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Principles of Management

Evolution of Management
 Evolution of the Management Thought

 Classical Approach to Management

1. Bureaucratic Approach to Management- Max Weber


2. Taylor and Scientific Management
3. Fayol’s administrative management
4. Hawthorne Experiments-The human relations approach

 Modern Theories of Management:

1. Contributions of behavioral scientists


2. Quantitative Approach
3. Behavioral Approach
4. Contingency Approach
Principles of Management

Evolution of the Management Thought

 Evolution dates back to human civilisation

 Every human group needs management

 Instances- Agricultural revolution – 5000 BC

 Egyptian civilisations, pyramids - 4000 BC

 Ancient India- Harappa & Mohenjodaro – 2000 BC

 Italian trading houses: Introduction of double entry book keeping –


1300 and 1400 AD
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 In the 19th century


- Industrial revolution
- Mass production
- Huge capital
- Ownership separated from management

 20th century
- World war I
- Limited resources available
- Need for solution to use them in an optimum way
- World War II added to the problem

Thus, the issue of managing complex and huge business and growing
competition forced us to develop systematic management concepts
and principles
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Bureaucratic Approach to Management- Max Weber

 Max Weber analyzed functioning of church, government, military and


business organisations

 He believed that bureaucracy was the most efficient form of a business


structure for any type of business organisation
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Features of bureaucracy

 Administrative Class:
This class exists in a bureaucratic organisation
The employees are full time and look after coordination among activities

 Hierarchy:
It is a system of ranking
Strict rules of authority-responsibility
Serves lines of communication and delegation of authority

 Division of work:
Organisation divided in various departments
Each department will have a specific function
Clear definition of work
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 Official Rules:
Administrative process covered by rules
Antithesis to ad hoc
Provides stability and uniformity

 Impersonal Relationships
Official relationships free from personal involvement, emotions and
sentiments
Decisions are based on rational thinking

 Official Record:
Maintenance of official records
Beneficial for future reference
Filing system used extensively
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Taylor and Scientific Management

 Introduced by Frederick Taylor in 20th century

 A worker and then a supervisor in steel company

 Carried experiments to increase efficiency of the workers

 Published many books and papers

 Studied M.E (Masters of Engineering)

 His experiments are divided into


 Elements and tools of scientific management

 Principles of scientific management


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Elements and tools of scientific management

1. Separation of planning and doing- Supervisor plans, worker only carries


out the task

3. Functional foremanship- 4 types of supervisors for planning aspect,


while 4 for supervision aspect of the work

5. Job Analysis- best way to do a job

7. Standardisation – of process, period and amount of work, working


conditions, tools used etc
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5. Scientific selection and training of workers

6. Financial incentives

7. Economy- optimum usage of resources an eliminate or reduce


wastages

8. Mental revolution – cooperation between workers and the management


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Principles of scientific management

 Replacing rule of thumb with science

 Harmony in group actions

 Cooperation

 Maximum output

 Development of workers
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Critical Analysis of Scientific Management

 Relevant from an engineering point of view rather than management


point of view

 Human aspect of the work was sidelined- workers got aggressive


resulting in unhealthy competition

 Increased authoritarian approach in industries- strict supervision

 Financial incentives exploited the workers (Differential piece rate system)


Principles of Management

Fayol’s Administrative Management

 Henry Fayol- French Industrialist

 Used the term- Administration instead of Management

 Divided industrial organisation into 6 groups-

Technical
Commercial
Financial
Security
Accounting
Managerial

 Identified qualities of a Manager


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Managerial Qualities and training- according to Fayol

 Physical- Health, vigour

 Mental- ability to learn, judge, think, plan

 Moral- loyalty, firmness, tact, dignity

 Educational- acquaintance to subjects not related to functions performed

 Technical- pertaining to the function performed, eg, production

 Experience- arising through work


Principles of Management

Fayol’s 14 principles of Management

1. Division of work

To take advantage of specialisation, every worker/ manager works on a


same part/function. It increases the accuracy, ability and speed of work.

2. Authority and responsibility

Both are related. Authority arises out of a manager’s position and


responsibility, out of assignment of activity. Acc, to Fayol, there should
be parity (equality) between both.

3. Discipline

It can be self imposed, or commanded. Disciple by command arises


through company policies.
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4. Unity in command

A person should get orders from only one superior. This increases
clarity, reduces conflict and builds a personal responsibility for results

If it is violated, discipline is lost, importance of authority decreases


and stability is threatened.

