CHAPTER 2- PRINCIPLES OF MANAGEMENT

Concept-
Principles of management are general guidelines which help in the decision-making process in the
management and help in determining the behaviour of the managers in certain situations.
Management principles are not as rigid as principles of science as they deal with human behaviour and
thus are to be applied creatively as the situation demands.

Nature of Principles of Management

The nature of principles of management are as follows:

1. Universal applicability: Principles of management is applicable in all types of organizations,

business as well as non-business, small as well as large enterprises depending on the nature of the
organisation.

2. General Guidelines: They are general guidelines to action but do not provide straight solution to all
managerial problems, as the business situations are complex and dynamic.

3. Formed by practice and experimentation: They are formed from the knowledge, experiences and
experiments of the managers.

4. Flexible: These principles are not rigid and can be adapted and modified by the practicing managers
depending upon the situation.
5. Mainly Behavioral: Since the principles aim at influencing complex human behavior they are
behavioral in nature.

6. Cause and Effect relationship: They are intend to establish relationship between cause & effect so
that they can be used in various situations.

7. Contingent: Their applicability depends upon the prevailing situation at a particular point of time.
The application has to be changed as per the situation.

Significance of Principles of Management

• Providing Managers with Useful Insights into Reality: Through principles of management,
managers get insights into real work situations. The use of principles will increase their knowledge,
ability, and understanding of various managerial situations and circumstances.

• Optimum Utilisation of Resources and Effective Administration: Optimum utilisation of

resources means maximum benefit with minimum cost. The principles have been developed from
the experience of various experts to improve managerial efficiency. The principles guide managers
to work systematically without wastage of time and resources to avail maximum benefit.

• Scientific Decisions: Decisions must be based on facts, and should be justified in terms of intended
purpose. They should be realistic, practical, and able to be measured and evaluated. Principles are
free from bias and prejudice.

• Meeting the Changing Environmental Requirements: Principles of Management are flexible

and dynamic and thus help the organisation to achieve its goal even in the changing business
environment.
 • Fulfilling Social Responsibility: Due to the increased awareness of the public forces all
companies are required to fulfill social responsibilities. Principles of management not only help in
achieving organizational goals but also guide managers in performing social responsibilities.

• Management Training, Education, and Research: Principles of management are an important

aspect for managers and help enhance their knowledge, which forms the basis for management
training and research.

Taylor’s Scientific Management

“Scientific management is the art of knowing exactly what you want your men to do and then seeing that
they do it in the best and cheapest way.” — F.W. Taylor

F.W. Taylor also known as the ‘Father of Scientific Management’ was the first expert to lay down the
foundation of management as a science consisting of fundamental principles and the use of these scientific
methods to solve managerial problems.

Principles of Scientific Management

1.Science not Rule of thumb

• Taylor introduced the method of scientific inquiry into the domain of management practice.
• He believed that there was only one best method to maximize efficiency and it could be
developed through study and analysis
 • Scientific method involved investigation of traditional methods through work study, unifying
the best practices and developing a standard method which would be followed throughout the
organization.

2. Harmony, Not Discord

• There should be complete harmony between management and workers in achieving

organizational goals.
• It implies that there should be mental revolution on part of managers and workers in order to
respect each other’s role and eliminate any class conflict to realize organizational objectives.
• Management should share the gains of the company, if any, with the workers .At the same
time workers should work hard and be willing to embrace change for the good of the
company.

3.Co-operation, Not Individualism

• It is an extension of the Principle of Harmony not discord, there should be complete cooperation
between the labour and management instead of individualism.
• Constructive suggestions from employees must be encouraged and desist workers from going on strike
and making unreasonable demands.

4. Development of Each and Every Person to His or Her Greatest Efficiency and Prosperity
• The organisational efficiency depends upon personnel competencies.
• There must be the development of every employee working. They must be given tasks to
improve their physical, mental and intellectual capabilities.
• This will ensure their greatest efficiency and prosperity for both company and workers.
Techniques of Scientific Management

