(Subject Notes) Business Studies

II - Nature & Significance Of Management

What do you understand by principles of management?

• They are statements of fundamental truth

• They provide guidelines which help management to take decisions and action

• They are derived by observation and experimental studies

• They establish cause and effect relationship

How are management principles derived? – 3 marks

Management principles are derived by observation and experimental studies as follows:

Observation:

Management principles are derived by observing and analysing the events management have to face in actual practice. For example the principle of division of labour was derived after it was observed that dividing the work based on the workers’ knowledge and experience, resulted in improved performance.

Experimental Studies:

By conducting experimental studies. For example – suppose we wish to conduct an experimental study to confirm the correctness of the principle of unity of command which states that no subordinates should receive orders from more than one boss, we take two groups of employees – one having only one boss and the other having two bosses. After some time it will be noted that the group with one boss is doing better than the other. This confirms that the principle of unity of command is correct.

State any 3 reasons why proper understanding of management principles is necessary?

Or

Explain briefly any 3 points establishing the NEED/IMPORTANCE of management principles?–3 marks Marking Scheme

Management principles are needed for the following reasons: (OCE)

Optimum use of resources:

The management principle of “science, not rule of the thumb” suggest that every task should be done with minimum effort and energy and additional work can be done with the saved energy. By saving time, efforts and energy activities can be made economical and enhance the productivity of the resources.

Change in technology:

The management principle of “division of labour” helps management in identifying in which activity technology has changed. If there is no division of labour then confusion may prevail about what and how much to change and the firm might find it difficult to face competition and might in extreme case run out of business.

Effective Administration:

• The principle of ‘scalar chain’ helps the enterprise to communicate with people at different levels

• ‘Unity of direction’ removes confusion in minds of employees; and

• ‘Unity of command’ avoids dual subordination.

• Thus these principles help management in managing their organisations effectively.

• Besides the above, management principles also provide guidelines to managers to:

  • Effectively handle complex problems.

  • Clearly understand the nature and scope of their work

  • To make optimum use of the resources.

  • To take scientific decisions to meet changing conditions.

Explain 3-4 points that highlight nature/characteristics of principles of management –3 or 4 marks

The following characteristics highlight the nature of management principles: (FUEL)

Flexibility:

Management principles are flexible guidelines and can be modified in different ways in different situations depending upon the knowledge and experience of an employee and importance of decisions that have to be taken.

Universal application: Taylor’s techniques of mgt are UNIVERSALLY APPLICABLE. Do you agree? Give any four reasons in support of your answer – 4 marks - Important

• Management principles are effective in:

  • Both business enterprises as well as government organisations. (All social, economic, political, cultural or even religious organisations apply management principles for the successful operations of their activities)

  • All types or sizes of organisation

  • All types of problems

  • Any type of group action be it the army unit, hospital, etc

• Example: Delegation of authority in any nature of business is considered as key to organisational success universally because it empowers people to take decisions on the spot.

• Hence it can be concluded that the principles of management are universal and it is possible to transfer them from one organisation to another and from one country to another.

Evolutionary:

Management principles are developed either from organised quantitative facts or from long experiences of leaders and scholars of management thoughts. Therefore they are evolutionary in nature.

Limited application:

Application of principles of management in real life is affected by certain limiting factors such as nature, size, form of business, etc.

An organisation follows the principles of management. Learn the
(a) principles
(b) positive effects, or (c) adverse effects and
(c) examples if any of

each of the following principles of management on the organisation? – 3 marks - Important

Which principle of management is violated if subordinate is asked to receive orders from two seniors? Explain with a suitable example. Name any two ADVERSE EFFECTS that may take place due to this violation - 4 marks CBSE, 2005 (2)

Fayol’s principle of UNITY OF COMMAND is violated. This principle implies that an employee should receive orders from only one superior. If he gets orders from more than one superior at a time then he will be confused as to which superior’s orders should be carried out first.

Adverse Effects: If this principle is violated it may lead to confusion, indiscipline, delay in performance, difficulty in satisfying seniors and difficulty in fixing responsibility. Therefore to avoid this confusion, dual subordination should be ruled out.

Example: If a salesman gets instructions from marketing as well as production department at the same time. He may get instructions from production manager to go slow in selling the product as there is a power cut in the factory and goods are not being produced fast enough.
On the other hand the marketing manager may insist he sell as per schedule to reach the target. In such a situation, it may be difficult for the salesman to carry out the orders of two
people, as their instructions are contradictory. Unity of command therefore helps in avoiding such contradictory issues.

Which principle of management envisages that each group of activities having the same objectives must have one head and one plan? Explain the principle with a suitable example. What are the positive effects of this principle – 3 marks

UNITY OF DIRECTION

• This principle calls of “one manager one plan” for a group of activities having the same objective so that the efforts of all employees are directed towards common goals.

• The positive effect of this principle is that it ensures unity of action and facilitates coordination.

