Engineering Economics and Management

Module V

Principles of Management
 INTRODUCTION:
 In the present context, managing has become one of
the most important areas of human activity because
of the increasing role of large and complex
organizations in society.
 Because of their increasing role, the organizations
have attracted the attention of both practitioners and
academicians to find out the solutions to business
problems.
 DEFINITION
 Management is the art of getting things done through and
with people in formally organized groups‖ --- Koontz

―Management is the art of knowing what you want to

do and then seeing that it is done in the best and cheapest
way‖ – F.W. Taylor
 Management is simply the process of decision-making
and control over the action of human beings for the
expressed purpose of attaining predetermined goals‖ –
Stanley V.
 Management is a process involving planning, organizing,
staffing, directing, and controlling human efforts to
achieve stated objectives in an organization.‖
The importance of management may be traced by the following:
1) Effective utilization of Resources: The resources are scarce in
nature and to meet the demand of society, their contribution should be
more for the general interests of society. Management not only decides in
which particular alternative a particular resource should be used but also
takes actions to utilize it in that particular alternative in the best way.
2) Development of Resources: Most of the research for resource
development is carried on in an organized way and management is
involved in these organized activities.
3) It ensures continuity in the organization: Where there are no
proper guidelines for decision-making continuity can not be guaranteed.
4) Integrating various interest groups:
For example, in the case of a business organization, there are various pressure
groups such as shareholders, employees, govt. etc. these interest groups
have pressure on an organization. Management has to balance these
pressures from various interest groups
 Stability in the society: Management provides stability in the
society by changing and modifying the resources in
accordance with the changing environment of the society.
Functions of Management:-
 To achieve the organizational objectives managers at all levels
of the organization should perform different functions such as:
 Planning: Planning is the conscious determination of the
future course of action.
 This involves why an action, what action, how to take action,
and when to take action.
 Thus, planning includes the determination of specific
objectives, determining projects and programs, setting policies
and strategies, setting rules and procedures, and preparing
budgets.
 Organising: Organising is the process of dividing work into
convenient tasks or duties, grouping such duties in the form of
positions, grouping various positions into departments and
sections, assigning duties to individual positions, and
delegating authority to each position so that the work is carried
out as planned.
 It is viewed as a bridge connecting the conceptual idea
developed in creating and planning to the specific means for
accomplishing these ideas.
 Staffing: Staffing involves manning the various positions
created by the organizing process.
 It includes preparing an inventory of personnel available and
identifying the sources of people, selecting people, training and
developing them, fixing financial compensation, appraising
them periodically, etc.
 Directing: when people are available in the organization,
they must know what they are expected to do in the
organization.
 Superior managers fulfil this requirement by communicating
to subordinates about their expected behavior.
 Once subordinates are oriented, the superiors have the
continuous responsibility of guiding and leading them to better
work performance and motivating them to work with zeal and
enthusiasm. T
 Thus, directing includes communicating, motivating, and
leading.
Controlling: Controlling involves the identification of actual
results, and comparison of actual results with expected results
as set by the planning process.
 Identification of deviations between the two, if any, and