FUNCTIONAL FOREMANSHIP
Functional foremanship is a technique in which planning and execution are considered different.
Supervision is divided into several specialised functions and each function is to be entrusted to a
foreman. This principle is an extension of Fayol’s principle of division of work and specialisation. It
takes place through eight personnel, namely divided under heads of Planning and Production Incharge:
• INSTRUCTION CARD CLERK – draft instruction for workers
• ROUTE CLERK -specify the route of production
• TIME AND COST CLERK- prepare time and cost sheet
• DISCIPLINARIAN -ensure discipline
• SPEED BOSS- Responsible for timely and accurate completion of job
• GANG BOSS- Keeping machines and tools ready for operation by workers
• REPAIR BOSS- ensure proper working condition of machines and tools
• INSPECTOR- Check the quality of work
STANDARDISATION AND SIMPLIFICATION OF WORK
Standardization refers to developing standards for every business activities to maximize output. Whereas
simplification refers to eliminating unnecessary varieties, sizes and grades of products or services. It
results in savings of cost of labour, machines and tools. It leads to fuller utilization of equipment and
increase in turnover.
METHOD STUDY
The objective of method study is to find out one best way of doing the job to maximize efficiency in the
use of resources and to reduce cost of production and to maximizing quality and satisfaction of
customers.
MOTION STUDY
It to the study of productive movements. It is the science of identifying and eliminating wasteful
movements resulting from unnecessary, incidental and unproductive motions of the workers so that it
takes less time to complete the job efficiently.
TIME STUDY
It determines the standard time taken to perform a well-defined job. The objective of time study is to
determine the number of workers to be employed, frame suitable incentive schemes & determine labour
costs.
FATIGUE STUDY
Fatigue study seeks to determine time and frequency of rest intervals in completing a task. The rest
interval will enable workers to regain their lost stamina thereby avoiding accidents, rejections and
industrial sickness.
DIFFERENTIAL PIECE WAGE SYSTEM
This differentiates efficient and inefficient workers and links wages and productivity. The standard
output per day is established and two-piece rates are used: higher for those who achieve upto and more
than standard output i.e. efficient workers and lower for inefficient and slow workers. Thus, efficient
workers will be rewarded & inefficient will be motivated to improve their performance.

Fayol’s Principles of Management

1. Division of work: Work is divided in small tasks/job and a trained specialist who is competent
enough to perform that job does each work. Thus it leads to greater efficiency, specialization,
increased productivity.

2. Authority and Responsibility: Authority means power to take decisions and responsibility means
obligation to complete the job assigned on time. There should be a balance between authority and
responsibility. Mere responsibility without authority makes an executive less interested in discharging
duties. Similarly, giving authority without assigning responsibility makes him arrogant and there is fear
of misuse of power.
3. Discipline: Is the obedience to organizational rules and employment agreement, which are necessary
for the working of the organisation. Discipline requires good supervisors at all levels, clear and fair
agreements and judicious application of penalties.
4. Unity of Command: According to Fayol there should be one and only one boss for every individual
employee. It implies that every worker should receive orders from one superior only, otherwise it will
create confusion, conflict and duplication of work.
5. Unity of Direction: All the units of an organisation should move towards the same objectives through
coordinated and focused efforts. Each group of activities having the same objective must have one head
and one plan. This ensures unity of action and coordination.

Difference between Unity of Command and Unity of Direction

BASIS FOR UNITY OF COMMAND UNITY OF DIRECTION
COMPARISON
Meaning Unity of command refers to a Unity of direction is a
principle of management that management principle, which
states that one should get orders implies that all the activities
from and report to only one boss. with same objective must
have one head and one plan.
Aim To prevent dual subordination. To prevent overlapping of
activities.
Implication To prevent duplication of It effects the entire
activities. organization

o 6. Subordination of Individual Interest to general interest: The interest of an organization

should take priority over the interest of any individual employee. In simple words the organisation
interest to be prioritized over individual interest.
o For example, the organisational objective to achieve a certain objective should be prioritised
over an individual’s objective to get a higher salary with the lowest work.
 7. Remuneration of Employees: The overall pay and compensation should be, fair to both employees
and the organization. The employees should be given fair wages so that they can have a reasonable
standard of living. Wages should be within the paying capacity of the organisation.
8. Centralization and Decentralization: Centralization means concentration of decisions making
authority with some, whereas its dispersal among more than one person is Decentralization. Both should
be balanced, as no organization can be completely centralized or completely decentralized.

