MANAGEMENT PRINCIPLES AND PRACTICES

Definition of Management:
Management is an act of achieving results by coordinating individual efforts. Management is a process
of creating and maintaining environment where individuals work together to achieve goals by using the
available resources optimally. It is an integral part of every organization as it helps in planning and
coordination the activities of the organization.

Federick Winslow Taylor: Management is the art of knowing what you want to do and then seeing that
it is done in the best and cheapest way.

Harold Koontz & Cyrill O’ Donnell: Management is the creation and maintenance of an internal
environment in an enterprise where individuals or working groups can perform efficiently and effectively
towards the attainment of organization goals.

George R. Terry: Management is the process consisting of planning organizing, actuating and
controlling, performed to determine and accomplish the objectives by the use of people and resources.

E.F.L. Beach: Management is concerned with seeing that the job gets done; its tasks all center on
planning and guiding the operations that are going on in the enterprise.

F. Drucker: Management is the substitution of thought for brawn and muscle, of knowledge for folklore
and superstition, and of cooperation for force.

Traditional viewpoint: Management is about managing people tactfully and getting jobs done through
the efforts of people.

Modern viewpoint: Management is a group activity that intends to achieve individual goals of the group
as well as organizational goals. For this, it performs five major functions, such as planning, organizing,
directing, staffing and controlling, and employs various human and non-human resources like material
and machines.

7 Ms viewpoint: Management is the combination if 7 Ms, which are, Men, Machine, Material, Money,
Methods, Market and Motive. When this 7 Ms are combined together the helps in achieving results in
the form of increased production, sales, revenue, and goodwill.

4 Ps viewpoint: Management centers around 4 Ps. Which are Productivity, People, Profit and Public
relationship. Thus, Management aims to earn profit by transforming inputs into output and at the same
time serving the interest of employees and society.
Nature of Management:-
Management is as activity that employs various resources to accomplish the predefined goals and
objectives.

1) Management is Goal oriented and purposive: Management does not exist without a goal. It is
because the success of any management activity is determined by the achievement of goals.
Thus, it can be said the management is purposeful and centered on a particular goal.
2) Management is universal: Management is required by individuals in every aspect be it there
personal or professional life. Apart from this, management forms an integral part of every type
of organization be it is a small scale firm in trading or billion dollar firms like Tata, Reliance, etc.
therefore, management is called pervasive activity.
3) Management is continuous: Management is as ongoing activity that is performed be managers
at all levels for the continuous and consistent achievement if organizational goals. Apart from
this, management identifies growth opportunities on a regular basis to survive in the market.
Thus, management is a never-ending process.
4) Management is a group activity: Management is more concerned with groups rather than
individuals. This is because the essence of the organization lies in the coordination of individual
efforts. Thus, management is an integrative force that sums up individual efforts to achieve the
desired goals and objective.
5) Management is intangible: Management can only be seen in the form of results like increased
productivity and profits. Thus, its presence can be felt but cannot be seen.

Purpose of Management:-
1) Achievement of Goals and Objectives: An organization can be successful if it continuously
strives to achieve its goals and objectives. Management aims to achieve individual and
organizational goals by utilizing human and non-human resources. This also create the spirit of
team work and coordination among the employees.
2) Optimum utilization of resources: Effective management ensures the availability of adequate
resources, such as material, money, manpower and machines, so that production cannot be
hampered. Moreover, management ensures that employees get the required training and
instruction to make the best utilization of available resources.
3) Cost minimization: Management ensures that day to day operations in the organization take
place in such a manner that the wastage of the resources in prevented. This ultimately results in
the reduced production cost.
4) Survival and growth: It is important for every organization to adapt itself to the changing needs
of the market and society. Management assesses the existing business environment and
forecasts risks and opportunities in the future. This helps in minimizing risks and maximizing
opportunities for the organization.
5) Development of nation: Management is also important at the national level that is why it is
called key to economic growth of a country. Nations can grow well if wealth-related resources
are managed well. This further leads to increase in the national income and a rise in the living
standards of people.
Hawthorne Experiment: (Elton Mayo)
The possibility that workers who received special attention perform better simply because they
received that attention: one interpretation of the studies of Elton Mayo and his colleagues.

