Chapter 2 Principles of Management

Principles of management are general guidelines, which can be used for conduct in work places under certain situations. They help managers in decision making and their implementations. Principles of management are not as rigid as principles of science. This chapter also explains us various topics that are Nature of principles of management, Significance of principles of management, Fayol’s principles of management, Taylor’s scientific management and Principles and techniques of scientific management.

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Exercise 1 ( Page No. : 65 )

Exercise 2 ( Page No. : 65 )

  • Q1 How is the Principle of ‘Unity of Command’ useful to management? Explain briefly.
    Ans:

    Under the principle of unity of command an employee should receive orders from only one boss because if he receives orders from more than one boss then he will get confused and the employee may not understand whose orders should be executed first. And the employee may give excuses by saying that he was fulfilling the orders of the other boss if he receives orders from more than one boss. So to avoid these confusions and excuses of the employees there must be unity of command.


    Q2 Define scientific management. State any three of its principles.
    Ans:

    Scientific management means knowing exactly what you want men to do and seeing that they do it in the best and cheapest way. In other words it means application of scientific tools, methods and trained personnel in order to increase the output.

    Following are the three principle of management:

    1. Science, not rule of thumb: Rule of thumb means a manager makes decisions and finds solutions to any problem on the basis of their personal judgment and experiences and that will be not equally effective. So in order to increase the efficiency of the organization the rule of thumb should be substituted by the scientific method which involves investigations of traditional methods through work and study. According to Taylor even doing any small activity of production should be done scientifically for saving manpower and wastage of time and materials.

    2. Harmony, Not Discord: According to this principle there should be complete harmony among the workers and the management because if there is any conflict between workers and the manager then it will help none, the worker, the managers or the owners. Both should realize their importance in the organization for each other. And management should take care of the needs of the workers and at the same time the workers should work hard for the good of the company. And in order to achieve this Taylor called for complete mental revolution on both the part management and workers.

    3. Cooperation, Not Individualism: There should be complete cooperation among the workers and the management instead of individualism. In this principle competition should be replaced by cooperation. Both of them understand that they need each other. And for this the workers should not strike and do not make any unreasonable demand by the management. And at the same time the management should not close their ears when the workers give any constructive suggestions and also be rewarded for their suggestions which is beneficial for the organization.


    Q3 If an organisation does not provide the right place for physical and human resources in an organisation, which principle is violated? What are the consequences of it?
    Ans:

    In the above case the principle that is violated is the principle of order. Principle of order doesn’t mean command, it actually means orderliness. According to this principle the right person should be at the right place and the right thing should be placed at the right place. If everything will be at the right place then there will be no hindrance in the activities of business. And this will increase efficiency and productivity.

    The consequences of violation of this principles are:

    1. Wastage of time and energy if the men and materials are not placed at the right place then in searching for the right men and materials give rise to wastage of time and energy.

    2. If the men and material are not placed in an organized manner then not be able to contact the right person at the right time or when required.


    Q4 Explain any four points regarding significance of principles of management.
    Ans:

    The principles of management provide useful insights to managerial behavior and influence managerial practices. Managers may apply these principles to fulfill their task and responsibilities.

    Following points highlight the significance of principle of management:

    1. Providing managers with useful insights into reality: Principle of management provides the managers with useful insight into real world situations. And these principles guide the managers when they are facing real world problems. It also enables the managers to learn from past mistakes and conserve time by solving recurring problems quickly.

    2. Optimum utilization of resources and effective administration: As the resources available with the company are limited so they have to be put to optimum use. Optimum use means that the resources should be used in such a manner that it provides maximum benefits with minimum cost. These principles provide the manager to foresee the cause and effect relationships of their decisions and actions. And the wastage associated with trial and error methods can be overcome.

    3. Scientific decisions: Principles of management help in thoughtful decision making. The decisions must be based on facts. Principles of management emphasize on logic rather than blind faith. Management decisions taken on the basis of principles are free from bias and prejudice.

    4. Meeting changing environment requirements: The principles of management are in the nature of general guidelines but they are modified and help the managers to meet requirements of the changing environment as the principles of management are flexible to adapt.


    Q5 Explain the principle of ‘Scalar Chain’ and gang plank.
    Ans:

    The formal lines of authority from highest to lowest ranks are known as scalar chains. Fayol insists that every organization should have a chain of authority and communication that runs from top to bottom and should be strictly followed by managers and the subordinates.