9. Scalar Chain: The formal lines of authority and communication between superiors and subordinates
from the highest to the lowest ranks is known as scalar chain. This chain should not be violated but in
case of emergency employees at same level can contact through Gang Plank by informing their
immediate superiors.
10. Order: According to Fayol “ People and material should be in suitable places at appropriate time for
maximum efficiency”. A place for everything and everyone and everything and everyone should be in
its designated place

11. Equity: Good sense and experience are needed to ensure fairness to all employees who should be
treated as fairly as possible. The working environment of any organization should be free from all forms
of and principles of justice and fair play should be followed. No worker should be unduly favoured or
punished.
12. Stability of Personnel: Employee turnover should be minimized to maintain organizational
efficiency. A personnel should be selected and appointed after rigorous procedure and the selected
person should be kept at the post for a minimum tenure to show results.
13. Initiative: Workers should be encouraged to develop and carry out their plan for improvements.
Initiative means taking the first step with self-motivation. It is thinking out and executing the plan.

14. Espirit De Corps: Management should promote team spirit, unity and harmony among employees.

Fayol versus Taylor

 Basis Henry Fayol F.W. Taylor

Basis of
Personal Experience Observations and experimentation
formation

Improve overall efficiency

Focus Increasing productivity
of the management.

Applicability Universal applicability Applicable to specialised situations.

Perspective Top-level of management Shop floor level of a factory

Personality Practitioner Scientist

general theory of
Expression Scientific Management
administration

Did not feel that it is important as under functional

Unity of
Staunch Proponent foremanship a worker received orders from eight
Command
specialist

CASE BASED QUESTIONS

1. Leena has been appointed as the Operations Manager in a small trading company dealing in
garments, with growing online sales. The company has recently rented space in a warehouse to
store garments and mail out orders. In order to take over the responsibilities of order fulfilment,
Leena promotes an associate, Kushagra to the post of Inventory and Order fulfilment Supervisor.
Kushagra has been given the task to assess whether it is best to process orders as they come in or
let them accumulate and then to process them in batches. He concludes that accumulating and
then processing them in batches is the best way of fulfilling orders, in order to minimise cost and
maximise customer satisfaction. Through several readings Leena finds that the standard time
taken from the placement of order to the delivery of garments for a batch of 100 pieces is 72
hours. This helped her to determine the labour cost. On the basis of the understanding of
concepts of scientific management, identify and explain the techniques used by Leena and
Kushagra to improve the performance of the employees.

ANSWER:
Various techniques used by Leena to improve the performance of her employees:
Method Study-The objective of method study is to find out one best way of doing the job. To
determine the best way there are several parameters. Right from procurement of raw materials
till the final product is delivered to the customer every activity is part of method study. Taylor
devised the concept of assembly line by using method study. The objective is to minimise the
cost of production and maximise the quality and satisfaction of the customer.
Time Study-It determines the standard time taken to perform a well-defined job. The standard
time is fixed for the whole of the task by taking several readings. The method of time study will
 depend upon volume and frequency of the task, the cycle time of the operation and time
measurement costs. The objective of time study is to determine the number of workers to be
employed; frame suitable incentive schemes and determine labour costs.

2. Rajiv works as a plant superintendent in a carpet making factory. In order to complete the export
orders on time, the production manager ask him to make the workers work overtime, whereas the
finance manager is strictly against this practice because it will increase the cost of production.
Moreover, Rajiv feels that since the company is manufacturing handmade carpets as well as
machine made carpets, there is a lot of overlapping of activities. Therefore, they should be two
separate divisions for both of them wherein each division should have its own in charge, plans
and execution resources.
In the context of the above case
a. Identify and explain the principle of management which has been violated.
b..Also identify and state the principle of management that Rajiv feels should be
implemented in the factory.
ANSWER
The principle of management, which is being violated, is Unity of Command.
Unity of command means there should be one and only one boss for every individual
employee.Dual subordination should be avoided. Fayol felt that if this principle is
violated, authority is undermined, discipline is in jeopardy, order disturbed and stability
threatened.
The principle of management that Rajvir feels should be implemented in the factory is Unity
of direction.
Unity of direction means all the units of an organization should be moving towards the same
objectives through coordinated and focused efforts. Each group of activities having the same
objectives must have one head and one plan. This will lead to unit of action and coordination
3 The employees of Alfa Ltd .deserve fair and just remuneration. But what is just and fair is
determined by multiple factors. They include contribution of the employee, paying capacity of the
employer and also prevailing wage rate for the occupation under concentration. Identify and state
the feature of principles of management to which the above case is related.
ANSWER:
The feature of principle of management which has been identified here is contingent.
 • The application of principle of management is contingent or dependent upon prevailing
situation at a particular point of time.
• The application of principles has to be changed as per requirements.

