Principles of Business Management CBCMJ1T01

Syllabus topics (RTMNU)

• Introduction – Nature, function, definition and importance of management
• Definition, nature, purpose and scope of management
• Functions of a manager
• Is management a science or art?
• Development of Management Thought – Scientific management
• Contribution of Taylor, Fayol, Mary Follet, Elton Mayo
• Hawthorne experiments
• Contingency approach

Introduction: Definition, Nature, Function and Importance of Management

Meaning: Management means getting work done through and with other people in an efficient and effective way. Every organisation, big or small (a kirana shop, Tata Steel, a college, a hospital), needs management to reach its goals.

Definitions:

• F. W. 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."
• Henri Fayol: "To manage is to forecast and plan, to organise, to command, to co-ordinate and to control."
• Koontz and O'Donnell: Management is the process of designing and maintaining an environment in which people, working together in groups, efficiently achieve selected aims.
• Mary Parker Follett: "Management is the art of getting things done through people."

Nature / Features of Management:

1. Goal-oriented: it works to achieve fixed objectives such as profit, growth or service.
2. Universal: it is needed in every type and size of organisation, in every country.
3. Continuous process: planning, organising, staffing, directing and controlling go on all the time.
4. Group activity: it is about people working together, not one person alone.
5. Intangible: management cannot be seen; it is felt through results (order, output, satisfied staff).
6. Dynamic: it changes with the business environment (technology, government policy, competition).
7. Distinct entity / Authority: managers are a separate group with authority to make decisions.

Importance of Management:

1. Helps achieve group goals by giving direction to everyone.
2. Makes best use of resources (men, money, materials, machines) and reduces waste.
3. Increases efficiency – more output at lower cost.
4. Creates a dynamic organisation that adapts to change.
5. Helps in personal goals of employees (salary, growth, satisfaction).
6. Contributes to development of society – jobs, quality goods, taxes to Government.

Definition, Nature, Purpose and Scope of Management

Purpose: The basic purpose of management is to achieve organisational objectives effectively (doing the right thing, i.e., reaching the target) and efficiently (doing it at the lowest cost, i.e., without waste). Other purposes: survival, growth, profit, and social responsibility.

Scope of Management (areas where management is applied):

1. Production management: planning and controlling the making of goods – plant location, quality control.
2. Marketing management: finding customer needs, pricing, promotion, distribution, selling.
3. Financial management: raising funds, investing them, managing working capital and dividends.
4. Personnel / HR management: recruitment, training, wages, welfare, industrial relations.
5. Office management: records, communication and office systems.

Functions of a Manager

Most authors (Koontz and O'Donnell) give five functions; Fayol gave POCCC (Planning, Organising, Commanding, Co-ordinating, Controlling). Remember POSDC:

1. Planning: deciding in advance what to do, how, when and by whom. It is the first and basic function.
2. Organising: dividing work into jobs and departments, giving authority and fixing relationships.
3. Staffing: filling jobs with the right people – recruitment, selection, training, promotion.
4. Directing: guiding and motivating people; includes supervision, motivation, leadership and communication.
5. Controlling: comparing actual results with plans and correcting the gaps.

Co-ordination is called the essence of management because it runs through all these functions and keeps all departments working in harmony.

Is Management a Science or an Art?

As a science: science is a systematic body of knowledge based on cause–effect principles. Management has principles (Fayol's 14 principles, Taylor's scientific management) found by observation and testing. But its principles are not exact like physics because they deal with human beings. So management is an inexact or soft science.

As an art: art is the personal skill of applying knowledge to get results. A manager uses creativity, practice and personal style. Like a musician, a manager becomes better with practice.

Development of Management Thought: Scientific Management – Contribution of F. W. Taylor

Frederick Winslow Taylor (1856–1915), an American engineer, is called the Father of Scientific Management. He wrote The Principles of Scientific Management (1911). He replaced "rule of thumb" with scientific study of each job.

Principles:

1. Science, not rule of thumb.
2. Harmony, not discord between workers and managers.
3. Co-operation, not individualism.
4. Development of each person to greatest efficiency and prosperity.
5. Mental revolution – both sides should stop fighting over profit and try to increase it.