                                                     

    In the above diagram A is the head and under A there are two lines of authorities. One line consists of B and C and another line consists of D and E. And if C wants to communicate with E who is at the same level of authority then the chain of communication will be from C – B – A – D – E. This is due to the principle of the scalar chain being followed. And this process of communication is long and it should not be violated. But in case of emergency then C can communicate with E directly and this is called gang plank. As shown in the above diagram. And this is the shorter way of communication which is provided so that communication is not delayed.


    Q6 A production manager at top level in a reputed corporate, Mr. Rathore holds the responsibility for ordering raw material for the firm. While deciding on the supplier for the financial year 2017-18, he gave the order to his cousin at a higher price per unit instead of the firm’s usual supplier who was willing to lower the rates for the order. Which principle of management was violated by Mr. Rathore? What are the positive impacts of following the above identified principle?
    Ans:

    Mr. Rathore had violated the principle of subordination of individual interest to general interest. By providing the supply order to his cousin at a higher price per unit rather than the firm’s usual supplier who was willing to provide the goods at lower rates for the order he was preferring his own interest instead of general interest. And as a result he was achieving his personal goal but not the organizational goal.

    Following are the positive impacts of following the above principle are:

    1. This principle helps in achieving the organizational goals.
    2. This principle provides coordination between individual and organizational goals.
    3. This principle also helps in maintaining harmony in the organization.
    4. And if this principle is followed in the organization then it leads to increase the status of the manager and the organization in the eyes of the workers.

Exercise 3 ( Page No. : 65 )

  • Q1 Explain the Principles of Scientific management given by Taylor.
    Ans:

    Scientific management refers to conducting business activities according to standardized tools and methods and trained personnel in order to increase the output, improve its quality and reduce cost and wastage. In other words scientific management means knowing exactly what you want men to do and seeing that they do in the best and cheapest way. Scientific management increases the effectiveness and efficiency of the organization.

    Followings are the principles of scientific management :

    1. Science not Rule of Thumb: Rule of thumb means a manager makes decisions and finds solutions to any problem on the basis of their personal judgment and experiences as different managers would follow their indigenous rules of thumb and that will be not equally effective. So in order to increase the efficiency of the organization the rule of thumb should be substituted by the scientific method which involved investigations of traditional methods through work and study. According to Taylor even doing any small activity of production should be done scientifically for saving manpower and wastage of time and materials.

    2. Harmony, Not Discord: Factory system of production implied that the manager served as a link between the owner and workers. According to this principle there should be complete harmony among the workers and the management because if there is any conflict between workers and the manager then it will help none, the worker, the managers or the owners. Both should realize their importance in the organization for each other. And management should take care of the needs of the workers and at the same time the workers should work hard for the good of the company. And in order to achieve this Taylor called for complete mental revolution on both the part management and workers.

    3. Cooperation, Not Individualism: There should be complete cooperation among the workers and the management instead of individualism. According to this principle everybody in the organization must work together in harmony and that is only possible by give and take and proper understanding. In this principle competition should be replaced by cooperation. Both of them understand that they need each other. And for this the workers should not strike and do not make any unreasonable demand by the management. And at the same time the management should not close their ears when the workers give any constructive suggestions and also be rewarded for their suggestions which is beneficial for the organization.

    4. Development of each and every person to his or her greatest efficiency and prosperity: Industrial efficiency depends to a large extent on personnel competencies. Worker training was essential for their development and to learn the best method developed as a consequence of the scientific approach. According to Taylor each person should be selected scientifically and assign work according to their physical, mental and intellectual capabilities. And the workers should be given required training from time to time to increase their efficiency. Because an efficient worker produces more and earns more and this will raise efficiency and prosperity for both the company and the workers.


    Q2 Explain the following Principles of management given by Fayol with examples: a. Unity of direction b. Equity c. Espirit de corps d. Order e. Centralisation and decentralisation f. Initiative
    Ans:

    (a) Unity of direction: Unity of direction means all the units of an organization should be moving towards the same objectives with coordination. According to this principle each group of activities having the same objective must have one head and one plan. And the organization and its members must be directed towards the achievement of the same goal. For example, if my company is manufacturing both mobile and laptop then it should have two different divisions for both of them and each division should have their own incharge, plans and executive resources.

