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Business Studies
Chapter 2
Principles of management
Principle

A principle is a fundamental statement of truth that provides guidance to thought and action.

Principles of Management

Principles of management are broad and general guidelines for managerial decision making and behaviour (i.e. they guide
the practice of management).

Nature/characteristics/features
1. Universal Applicability: They can be applied in all types of organizations, business as well as non-business, small as
well as large enterprises.
2. General Guidelines: They are general guidelines to action and decision making however they do not provide
readymade solutions as the business environment is ever changing or dynamic.
3. Formed by practice and experimentation: They are the results of various problems faced by the professional
peoples. They are developed after thorough research work on the basis of experiences of managers.
4. Flexible: These can be adapted and modified by the practicing managers as per the demands of the situations as
they are man-made principles.
5. Behavioural: It is behavioural in nature because they aim at influencing the behaviour of human beings.
6. Cause and Effect relationship: They specify what the ultimate outcome will be if in a particular situation, work is
done in a particular manner.
7. Contingent: The principles of management are not fixed or permanent. They are affected by situations or
circumstances. Therefore, the decision to implement them or not is taken according to the situations or
circumstances.

Significance/importance of management principles

1. Provides useful insight reality: It increase managerial efficiency by increasing their knowledge, ability and
understanding of managerial situations and circumstances.
2. Optimum utilization of resources and effective administration: In every organisation physical, financial and human
resources are used. The function of management is to put them to optimum use and avoid wastages of resources.
3. Scientific decisions: It means a balanced decision. The management decision taken on the basis of principles are free
from bias and prejudice.
4. Meeting the changing environmental requirements: Management principles provide an effective and dynamic
leadership and help the organization to implement the changes.
5. Fulfilling social responsibility: Principles of management not only help in achieving organizational goals but also
guide managers in performing social responsibilities. Example: good quality product at reasonable price.
6. Management training, education and research: Management principles are helpful in identifying the areas in which
existing and future managers should be trained. They also provide the basis for future research.

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Fayol principles of management
1. Division of work: Work is divided in small tasks/job and each work is done by a trained specialist which leads to
greater efficiency, specialization, increased productivity and reduction of unnecessary wastage and movements.
2. Authority & Responsibility: According to this principle, authority and responsibility should go hand in hand.
3. Discipline: The organisational rules and employment agreement should be obeyed by both superiors and
subordinates which is necessary for the successful working of the organisation.
4. Unity of Command: An individual employee should receive orders from only one superior at a time and employee
should be answerable only to that superior.
5. Unity of Direction: It means that there should be one head for one plan for a group of activities having the same
objectives.
6. Subordinates to individual interest to general interest: The interest of an organisation should be taken priority over
the interest of any one individual employee.
7. Remuneration to employees: The employee should be paid fair remuneration which should give them at least a
reasonable standard of living.
8. Centralisation and decentralisation: The concentration of decision-making authority is called centralisation whereas
its dispersal among more than one person is known as decentralisation.
9. Scalar chain: The formal line of authority from highest to lowest rank is called scalar chain. This chain should not be
violated but in emergency employees at same level can contact through Gang Plank by informing their immediate
superiors.
10. Order: A right person should be placed at right job and a right thing should be placed at the right place.
11. Equity: The manager should be treating their subordinates as fairly as possible so that they develop a feeling of
dedication for their work.
12. Stability of Personnel: There should be stability of tenure of the employee so that the work continues efficiently.
13. Initiative: Employees in the organisation must be given an opportunity in making and executing plan.
14. Espirit De Corps: As per this principle, a manager should continuously make efforts to develop a team spirit among
the subordinates.

Scientific management
According to Taylor “Scientific management means knowing exactly what you want men to do and seeing that they do it in
the best and cheapest way”.

Principles of Scientific Management:

1. Science not rule of thumb: There was only one best method to maximise efficiency. This method can be developed
through scientific study and analysis of each element of the job.
2. Harmony not discord: There should be complete harmony between the management and workers. Both should
realise that each one is important.
3. Cooperation not individualism: According to this principle, there should be complete cooperation between the
labour and the management instead of individualism.
4. Development of each and every person to his/her greatest efficiency and prosperity: It implies development of
competencies of all persons of an organization after their scientific selection and assigning work suited to their
temperament and abilities.

Technique of Scientific Management

1. Functional Foremanship: Functional foremanship is a technique in which planning, and execution are separated.
There are eight types of specialized, professionals, four each under planning and execution who keep a watch on all
workers to extract optimum performance.
A. Planning In charges:
 Route Clerk: It specify the exact sequence and route of production.
 Instruction card clerk: It is responsible for drafting instructions for the workers.
 Time and cost clerk: It prepare time and cost sheet for the job.

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  Disciplinarian: It ensure discipline and enforcement of rules and regulations among the workers.

B. Production In charges:
 Gang boss: It is responsible for keeping tools and machines ready for operation.
 Speed boss: It is responsible for timely and accurate completion of job.
 Repair boss: It ensure proper working conditions of tools and machines.
 Inspector: It check quality of work.

2. Standardization and Simplification of work: Standardization refers to developing standards for every business
activity whereas Simplification refers to eliminating superfluous varieties of product or service. It leads to fuller
utilization of equipment and increase in turnover.
3. Work Study: It means of enhancing the production efficiency (productivity) of the firm by elimination of waste and
unnecessary operations. It includes four techniques:
 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 materials, machinery, manpower and capital.
 Time study: It determines the standard time taken to perform a well-defined job.
 Motion study: It is the science of eliminating wastefulness resulting from using unnecessary, inefficient
motions by workers and machines.
 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.
4. Differential piece wages system: Its means wages are paid on the basis of work done not on the basis of time spent
on doing the work.

Basis Fayol Taylor

1. Nature of He developed the theory of Functional He developed the concept of Scientific
Research management or Management process. management.
2. Concern His principles are concerned with management His principle and techniques are concerned
efficiency. with workers efficiency.
3. Level He designed principles for top level of He designed principles for lower level of
management. management.
4. Focus Improving overall administration by observing For him increasing productivity through work
certain principles was his main focus. simplification was main focus.
5. Personality He developed the personality of a researcher and He developed the personality of scientist and
practitioner and was called as ‘father of general was called as ‘father of scientific management
management.
6. Major Hid main contribution was to produce a systematic He provided a basis on accomplishment on
contribution theory of management with the help of fourteen production line with the help of scientific
principles of general management. techniques and management.
7. Human He gave due emphasis to human elements by He ignored the human element and
element suggesting principles like equality, initiative, fair emphasized more on increasing productivity.
renumeration etc.
8. Rigidity and His principles were flexible. He was rigid in his approach and he felt that
flexibility there should be no deviation from fixed
standards.
9. Applicability His principles are applicable to business as well as His principles are applicable to production and
non-business organizations i.e. are applicable manufacturing i.e. are applicable to specific
universally. situations.
10. Unity of He strictly follows this principle i.e. one boss for He did not follow this principle instead he
command one employee. insisted on minimum eight bosses.

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