manner only through division of labour and specialization.
2. Authority and Responsibility: The right to give order is called authority. The obligation to accomplish is called responsibility. Authority and Responsibility are the two sides of the management coin. They exist together. They are complementary and mutually interdependent.
3. Discipline: The objectives, rules and regulations, the policies and procedures must be honoured by each member of an organization. There must be clear and fair agreement on the rules and objectives, on the policies and procedures. There must be penalties (punishment) for non-obedience or indiscipline. No organization can work smoothly without discipline - preferably voluntary discipline.
4. Unity of Command: In order to avoid any possible confusion and conflict, each member of an organization must received orders and instructions only from one superior (boss).
5. Unity of Direction: All members of an organization must work together to accomplish common objectives.
6. Emphasis on Subordination of Personal Interest to General or CommonInterest: This is also called principle of co-operation. Each shall work for all and all for each. General or common interest must be supreme in any joint enterprise.
7. Remuneration: Fair pay with non-financial rewards can act as the best incentive or motivator for good performance. Exploitation of employees in any manner must be eliminated. Sound scheme of remuneration includes adequate financial and nonfinancial incentives.
8. Centralization: There must be a good balance between centralization and decentralization of authority and power. Extreme centralization and decentralization must be avoided.
9. Scalar Chain: The unity of command brings about a chain or hierarchy of command linking all members of the organization from the top to the bottom. Scalar denotes steps.
10. Order: Fayol suggested that there is a place for everything. Order or system alone can create a sound organization and efficient management.
11. Equity: An organization consists of a group of people involved in joint effort. Hence, equity (i.e., justice) must be there. Without equity, we cannot have sustained and adequate joint collaboration.
12. Stability of Tenure: A person needs time to adjust himself with the new work and demonstrate efficiency in due course. Hence, employees and managers must have job security. Security of income and employment is a pre-requisite of sound organization and management.
13. Esprit of Co-operation: Esprit de corps is the foundation of a sound organization. Union is strength. But unity demands co-operation. Pride, loyalty and sense of belonging are responsible for good performance.
14. Initiative: Creative thinking and capacity to take initiative can give us sound managerial planning and execution of predetermined plans.
C. Bureaucratic Model: Max Weber, a German Sociologist developed the bureaucratic model. His model of bureaucracy include
a. Hierarchy of authority.
b. Division of labour based upon functional specialization.
c. A system of rules.
d. Impersonality of interpersonal relationships.
e. A system of work procedures.
f. Placement of employees based upon technical competence.
g. Legal authority and power.
Bureaucracy provides a rigid model of an organization. It does not account for important human elements. The features of Bureaucracy are:-
1. Rigidity, impersonality and higher cost of controls.
2. Anxiety due to pressure of conformity to rules and procedure.
3. Dependence on superior.
4. Tendency to forget ultimate goals of the organization.
Bureaucratic Model is preferred where change is not anticipated or where rate of change can be predicated. It is followed in government departments and in large business organizations.
3. Neoclassical Theory:Neo-classical Theory is built on the base of classical theory. It modified, improved and extended the classical theory. Classical theory concentrated on job content and management of physical resources whereas, neoclassical theory gave greater emphasis to individual and group relationship in the workplace. The neo- classical theory pointed out the role of psychology and sociology in the understanding of individual and group behaviour in an organization.
George Elton Mayo (Australia, 1880 - 1949): Elton Mayo was born in Australia. He was educated in Logic and Philosophy at St. Peter's College, Adelaide. He led a team of researchers from Harvard University, which carried out investigation in human problems at the Hawthorne Plant of Western Electrical Company at Chicago. They conducted some experiments (known as Hawthorne Experiments) and investigated informal groupings, informal relationships, patterns of communication, patterns of informal leadership etc. Elton Mayo is generally recognized as the father of Human Relations School. Other prominent contributors to this school include Roethlisberger, Dickson, Dewey, Lewinetc.