    (b) Equity: This principle emphasizes kindness and justice in the behaviour of the manager toward workers. There should be no discrimination against anyone on account of sex, religion, language, caste, belief or nationality etc. there must be given equal opportunity to everyone in the organization without any discrimination and then the employee give their best in the betterment of the organization.

    (c) Esprit de Corps: This means that the management should promote a team spirit of unity and harmony among employees. And the manager should replace ‘I’ with ‘WE’ in all his conversation with the workers. This will give rise to a spirit of mutual trust and belongingness between team members. And this will also minimize the need for using penalties.

    (d) Order: Order doesn’t mean command it actually means orderliness. According to this principle the right person should be at the right place and the right thing should be placed at the right place. If everything will be at the right place then there will be no hindrance in the activities of business. And this will increase efficiency and productivity. And If the men and material are not placed in an organized manner then not be able to contact the right person at the right time or when required and this will delay work.

    (e) Centralization and Decentralization: Centralization means concentration of decision making authority. Here decision making power is given to one or very few people and that is top level management. And decentralization means dispersal of decision making authority among more than one person. According to Fayol there should be a proper balance between centralization and decentralization in the organization. The involvement of the employees with higher authority should be balanced by decentralizing the authority to the managers. Any organization must not be completely centralized or decentralized. There should be a blend of both and this is decided on the basis of size, nature and location.

    (f) Initiative: Initiative refers to taking the first step with self motivation. It means thinking out and executing the plans. According to Fayol in this principle workers should be encouraged to develop and carry out their plans for improvement. Initiative should be encouraged but it doesn’t mean going against the established practices and rules. A good company should have an employee suggestion system and any good suggestion should be rewarded.


    Q3 Explain the technique of ‘Functional Foremanship’ and the concept of ‘Mental Revolution’ as enunciated by Taylor.
    Ans:

    The foreman represents the managerial figure with whom the workers are in direct contact on a daily basis. In this technique Taylor suggests the separation of planning and execution functions. And through this technique the workers are free from planning functions and are more focused on work and production. Functional foremanship is the extension of the principle of division of work and specialization to the shop floor. In the factory there was a planning incharge and a production incharge and each department had four functional experts to supervise and give orders to workers. Under planning incharge the four personnel are instruction card clerk, route clerk, time and cost clerk and a disciplinarian. And under production incharge the four personnel are speed boss, gang boss, repair boss and inspector. The foreman should have intelligence, education, tact, grit, special knowledge, manual dexterity, energy and honesty. But all these qualities could not be found in a single person so Taylor eight specialists and assigned them work according to their qualification and qualities.

    Mental Revolution

    Mental revolution means to change in the attitude of workers as well as the management towards one another from competition to cooperation. Both should realize that they require each one another. And both should work in the aim to achieve the goal of the organization by achieving more surpluses. And the management should share the surplus with the workers and they should also give their best for the betterment of the company and should not make any illegal demand with the management so that the company can achieve their goal and maximum profit. And this attitude will be good for both of them and for the company also. In this technique Taylor emphasizes drastically changing the attitude of both the groups for prosperity of the business.


    Q4 Discuss the following techniques of Scientific Work Study: a. Time Study b. Motion Study c. Fatigue Study d. Method Study e. Simplification and standardisation of work
    Ans:

    (a) Time study: In this technique the standard time is decided to perform a well defined job. The standard time is fixed for a task by taking several readings. This method of time study is depending upon the volume and the frequency of the task. And once the standard time is set for any particular task then that task should be assigned to the workers and on the basis of standard time we can determine the efficiency of the workers. If any worker completes the particular task within the standard time then that worker should be considered as efficient and if any worker cannot accomplish the task within standard time then he will be considered as inefficient. The objectives of the time study are:

    • To determine the number of workers/employees should be employed to do any particular task.
    • To determine the suitable incentive schemes.
    • And to determine the cost of labour.

    (b) Motion study: Motion study means study of movements like lifting, putting objects, sitting and changing position etc. while doing any particular job. And under this study all the unnecessary movements are eliminated so that it takes less time to complete the job efficiently. Taylor used stopwatches and various symbols and colors to identify different motions. And by this study he designed suitable equipment and tools to educate workers on their use and to minimize the unproductive motions..