taking corrective action so that actual results match with
expected results.
General Principles Of Management:
Division of work:
 It is helpful to take the advantage of specialization.
 Here, the work is divided among the members of the group
based on the employee’s skills and talents.
 It can be applied at all levels of the organization
Authority and Responsibility:
 Official authority is derived from the manager‘s position and
personal authority is derived from personal qualities such as
intelligence, experience, moral worth, past services, etc.
 Responsibility arises out of the assignment of activity.
 In order to discharge the responsibility properly, there should
be parity between authority and responsibility.
Discipline:
 All the personnel serving in an organization should be
disciplined.
 Discipline is obedience, application, behavior and the outward
mark of respect shown by employees.
Unity of Command:
 Unity of command means that a person should get orders from
only one superior
 Fayol has considered unity of command as an important aspect
in managing an organization.
 He says that ―should it be violated, authority is undermined,
discipline is in jeopardy, order disturbed, and stability threatened
Unity of Direction:
 According to this principle, each group of activities with the
same objective must have one head and one plan.
 It is concerned with functioning of the organization irrespect of
grouping of activities or planning.
 Unity of direction provides better coordination among various
activities to be undertaken by an organization.
Subordination of individual interest to general
interest:
 Individual interest must be subordinate to general interest when
there is conflict between the two.
 However factors like ambition, laziness, weakness, etc., tend to
reduce the importance of general interest.
 Therefore, superiors should set an example in fairness and
goodness.
Remuneration to Personnel:
 Remuneration to employees should be fair and provide
maximum possible satisfaction to employees and employers.
 Fayol did not favour profit sharing plan for workers but
advocated it for managers.
 He was also in favour of non-financial benefits.
Centralization:
 Everything which goes to increase the importance of
subordinate‘s role is decentralization; everything which goes
to reduce it is centralization.
 The degree of centralization or decentralization is determined
by the needs of the company
Scalar Chain:
 There should be a scalar chain of authority and of
communication ranging from the highest to the lowest.
 It suggests that each communication going up or coming
down must flow through each position in the line of authority.
 It can be short-circuited only in special circumstances.
 For this purpose, Fayol has suggested ‗gang plank‘ Scalar
chain.
Order:
 This is a principle relating to the arrangement of things and
people.
 In material order, there should be a place for everything and
everything should be in its place.
 Similarly, in social order, there should be the right man in the
right place.
Equity:
 Equity is the combination of justice and kindness.
 Equity in treatment and behaviour is liked by everyone and it
brings loyalty in the organization.
 The application of equity requires good sense, experience and
good nature
Stability of tenure:
 No employee should be removed within short time.
 There should be reasonable security of jobs.
 Stability of tenure is essential to get an employee accustomed
to new work and succeeding in doing it well .
Initiative:
 Within the limits of authority and discipline, managers should
encourage their employees for taking initiative.
 Initiative is concerned with thinking out and execution of a
plan. Initiative increases zeal and energy on the part of human
beings.
 ROLES OF MANAGER
 The manager is an expert in his or her field and is a support
system for employees.
 Managers work within a business and work together as a team
to achieve company goals.
 A manager is not a person who does a million things at once
while employees take a back seat.
 It is vital for managers to delegate responsibilities to
employees and assist them if they need help.