The human relations movement grew out of a famous series of studies conducted at the Western
Electric Company from 1924 to 1933. These eventually became known as the “Hawthorne Studies”
because many of them were performed at Western Electric’s Hawthorne plant near Chicago.

The electric company had commissioned research to determine if there was a relationship between
productivity and work environments.

The original purpose of the Hawthorne studies was to examine how different aspects of the work
environment, such as lighting, the timing of breaks, and the length of the workday, had on worker
productivity.

In the most famous of the experiments, the focus of the study was to determine if increasing or
decreasing the amount of light that workers received would have an effect on how productive workers
were during their shifts. In the original study, employee productivity seemed to increase due to the
changes but then decreased once the experiment was over.

What the researchers in the original studies found was that almost any change to the experimental
conditions led to increases in productivity. For example, productivity increased when illumination was
decreased to the levels of candlelight, when breaks were eliminated entirely, and when the workday
was lengthened.

The researchers concluded that workers were responding to the increased attention from supervisors.
This suggested that productivity increased due to attention and not because of changes in the
experimental variables.

Landsberger defined the Hawthorne effect as a short-term improvement in performance caused by

observing workers. Researchers and managers quickly latched on to these findings. Later studies
suggested, however, that these initial conclusions did not reflect what was really happening.

The term Hawthorne effect remains widely in use to describe increases in productivity due to
participation in a study, yet additional studies have often offered little support or have even failed to
find the effect at all.

The following are real-life examples of the Hawthorne effect in various settings:

Healthcare: One study found that patients with dementia who were being treated with Ginkgo biloba
showed better cognitive functioning when they received more intensive follow-ups with healthcare
professionals. Patients who received minimal follow-up had less favorable outcomes.

School: Research found that hand washing rates at a primary school increased as much as 23 percent
when another person was present with the person washing their hands—in this study, being watched
led to improved performance.

Workplace: When a supervisor is watching an employee work, that employee is likely to be on their
"best behavior" and work harder than they would without being watched.
While the Hawthorne effect may have an influence on participant behavior in experiments, there may
also be other factors that play a part in these changes. Some factors that may influence improvements
in productivity include:

Demand characteristics: In experiments, researchers sometimes display subtle clues that let participants
know what they are hoping to find. As a result, subjects will alter their behavior to help confirm the
experimenter’s hypothesis.

Novelty effects: The novelty of having experimenters observing behavior might also play a role. This can
lead to an initial increase in performance and productivity that may eventually level off as the
experiment continues.

Performance feedback: In situations involving worker productivity, increased attention from

experimenters also resulted in increased performance feedback. This increased feedback might actually
lead to an improvement in productivity.

While the Hawthorne effect has often been overstated, the term is still useful as a general explanation
for psychological factors that can affect how people behave in an experiment

 The Hawthorne Effect is when subjects of an experimental study attempt to change or improve
their behavior simply because it is being evaluated or studied.
 The term was coined during experiments that took place at Western Electric’s factory in the
Hawthorne suburb of Chicago in the late 1920s and early 1930s.
 The Hawthorne Effect is thought to be unavoidable in studies and experiments that use humans
as subjects.
 Whether or not the Hawthorne Effect is real remains up for debate.

Although it can be challenging to determine how a subject's awareness of a study might modify their
behavior, researchers should nevertheless strive to be mindful of this phenomenon and adapt
accordingly.

How to Reduce the Hawthorne Effect

In order for researchers to trust the results of experiments, it is essential to minimize potential problems
and sources of bias like the Hawthorne effect.

Conduct experiments in natural settings: One way to help eliminate or minimize demand characteristics
and other potential sources of experimental bias is to utilize naturalistic observation techniques.
However, this is simply not always possible.

Make responses completely anonymous: Another way to combat this form of bias is to make the
participants' responses in an experiment completely anonymous or confidential. This way, participants
may be less likely to alter their behavior as a result of taking part in an experiment.

Get familiar with the people in the study: People may not alter their behavior as significantly if they are
being watched by someone they are familiar with. For instance, an employee is less likely to work harder
if the supervisor watching them is always watching.
Planning:
Planning is the function of management that involves setting objectives and determining a course of
action for achieving those objectives. Planning requires that managers be aware of environmental
conditions facing their organization and forecast future conditions. It also requires that managers be
good decision makers.

