CHAPTER ONE

FUNDAMENTALS OF MANAGEMENT

Introduction

Management is the integrating force in all kinds of organized activity. It is not unique to business
organizations but common to all kinds of organizations. Every organization has problems to be
solved and opportunities to be maximized. They need skilled managers to be successful.

High performance requires the efficient and effective use of organizational resources, which can
be realized through the application of management. This unit introduces a number of important
concepts about management. It invites you to the subject matter of management and explains
what is really needed to be a successful manager. It tries to look at the importance of
management, the functions of management, the skills, roles, and activities of management, the
universality of management and many others.

1.1. Definition of Management

There are several definitions of management given by different authors in the field. The various
definitions of management can be conveniently classified as follows:

1. Functional School

According to functional school, management is a process consisting of planning, organizing,

actuating and controlling to determine and accomplish the objectives by the use of people and
resources. To manage is to forecast and to plan, to organize, to command, to coordinate and to
control.

2. Human Relations School

According to the human relations school, management is a social process. It is a social process
because managerial actions are principally concerned with relations between people;
management is essentially concerned with the development of people and not the direction of
things.

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  Management is the accomplishment of results through the effects of other people.
 Management is the art of getting things done through and with people in a formally
organized group.
3. Decision Making School

In the words of Peter Drucker (1974), the life of a manager is a perpetual choice making activity.
Whatever a manager does, he does through decision- making only.

According Decision Making School

 Management means decision making

 Management is simply the process of decision- making and control over the action of
human beings for the express purpose of attaining pre-determined goals.
4. System and Contingency School

According to this school, organizations like any living organism must adapt themselves to their
environments for survival and growth. Thus, management involves designing organizations
adaptable to changing markets, technology and other critical environmental factors. The systems
theory of organizations are organic and open systems consisting of interacting and
interdependent parts and having a variety of goals. Managers are supposed to maintain balance
among the conflicting objectives, goals and activities of members of the organization. He must
achieve results efficiently and effectively. According Contingency School there is no best way to
design organizations and manage them. Managers should design organizations, define goals and
formulate policies and strategies in accordance with the prevailing environmental conditions.

Based on the above definitions let us wind up the precise definition of management.

Management may be defined as the process of planning, organizing, directing (leading) and
controlling to accomplish organizational objectives through the coordinated use of human and
material resources. It is a process of efficiently getting activities completed with and through
other people. It is a process by which human and non-human resources are coordinated to
accomplish a set of objectives.

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1.2. Significance of management

It helps in Achieving Group Goals - It arranges the factors of production, assembles and
organizes the resources, integrates the resources in effective manner to achieve goals. It directs
group efforts towards achievement of pre-determined goals. By defining objective of
organization clearly there would be no wastage of time, money and effort. Management converts
disorganized resources of men, machines, money etc. into useful enterprise.

Optimum Utilization of Resources - Management utilizes all the physical & human resources
productively. This leads to efficacy in management. Management provides maximum utilization
of scarce resources by selecting its best possible alternate use in industry from out of various
uses. It makes use of experts, professional and these services leads to use of their skills,
knowledge, and proper utilization and avoids wastage. If employees and machines are producing
its maximum there is no under employment of any resources.

Reduces Costs - It gets maximum results through minimum input by proper planning and by
using minimum input & getting maximum output. Management uses physical, human and
financial resources in such a manner which results in best combination. This helps in cost
reduction.

Establishes Equilibrium - It enables the organization to survive in changing environment. It

keeps in touch with the changing environment. With the change is external environment, the
initial co-ordination of organization must be changed. So it adapts organization to changing
demand of market / changing needs of societies. It is responsible for growth and survival of
organization.

Essentials for Prosperity of Society - Efficient management leads to better economical

production which helps in turn to increase the welfare of people. Good management makes a
difficult task easier by avoiding wastage of scarce resource. It improves standard of living. It
increases the profit which is beneficial to business and society will get maximum output at
minimum cost by creating employment opportunities which generate income in hands.
Organization comes with new products and researches beneficial for society.

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 1.3 Managerial Functions an Overview

Managers are known by the work they do, the functions they perform. According to the functions
approach, originated by Heneri Fayol (1949), in every organization managers perform certain
functions in order to achieve the results. Nowadays these functions may be broadly classified
into four categories; planning, organizing, leading, and controlling. A brief discussion of the four
basic functions is presented here.

1. Planning

Planning is the first function that all mangers engage in because it lays the groundwork for all
other functions. It identifies the goals and alternatives. It maps out courses of action that will
commit individuals, departments, and the entire organization for days, months, and years to
come.