Ø Hawthorne Experiment: In 1927, a group of researchers led by Elton Mayo and Fritz Roethlisberger of the Harvard Business School were invited to join in the studies at the Hawthorne Works of Western Electric Company, Chicago. The experiment lasted up to 1932. The Hawthorne Experiments brought out that the productivity of the employees is not the function of only physical conditions of work and money wages paid to them. Productivity of employees depends heavily upon the satisfaction of the employees in their work situation. Mayo's idea was that logical factors were far less important than emotional factors in determining productivity efficiency. Furthermore, of all the human factors influencing employee behaviour, the most powerful were those emanating from the worker's participation in social groups. Thus, Mayo concluded that work arrangements in addition to meeting the objective requirements of production must at the same time satisfy the employee's subjective requirement of social satisfaction at his work place.
The Hawthorne experiment consists of four parts. These parts are briefly described below:-
1. Illumination Experiment.
2. Relay Assembly Test Room Experiment.
3. Interviewing Programme.
4. Bank Wiring Test Room Experiment.
1. Illumination Experiment: This experiment was conducted to establish relationship between output and illumination. When the intensity of light was increased, the output also increased. The output showed an upward trend even when the illumination was gradually brought down to the normal level. Therefore, it was concluded that there is no consistent relationship between output of workers and illumination in the factory. There must be some other factor which affected productivity.
2. Relay Assembly Test Room Experiment: This phase aimed at knowing not only the impact of illumination on production but also other factors like length of the working day, rest hours, and other physical conditions. In this experiment, a small homogeneous work-group of six girls was constituted. These girls were friendly to each other and were asked to work in a very informal atmosphere under the supervision of a researcher. Productivity and morale increased considerably during the period of the experiment. Productivity went on increasing and stabilized at a high level even when all the improvements were taken away and the pre-test conditions were reintroduced. The researchers concluded that socio-psychological factors such as feeling of being important, recognition, attention, participation,cohesive work-group, and non-directive supervision held the key for higherproductivity.
3. Mass Interview Programme: The objective of this programme was to make a systematic study of the employees' attitudes which would reveal the meaning which their "working situation" has for them. The researchers interviewed a large number of workers with regard to their opinions on work, working conditions and supervision. Initially, a direct approach was used whereby interviews asked questions considered important by managers and researchers. The researchers observed that the replies of the workmen were guarded. Therefore, this approach was replaced by an indirect technique, where the interviewer simply listened to what the workmen had to say. The findings confirmed the importance of social factors at work in the total work environment.
4. Bank Wiring Test Room Experiment: This experiment was conducted by Roethlisberger and Dickson with a view to develope a new method of observation and obtaining more exact information about social groups within a company and also finding out the causes which restrict output. The experiment was conducted to study a group of workers under conditions which were as close as possible to normal. This group comprised of 14 workers. After the experiment, the production records of this group were compared with their earlier production records. It was observed that the group evolved its own production norms for each individual worker, which was made lower than those set by the management. Because of this, workers would produce only that much, thereby defeating the incentive system. Those workers who tried to produce more than the group norms were isolated, harassed or punished by the group. The findings of the study are:-
i. Each individual was restricting output.
ii. The group had its own "unofficial" standards of performance.
iii. Individual output remained fairly constant over a period of time.
iv. Informal groups play an important role in the working of an organization.
Contributions of the Hawthorne Experiment: Elton Mayo and his associates conducted their studies in the Hawthorne plant of the western electrical company, U.S.A., between 1927 and 1930. According to them, behavioural science methods have many areas of application in management. The important features of the Hawthorne Experiment are:-
1. A business organization is basically a social system. It is not just a techno-economic system.
2. The employer can be motivated by psychological and social wants because his behavior is also influenced by feelings, emotions and attitudes. Thus economic incentives are not the only method to motivate people.
3. Management must learn to develop co-operative attitudes and not rely merely on command.
4. Participation becomes an important instrument in human relations movement. In order to achieve participation, effective two-way communication network is essential.
5. Productivity is linked with employee satisfaction in any business organization. Therefore management must take greater interest in employee satisfaction.