Planning can be defined as a process of setting up of goals and objectives for a given period of time,
formulating alternatives for the course of action to be taken, and finally deciding an appropriate action
from the various alternatives.

Objectives of Planning:
1) Minimizing the risk: Risk is a situation where moderately reliable information is available about
future but it is incomplete. Uncertainty, on the other hand, is a situation where no information
is available about future. Changes in government’s policies are a situation of uncertainty while
entry of competitors in the market with a better technology represents a situation of risk.
Planning helps to reduce risk through techniques of forecasting.
2) Achieving the goal: Planning helps the organization to achieve its objectives. Planning provides
the path for achievement of organizational goals with minimum waste of time, money and
energy. It bridges the gap between where we are and where we want to go. Organization have
long-term and short- term commitments towards society, depending on their nature. A defense
organization, for example, has long- run commitments while a retailer is more interested in
short term goals or responsibilities. These commitments or goals of the organization can be
fulfilled through planning.
3) Coordination: Organization is a structure of relationships where each person’s authority and
responsibility is clearly defined. Planning coordinates the functions performed by individual
human beings and departments and unifies them into a single goal-the organizational goal. It
unifies inter- departmental activates so that all departments work according to plans.
4) Controlling: Planning frames standards of performance and control ensures achievement of
standards. Its comparisons to make better plans for future. Unless there are plans, there will be
no control. Planning is, thus, the basis for control.
5) Minimizing Utilization of resources: Organizations work with limited resources. Planning
allocates these resources over different objectives and functional areas (production, personnel,
finance and marketing) in the order of priority. This results in optimum utilization of scarce
organizational resources (men, material, and money etc.) and effective conversion into
productive outputs.
6) Decision Making: Managers have to make decisions like: what to produce and how to produce.
What are the organizational resources and how can they be effectively allocated over different
functional areas. What are their primary goals- profit or social responsibility and many more?
Planning helps to decide a course of action that will clove the specific problem.
7) Innovative ideas beneficial to us: Planning involves forecasting. Managers foresee future.
Analyze the strengths of their competitors and think of new and innovative ways of promoting
 their products. Planning promoters new ideas, new products, new relationships and thus,
promotes innovation and creativity.
8) Morale boost up: If organizational plans succeed and goals are achieved, managers and
employees feel satisfied and morally boost up to further concentrate on organizational
activities. Successful planning, thus, promotes success of the organization.
9) Development of managers: Planning involves imagination, thought and creativity by managers.
While planning, managers develop their conceptual and analytical skill to coordinate
organizational activities with external environment.
10) Stability to organization: Organizations that plan their operations ate more stable than others.
Managers foresee risk and prepare their organizations to face them when they occur.