Planning is concerned with future. Planning anticipate and precedes action. It is basically
concerned with determining the objectives of the firm and the means for achieving them. It is
choosing an effective course of action from among various alternatives. Generally speaking,
plans permit:

 The organization to obtain and commit the resources needed to reach its objectives
 The members of organization to carry on activities consistent with the objectives chosen,
and
 The progress toward the objectives to be mentioned and measured, so that corrective
measures may be taken, if the rate of progress is unsatisfactory.
2. Organizing

Organizing as a management function is concerned with

1. Assembling the resources necessary to achieve the organization’s objective and
2. Establishing the activity-authority relationships of the organization. Planning has
established the goals of the company and how they are to be achieved; now, organizing
develops the structure to reach these goals.
The activities necessary to achieve the objectives are grouped into working divisions,
departments, or other identifiable units primarily by clustering similar and related duties. The

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result is a network of interdependent units. Each unit and each person in the unit should have
clearly defined authority, or a clearly defined list of duties, and one person to whom to repot.

3. Directing/Leading

Directing is aimed at getting the members of the organization to move in the direction that will
achieve its objectives. Directing builds a climate, provides leadership, and arranges the
opportunity for motivation.

4. Controlling

Ensuring that the objectives and plans of the organizations are achieved is known as controlling
function. Controlling is devising the ways and means of ensuring planned performance is
actually achieved. Essentially controlling function involves the following elements:

 Setting of standard against which work progress is measured.

 Comparing actual performance against the standard.
 Identifying and initially examining causes of deviations between the standard and
the actual performance
 Taking corrective actions to eliminate causes of unfavorable deviations.

1.4. Levels of Management and Types of Managers

Levels are hierarchical arrangement of managerial positions in an organization. The number of

levels of management, among other things, depends on the size of the organization. In general,
there are three managerial levels.
i. Top level management,
ii. Middle level management,
iii. First level (operating level) management
Top – Level Management: encompasses small group of individuals who are at the highest level
of management and responsible for making decisions and formulating polices that affect all
aspects of the organizations. In most cases strategies and general guidelines of activities are
going to be set at this level of management. Functions of top management include:

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  Establishing broad objectives,
 Designing major strategies,
 Outlining principal policies
 Providing effective organizational structure that insures integration
 Providing overall leadership and direction
 Making overall control of the organization
 Dealing with external parties such as the government, community, business etc. By
representing the organization, and
 Analyzing the changes in the external environment and respond to it.

Middle – Level Management

Middle level of management encompasses all management levels below top level management
and above operational level of management. Middle – level management includes heads of the
different functional areas and their assistants: divisional heads, department managers, section
heads, plant managers, branch managements, etc. managers in this level are specialists and their
activities are limited to a particular area of operation or to a section or department. The major
functions of middle level management are:
 Acting as intermediary between top and operating level management
 Translating long-term plans of top management into medium range plans,
 Developing specific targets in their areas of responsibility;
 Develop specific schedules to guide actions and facilitate control,
 Coordinating inputs, productivity and outputs of operating level managements.

Operating Level Management (First – Level Management)

This is the last step of the ladder in the hierarchy of management. The subordinates of Operating
Level Managers are non- management workers. Operating level mangers direct a small team of
workers and keep a check on their performance so that short-term production and work targets
are achieved. The typical titles in this level are section chief, office manager, foreman,
supervisor, etc. the major functions of Operating Level Management are:
 Planning daily and weekly activities and accomplishments based on the monthly,
quarterly, and yearly plans;
 Assigning operating employees to specific tasks;

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  Issuing instructions at the work place, following – up, motivating and evaluating, workers
and reporting to their superiors.

Types of Managers
Managers are found at multiple levels in an organization. They may lead an entire organization
or they may head functions, departments, or units. Mangers are distinguished or classified based
on the scope of the activities they mange into Frontline, Functional and General Managers.

Frontline Mangers
Frontline managers are managers who manage employees who are themselves are not managers.
They are found at the lowest level of the management level.

Functional Mangers
Functional mangers supervise with specialized skills in a single area of operation, such as
accounting personnel, finance, marketing, and production. All these functions are necessary for
the success of the organization.

General Mangers
General Managers are responsible for the overall operations of a more complex unit, such as a
company or a division. General Managers hold functional management accountable for their
specialized areas and usually coordinate two or more departments. In their jobs, general
managers have to deal with major uncertainties, great diversity, and a large volume of
information.

