CHAPTER 1 - FUNDAMENTALS OF MANAGEMENT

1.1. Meaning and Definition of Management

1.1.1. Meaning of Management
 Management is a group of people responsible for guiding and controlling an
organization
 Management is the process of running an organization (Planning, organizing, leading,
staffing and controlling)
 It is a body of knowledge, a discipline/ Discipline refers to the field of study having well
defined concepts and principles. Classifying management as disciplines implies that it is
an accumulated body of knowledge that can be learnt.
 The process of designing and maintaining an environment in which individuals,
working together in groups, effectively accomplish selected aims.
1.1.2. Definition of management

Management as discipline is young. Management has various aspects that cannot be

represented by a single definition. But all the definitions given by different scholars not
contradicting or mutually exclusive but complementary.

As far as the definition of management is concerned, it is rich in definition. Hence, there is no

one universally accepted definition of management. This is because,

I. Management as a discipline is recent in origin: management as a field of study is too

young, to develop.
II. Management is so broad that it is difficult to encompass all of its aspects in a single
definition.
III. There are different approaches to management, definitions change as the
environment changes. The environment of an organization changes because of
changes in political, economic, social and ethical changes.

Management has been given various but mutually supportive definitions by different
authors and scholars i.e. All the definitions given by different scholars not contradicting
or mutually exclusive but complementary. Among others the following are several of
them:
 1) According to F.W. Taylor, "Management is the art of knowing what you want to
do... in the best and cheapest way."
2) According to Terry and Franklin, "Management is a distinct process consisting of
activities of planning, organizing, actuating, and controlling, performed to determine
and accomplish stated objectives with the use of human beings and other resources.
3) According to Henery Fayol; "to manage is to forecast and plan, to organize, to
command, to coordinate, and to control.
4) According to Kinard, "Management is the process of maximizing the potential of an
organization's people and coordinating their efforts to attain predetermined goals.
5) According to Follet, management is ‘the art of getting things done through people’.
.

From the various definitions of management, we can derive the following important
points
 Management refers to the managerial functions of planning, organizing, staffing,
leading and controlling.
 Management is defined as the process of planning, organizing, leading and con
controlling the efforts of organization members and of using all other organizational
resources to achieve stated organizational goals
 Management co-ordinates both human and non-human resources (land, labour,
capital) for the accomplishment of objectives.
 Management is applied to all types of organization
- Profit or not for profit - Large, medium or small organization
- Manufacturing or service giving, etc.
 Management deals with creating a comfortable internal environment, with a
great consideration of the external environment.
1.2. Significance of Management
 Scientific Management only can meet the challenges and complexities of modern
business.
 Efficient Management can effectively utilize the available resources in the enterprise.
 Management creates teamwork and coordination among employees.
 Management directs and controls the organization to achieve the desired goal.
 Management provides stability in organization.
 Management provides new ideas, imagination and vision for better and greater
performance.
 Good management serve as a friend, philosopher and guide in tackling business
problems.
 Management is a tool of personality development of the people and attempts to raise
their efficiency and productivity
 Management is an agent of change and economic development.
 Effective functioning of business: Ability, experience, mutual understanding, co-
ordination, motivation and supervision are some of the factors
 Social benefits: Management is useful not only to the business firms but to the society as
a whole.
 Useful for developing countries: Management has to play a more important role in
developing countries.
 Sound organization structure: Management establishes proper organization structure
1.3. Managerial Functions an Overview

Management is a process which comprises five stages (functions) which are described below:
Planning Organizin Staffing Directing Controlling
Planning g Planning Planning Planning Planning

1. Planning: is conscious determination of future course of action. Deciding in advance

what is to be done, when it is to be done, how it is to be done and why it is to be done.
Planning involves determination of specific objectives, programs, setting policies,
strategies, rules and procedures and preparing budgets.

– It is looking ahead and preparing for the future

– It involves (i) problem-solving and (ii) decision-making.
2. Organizing: Organizing is the distribution of work in group-wise or section wise for
effective performance. Determining what activities are necessary to achieve the
objectives and how they should be divided among departments and employees.

Organizing involves dividing work into convenient tasks or duties, grouping of such duties
in the form of positions, grouping of various positions into departments and sections,
assigning duties to individual positions and delegating authority to each position so that
the work is carried out as planned.
3. Staffing: Staffing involves managing various positions of the organizational structure. It
involves selecting and placing the right person at the right position. Staffing includes
identifying the gap between manpower required and available, identifying the sources from
where people will be selected, selecting people, training them, fixing the financial
compensation and appraising them periodically. The success of the organization depends upon
the successful performance of staffing function.

