BITS HD Preparation ~ Principles

of Management
Principles of Management abbreviated as POM constitutes 4-5 questions in the paper.
Don’t pay too much attention to this topic. Either you will be able to answer each
question in a second or you will not be able to answer correctly. Hence, do only those
questions that you know with 100% surety. Questions will come only from the following
explained topics. No need to do anything from any other source.

Functions of Management

Management has been described as a social process involving responsibility for

economical and effective planning & regulation of operation of an enterprise in the
fulfillment of given purposes. It is a dynamic process consisting of various elements and
activities. These activities are different from operative functions like marketing, finance,
purchase etc. Rather these activities are common to each and every manger
irrespective of his level or status.
Different experts have classified functions of management. According to George &
Jerry, “There are four fundamental functions of management i.e. planning, organizing,
actuating and controlling”.
According to Henry Fayol, “To manage is to forecast and plan, to organize, to
command, & to control”. Whereas Luther Gullick has given a keyword ’POSDCORB’
where P stands for Planning, O for Organizing, S for Staffing, D for Directing, Co for Co-
ordination, R for reporting & B for Budgeting. But the most widely accepted are
functions of management given by KOONTZ and O’DONNEL
i.e. Planning,Organizing, Staffing, Directing and Controlling.
For theoretical purposes, it may be convenient to separate the function of management
but practically these functions are overlapping in nature i.e. they are highly inseparable.
Each function blends into the other & each affects the performance of others.
1. Planning
It is the basic function of management. It deals with chalking out a future course of
action & deciding in advance the most appropriate course of actions for achievement of
pre-determined goals. According to KOONTZ, “Planning is deciding in advance – what
to do, when to do & how to do. It bridges the gap from where we are & where we want
to be”. A plan is a future course of actions. It is an exercise in problem solving &
decision making. Planning is determination of courses of action to achieve desired
goals. Thus, planning is a systematic thinking about ways & means for accomplishment
of pre-determined goals. Planning is necessary to ensure proper utilization of human &
non-human resources. It is all pervasive, it is an intellectual activity and it also helps in
avoiding confusion, uncertainties, risks, wastages etc.

2. Organizing
It is the process of bringing together physical, financial and human resources and
developing productive relationship amongst them for achievement of organizational
goals. According to Henry Fayol, “To organize a business is to provide it with everything
useful or its functioning i.e. raw material, tools, capital and personnel’s”. To organize a
business involves determining & providing human and non-human resources to the
organizational structure. Organizing as a process involves:

• Identification of activities.
• Classification of grouping of activities.
• Assignment of duties.
• Delegation of authority and creation of responsibility.
• Coordinating authority and responsibility relationships.
3. Staffing
It is the function of manning the organization structure and keeping it manned. Staffing
has assumed greater importance in the recent years due to advancement of technology,
increase in size of business, complexity of human behavior etc. The main purpose o
staffing is to put right man on right job i.e. square pegs in square holes and round pegs
in round holes. According to Kootz & O’Donell, “Managerial function of staffing involves
manning the organization structure through proper and effective selection, appraisal &
development of personnel to fill the roles designed un the structure”. Staffing involves:

• Manpower Planning (estimating man power in terms of searching, choose the

person and giving the right place).
• Recruitment, Selection & Placement.
• Training & Development.
• Remuneration.
• Performance Appraisal.
• Promotions & Transfer.
4. Directing
It is that part of managerial function which actuates the organizational methods to work
efficiently for achievement of organizational purposes. It is considered life-spark of the
enterprise which sets it in motion the action of people because planning, organizing and
staffing are the mere preparations for doing the work. Direction is that inert-personnel
aspect of management which deals directly with influencing, guiding, supervising,
motivating sub-ordinate for the achievement of organizational goals. Direction has
following elements:

• Supervision
• Motivation
• Leadership
• Communication

Supervision- implies overseeing the work of subordinates by their superiors. It is the act
of watching & directing work & workers.

Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to

work. Positive, negative, monetary, non-monetary incentives may be used for this
purpose.

Leadership- may be defined as a process by which manager guides and influences the
work of subordinates in desired direction.

Communications- is the process of passing information, experience, opinion etc from

one person to another. It is a bridge of understanding.
5. Controlling
It implies measurement of accomplishment against the standards and correction of
deviation if any to ensure achievement of organizational goals. The purpose of
controlling is to ensure that everything occurs in conformities with the standards. An
efficient system of control helps to predict deviations before they actually occur.
According to Theo Haimann, “Controlling is the process of checking whether or not
proper progress is being made towards the objectives and goals and acting if
necessary, to correct any deviation”. According to Koontz & O’Donell “Controlling is the
measurement & correction of performance activities of subordinates in order to make
sure that the enterprise objectives and plans desired to obtain them as being
accomplished”. Therefore controlling has following steps:

1. Establishment of standard performance.

2. Measurement of actual performance.
3. Comparison of actual performance with the standards and finding out deviation if
any.
4. Corrective action.
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ORGANISATIONAL FUNCTIONS

Introduction
In order to produce and sell their product or service most organisations will need to
undertake 6 key functions.