The roles of manager are as follows:

Interpersonal Role:
Interpersonal roles of a manger are concerned with his interacting
with people both inside the organization and outsiders.
Figure Head: 
 In figure head role manager performs activities which are
ceremonial and symbolic nature.
 These include greeting the visitors attending the social functions
involving employees, handing out merit certificates and other
awards to outstanding employees.
Leader: 
 Manager’s leader role involves leading his subordinates and
motivating them for willing contributions.
 Manager is responsible for activities of his subordinates.
 He has to set an example of hard work and dedication so that
subordinate follow his directions with respect.
Liaison Role: 
 In liaison role manager serves as a connecting link between his and
outsiders or between his unit and other organizational
Informational Role:
Informational role involves receiving collecting of information and
distributing them as required.
It is of three types
 Monitor: In monitoring role manager collects the information
which can affect the organizational activities by reading magazines
and periodicals, reports from the departments, talking with others to
learn changes in the public’s taste.
 Disseminator: In disseminator role manger distribute the
information to his subordinates and superiors by sending circulars,
holding meetings and making phone calls.
 Spokesperson: In spokesperson role the manager represents his
organization or unit with interacting with outsiders.
 These may customer, financier, govt. suppliers or other agencies in
society. It can be done by attending press conferences, meetings and
by issuing notices.
Decisional Role:
It is very important role. Manager has to take decisions daily.
In decisional role he performs four roles.
Entrepreneur: 
 As an entrepreneur the manger assumes certain risks which can affect the
organization.
 He has to take decisions like expansion or diversification, initiation of
new projects, development of older procedures etc.
As a Conflict Handler: 
 As a conflict handler he has to take care of certain disturbance in
organization such as resolving employee disputes and strikes etc.
Resource Allocator: 
 As a resource allocator managers fulfil the demand of various units in
terms of human physical and financial.
 He tries to utilize these resources in such way that no department suffers
for their inadequacy.
Negotiator: 
 As negotiator manager has to take decisions regarding prices
with suppliers and customers.
 He also deals with trade unions and negotiates with them
regarding working conditions and wage fixation..
  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:
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.
  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.
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 .
• 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.
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.
 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 theS desired goals. 
 Management as a Profession
 A profession may be defined as an occupation that requires
specialized knowledge and intensive academic preparations to
which entry is regulated by a representative body.
 The essentials of a profession are:
Specialized Knowledge –
 A profession must have a systematic body of knowledge that
can be used for development of professionals.
 Every professional must make deliberate efforts to acquire
expertise in the principles and techniques.
 Similarly a manager must have devotion and involvement to
acquire expertise in the science of management.
Formal Education & Training –
 There are no. of institutes and universities to impart education
& training for a profession.
 No one can practice a profession without going through a
prescribed course.
 Many institutes of management have been set up for imparting
education and training.
 For example, a CA cannot audit the A/C’s unless he has
acquired a degree or diploma for the same but no minimum
qualifications and a course of study has been prescribed for
managers by law.
 For example, MBA may be preferred but not necessary.
Social Obligations –
 Profession is a source of livelihood but professionals are primarily
motivated by the desire to serve the society.
 Their actions are influenced by social norms and values. Similarly a
manager is responsible not only to its owners but also to the society and
therefore he is expected to provide quality goods at reasonable prices to
the society.
Code of Conduct
 -Members of a profession have to abide by a code of conduct which
contains certain rules and regulations, norms of honesty, integrity and
special ethics.
 A code of conduct is enforced by a representative association to ensure
self discipline among its members.
 Any member violating the code of conduct can be punished and his
membership can be withdrawn.
 The AIMA has prescribed a code of conduct for managers but it has no
right to take legal action against any manager who violates it.
Representative Association –
 For the regulation of profession, existence of a representative
body is a must.
 For example, an institute of Charted Accountants of India
establishes and administers standards of competence for the
auditors but the AIMA however does not have any statuary
powers to regulate the activities of managers
 Leadership( defination)
 Koontz and O’Donnell, Leadership is the ability of a manager
to induce subordinates to work with confidence and zeal.
 Dubin, R. Leadership is the exercise of authority and making
of decisions.
 Allford and Beaty, Leadership is the ability to secure
desirable actions from a group of followers voluntarily,
without the use of coercion.
 George R. Terry, Leadership is the activity of influencing
people to strive willingly for group objectives.
 Hemphill, J.K., Leadership is the initiation of acts which
result in a consistent pattern of group interaction directed
towards the solution of a mutual problem.
 Nature and Characteristics of Leadership:
 Leadership is a personal quality.
 It exists only with followers. If there are no
followers, there is no leadership?
 It is the willingness of people to follow that makes
person a leader
 Leadership is a process of influence. A leader must
be able to influence the behaviour, attitude, and
beliefs of his subordinates.
 It exists only for the realization of common goals.
 It involves readiness to accept complete
responsibility in all situations.
 Leadership is the function of stimulating the
followers to strive willingly to attain
organizational objectives.
 Leadership styles do change under different
circumstances.
 Leadership is neither bossism nor synonymous
with; management.
 Leadership Functions:
1. Setting Goals:
 A leader is expected to perform creative function of laying out
goals and policies to persuade the subordinates to work with zeal
and confidence:
2 Organizing:
 The second function of a leader is to create and shape the
organization on scientific lines by assigning roles appropriate to
individual abilities with the view to make its various components to
operate sensitively towards the achievement of enterprise goals.
3. Initiating Action:
 The next function of a leader is to take the initiative in all matters
of interest to the group. He should not depend upon others for
decision and judgment. He should float new ideas and his decisions
should reflect original thinking.
• 4. Co-Ordination: A leader has to reconcile the interests of the individual
members of the group with that of the organization. He has to ensure voluntary
co-operation from the group in realizing the common objectives.