Techniques: time study, motion study, fatigue study, method study, standardisation of tools and work, functional foremanship (8 foremen: 4 in planning – route clerk, instruction card clerk, time and cost clerk, disciplinarian; 4 in production – gang boss, speed boss, repair boss, inspector), and differential piece-rate system (higher rate for workers who reach the standard output, lower rate for those who do not).

Contribution of Henri Fayol

Henri Fayol (1841–1925), a French mining engineer, is the Father of Modern (General) Management. He wrote General and Industrial Administration (1916). He divided business activities into six groups: technical, commercial, financial, security, accounting and managerial. He gave 14 principles of management:

1. Division of work
2. Authority and responsibility
3. Discipline
4. Unity of command (one boss for one worker)
5. Unity of direction (one head, one plan for a group of similar activities)
6. Subordination of individual interest to general interest
7. Remuneration
8. Centralisation and decentralisation
9. Scalar chain (with "gang plank" for quick communication)
10. Order
11. Equity
12. Stability of tenure of personnel
13. Initiative
14. Esprit de corps (team spirit)

Contribution of Mary Parker Follett

Mary Parker Follett (1868–1933), an American social worker and thinker, linked classical and human relations ideas. Her main ideas:

1. Constructive conflict: conflict should be settled by integration (a solution where both sides gain), not by domination or compromise.
2. Law of the situation: orders should come from the needs of the situation, not from personal power ("depersonalising orders").
3. Power with, not power over: shared power with workers, not bossing.

Contribution of Elton Mayo and the Hawthorne Experiments

George Elton Mayo (1880–1949) is the Father of the Human Relations Movement. With Roethlisberger and others, he studied workers at the Hawthorne plant of Western Electric Company, Chicago (1924–1932).

Four phases:

1. Illumination experiments: light was increased and decreased; output rose in both groups. So physical factors were not the main cause.
2. Relay assembly test room: six women workers given rest pauses, shorter hours, snacks; output kept rising even when facilities were withdrawn – because of attention and friendly supervision.
3. Mass interviewing programme: about 20,000 workers interviewed; workers felt better when allowed to speak freely.
4. Bank wiring observation room: 14 men; the informal group fixed its own output norm and members followed it, ignoring the incentive scheme.

Conclusions: a worker is a social being; informal groups affect output; attention, recognition and participation motivate more than money alone; communication and good supervision matter. (The "Hawthorne effect" = people work better when they feel observed and cared for.)

Contingency Approach

Meaning: There is no "one best way" to manage. The right method depends on the situation ("it all depends").

1. Management action should match the environment, technology, size and people of the firm.
2. It combines ideas from classical, behavioural and systems approaches.
3. It is practical: e.g., a software company may use flexible teams, while a steel plant needs strict rules and shifts.

Limitation: it gives no fixed principles, so it is hard to teach and to apply quickly.

Likely exam questions

1. (Long, 8/16 marks) Define management. Explain its nature and importance in modern business.
2. (Long, 8/16 marks) Explain the principles of management given by Henri Fayol. How do they differ from Taylor's scientific management?
3. (Short, 4 marks) Is management a science or an art? Explain briefly.
4. (Short, 4 marks) State the main conclusions of the Hawthorne experiments.
5. (Short, 4 marks) What is the contingency approach to management?

Syllabus topics (RTMNU)

• Management and Administration
• Management as a profession
• Professionalism of management in India
• Management ethics and management culture
• Skills required of manager
• Classification of skills
• Methods of skills development

Management and Administration

Administration is the top-level function that decides objectives and broad policies. Management is the function of carrying out those policies through people. Oliver Sheldon said administration is "thinking" and management is "doing". In modern usage (Koontz) both words are used for the same process, and the difference is only of level.

Management as a Profession

A profession is an occupation that needs specialised knowledge, formal training, a code of conduct, a representative body and a motive of service (e.g., doctors, CAs, lawyers).

Conclusion: management has many features of a profession and is moving towards becoming one, but it is not a full profession like medicine or law.