1.5. Managerial Roles and Skills

Managers perform the basic managerial functions by playing a variety of managerial roles. A
role is an organized set of behaviors. Henry Mintzberg studied a variety of managerial jobs and
arrived at the ten most common roles of top managers. The ten roles are classified into three
categories: interpersonal roles, informational roles, and decisional roles. However:
i. Every manager’s job consists of some combination of roles
ii. These roles often influence the characteristic of managerial work
iii. Although we describe them separately for simplicity, these roles actually are highly
interrelated

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 iv. The relative importance of each role varies considerably by managerial level of
function
Interpersonal Roles
Interpersonal roles: which arise directly from a manger’s formal authority, involves
interpersonal relationships. Managers play the following three interpersonal roles.
Figurehead Role: in the figurehead role, the manger represents the organizations at ceremonial
and symbolic functions. It is the most basic and the simplest of all managerial roles.
The supervisor who attends the wedding of the machine operator, the sales manager who takes
an important customer to lunch all are performing ceremonial duties important to the
organization’s image and success. While these duties may not seem important, they are expected
of managers. They symbolize management’s concern for employees, customer and the
community.

Leadership Role: the leadership role involves responsibility for directing and coordinating the
activities of subordinates in order to accomplish original objectives. Some aspects of the
leadership role have to do with staffing: hiring, promoting. Other aspects involve motivating
subordinates to meet the organization’s needs. Still other aspects relate to creating a vision that
company employees can identify with.

Liaison Role: The liaison role refers to dealing with people outside the organization, such as
clients, government officials, customers, and suppliers. It also refers to dealing with mangers in
other departments, staff specialists, and other departments’ employees. In the liaison role, the
manger seeks support from people who can affect the department’s and the organization’s
success.

Informational Roles

Managers should collect, disseminate and transmit information both from internal and external
environment of their organization. In order to make the right decisions, managers need
information from various sources. Effective mangers build networks of contacts for sharing
information. Because of these contacts, managers emerge as the nerve system centers of their
organizations.

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In this regard, monitoring, dissemination, and spokesperson roles are described below under this
category.
Monitor Role: the Monitor role involves seeking out, receiving, and screening information. Just
as a radar unit scans the environment, managers scan their environments for information that
may affect their organizations. Since much of the information received is oral (from gossip and
hearsay, as well as formal meetings), managers must evaluate and decide whether to use this
information.

Disseminator Role: in the Disseminator role, the manager shares information with subordinates
and other members of the organization. Sometimes the manager passes along special or
“privileged” information to certain subordinates who would not originally have access to it and
who can be trusted not to let it go further. In practice passing information along to subordinates
is often difficult and time consuming. Therefore, the manager must decide which and how much
information will be useful.

Spokesperson Role: in the spokesperson role managers transmit information other, especially
those outside the organization, as the official position of the company. The manager is the person
who speaks for his or her work unit or organization to people outside the work unit or
organization.

Decisional Roles
Managers use information to make decisions about when and how to commit their organization
to new objectives and actions. Decisional roles are perhaps the most important of the three
categories of roles. Managers are the core of the organization’s decision-making system since
they play the following four decisional roles.

Entrepreneurial Role: this role involves designing and initiating planned change in order to
improve the organization’s position. Managers play this role when they initiate new projects,
launch a survey, test a new market, or enter a new business.

Disturbance handler Role: managers play the disturbance handler role when dealing with
problems and changes beyond their immediate control. Typical problems include strikes by
labor, bankruptcy or major suppliers, or breaking of contracts by customers. Sometimes

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disturbances may arise because a poor manger ignores the situation until it becomes a crisis.
However, even good mangers can’t possibly anticipate all the consequences of their decisions or
control the actions of others.

Resource Allocator Role: this role involves choosing among competing demands for money
equipment, personnel, and other’s demands on manager’s time. What portion of the budget
should be earmarked for advertising ad what portion for improving an existing product line?
Should she/he add a second shift or pay overtime to handle new orders? For example, one may
choose among allocating resources to automate certain plants, close others down, etc.

Negotiator Role: closely linked to the resource allocator role is the negotiator role. In this role
mangers meet and discuss their difference with individuals or groups for the purpose of reaching
an agreement. Negotiations are an integral part of a manager’s job. They are especially tough
when a manger must deal with others (such as unions or political action groups) who don’t share
he manger’s objectives.

1.5.2. Managerial Skills

In order to be effective a manager must possess and develop several essential skills. Skill is
ability to do something expertly and well. It is meant ability related to performance that is not
necessarily inborn but which can be developed or acquired. For the purpose of discussion,
managerial skills are classified into four distinct categories: technical, interpersonal, conceptual,
and communication skills. However, in practice these skills are closely related and it may be
difficult to tell where one begins and the other ends.
Technical Skills

Technical skills involve the ability to apply specific methods, procedures, and techniques in a
specialized field. Technical skill is considered to be very crucial to the effectiveness of lower
level (operational) managers because these persons have direct contact with employees
performing work activities within the firm. It is easy to visualize the technical skills of design
engineers, market researchers, accountants, musicians, and computer programmers.

