B Com Ist Sem (NEP) PRICIPLES & FUNCTIONS OF MANAGEMENT Module-2

Principles of Management:
Principles of management are set of general guidelines used in managerial decision making.
These are the guidelines to management.

Nature / Characteristics of principles of management:

1. Universal acceptability:

All types of organisations and business units whether small or large applies the principles of
management.

2. General guidelines: Principles of management will give guidelines or suggestions to take

management decisions.

3. Flexibility: The principles can be adopted and modified according to situation and time.

4. Practice & Experimentation: it refers to based on the experience of the manager he will take
a decision based on that he will get a result.

5. It concentrates on human behaviour: the management principles concentrates more on

human behaviour that is employee’s behaviour.

Importance of Principles of Management:

1. It provides guidelines to take managerial decisions: the principles of management

helps to take a valuable management decisions.

2. It helps to optimum utilization of resources: the principles of management helps to

maximum utilization of available resources. It may include finance resources, human
resources or technological resources etc…

3. It helps to fulfill obligations of CSR: the management principles suggest fulfilling the
need of corporate social responsibility of the company.

4. Scientific Decisions: principles of management will give guidelines to take scientific

decisions.

5. It helps in training, education & research: the management principles help to give
training to the employees, it also helps to increase the efficiency of labour and it helps to
conduct research or survey.

Taylor’s Scientific Management:

*F.W. Taylor is the father of scientific management. He gave a set of principles of management
to the organisation. The scientific management includes 4 principles.

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B Com Ist Sem (NEP) PRICIPLES & FUNCTIONS OF MANAGEMENT Module-2

1. Replace rule of thumb work:

F.W Taylor is saying that replace the method of rule of thumb by introducing different
methods to solve the problem by different work force.

*Rule of thumb refers to providing a basic guideline regarding a particular subject or

particular concept.

2. Scientifically select and teach, train & develop the work man: while selecting the
employees, first we should select the best employee, the give training to the employee. After
that we should teach the employee to do the work & later on we should develop the
employee.

3. Distribute the work equally between managers and workers: According to this principle,
managers should make plans and workers should perform the task. The work must be
distributed between managers & workers to accomplish the given work.

4. Provide detail instructions about work & supervise each worker performance: in this
principle, the higher authority should give the instructions to the employees about the work
after that they should supervise the performance of each worker.

Henry Fayol’s 14 Principles of Management:

Henry Fayol is regarded as the Father of modern management. He developed 14 principles of

management for managing an organisation. They are:

1. Division of work 8. Centralisation & Decentralisation

2. Authority & Responsibility 9. Scalar Chain principle
3. Discipline 10. Order
4. Unity of Command 11. Equity
5. Unity of Direction 12. Stability of Staff
6. Individual interest & general Interest 13. Initiative
7. Fair remuneration to workers 14. Espirite De-corps.

1. Division of work: it refers to distribution of work among different employees or different

groups or different departments.

2. Authority & Responsibility: It refers to higher authority is having power, right to pass
the orders and lower employees is having the responsibility to follow the instructions
given by the higher authority.

3. Discipline: Discipline refers to each and every employee should follow the rules &
norms framed by the authority. It is very essential for smooth running of business.

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B Com Ist Sem (NEP) PRICIPLES & FUNCTIONS OF MANAGEMENT Module-2

4. Unity of Command: Unity of command means the employees should receive the orders,
instructions, directions and guidelines from one supervisor for any activity. It states that
one person should receive the orders from only one supervisor.

5. Unity of Direction: It means there should be one head, one plan for group of activities.

6. Individual interest & general Interest: this principle states that the individual goal and
organisational goals will be influenced to the employee’s behaviour. Therefore the higher
authority should concentrate on both individual goals & organisational goals.

7. Fair remuneration to workers: Remuneration includes wages or salaries. It places a

very important role to satisfy employee in work place.

8. Centralisation & Decentralisation: Centralisation refers to the authority in the hands of

a few people. Decentralisation refers to authority in the hands of many people.

9. Scalar Chain principle: Scalar chain principle refers to the orders or principles
communication should pass through a proper channel of authority.

10. Order: it refers to guidelines or policies related to work force. The higher authority
should pass the orders to control human resources. There are two kinds of orders. That is
material order & social order.