Professionalism of Management in India

Earlier, most Indian firms were family-run (managing agency system, abolished in 1970). Today professional managers run many companies. Reasons for growth:

1. Growth of large companies and public sector undertakings needing trained managers.
2. Separation of ownership and management in joint stock companies under the Companies Act, 2013 (independent directors, key managerial personnel).
3. Liberalisation, privatisation and globalisation (1991) increased competition.
4. Management education – IIMs, university MBA courses, AIMA programmes.
5. Entry of multinational companies with professional practices.

Examples: Infosys, HDFC Bank, Larsen & Toubro and Tata group companies are led by professional CEOs. Problems: family control in many firms, shortage of good managers in small towns, resistance to change.

Management Ethics and Management Culture

Management ethics means moral principles of right and wrong that guide managers' decisions and behaviour – honesty, fairness, transparency and responsibility to society.

1. Fair dealing with customers – correct weight, quality, honest advertising.
2. Fair wages and safe conditions for employees.
3. Paying taxes and following laws.
4. Protecting the environment.
5. Avoiding bribery, insider trading and conflict of interest.

Importance: builds goodwill and trust, avoids legal trouble, attracts good employees and investors. Companies with net worth, turnover or net profit above limits must spend on CSR (Section 135, Companies Act 2013).

Management culture (organisational culture) means the shared values, beliefs, customs and ways of working in an organisation. It answers "how things are done here". Example: the Tata group's culture of trust and community service.

• Strong culture: clear values accepted by all; gives unity and loyalty.
• Weak culture: no common values; leads to confusion and conflict.

Skills Required of a Manager and Classification of Skills

Robert L. Katz (1955) classified managerial skills into three types:

1. Technical skills: knowledge of methods, processes and tools of a particular job (e.g., accounting software, machine operation). Most needed at the lower level (supervisors).
2. Human (interpersonal) skills: ability to work with, understand and motivate people; communication and leadership. Needed equally at all levels.
3. Conceptual skills: ability to see the organisation as a whole, analyse complex situations and think ahead. Most needed at the top level.

Other skills often added: diagnostic/analytical skill (finding the cause of a problem), decision-making skill, communication skill, design skill (finding practical solutions), and digital skill.

Methods of Skills Development

1. On-the-job methods: job rotation, coaching by a senior, understudy (assistant to a manager), special project assignments.
2. Off-the-job methods: lectures, conferences, seminars, case study method, role playing, management games, in-basket exercise, sensitivity training.
3. Formal education: MBA, executive programmes, online courses.
4. Mentoring and feedback: regular guidance and 360-degree feedback.
5. Self-development: reading, practice, learning from mistakes.

Likely exam questions

1. (Long, 8/16 marks) Distinguish between management and administration. Is management a profession? Discuss.
2. (Long, 8/16 marks) What skills are required of a manager? Classify them and explain the methods of developing managerial skills.
3. (Short, 4 marks) What is meant by management ethics?
4. (Short, 4 marks) Write a short note on professionalism of management in India.
5. (Short, 4 marks) What is management culture?

Syllabus topics (RTMNU)

• Concept of planning
• Objectives
• Nature
• Types of plan
• Stages involved in planning
• Characteristics of a good plan
• Importance
• Limitations of planning
• Making planning effective
• Strategic planning in Indian Industry

Concept of Planning

Definition: Planning is deciding in advance what is to be done, how it is to be done, when, and by whom. Koontz and O'Donnell: "Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. It bridges the gap from where we are to where we want to go."

Example: Maruti Suzuki planning how many cars to produce next year, at which plant, with what budget.

Objectives and Nature of Planning

Objectives of planning: to fix clear goals, reduce uncertainty, use resources economically, help co-ordination, and provide standards for control.

Nature / Features:

1. Goal-oriented: every plan aims at some objective.
2. Primary function: it comes before organising, staffing, directing and controlling.
3. Pervasive: done at all levels – top makes strategic plans, lower makes daily plans.
4. Continuous: new plans are made when old ones end or conditions change.
5. Futuristic: it looks ahead and is based on forecasting.
6. Involves decision making: choosing the best among alternatives.
7. Mental exercise: needs thinking, foresight and judgement.
8. Flexible: a plan should be changeable when needed.