    (c) Fatigue study: Fatigue study determines the amount and frequency of rest intervals is required for completing the task. A person is bound to feel tired physically and mentally if he/ she does not take rest while working. If the worker doesn’t take rest while working then it reduces his/her efficiency. The rest intervals help the worker to regain their stamina to work again and they can perform their job efficiently. And this will increase productivity.

    (d) Method study: There are various methods to perform the job. The objective of method is to determine the best way of doing the job. To determine the best way there are various parameters. Each and every activity right from procurement of raw material to delivering the finished goods is a part of method study. And this will help in minimizing the cost of production and maximizing the quality and satisfaction of the customer.

    (e) Simplification and standardization of work: Standardization refers to the process of setting standard for each and every business activity and that is standardization of process, raw materials, time, products, machinery, methods or working conditions. The main objective of this method is to establish standards for performance of men and machines.

    Whereas simplification aims to eliminate superfluous/unnecessary varieties, size and dimensions. It eliminates all unnecessary diversity of products. And this will give rise in saving the cost of labour, machines and tools. This technique helps in fuller utilization of equipment and increasing turnover.


    Q5 Discuss the differences between the contributions of Taylor and Fayol.
    Ans:
    Basis of Difference Taylor's Cintributions Fayol's Contributions
    Perspective Shop floor level of a factory. Top level of management.
    Contrbution Scientific management theory was given by Taylor in 1911. General theory of administration was given by Fayol in 1916.
    Personality Taylor was mechanical engineer (scientist). Fayol was a mining engineer (practitioner).
    Applicability Applicable to specialised situations. Applicable universally.
    Basis of formation Observation and experimentation. Personal experience.
    Title Taylor is called 'Father of scientific management'. Fayol is called 'Father of General Management.'

     


    Q6 Discuss the relevance of Taylor and Fayol’s contribution in the contemporary business environment.
    Ans:

    Both Fayol and Taylor have contributed immensely to the knowledge of management. And their contributions are complementary to each other because both have relevance in the business due to the following reasons:

    1) The main aim of both Fayol and Taylor is to increase the efficiency of workers and management.
    2) Both of them give more importance and preference to organizational interest over the individual interest.
    3) Both of them give suggestions for division of work and specialization.
    4) The principles of both of them are used as a basis for research and practice in the field of management studies.
    5) Both of them are emphasis on cooperation among the workers and the managers or employers.


    Q7 ‘Bhasin’ limited was engaged in the business of food processing and selling its products under a popular brand. Lately the business was expanding due to good quality and reasonable prices. Also with more people working the market for processed food was increasing. New players were also coming to cash in on the new trend. In order to keep its market share in the short run the company directed its existing workforce to work overtime. But this resulted in many problems. Due to increased pressure of work the efficiency of the workers declined. Sometimes the subordinates had to work for more than one superior resulting in declining efficiency. The divisions that were previously working on one product were also made to work on two or more products. This resulted in a lot of overlapping and wastage. The workers were becoming indisciplined. The spirit of teamwork, which had characterized the company, previously was beginning to wane. Workers were feeling cheated and initiative was declining. The quality of the products was beginning to decline and market share was on the verge of decrease. Actually the company had implemented changes without creating the required infrastructure. a. Identify the Principles of Management (out of 14 given by Henry Fayol) that were being violated by the company. b. Explain these principles in brief. c. What steps should the company management take in relation to the above principles to restore the company to its past glory?
    Ans:

    a. 

    The following principles are violated by the company:

    1. Division of work
    2. Unity of command
    3. Unity of direction
    4. Discipline
    5. Remuneration of personnel
    6. Order
    7. Initiative
    8. Esprit de corps

    b. 

    1. Division of work: Division of work separates the work into a number of tasks, and each task is performed by the trained specialist which leads to specialization. According to Fayol, the intention of division of work is to produce more and better work for the same effort. If the work is divided into specialists then the work is performed more efficiently and effectively.

    2. Unity of command: Under the principle of unity of command an employee should receive orders from only one boss because if he receives orders from more than one boss then he will get confused and the employee may not understand whose orders should be executed first. And the employee may give excuses by saying that he was fulfilling the orders of the other boss if he receives orders from more than one boss. So to avoid these confusions and excuses of the employees there must be unity of command.

    3. Unity of direction: Unity of direction means all the units of an organization should be moving towards the same objectives with coordination. According to this principle each group of activities having the same objective must have one head and one plan. And the organization and its members must be directed towards the achievement of the same goal. For example, if my company is manufacturing both mobile and laptop then it should have two different divisions for both of them and each division should have their own incharge, plans and executive resources.