5. Direction and Motivation:

• It is the primary function of a leader to guide and direct his
group and motivate people to do their best in the
achievement of desired goals, he should build up confidence
and zeal in the work group.
6. Link between Management and Workers:
• A leader works as a necessary link between the
management and the workers. He interprets the policies
and programmes of the management to his subordinates
and represents the subordinates’ interests before the
management. He can prove effective only when he can act
as the true guardian of the interests of his subordinates.
Characteristics Of A Good Leader
– 1. Honesty
 A good leader will be able to establish an honest connection with
his or her peers. A relationship based on trust and reliability makes
the team know that their leader is always there for them, which in
turn inspires them to be there for their leader.
– 2. Ability To Delegate
 Each person in a group will be able to bring something different to
the table, and a good leader will work with each member’s
strengths and weaknesses in order to make sure that the best is
being done.
– 3. Ability To Communicate
 By clearly describing his or her idea to their team, the leader will be
able to create a sense of ease and understanding with his peers.
When every member of the team is striving towards a common
goal, then there is nothing that cannot be accomplished.
 – 4. Sense Of Humor
• Negative situations will always arise, but a good business leader will
know how to diffuse them and help give his team peace of mind. A
stress-free work environment often garners the most results, and
sometimes all that is necessary to help push your team forward is a
healthy dose of humor in the face of difficulty.
– 5. Confidence
• A good leader will show confidence in the face of challenges, and will
inspire confidence in his team by reminding them that obstacles are just
there to be overcome. The confident leader will keep his eye on the goal
and will not allow anything deter him or her, or their team, from success.
6. Commitment
• Some leaders may drive their teams to work hard, while others will
constantly be at their sides, giving every task their one hundred percent.
The latter is the type of leader that can expect to achieve more. Teams
work better when they see that the one that they answer to is right by
their side, sharing their struggles and triumphs.
 – 7. Positive Attitude
• Motivation is the key to success, and it can be hard to stay
motivated in a negative environment. By keeping your team’s
spirits up, you will be able to motivate them to achieve
more, and not let them be bothered by minor setbacks.
– 8. Creativity
• Sometimes a difficult situation will arise that will require you
to think outside of the box and help your team do the same.
At such crucial movements, a good leader will be able to
demonstrate a unique type of creativity that can help his
team push through any situation.
– 9. Ability To Inspire
• Inspiration can take many forms, but a capable leader will be
able to demonstrate his ability to lead and inspire by
motivating his team to share his vision.
10. Intuition
 Finally, a good leader will have intuition. Sometimes
obstacles will arise that nobody will know how to
handle, perhaps even you. In such situations, it is
important to be confident and make a decision.
 No matter what the decision is, if you show that you
are giving the problem everything you have got, it
will inspire your team to do the same, which can
often be just all that is needed to help get past the
situation to begin with.
importance of leadership
– 1. It Improves Motivation and Morale:
• Through dynamic leadership managers can improve
motivation and morale of their subordinates. A good leader
influences the behaviour of an individual in such a manner
that he voluntarily works towards the achievement of
enterprise goals.
– 2. It Acts as a Motive Power to Group Efforts:

• Leadership serves as a motive power to group efforts. It

leads the group to a higher level of performance through
its persistent efforts and impact on human relations.
– 3. It Acts as an Aid to Authority:
• The use of authority alone cannot always bring the desired
results. Leadership acts as an aid to authority by
influencing, inspiring and initiating action.
 – 4. It is Needed at All Levels of Management:
• Leadership plays a pivotal role at all levels of management
because in the absence of effective leadership no management
can achieve the desired results.
5. It Rectifies the Imperfectness of the Formal Organisational Relationships:
• No organizational structure can provide all types of
relationships and people with common interest may work
beyond the confines of formal relationships. Such informal
relationships are more effective in controlling and regulating
the behaviour of the subordinates. Effective leadership uses
there informal relationships to accomplish the enterprise goals.
– 6. It Provides the Basis for Co-operation:
• Effective leadership increases the understanding between the
subordinates and the management and promotes co-operation
among them.
 Leadership styles:
 leadership style can be defined as the technique and approach
of providing direction, implementing plans, and method of
motivating people.
 It is an acquired attribute that begins in early childhood and
may evolve over time. An effective leader is not just aware that
there are different leadership styles but also mixes and matches
them to influence followers in a desired manner to achieve
desired results.
 Different leadership styles can be developed through training
and practical experiences to boost organisational effectiveness
and enhance performance output.
 Read, reflect and experiment with the ten leadership styles
outlined here, to decide which leadership styles to employ to
manage circumstances and achieve your intended goals.
This leadership style is usually employed by military commanders.
North Korean dictator Kim Jong-un exemplifies this leadership style.
 Charismatic Leadership
 Charismatic leaders create a self-image so powerful that
people are naturally drawn to them.
Difference between Leader and manager
   Leaders create a vision, managers create goals.
 Leaders are change agents, managers maintain the status quo.
 Leaders are unique, managers copy.
 Leaders take risks, managers control risk .
 Leaders are in it for the long haul, managers think short-term.
 Leaders grow personally, managers rely on existing, proven
skills.
 Leaders build relationships, managers build systems and
processes.
 Leaders coach, managers direct.
 Leaders create fans, managers have employees.
 A leader invents or innovates while a manager organizes
 A manager relies on control, whereas a leader inspires trust:
 A leader asks the questions “what” and “why", whereas a
manager leans more towards the questions “how” and
“when”:
 Leaders tend to have charismatic personalities, are regularly
positive and focused on ensuring the people around them
understand the vision and embrace it.
 Whereas, managers tend to have a vision, and tell people to
either agree with it, or get out.
 To manage means to handle, which implies a high degree of
direct involvement.
 To lead means to go before and prepare the way.
 Managers supervise staff in the day-to-day operations of an
organisation, whereas Leaders create change within
organisations and inspire others towards greatness.
 A great leader thinks of people as people. A mere manager
sees only titles or organisational charts.
 A great leader wants to earn respect. A mere manager wants
to be liked.
 A great leader cares mainly about results. A mere manager is
more concerned with process.
 Management is doing things right; leadership is doing the
right things.
 Great managers have leadership skills, it doesn’t mean that all
leaders are in a management role
 One can be both a manager and a leader, or one or the other.
When you are in ‘management mode’ you are working
towards the short term goals and objectives.
 When in ‘leadership mode’ you are envisioning a vision of the
future, and laying out the groundwork of influencing others to
join you in heading towards that future.
 The main difference between being a leader and a manager, is
that people follow leaders, while managers have people who
work for them.
 A leader influences his subordinate to achieve a specified
goal, whereas a manager is a person who manages the
entire organisation.
 A leader possesses the quality of foresightedness while a
manager has the intelligence
 A leader sets directions, but a manager plans details.
 A manager takes decision while a leader facilitates it.
 A leader and the manager is that a leader has followers while
the manager has the employees.
 A manager avoids conflicts. On the contrary, a leader uses
conflicts as an asset.
 The manager uses transactional leadership style. As against
this, transformational leadership style is used by the leader.
 Leaders promote change, but Managers react to the change.
 A leader aligns people, while a manager
organizes people.
 A leader strives for doing the right things.
Conversely, the manager strives for doing the
right things.
 The leader focuses on people while a manager
focuses on the Process and Procedure.
 A leader aims at the growth and development
of his teammates while a manager aims at
accomplishing the end results.