Features and Characteristics of Planning

1) Focuses on achieving objectives: Companies are set up with a common goal in view. Explicit
purposes are placed out in the projects along with the ventures to be initiated to accomplish the
goals. Therefore, planning is helpful.
2) Primary function of management: Planning puts down the foundation for other operations of
management. All other managerial duties are conducted within the structure of the ideas
outlined. Consequently, planning leads to other operations. This is also mentioned as the
supremacy of planning.
3) Continuous: Plans are outlined for a particular period of time, perhaps for a period, a quarter or
a year. At the completion of that period, there is a requirement for a new policy to be formed on
the support of new conditions and future circumstances.
4) Futuristic: Planning typically includes looking forward and outlining for the future. The idea of
planning is to coincide future results efficiently to the valid advantage of an association. It
means glancing into the future, investigating it and foretelling it. Planning is, therefore,
perceived as a forward-looking capacity based on predicting.
5) Intellectual process: Planning is a mental exercise involving creative thinking, sound judgment
and imagination. It is not a mere guesswork but a rotational thinking. A manager can prepare
sound plans only if he has sound judgment, foresight and imagination. Planning is always based
on goals, facts and considered estimates.
6) Decision making: Planning essentially involves choice among various alternatives. Therefore, if
there is only one possible course of action, there is no need planning because there is no choice.
Thus, decision making is an integral part of planning. A manager is surrounded by no. of
alternatives. He has to pick the best depending upon requirements & resources of the
enterprises.
7) Pervasive: It is required at all levels of management and in all departments of enterprise. Of
course, the scope of planning may differ from one level to another. The top level may be more
concerned about planning the organization as a whole whereas the middle level may be more
specific in departmental plans and the lower level plans implementation of the same.
8) Flexible: Planning is done for the future. Since future is unpredictable, planning must provide
enough room to cope with the changes in customer’s demand, competition, and govt. policies
etc. Under changed circumstances, the original plan of action must be revised and updated to
make it more practical.
Process of Planning
1) Setting Objectives: This is the primary step in the process of planning which specifies the
objective of an organization, i.e. what an organization wants to achieve. The planning process
begins with the setting of objectives. Objectives are end results which the management wants to
achieve by its operations. Objectives are specific and are measurable in terms of units.
Objectives are set for the organization as a whole for all departments, and then departments set
their own objectives within the framework of organizational objectives. Example: A mobile
phone company sets the objective to sell 2,00,000 units next year, which is double the current
sales.
2) Developing Planning Premises: Planning is essentially focused on the future, and there are
certain events which are expected to affect the policy formation. Such events are external in
nature and affect the planning adversely if ignored. Their understanding and fair assessment are
necessary for effective planning. Such events are the assumptions on the basis of which plans
are drawn and are known as planning premises. Example: The mobile phone company has set
the objective of 2,00,000 units sale on the basis of forecast done on the premises of favorable
Government policies towards digitization of transactions.
3) Identifying Alternative Courses of Action: Once objectives are set, assumptions are made. Then
the next step is to act upon them. There may be many ways to act and achieve objectives. All
the alternative courses of action should be identified. Example: The mobile company has many
alternatives like reducing price, increasing advertising and promotion, after sale service etc.
4) Evaluating Alternative Course of Action: In this step, the positive and negative aspects of each
alternative need to be evaluated in the light of objectives to be achieved. Every alternative is
evaluated in terms of lower cost, lower risks, and higher returns, within the planning premises
and within the availability of capital. Example: The mobile phone company will evaluate all the
alternatives and check its pros and cons.
5) Selecting One Best Alternative: The best plan, which is the most profitable plan and with
minimum negative effects, is adopted and implemented. In such cases, the manager’s
experience and judgment play an important role in selecting the best alternative. Example:
Mobile Phone Company selects more T.V advertisements and online marketing with great after
sales service.
6) Implementing the Plan: This is the step where other managerial functions come into the
picture. This step is concerned with “DOING WHAT IS REQUIRED”. In this step, managers
communicate the plan to the employees clearly to help convert the plans into action. This step
involves allocating the resources, organizing for labor and purchase of machinery. Example:
Mobile Phone Company hires salesmen on a large scale, creates T.V advertisement, starts online
marketing activities and sets up service workshops.
7) Follow up Action: Monitoring the plan constantly and taking feedback at regular intervals is
called follow-up. Monitoring of plans is very important to ensure that the plans are being
implemented according to the schedule. Regular checks and comparisons of the results with set
standards are done to ensure that objectives are achieved. Example: A proper feedback
 mechanism was developed by the mobile phone company throughout its branches so that the
actual customer response, revenue collection, employee response, etc. could be known.

Classification of Plans
1. Based on scope:
a. Strategic planning
b. Tactical planning
c. Operational planning
2. Based on Time:
a. Short term Planning
b. Intermediate Planning
c. Long Term Planning
3. Based on Frequency of Use:
a. Single use Planning
b. Standing Plan
4. Specificity:
a. Specific Planning
b. Direction Planning

Based on Scope

1. Strategic planning: Involves analyzing competitive opportunities and threats, as well as the
strengths and weaknesses of the organization, and then determining how to position the
organization to compete effectively in their environment. Strategic planning has a long time
frame, often three years or more. Strategic planning generally includes the entire organization
and includes formulation of objectives. Strategic planning is often based on the organization’s
mission, which is its fundamental reason for existence. An organization’s top management most
often conducts strategic planning.
2. Tactical planning: It is intermediate-range (one to three years) planning that is designed to
develop relatively concrete and specific means to implement the strategic plan. Middle-level
managers often engage in tactical planning.
3. Operational planning: It generally assumes the existence of organization-wide or subunit goals
and objectives and specifies ways to achieve them. Operational planning is short-range (less
than a year) planning that is designed to develop specific action steps that support the strategic
and tactical plans.