    4. Discipline: Discipline means obedience of organizational rules and employment agreement which are necessary for the working of the organization. The workers and the management both should honour their commitments without any prejudice toward one another.

    5. Remuneration of employees: The overall pay and compensation should be fair for both the employees and the organization. All the employees should be given fair wages which give them at least a reasonable living. And at same time the wages paid by the organization should be within the paying capacity of the organization.

    6. Order: Order doesn’t mean command it actually means orderliness. According to this principle the right person should be at the right place and the right thing should be placed at the right place. If everything will be at the right place then there will be no hindrance in the activities of business. And this will increase efficiency and productivity. And If the men and material are not placed in an organized manner then not be able to contact the right person at the right time or when required and this will delay work.

    7. Initiative: Initiative refers to taking the first step with self motivation. It means thinking out and executing the plans. According to Fayol in this principle workers should be encouraged to develop and carry out their plans for improvement. Initiative should be encouraged but it doesn’t mean going against the established practices and rules. A good company should have an employee suggestion system and any good suggestion should be rewarded.

    8. Esprit de Corps: This means that the management should promote a team spirit of unity and harmony among employees. And the manager should replace ‘I’ with ‘WE’ in all his conversation with the workers. This will give rise to a spirit of mutual trust and belongingness between team members. And this will also minimize the need for using penalties.

    c.

    1. The company must increase its capital investment because the existing capacity of the company is not able to cooperate with the increased workload.
    2. There must be unity of command, by making subordinates responsible to only one superior.
    3. They should clearly define the authority responsibility relationships in context of expansion of production activity.
    4. One division for one product should be followed to ensure unity of direction and division of work.
    5. Employees should be motivated by giving them incentive and motivated employees will lead to restore discipline, initiative and esprit de corps.
    6. Fair remuneration should be given, to increase the efficiency of the employees.


    Q8 (Further information related to the above question 6) The management of company Bhasin Limited now realised its folly. In order to rectify the situation it appointed a management consultant -Mukti Consultants - to recommend a restructure plan to bring the company back on the rails. Mukti Consultants undertook a study of the production process at the plant of the company Bhasin Limited and recommended the following changes — • The company should introduce scientific management with regard to production. • Production Planning including routing, scheduling, dispatching and feedback should be implemented. • In order to separate planning from operational management ’Functional foremanship’ should be introduced. • ‘Work study’ should be undertaken to optimise the use of resources. • ‘Standardisation’ of all activities should be implemented to increase efficiency and accountability. • To motivate the workers ‘Differential Piece Rate System’ should be implemented. (The above changes should be introduced apart from the steps recommended as an answer to Part c - case problem 6 above.) It was expected that the changes will bring about a radical transformation in the working of the company and it will regain its pristine glory. a. Do you think that introduction of scientific management as recommended by M consultants will result in intended outcome? b. What precautions should the company undertake to implement the changes? c. Give your answer with regard to each technique separately as enunciated in points 1 through 6 in the case problem.
    Ans:

    a. Yes, I think that introduction of scientific management as recommended by M consultants will be helpful for the organization. By implementation of scientific techniques the company can work according to standardized techniques and tools. By adopting scientific management the quality and quantity of their product will improve. And it will also increase the effectiveness and efficiency of the company and its work.

    b. The following precautions can be taken by the company to implement the changes are:

    1) They should provide proper training to their existing employee and should hire trained and specialised staff.
    2) By introducing functional foremanship they should take care that there is incentive and motivation for the employees.
    3) Not only work study but other studies like motion study, fatigue study and time study should be followed.
    4) Monetary incentive can be given to employees to motivate them so that they provide efficient work.

    c. The company should introduce the latest form of scientific management, with due consideration to human factors in mind and by obtaining their motivated willingness.

    1) Production planning including routing, scheduling, dispatching and feedback should be implemented.
    2) Functional foremanship will be good but it neglects unity of command. And it is not useful for the company, so it should be avoided.
    3) Standardization should be implemented because it will improve productivity and also reduce quality variations. But right training and willingness must be obtained.
    4) ‘Differential piece rate system’ if it is introduced then it should be done with extreme caution. It must not result in unhealthy competition. Hence monetary and non-monetary incentives can be introduced in place of differential piece rate systems.


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