• Design and Production

• Finance
• Human Resources
• Sales and Marketing
• Administration
• Research and Development.

Each of the functions will need to work together so that the whole of the organisation
has the same aims and objectives. To achieve this communication across the various
functions is key activity. A starting point for this type of communication is the creation of
a clear set of company objectives which each function is aware of. These objectives
then need to be further broken down into specific objectives for each function.
Regular reviews of firstly how each function is performing against it’s objectives and
secondly how the company is performing against it’s overall objective should ensure
that the whole company is pulling in the same direction.
Factors of Production
To generate a product or service an organisation will need to combine labour, capital,
energy, materials and information.
Labour is the mental and or physical effort of employees and can take a variety of forms
including filing, lifting, data processing, decision making, and line management. In fact
labour is any effort/task an employee needs to undertake in order to produce the
product or service.
Capital is the machines and tools needed to produce the product or service. This
physical capital is purchased through financial capital such as loans, sale of shares in
the organisation and use of profit generated by the organisation.
Energy is provided through the use of gas, electricity, solar power and steam. Energy is
needed to heat/light up the premises, make the machinery work and to ensure that the
organisation is a comfortable place for the employees to work in.
Materials in their raw form are needed to produce the product or service. For example a
restaurant will need ingredients to make the food that they serve to their customers.
Information is the knowledge and expertise needed to produce the end product. For
example a restaurant will need to know what ingredients are necessary for each dish,
what quantity of ingredient to use, how to mix each ingredient and how long (if at all) to
cook each dish.
NB Factors of production have also been classified into land, labour, capital and
enterprise. In this type of classification natural resources such as water, coal and farm
land are grouped together as land. Whilst enterprise, are all the factors which bring
together land, labour and capital to produce the end product.

Finance Function
The financial section of the organisation will keep manual/electronic records of money
received and paid out by the organisation. This information will then be used to produce
various financial statements for tax purposes and to comply with legal requirements.
The information will also be used to produce management accounts to enable senior
managers to plan and review business strategy.
The finance department or unit may also be responsible for administering employee
expenses and salaries. For payment of wages the finance department will need to take
into account statutory deductions such as tax, and employee contributions such as
pension or loan repayments.

Human Resources Function

Human resources or Personnel’s main responsibility is the recruitment, selection,
training and development of staff. This will involve developing staff to maximise their
potential in a manner that furthers the organisation’s objectives.
Human resources may also need to comply with legislation applicable to the country in
which they are based. For example in the UK employers will need to maintain accurate
personal records in a manner that is compliant with the UK Data Protection Act 1984.
Human resources often adopt a welfare role which includes looking after employees
whilst they are at work. They may also create policies that balance organisational needs
with those of the employee. They will also interpret employee welfare legislation and
ensure that the organisation is complying with the applicable legislation.

Sales and Marketing Function

The marketing department will research customer needs to develop strategy and
product to satisfy that customer need. In it’s research, the marketing department will
investigate the market they are aiming at; the type of consumer making up the market
(age, background sex etc) and the preferences of the consumer within that market. The
marketing department will then need to marry consumer preferences with producing a
product that is profitable. Once the product has been designed by the production
department marketing will then need to package, advertise, and promote the product.
Sales are responsible for persuading the consumer to purchase the end product,
manufactured through marketing’s research. The Sales Department’s selling strategy
could involve mail shots, travelling sales representatives, telephone sales and devising
the sales interview.

Administrative ( or Facilities Management) Function

This involves dealing with all administrative tasks including mail handling, dealing with
enquiries/complaints, catering, and computer services. They will also produce
documents (e.g. forms, stationary, and newsletters) for the organisation and maintain
the organisation’s premises and equipment.
This function although not always recognised is vital, as it is the glue that holds the
organisation together. Without an administrative department, customer complaints
would not be resolved, customer orders may not be processed, and the workforce may
not have the tools they need to complete their tasks.

Research and Development Function

The aim of research and development is to improve existing products, create new and
better products, improve production methods, and create effective processes. This will
enable the organisation to reduce costs, increase profitability and remain ahead of the
competition. As not all research will lead to new/improved products/processes
companies will need to allocate a specific portion of their budget to research and
development activities.