5. Unity of direction

Each group of activities with same objective, must have only one plan
and one head.
Unity in command defines the reporting relationship, while unity in
direction defines the grouping of activities.
It ensures better coordination among activities.
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6. Subordination of individual, to general interest

Interest of the organisation is more important than the interest of


one/few employees, when there is a conflict between the two.

Hence, superiors should be the ideals, supervise employees


continuously and also have a fair agreement with them.

7. Centralisation

An organisation must have a proper balance of centralisation and


decentralisation, depending on its size, activities, objectives,
employees etc.
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8. Remuneration

Should be fair to both- employee and employer


In line with cost of living and value of employee
Fayol did not advocate profit sharing plan for workers, but for
managers

9. Scalar chain

It is the flow of authority or command, through which every


communication, must pass

In special circumstances, this flow can be ‘short-circuited’ in situations,


when the scalar chain of communication is non feasible. This is done,
using a gang plank
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10. Order

This refers to arrangement of things and people in an organisation


- A place for everything and everything in place
Similarly, the right person must be placed at the right position.
This demands for precise knowledge of human requirement and
resources

11. Equity

- combination of justice and kindness


It should be maintained in behaviour and treatment towards employees
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12. Stability of Tenure

Employee should be given a minimum job security at least


This ensures that he is given time to adjust to new work and succeed in it.

13. Initiative

Managers must encourage employees to take initiative, within the limits of


their authority.
It increases the zeal and energy in the employee

14. Espirit de Corps

Union is strength
Managers must encourage the team spirit among the employees
Erring employees must be given oral directions and not asked for a written
explanation
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Hawthorne Experiments-The human relations


approach

 In the approaches by Taylor and Fayol, the human element in the


organisation was not stressed upon.

 The elements in these approaches were not giving evoking positive results.

The General Electric Company, Chicago had Hawthorne plant that


manufactured telephone bell system

 The company was progressive, with sickness and pension benefits

 In spite of this, there was a dissatisfaction among workers

Team of psychologist-Elton Mayo, and sociologists-Whitehead and


Roethlisberger studied the phenomenon
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 Experiment I: Two group of workers, experimented with the lighting or


illumination and its effect on productivity.

 Experiment II: A girls group was chosen who worked in the telephone
relay assembly department. 5 types of changes introduced over a period
of time and productivity measured after every change.

 Experiment III: 20,000 interviews conducted in two years to determine


employee’s attitude towards company, work, supervision, waged,
insurance, incentives etc.

 Experiment IV: 14 male workers were employed and hypothesis was that
they would produce more in order to earn more. It was proved wrong
due to 4 reasons given by workers for a lesser output.
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Modern Theories-
Contributions of behavioral scientists

 Extension of human relation approach


 Studies: attitude, behaviour, performance of individuals & groups in an
organisation

Assumptions:

Important to recognise different needs/attitude/perception/values of


individuals in an organisation
Interpersonal behaviour influenced by various factors
Human needs and organisational needs have to be joined together
Conflicts in an organisation are unavoidable

Contributors include:

Maslow, Mcgregor, Herzberg, Argyris, Lewin, Keith Davis etc.


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Quantitative Approach

 It uses mathematical techniques to solve management problems

 Helps to increase the number of alternatives available, weigh the risks of


every alternative, assist faster decision making

 Methods used in this approach:

 LPP: Allocation of limited resources among competing uses


 Simulation
 Queuing theory: Minimise service cost+ Waiting time
 Inventory modeling: To determine EOQ, EBQ
 Regression analysis: To determine relationship among two variables
(Inversely/directly proportional etc)
 Game theory: Anticipate/predict future problems and be ready with a
solution/reaction
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Systems Approach

 System= A set of inter related components that operate together

 Components according to the approach:


Inputs
Transformation Process
Outputs
Feedback
Environment

 Key concepts in systems approach


Open/closed system
Sub-systems
Synergy (Within the sub-systems)
Feedback Mechanism
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Illustration

Environment

Inputs Outputs
Transformation Process

Feedback
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Contingency Approach

 Two types of management thinkers- Universalists & Situationalist

 Universalists- There is one best approach to management


 Situationalists- Advocate contingency theory

 Contingency theory states- The manager must identify which technique


will best contribute to the attainment of management goals, in a given
situation

 Contingency variables:
 Size of the firm

 Environment

 Resources

 Technology

 Group dynamics

 Individual differences

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