6. Group psychology plays an important role in any business organization. We must therefore rely more on informal group effort.
7. The neo-classical theory emphasizes that man is a living machine and he is far more important than the inanimate machine. Hence, the key to higher productivity lies in employee morale. High morale results in higher output.
4. Modern Theory
A. (System Approach): The systems approach to management indicates the fourth major theory of management thought called modern theory. Modern theory considers an organization as an adaptive system which has to adjust to changes in its environment. An organization is now defined as a structured process in which individuals interact for attaining objectives.
Meaning of "System": The word system is derived from the Greek word meaning to bring together or to combine. A system is a set of interconnected and inter-related elements or component parts to achieve certain goals. A system has three significant parts:
1. Every system is goal-oriented and it must have a purpose or objective to be attained.
2. In designing the system we must establish the necessary arrangement of components.
3. Inputs of information, material and energy are allocated for processing as per plan so that the outputs can achieve the objective of the system.
The Design of a Basic System
Systems Approach Applied to an Organization: When systems approach is applied to organization, we have the following features of an organization as an open adaptive system:-
1. It is a sub-system of its broader environment.
2. It is a goal-oriented – people with a purpose.
3. It is a technical subsystem – using knowledge, techniques, equipment and facilities.
4. It is a structural subsystem – people working together on interrelated activities.
5. It is a psychosocial system – people in social relationships.
6. It is co-ordinate by a managerial sub system, creating, planning, organizing, motivating, communicating and controlling the overall efforts directed towards set goals.
Characteristics
of Modern Management Thought:
1. The Systems Approach: An organization as a system has five basic parts -
1. Input
2. Process
3. Output
4. Feedback and
5. Environment.
It draws upon the environment for inputs to produce certain desirable outputs. The success of these outputs can be judged by means of feedback. If necessary, we have to modify out mix of inputs to produce as per changing demands.
2. Dynamic: We have a dynamic process of interaction occurring within the structure of an organization. The equilibrium of an organization and its structure is itself dynamic or changing.
3. Multilevel and Multidimensional: Systems approach points out complex multilevel and multi dimensional character. We have both a micro and macro approach. A company is micro within a business system. It is macro with respect to its own internal units. Within a company as a system we have:-
Ø Production subsystem
Ø Finance subsystem
Ø Marketing subsystem
Ø Personnel subsystem.
All parts or components are interrelated. Both parts as well as the whole are equally important. At all levels, organizations interact in many ways.
4. Multimotivated: Classical theory assumed a single objective, for instance, profit.Systems approach recognizes that there may be several motivations behind our actions and behaviour. Management has to compromise these multiple objectives eg: - economic objectives and social objectives.
5. Multidisciplinary: Systems approach integrates and uses with profit ideas emerging from different schools of thought. Management freely draws concepts and techniques from many fields of study such as psychology, social psychology, sociology, ecology, economics, mathematics, etc.
6. Multivariable: It is assumed that there is no simple cause-effect phenomenon. An event may be the result of so many factors which themselves are interrelated and interdependent. Some factors are controllable, some uncontrollable. Intelligent planning and control are necessary to face these variable factors.
7. Adaptive: The survival and growth of an organization in a dynamic environment demands an adaptive system which can continuously adjust to changing conditions. An organization is an open system adapting itself through the process of feedback.
8. Probabilistic: Management principles point out only probability and never the certainty of performance and the consequent results. We have to face so many variables simultaneously. Our forecasts are mere tendencies. Therefore, intelligent forecasting and planning can reduce the degree of uncertainty to a considerable extent.
B. Contingency Theory: Systems approach emphasizes that all sub- systems of an organization along with the super system of environment are interconnected and interrelated. Contingency approach analysis and understands these inter relationship sothat managerial actions can be adjusted to demands of specific situations or circumstances.