• Example: Suppose an automobile company has three divisions – cars, scooters and three wheelers. Now each division must have its own targets since each product has its own market and problems. Each division must plan its target as per its environmental conditions to achieve better results.
  (I mark for naming the principle + 1 mark for each point of explanation + 1 mark for example)

What do you mean by the principle “ SUBORDINATION OF INDIVIDUAL INTEREST TO GROUP/GENERAL INTEREST” CBSE-2005 Set 1. 3 marks

According to this principle of Fayol, management should reconcile the interest of an individual with those of the group. However if they differ, then the group interest should supersede that of the individual interest.

Example: If a manager gets an order for supply of a product at his own initiative and due to which the company benefits immensely.

Positive Effect: The principle suggests that the profit should be shared by all since one person cannot alone meet an order.

State the principle of ESPIRIT DE CORPS? What is the positive effect of this principle? – 3 marks CBSE-2000, CBSE-2005 Set 1

• Espirit de corps means “spirit of cooperation”.

• It means harmony, mutual understanding and team spirit among workers.

• If there is team spirit, everyone comes forward to help others.

• It helps to develop an atmosphere of mutual trust and understanding and a sense of belong among workers, which inspires them to work harder and improve quality of work.

• Employees up to the standard should be rewarded and those who are not up to the standard should be given an opportunity to improve their performance.

• Positive Effect: When esprit de corps is present the need to penalise the defaulting person is minimised

Explain FAYOL’S Principle of DIVISION OF WORK (2 marks)

State the adverse effects on the violation of the principle of division of work – V. Imp

• According to this principle of Fayol’s, every task should be divided into small task and assigned to the right person who is capable of doing that job. He should also be trained for doing that job. This is called division of labour.

• This principle applies to all kinds of work managerial as well as technical

• Positive Effect: A person holding the same post and doing the same job will over time specialise in that job and improve his performance, efficiency and result in increased output.

• Adverse Effects: If this principle is violated it leads to
  (a) inefficiency (b) delay in work (c) increase in costs (d) decrease in output.

Explain FAYOL’S PRINCIPLE OF DISCIPLINE (2 marks)

• According to Fayol, discipline means respect for agreements that are directed at achieving energy, application, obedience and outward mark of respect (EARO).

• Fayol says that discipline requires:

  • Good supervisors at all levels

  • Agreements should be clear and fair

  • Penalties should be fairly imposed

• However Fayol does not support wrong use of authority to enforce discipline such as warnings, fines, suspensions, dismissal, etc.

• Example: If a company has entered into agreement with employees regarding their wages for 5 years then the company should honour it. Likewise, employee should also honour the commitments made by them.

An organisation follows the principles of management. What are the POSITIVE EFFECTS of each of the following principles of management on the organisation (3 will be asked) -3 marks (30-40 words) – V. Important

(a) Unity of Direction

Positive effect: of this principle is that it ensures unity of action and facilitates coordination

(b) Espirit de corps

Positive Effect: When esprit de corps is present the need to penalise the defaulting person is minimised

(c) Subordination of individual interest to general interest

Positive Effect: This principle suggests that the profit should be shared by all since one person cannot alone meet an order.

(d) Scalar chain

Positive Effect: This will produce quicker results in sorting out problems in one or two sittings and avoid lengthy time procedure, danger of miscommunication, distortion or even danger of being killed in the process.

(e) Equity

Positive Effect: If similar treatment is assured to people performing similar jobs and the management is always kind, fair and just in its dealing with its subordinates, it earns the respect, loyalty and devotion of the employees and they are motivated to put in their best efforts.

(f) Division of work:

Positive Effect: A person holding the same post and doing the same job will over time specialise in that job, improve his performance, efficiency and result in increased output

An organisation follows the principles of management. What are the ADVERSE EFFECTS of each of the following principles of management on the organisation? – V. Important

(a) Unity of command

Adverse Effect: If this principle is violated it may lead to confusion, indiscipline, delay in performance, difficulty in satisfying seniors and difficulty in fixing responsibility. Therefore to avoid this confusion, dual subordination should be ruled out.

(b) Unity of order

Adverse Effect: When there is no arrangement for things and people, the organisation will not be able to achieve its objectives in time. Effective utilisation of physical and human resources will not be possible.

(c) Stability of tenure of personnel

Adverse Effect: If this principle is violated, it will lead to high labour turnover rate and will increase the cost of selection and training of the employees

(g) Division of work

Adverse Effects: If this principle is violated it leads to

(a) inefficiency (b) delay in work (c) increased costs (d) decreased output.

(h) Remuneration of personnel

Adverse Effects: If fair remuneration is not paid to the workers, it will create a sense of dissatisfaction among workers leading to various problems such as trade unions, strikes, high labour turnover rate, etc

Explain Fayol’s view on REMUNERATION OF PERSONNEL? – 2 marks

• In Fayol’s view, remuneration of employees should be fair and reasonable which will satisfy both employers and employees.

• It will stimulate the workers to work more and better.

• Wages should be determined on the basis of

  • work assigned

  • cost of living

  • financial position of the business; and

  • average wage rate for similar work in the industry.

• Adverse Effects: If fair remuneration is not paid to the workers, it will create a sense of dissatisfaction among workers leading to various problems such as trade unions, strikes, high labour turnover rate, etc.

Why did Fayol suggest the idea of ‘GANG PLANK’? What light does it throw on the nature of Fayol’s principles? – 5 marks

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