11. Equity: It refers to equality. It means the managers should treat subordinates equally.
They should divide responsibility or work equally among different employees.

12. Stability of Staff: as per this principle, the higher authority should provide a good
salaries, job security and facilities to the employees. Otherwise absenteeism and labour
turn over will increase.

13. Initiative: The higher authority should give freedom to the subordinates to think and
execute the plan. Then only the employee will take initiative and do their job effectively.

14. Espirite De-corps: It refers to unity is strength. Therefore the management should create
a team spirit among the employees.

Management by Objectives (MBO):

MBO concept was developed by Peter F Drucker. Management by Objectives refers to process
of defining the objectives of the organisation and management & employees agree to the
objectives and they should work according to that.

Advantages or Merits of MBO:

1. MBO improves employee’s motivation.

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B Com Ist Sem (NEP) PRICIPLES & FUNCTIONS OF MANAGEMENT Module-2

2. Improved performance
3. Maximum utilization of resources
4. Improves communication
5. It is a technique for organisational control
6. Career development of employees is possible
7. No role ambiguity
8. Improved organisational structure
9. Result based organisational performance
10. Greater sense of identification

Disadvantages or Demerits of MBO:

1. Lack of support from the top level management

2. Difficult to each goal
3. It is costly and takes long time
4. Lack of follow-up
5. It is not suitable for long term goals
6. Lack of adequate skills & training
7. Poor integration
8. Rigid
9. Limited application
10. Long gestation period.

Management by Exception (MBE):

MBE stands for Management by Exception. This concept was developed by F W Taylor. It is a
management policy to investigate the actual results with planned results and it concentrates only
on important tasks. They compare actual results with planned results. They take only important
decisions.

Advantages or Merits of MBE:

1. It consumes less time
2. It focus on managerial problems
3. It is a best technique for judging a result
4. It reduces repeated decisions
5. It prevents over management
6. No need of supervision of each & every thing
7. Subordinates can easily concentrate on their job
8. It helps in installing effective controlling system

Disadvantages or Demerits of MBE:

1. Only managers have power to take decision

2. Demotivates employee
3. This system is silent till the problem becomes critical

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B Com Ist Sem (NEP) PRICIPLES & FUNCTIONS OF MANAGEMENT Module-2

4. Some important factors like human behaviour is difficult to measure

5. It concentrates only on important decisions.
6. It requires detailed reporting system
7. Subordinates cannot assess the performance
8. MBE principles cannot be applicable sometimes.

Differences between MBO & MBE:

MBO
It is a process of defining objectives
High employee participation
Responsibility clearly defined
Low dependency(Independent)
MBE
It is a policy of comparing actual results
with a planned results
Low employee participation
No responsibility is assigned
High dependency (Independent)

Functional Areas of Management:

 Production Management
 Finance Management
 Human Resource Management
 Marketing Management
 Service Management
 R & D (Research & Development ) Management

Functions of Management (9 Functions):

1. Planning
2. Organising
3. Directing
4. Staffing
5. Controlling
6. Co-ordination
7. Communication
8. Leadership or Leading
9. Motivation

1. Planning:
Planning is a predetermined course of action to achieve specific goals. Planning means “thinking
before doing”. Planning is concerned with the mental state of the manager.
It is concerned with deciding in advance about what, when, why and who shall do the work”.
Definition:
According to Allen, “A plan is a trap laid to capture the future”.

According to Newman, “Generally speaking, planning is deciding in advance what is to be

done”.
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B Com Ist Sem (NEP) PRICIPLES & FUNCTIONS OF MANAGEMENT Module-2

According to Alfred & Beatty, “Planning is thinking process. The organised foresight, the
vision based and experience that is required for intelligent action”.

Characteristics or Nature of Planning:

1. Contributes to achieve objectives

2. Primary or first function
3. Intellectual process
4. Selection process
5. Continuous process
6. Deciding function
7. Integrated process
8. Co-ordinates with other functions
9. It is Flexible
10. Requires at all levels of management
11. Planning results in higher efficiency.