3. Principles of management equip the managers to foresee the cause and effect relationships of their
decisions and actions so that the wastages associated with a trial and error approach can be
overcome.
a. Identify the point of significance of principles of management highlighted here.
b. Also explain briefly two more points of the significance of principles of management.
ANSWER
a. Optimum utilization of resources and effective administration.
b. (i) Scientific decisions: Management principles help in thoughtful decision- making. They
emphasis on logic than blind faith.
(ii)Fulfilling social responsibility: The principles of management increase the efficiency of
managers and enable them to fulfill their social responsibility. Using environment friendly
production technique and producing good quality products are examples of social
responsibilities.

4. ‘Flavours of South’ is a famous chain of South Indian restaurants. It believes in complete co-
operation between the labour and management. Its management encourages the employees for
their constructive suggestions. They take their employees into confidence for all important
decisions. State the principle of scientific management that has been followed by ‘Flavours of
South’?
ANSWER
Co-operation, Not individualism-
• There should be complete cooperation between the labour and the management instead of
individualism.
• Competition should be replaced by cooperation.
MULTIPLE CHOICE QUESTIONS
1. Which technique of Taylor is used to differentiate efficient and inefficient workers?

A. Method Study
B. Differential Piece Wage System
C. Fatigue Study
D. Motion Study
Answer: B. Differential Piece Wage System
2.Which of the following principles of management suggests that employee turnover should be
minimized?

A. Stability of Tenure
B. Discipline
C. Remuneration
D. Scalar Chain
Answer: A. Stability of Tenure

3. Assertion (A): Unity of Command ensures that each employee receives orders from only one
superior.
Reason (R): It avoids confusion and conflicts in the organization.

a) Both Assertion (A) and Reason(R) are true and Reason (R) is the correct explanation of
Assertion (A)
b) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of
Assertion (A)
c) Assertion (A) is true, but Reason (R)is false
d) Assertion (A) is false, but Reason (R) is true.
Answer: Both Assertion (A) and Reason(R) are true and Reason (R) is the correct explanation of
Assertion (A)
4. Assertion (A): The principle of Equity leads to better employee satisfaction.
Reason (R): Equity in management refers to equal pay for all employees.
a) Both Assertion (A) and Reason(R) are true and Reason (R) is the correct explanation of
Assertion (A)
b) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of
Assertion (A)
c) Assertion (A) is true, but Reason (R)is false
d) Assertion (A) is false, but Reason (R) is true.

Answer: Assertion (A) is true, but Reason (R)is false

5.The principles of division of labour may be used to a government office where a diary/dispatch clerk
receives and sends mail, and a data entry operator enters data into a computer. Division of labour also
applies to limited companies with different divisions such as production, finance, research &
development, and so on. Which aspect of management principles is highlighted above?

a. General Guideline
b. Universal applicability
c. Flexible
d. d. Contingent
Answer: b
6.Principles of science are based on __________ relationship.

a. Functional
b. Economical
c. Cause and Effect relationship
d. None of the above

Answer:c

7. Management should find ‘one best way’ to perform a task. Which technique of scientific management
is defined in this sentence?

A. Time study
B. Method study
C. C. Fatigue study
D. D. Motion study

Answer: B

8.Statement I- In case of emergencies, two persons at the same level can directly communicate with
each other.

Statement II- This has been provided so that communication is delayed.

Choose the correct option from the options given below:

(a) Statement I is true and Statement II is false.
(b) Statement II is true and Statement I is false.
(c) Both the statements are true.
(d) Both the statements are false.
Answer: (a) Statement I is true and Statement II is false.
9. The concept of mental revolution as prescribed by Taylor involves a change in the mindset of:
a. Workers towards the management
b. Management towards the workers
c. Workers and management towards one another from competition to cooperation

d. Workers towards customers

Answer: c. Workers and management towards one another from competition to cooperation
10. This principle ensures unity of action and coordination. Choose the correct option.
a. Unity of command
b Espirit de corps
c.Stability of personnel
d.Unity of direction