Types of Plan

1. Objectives: end results the firm wants (e.g., 10% growth in sales).
2. Strategy: a broad plan to reach objectives while facing competition.
3. Policies: general guidelines for decisions (e.g., "promote from within").
4. Procedures: step-by-step order of doing a routine job (e.g., purchase procedure).
5. Methods: the best way of doing one step of a procedure.
6. Rules: fixed instructions about what must or must not be done (e.g., "No smoking in factory"). No discretion.
7. Programmes: a combination of goals, policies, procedures and budget for a project (e.g., launching a new product).
8. Budget: a plan stated in numbers (₹ or units) for a future period.

Other classifications: by time – short-term (up to 1 year), medium-term (1–5 years), long-term (more than 5 years); by use – standing (repeated use: policies, rules) and single-use (one time: programmes, budgets); by level – strategic, tactical, operational.

Stages (Steps) Involved in Planning

1. Setting objectives – clear and measurable.
2. Developing planning premises – assumptions about the future (demand, prices, government policy) based on forecasts.
3. Identifying alternative courses of action.
4. Evaluating alternatives – merits, cost, risk.
5. Selecting the best alternative.
6. Formulating derivative (supporting) plans – departmental plans, budgets.
7. Implementing the plan.
8. Follow-up and review.

Characteristics of a Good Plan

1. Clear objectives
2. Simple and easy to understand
3. Flexible
4. Based on facts and correct premises
5. Economical
6. Balanced (between short and long term, and between departments)
7. Practical / realistic
8. Provides for control (standards to measure)

Importance of Planning

1. Provides direction to all employees.
2. Reduces risk and uncertainty by looking ahead.
3. Reduces overlapping and wasteful activities.
4. Encourages new ideas and innovation.
5. Facilitates decision making.
6. Establishes standards for controlling.
7. Helps co-ordination between departments.

Limitations of Planning

1. Leads to rigidity – managers may stick to the plan even when conditions change.
2. May not work in a dynamic environment – sudden changes (e.g., COVID-19 lockdown, new tax rules) upset plans.
3. Reduces creativity – lower staff just follow orders.
4. Involves huge costs of data collection and experts.
5. Time-consuming – may delay urgent action.
6. Does not guarantee success – false sense of security.
7. Depends on forecasts, which may be wrong.

Making Planning Effective

1. Set clear, realistic objectives and tell everyone.
2. Use accurate information and reliable forecasts.
3. Involve employees in planning (participation).
4. Keep plans flexible and have contingency (backup) plans.
5. Get top management support.
6. Communicate plans properly.
7. Review and revise plans regularly.
8. Balance cost and benefit of planning.

Strategic Planning in Indian Industry

Meaning: Strategic planning is long-term planning by top management that decides the mission, objectives and broad strategies of the firm, after studying its environment. A common tool is SWOT analysis (Strengths, Weaknesses, Opportunities, Threats).

Steps: define mission and vision → environmental (SWOT) analysis → set long-term goals → choose strategies (growth, diversification, merger, cost leadership) → implement → evaluate and control.

Indian examples:

• Reliance Industries moved from textiles and petrochemicals into telecom (Jio, 2016) and retail – a diversification strategy.
• Tata Motors bought Jaguar Land Rover (2008) to enter the global luxury car market.
• Many Indian firms adopted digital strategies after 1991 liberalisation and again after UPI growth.

Growth of strategic planning in India: after 1991 liberalisation, competition from MNCs, globalisation and technology change made long-term planning necessary. Problems: lack of reliable data, sudden policy changes, and family-controlled decision making in small firms.

Likely exam questions

1. (Long, 8/16 marks) Define planning. Explain the stages involved in the process of planning.
2. (Long, 8/16 marks) Explain the importance and limitations of planning. How can planning be made effective?
3. (Short, 4 marks) Explain any four types of plans.
4. (Short, 4 marks) State the characteristics of a good plan.
5. (Short, 4 marks) What is strategic planning? Give an Indian example.

Syllabus topics (RTMNU)

• Decision Making – Concept
• Characteristics of decisions
• Types of decisions
• Steps Involved in decision making
• Importance of decision making
• Methods of decision making
• Committee Decision Making
• Organisation – Concepts
• Principle of organization
• Importance
• Features of good organization structure
• Types of Organisation structure

Decision Making: Concept and Characteristics of Decisions

Definition: Decision making is the process of selecting the best course of action from two or more alternatives to solve a problem or reach a goal. Herbert Simon called decision making the "heart of administration".