Importance or Advantages or Merits of Planning:

1. Minimise uncertainty
2. Helps to face complexity in business
3. It helps in co-ordination
4. Facilitates for control
5. Better utilization of resources
6. Avoids confusion
7. Reduces business failures
8. Attention on objectives
9. It improves competitive strength
10. Adjust with the changing conditions
11. Helps in decision making
12. Economy in operations possible
13. Encourages innovation & creativity
14. Improves employee’s morale.

Disadvantages or Demerits of Planning:

1. Lack of accurate information

2. Resistance to change
3. Rigidity or Inflexibility
4. Inadequate planning
5. Time consuming
6. Expensive
7. Scope is restricted

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B Com Ist Sem (NEP) PRICIPLES & FUNCTIONS OF MANAGEMENT Module-2

Steps in Planning (10 Steps):

1. Establishing objectives
2. Collection of information & forecasting
3. Setting objectives
4. Development of planning premises
5. Search of alternatives
6. Evaluation of alternatives
7. Selecting the best course of action
8. Determining secondary plans or Derivative plans
9. Securing employee participation
10. feedback

Essential elements or pre-requisites or features of good plan:

A manager has to keep in mind the following pre-requisites or essentials of a good plan while
preparing the plan:

1. It must be simple
2. It should be economical
3. It should be comprehensive
4. It must be easy to understand
5. It should be flexible
6. It must be balanced in all respects
7. It should be practicable
8. It should be clear, specific & logical
9. It should be based on clearly defined objectives
10. It should be possible to control.

Types of Plans:

Many different types of plans are adopted by management to monitor & control organisational
activities. Plans can be classified in different forms. Basically it is classified on the basis of:
Time, Management levels & Repetitiveness.

1. Short term Plans

Based on Time 2. Medium Term Plans
3. Long Term Plans
1. Strategic Plans
Based on Management Terms 2. Administrative, Tactical or Divisional Plans
3. Operational Plans
Based on Repetitiveness 1. Standing Plans
2. Single use plans

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B Com Ist Sem (NEP) PRICIPLES & FUNCTIONS OF MANAGEMENT Module-2

Standing Plans

Objectives Policies Procedures Rules

Plans

Single used plans

Programmes Budgets Schedules Methods Projects

I. On the basis of Time:

a) Short term Plan: it is plan prepared usually prepared for a period of 12 months or less.
Ex: Daily, weekly, monthly, quarterly etc…

b) Medium Term Plans: the plans prepared for a period more than one year & less than three or
five years. Ex: a plan prepared for 3 years.

c) Long term planning: a plan prepared for a period more than 3 or 5 years upto ten to twenty
years. Ex: a plan prepared by a company for 20 years.

II. On the basis of Management levels:

a) Strategic plans: This includes a high level overview of the entire business. This plan is
prepared by top level management by taking the long term objectives of the organisation
into consideration.
Ex: vision, mission & values.

b) Administrative plans, Tactical or Division plans: These plans support strategic

planning. Tactical plans prepared by middle level management. Ex: it is prepared to
allocate divisional activities like, production, finance, marketing, personal and other
activities.

c) Operational plans: These are the short-term (less than a year) plans developed to create
specific action steps that support the strategic & tactical planning.

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B Com Ist Sem (NEP) PRICIPLES & FUNCTIONS OF MANAGEMENT Module-2

III. on the basis of Repetitiveness:

a) Standing Plans: Standing plans are used repeatedly in similar situation. They are used
again and again for the similar situation.

i) Objectives: these are the basic goals of every business unit.

ii) Policies: These are generic statements, which are guide to channelize
energies towards a particular strategy.

iii) Procedure: These are clear cut administrative specification prescribing

the time sequence for work to be done.

iv) Rules: Rules are very specific statements that define an action or non-
action.it is rigidly enforced.

b) Single Use Plans: the plans which are used only once in a specific situation and not used
repeatedly or again and again. They are called single use plans.

i) Programmes: the programmes are an in-depth statement that outlines a

company’s policies.

ii) Budget: it is a statement of expected results for future needs covering all
the activities of an enterprise for a definite period of time.

iii) Schedule: it is a type of single use plan which specifies time limit
between activities which are to be completed.

iv) Method: it is a type of plan which prescribes or specifies the ways in

which a specific task is to be performed. It explains the steps in detail.

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