Based on Time

1. Long term planning: Time frame beyond five years. Long term Plans: >5yrs. It specifies what the
organization wants to become in long run. It involves great deal of uncertainty. Higher
management levels focus on longer time horizons. Cover a longer time May include a variety of
different types of training
 2. Intermediate term/ Midterm planning: Time frame between two and five years. Medium Term
Plans: >1 yr. but <5yrs. It is designed to implement long term plans.
3. Short term planning: Time frame of one year or less. Short term Plans: Up to one year. It
provide basis for day to day operations. Meet a particular objective in the near future. Cover a
limited area of training. Answer the question: Are we doing things right? Should fit well within
and contribute to long-range plans.

Basis of Use

1. Single-Use Plans: Single use plans are made to serve a specific objective. They cease to exist
once the objective is achieved. They are, thus, short lived plans made for nonrecurring activities.
For example, if company wants to install a machine, it has to plan its purchase; whether it wants
to buy a new machine or a second hand machine, whether it wants to buy or acquire it on lease.
2. Standing Plans: Standing plans are made to deal with situations which occur repeatedly in the
organization. They standardize the recurrent activities so that routine decisions with respect to
such activities can be taken by lower level managers and top-level managers can concentrate on
strategic issues. These plans can be repeatedly used in similar situations. Managers refer to
these plans to deal with problems of recurring nature and, thus, save time, money and efforts in
making decisions every time a problem of the same type arises.

Based on Specificity:

1. Specific Plan: A specific plan is developed for a particular department or unit about the activities
to be performed. Members of an organization are clear about the task to be performed and
resources to be used. All clearly stated plans are specific plans.
2. Flexible Plan: A flexible plan is changeable on the basis of time and situation. It is not specific in
terms of procedures and allocation of resources. Such a plan only provides guidelines to the
members. The members can modify such plans on the basis of their facility and requirement.

Limitations of Planning
1. Planning Leads to Rigidity: The plans are rigid in nature and have to be complied with
throughout the organization. Such rigidity of plans may be internal as well as external. Internal
rigidity relates to plans, policies, programs, rules, and methods, etc. External rigidity relates to
political, industrial, technological, legal and economic changes, etc.
2. Planning May Not Work in Dynamic Environment: The environment in which a business
survives is dynamic as it keeps on changing. It is difficult for an organization to access future
trends, the taste of customers, natural calamity, competitors’ policies and effects of changes in
the different components of the environment. The organization has to constantly adapt itself to
changes because it is difficult to forecast the future changes with absolute accuracy. The
dynamic environment may sometimes lead to failure of plans.
3. Planning Reduces Creativity: Planning is mostly done by the top management and other
members. Like middle and lower levels of management have to follow these plans. They can’t
deviate or change the plans made by their seniors. Under such circumstances, employees
become orders following machines and don’t involve creative thinking from their side. Such
rigidity to comply with the laid plans kills the creativity of some talented persons.
4. Planning Involves Huge Cost: Formulation of plans can be too much costly because there is a
lot of time and money is involved. Some costs are incidental in nature like- expenses on
boardroom meetings, discussions with professional experts and preliminary investigations to
find out the feasibility of the plan. Checking the accuracy of facts and scientific calculations may
involve lots of time. Sometimes, cost incurred may not justify the benefits derived from the
plans; it may leave a harmful effect on the enterprise.
5. Planning is a Time-consuming Process: Planning is a very lengthy process as it consumes a lot of
time for collection, analysis, and interpretation of data. Due to such a lengthy process,
sometimes decisions get delayed, opportunities are lost and there is not much time left for the
implementation of plans.
6. Planning Does Not Guarantee Success: The success of an enterprise is possible only when plans
are properly drawn up and implemented. Plans become meaningless if it is not translated into
action. Managers have a tendency to rely on previously tried and tested successful plans. It is
not necessary that a successful plan in the past will bring success in the future also as every
business organization survives in a dynamic and uncertain environment. Plans must be
implemented in the light of changing environment otherwise it may lead to failure of the
business.