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Interpersonal Skills

Interpersonal skills include the ability to lead, motivate, manage conflicts, and work with others.
Whereas technical skills emphasize working with things (techniques or physical objects.)
Interpersonal skills focus on working with people. In the long run organizations have only one
true resource, people. Thus, interpersonal skills are a vital part of every manager’s job regardless
of level of function.

Conceptual Skills: Conceptual skill involves the ability to view the organization as a whole and
recognize its relationships to the larger environment (business world). In other words, conceptual
skill involves visualizing the different parts of an organization as one big whole and to
understand the wholes interaction with its relevant environment. More specifically:
 How the organization’s various parts and functions depend on each other and thus, how
changes in one area can affect other areas?
 How each part contributes to the achievement of the overall organizational goal?
The manager uses conceptual skills to diagnose and assess different types of management
problems. Because they depend on an understanding of the interrelationships of various factors,
conceptual skills are among the most difficult to develop. The conceptual skills are especially
important to managers in making decisions.

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 Conceptual Technical Interpersonal Communication

Skill Skill Skill Skill

Figure 1.2: Relative Importance of Managerial Skills at Different Levels of Management

Communication Skills
Communication skills reflect a managerial ability to send and receive information, thoughts
feelings, and attitudes. Middle and operating level managers spend a large portion of their time
communicating. The basic communication skills are classified into writing, oral and non-verbal
(facial expressions, body posture, etc.,) communication skills are very crucial to all mangers. No
matter what wise ideas a manger has it is meaningless unless he is able to communicate it in a
wise way. Communication skills are necessary for effectively displaying interpersonal, technical
and conceptual skills.

1.6. Universality Of Management

Although the problems, other organizational constrains, and natures of different organizations
vary widely, the functions performed by each manger are nearly the same. This means to
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successfully attain the objectives of any organization, managers must plan, organize, staff, lead,
and control. These are the basic managerial functions.
To be more specific, management is regarded as a universal activity because of the following
factors:
I. In all kinds of organization the basic managerial functions are used to make individuals
contribute to group objectives. Management thus applies to any type of organization.
a) From small to large and complex,
b) In profit making and nonprofit making,
c) In manufacturing and service giving,
d) In all political systems socialist, capitalist, etc.
II. Mangers in all levels of organizational hierarchy perform the same basic managerial
functions. What varies from level to level is that the various management levels require
different amounts of time for each function, are different. Except for this all mangers
perform the same functions.
III. The principles of management are universal. They are applicable to any kind of
organization wherever there is the coordinated effort of human beings. The type of
enterprise is not significant. The managerial principles are also transferable from
department to department and from level to level.
Therefore, since at higher levels of management the operating non-managerial component of the
job is fewer and the job is more purely managerial, there is great possibility of transferability of
management from organization to organization and forms department to department.

1.7. Is Management Science or Art Profession?

The question whether management is an art or a science has been an issue of debate for a long
period of time. Science may be defined as a systematized knowledge derived from observation,
study, and experimentation carried on in order determining the nature and principles of the
subject under study. Since management has a structured body of knowledge with its own distinct
concepts and principles that are developed with reference to the general truths underlying the
management practice, management is a science.
Although we recognized management as a science, it is not as comprehensive or as exact as the
other sciences such as physical sciences. This is because the variables with which mangers deal
are complex and management mostly deals with the human elements. Human beings are not
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standardized and their behavior is unpredictable. As a result experiments cannot be repeated
under standardized conditions. They cannot be subject of controlled laboratory experiment.
Art is the application of knowledge that constitutes the science. Chester I. Barnard pointed out
that it is the function of the science to explain the phenomena, the events, the situation of the
past, and that their aim is not to produce specific events, effects, or situations, but explanations,
which we call knowledge. However, it is the function of the arts to accomplish concrete ends,
effect results, produce situations that would not come about without the deliberate effort to
secure them.
Like all other practices management is an art. It is known how, it is the application of
knowledge, and it is doing things in the light of the realities of the situation. Therefore,
management is both a science and an art. This is not a contradiction in terms, for art and science
complement each other – go hand in hand, and are not mutually exclusive.
If a manager attempts to mange without the science (structured body of management principles
and concepts) he/she must rust luck, intuition, or what he/she did in the past. Similarly, without
the art of management, if one tries to manage by memorization of principles, diagnose by the
books, he/she will neglect practical reality.
Management is a profession because to say a given field is a profession it must fulfill the
following criteria.

 Specialized knowledge
 Competent application
 Community application
 Social responsibility
 Self control
So, management is a profession because it fulfills the above criteria

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