Thus the contingency approach enables us to evolve practical answers to problems demanding solutions. Organization design and managerial actions most appropriate to specific situations will have to be adopted to achieve the best possible result under the given situation. There is no one best way (as advocated by Taylor) to organize and manage. Thus, Contingency Approach to management emphasizes the fact that management is a highly practice-oriented discipline. It is the basic function of managers to analyse and understand the environments in which they function before adopting their techniques, processes and practices. The application of management principles and practices should therefore be continent upon the existing circumstances.
Contingency approach guides the manager to be adaptive to environment. It tells the manager to be pragmatic and open minded. The contingency approach is an improvement over the systems approach. It not only examines the relationships between sub-systems of the organization, but also the relationship between the organization and its environment.
However, the contingency approach suffers from two limitations:-
1. It does not recognize the influence of management concepts and techniques on environment.
2. Literature on contingency management is yet not adequate.
MANAGEMENT PROCESS /
MANAGERIAL ACTIVITIES
The management activities are known as principles of management which are as follows:
Ø Forecasting and Planning,
Ø Organizing,
Ø Commanding,
Ø Co-ordaining and
Ø Controlling
A)
Forecasting and Planning
Planning means looking ahead or to foresee. To foresee means, “both to assess the future and make provision for it. To plan means to foresee and provide means for future. The process of planning includes:
1. The identification of organizational goals. The aim of any insurance company is to insure life or property of the human being. The goal is to insure maximum number of person or the property so that the risk can be spread on number of persons.
2. The line of action to be followed. Once aim is set to insurer human being or property then the next step is how to insure human beings or property. The action will be to create a Marketing Department for a company.
3. The various stages through which the action would pass: To sell the insurance product only marketing department at one place i.e head office cannot achieve the results therefore various offices at different location to be set up to sell the insurance products.
4. The method to be used to achieve the desired goals: The next issue comes how to sell the insurance products. Whether it should be through Agents or Corporate Agent or Broker. Accordingly the action of the insurance company will start to recruit the manpower.
B)
Organizing
1. To organize means building up the dual structure, material and human of the organization. To organize means to provide the organization with everything useful to its functioning raw material, tools, capital and personnel. An insurance company may not require the raw material but it requires other material i.e. tool (computers), capital and personnel. A sound organization should have the following to achieve the good relationship between material and human.
2. A single competent and energetic guiding authority: There should be a single person to be overall in-charge of the organization who will report to the Board of directors. Like Chief Executing Officer (CEO) or Managing Director is appointed in all organization whether it is insurance or other type of organization. Irrespective of the size of the organization.
3. Efficient selection of personnel: Any organization is run by the human beings therefore it is always endeavor of the CEO /Managing Director to recruit the manpower weather technical or finance or marketing the person should be intelligent and efficient. It saves the cost because the efficient people understand the working of the organization and take the decisions quickly. In an insurance industry the trained manpower is required because the insurance polices ate technical in nature and requires lot of skill to make the understand to the customer
4. Clear definition of duties at all levels: The duties of each employee should be defined to get the better results form the employees. If duties are not defined then the employees will be confused what to do or not to do. In an insurance company the target should be given to the marketing personnel to insure so many lives or property and being a marketing function, it should not be assigned to Finance Deptt. Moreover there will be many employees in the department the target should be given to the Head of the Deptt and then he will assign the targets to his juniors at different locations.
5. Initiative and responsibility: The management should ensure that employees take initiative to complete the job assigned to them. The employees should be held responsible for not doing the things. In an insurance company the marketing team should be very strong to sell the insurance products. The team should take initiative to meet the number of persons to get the insurance business. The team should not wait for the instruction of their superiors to meet the customers.
6. Minimum paper work: In the computer era the paper work can be reduced and the employees of the organization should maximum use the computers to save paper work. In insurance the marketing team should send the daily performance report through email which will reduce the paper work.
7. Reward & efficiency: The good performers should be awarded cash or non cash award which boost the moral and efficiency of the employees.
8. Unit of command: Every employee should report to one superior not to more than otherwise the performance and controlling of the employees will be very difficult.
9. Clear and precise decision making: Any decision taken by any employee should not be ambiguous i.e double meaning because it creates confusion.