Characteristics:

1. Choice among alternatives – if there is only one option, there is no decision.
2. Goal-oriented – aims to solve a problem or achieve an objective.
3. Mental process – needs judgement, reasoning and experience.
4. Continuous and pervasive – taken at all levels, all the time.
5. Involves commitment of time, money and effort.
6. May be positive or negative – deciding not to act is also a decision.
7. Future-oriented and involves risk.

Types of Decisions

Steps Involved in Decision Making

1. Identify and define the problem correctly.
2. Analyse the problem – collect facts, find causes, limiting factors.
3. Develop alternatives.
4. Evaluate alternatives – cost, benefit, risk, time.
5. Select the best alternative.
6. Implement the decision – communicate, allot resources.
7. Follow-up and feedback – check results and correct.

Importance of Decision Making

1. Basis of all management functions (planning itself is deciding).
2. Helps achieve objectives.
3. Ensures best use of resources.
4. Helps face challenges and change.
5. Encourages innovation.
6. Builds confidence and morale when decisions are sound.

Methods of Decision Making

1. Intuition / judgement: based on experience and gut feeling; quick but may be biased.
2. Facts and data: decisions based on records and analysis.
3. Experience: learning from past results.
4. Experimentation: trying on a small scale first (test marketing).
5. Quantitative techniques: operations research, linear programming, decision tree, break-even analysis.
6. Group techniques: brainstorming (free ideas, no criticism), Delphi technique (experts give opinions anonymously in rounds), nominal group technique.

Committee Decision Making

A committee is a group of persons formally appointed to discuss and decide a matter (e.g., Audit Committee, Nomination and Remuneration Committee under the Companies Act 2013).

Organisation: Concept, Principles and Importance

Concept: Organisation as a process means identifying and grouping work, defining authority and responsibility, and establishing relationships so that people can work together. As a structure it is the framework of jobs and relationships. Louis Allen: "Organisation is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships."

Principles of organisation:

1. Unity of objectives
2. Division of work / specialisation
3. Span of control (number of subordinates one manager can handle well)
4. Scalar chain (clear line of authority from top to bottom)
5. Unity of command
6. Parity of authority and responsibility
7. Delegation
8. Flexibility
9. Balance
10. Efficiency
11. Continuity

Importance: helps specialisation, clear roles, best use of resources, adaptation to change, growth and expansion, and effective administration.

Features of Good Organisation Structure

1. Clear lines of authority and responsibility
2. Proper span of control
3. Simple and easy to understand
4. Flexible to allow growth
5. Proper delegation and decentralisation
6. Good communication channels
7. Balance between departments
8. Stability with continuity

Types of Organisation Structure

1. Line organisation: authority flows directly from top to bottom in a vertical line. Simple, quick decisions, clear discipline; but overloads top managers and lacks specialists. Suitable for small firms.
2. Line and staff organisation: line managers have authority; staff specialists (legal, HR, finance experts) only advise. Gives expert advice; but may cause line–staff conflict. Used by most large companies.
3. Functional organisation: work is divided by functions (production, marketing, finance) each under an expert (based on Taylor's functional foremanship). Specialisation; but breaks unity of command.
4. Committee organisation: committees are used for decisions alongside line structure.
5. Divisional organisation: separate divisions for each product or region, each with its own functions (e.g., ITC – FMCG, hotels, paperboards, agri-business).
6. Matrix organisation: employees report to a functional head and a project head – used for projects (construction, IT).
7. Formal and informal organisation: formal = official structure created by management; informal = social groups formed naturally among employees.

Likely exam questions

1. (Long, 8/16 marks) What is decision making? Explain the steps involved in the decision-making process and the methods of decision making.
2. (Long, 8/16 marks) Define organisation. Explain the principles of organisation and the different types of organisation structure.
3. (Short, 4 marks) Distinguish between programmed and non-programmed decisions.
4. (Short, 4 marks) State the merits and demerits of committee decision making.
5. (Short, 4 marks) What are the features of a good organisation structure?