10.
Proper control
11. Disincentives for faults and error: for any fault of any employee or non performer should be penalized otherwise it will affect the working of the performers.
12. Supremacy of general interest in relation to individual etc: Any individual interest should not be clash with the organization interest. The organization interest should be protected.
C)
Commanding
It means setting the business going to get the desired optimum results from the subordinates. The managers must posses the requisites personal qualities and knowledge to command effectively. The managers must
Ø have a thorough knowledge of his personnel
Ø have capacity to spot the right and competent workers so as to eliminate the incompetent
Ø set a good example i.e leadership
Ø conduct periodic assessment or audit of performance
Ø be well versed in agreement binding the business and its employees
Ø have lively and constant touch with subordinates
Ø aim at making unity, energy imitative and loyalty prevail among personnel
D)
Co-ordinating
It means the process developed by a manger to secure an orderly pattern of group effort among his personnel through unity of action to pursue the common goals. The coordination should be with in the resources available in the organization.
E)
Controlling
The controlling means to ensure that everything is done in accordance with the established rules and instruction given to the workmen. The purpose of control is to point out weaknesses and errors in order to rectify them and prevent their recurrence. The effective control must be
i) prompt,
ii) followed with sanctions and
iii) include measure to prevent recurrence of variances a or error.
ADVANTAGE OF PRINCIPLES OF
MANAGEMENT:
i) To increase Management efficiency: The principles of management have been developed from experiences of various professional people. These principles provide guidelines as to how mangers should function in different situations which in turn increase their efficiency.
ii) To develop the Science of Management: The principles of management make use of scientific methods for observation. They have helped to develop the science of management. In absence of principles of management it would be not have been possible to develop the organized body of knowledge by management practitioners, thinker and philosophers.
iii) To train mangers: Management of principles is also needed to train managers. In the absence of principles the training of mangers depends upon trial and error methods. Formalized methods of acquiring training are possible only when there exists a systemized body of specialized knowledge, techniques or principles.
iv) To co-ordinate material and human resources: The principles of management help to coordinate the material and human resources in order to achieve the desired goals or common objectives. Without principles of management there would be a lot of wastage of resources. The principles of management make optimum utilization of natural resources possible.
v) To improve researches: The principles of management have helped in inverse of knowledge and carrying out of further research in the field of management. These have provided new ideas imagination and visions to the organization.
vi) To attain social objectives: Development of management principles have helped to attain the social goals by increasing efficiency in the use of scarce resources providing good quality products and services at the lowest possible costs.
Contribution
of Peter F. Drucker to Value Creation
PETER F. DRUCKER is widely credited with creating management as a formal discipline. In 1954, he published the first book that defined business management, The Practice of Management. Before this book, there was no coherent body of management knowledge, and only two or three books even addressed management issues. When it comes to the quality aspects of management, Drucker has established several ideas of importance to quality professionals. His concepts span from defining the purpose of a business to challenging leadership to manage information more effectively. Throughout his career, Drucker has presented an idea toolkit to create profound knowledge and stimulate business improvement. This article, based on the lifelong writings of Drucker and an interview I conducted with him in summer 2001, traces the ideas behind his strategic architecture for delivering value and quality to customers. Drucker almost always begins his discussions with a question like what is a business? To him the usual answer—the purpose of an organization is to make a profit—“is not only false, but it is totally irrelevant.” After rejecting this most obvious definition, Drucker then describes his basic concept as a starting point: If you want to know what a business is, you have to start with its purpose, which must be found outside the business itself—in society, since a business enterprise is an organ of society. “There is only one valid definition of business purpose: to create a customer.” From a quality perspective, Drucker develops the more traditional emphasis on financial return—that a business is an organization that “adds value and creates wealth.” Value is created for customers, and wealth is generated for owners. While this is a simple statement, Drucker observes traditional management methods often mask this basic business purpose. Throughout his body of work, Drucker gives quality professionals many lessons in economics, business, finance and accounting.
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