4. Directing/leading: includes guiding the subordinates, supervising their performance,

communicating information and motivating.
This function can be called by various names namely “leading”, “directing”, “motivating”,
“activating” and so on. Directing involves these sub functions:
 Communicating: It is the process of passing information from one person to another.
 Leading: It is a process by which a manager guides and influences the work of his
subordinates.
 Motivating: It is arousing desire in the minds of workers to give their best to the
enterprise.
5. Controlling: the process of measuring work performance, comparing results to
objectives and taking corrective actions as needed.

Control is the process of checking to determine whether or not proper progress is being made
towards the objectives and goals and acting if necessary to correct any deviations. Control
involves three elements:
(a) Establishing standards of performance.
(b) Measuring current performance and comparing it against the established standard.
(c) Taking action to correct any performance that does not meet those standards.

1.5 Managers and Level of Management

Managers may also be defined as those people in organization who are responsible to carryout
major activities of management. Managers could be categorized in different groups or types based
on hierarchical position and scope of activities for which they are responsible.
1.4. Levels of Management
Managers may also be defined as those people in organization who are responsible to carryout
major activities of management. Managers are many kinds. They can be differentiated by
levels and areas within an organization. Levels are hierarchical management of managerial
positions in an organization.

Managers are classified according to their levels/ positions within an organization/ (vertical
difference). . Kinds of managers by level are presented in the figure below.

Levels of management
Top Level Management
 Makes up the relatively small group of executives who manage the overall organization.
 is instrumental in developing concepts for such new enterprises;
 Responsible for committing resources for the organizations and also accountable for their
success or failure.
 titles found in this group include: Board of directors, Executive committee, Chief Executive
Officer (CEO), General Manager, President, Vice president, etc
 main functions are
 Create organization’s goals, overall strategies and operating policies.
 Officially represent the organization to the external environment/ parties by meeting with
government officials, executives of other organizations, and so forth.
 Providing effective organizational structure that insures integration.
 Providing overall leadership and direction.
 Making overall control of the organization.
 Analyzing changes in the external environment and respond to it.
 make decisions about such activities:
 acquiring other companies
 investing on Research and Development
 entering or abandoning other markets
 building new plants and office facilities
 Jobs are likely be complex and varied.
 Work long hours and spend much of their time in meetings or on the telephone.
 Are very well paid.
Middle Level Managements
 Are head of different functional areas and their assistants?
 Common titles are such as: division/ section heads; department heads; operation manager;
branch manager; plant manager; etc.
 Are primarily responsible for implementing the policies and plans developed by top managers,
and for supervising & coordinating the activities of lower level managers.
 Bridge the upper & lower levels of the organization to implement the strategies developed at
the top.
 Managers in this level are specialists.
o Their activities are limited to a particular area of operation.
 main functions are
o Acting as an intermediary between top and operational level of management.
o Translating long term plans in to medium range plans.
o Developing specific targets (in their area of responsibility).
o develop specific schedule (to guide action and facilitate control)
o coordinate inputs, productivity and outputs of operating levels of management
 E.g. Academic deans, Division Head, Plant managers, Army captain
Lower level management
 Is also called first-line management or operating-level management.
 The last level of the ladder in the hierarchy of management.
 Supervises and coordinate the activities of operating employees/ subordinates.
o Subordinate are non-management workers and they are directly engaged in
production or service rendering.
 Directs small team of worker and keeps a check on their performance so that short-term
production and work targets are achieved.
 Responsible for the work of operating employees and don’t supervise other managers.
 typical titles are such as: section chief; office manager; Forman; supervisor; etc
 Oversee the day-to-day operation of their respective activities. And typically spend a large
proportion of their time supervising the work of subordinates.
 main functions
o Plan daily and weekly activities and accomplish them based on monthly,
quarterly and annual plan.
o Assigning employees to specific jobs
o Issue instructions at the workplace
o Follow up, motivate and evaluate workers
o Send reports to their supervisors
o Keep a watch on workers performance
o Evaluate and make close contact with workers
E.g. Department Heads, supervisory personnel, Sales managers, Loan officers, Foreman.
1.5. Types of Managers
By range/scope of activities for which they are responsible, managers are categorized in to
General Managers and Functional Managers. (Horizontal difference)
1) General Managers: they are responsible for all activities of the organization. Oversee a
complex unit, such as a company, a subsidiary, or an independent operating division.
Managers who are responsible for managing the entire operations of more complex unit
or division which may have two or more functional units.
They are the top executive officers of the organization. Their decision affects virtually
broader areas of the organization.

Example, General Manager of bank, President of University, Dean of College etc

2) Functional Managers: Functional managers are responsible for only one organizational
activity such as production, marketing, finance, personnel etc. In other words they are
responsible for some specialized areas.
1.6. Managerial Roles and Skills
1.6.1. Managerial roles

Managers perform managerial function by playing variety of managerial roles.

A role is an organized set of behavior or action expected from the position holder.
The term managerial roles refer to specific actions or behaviors expected of and exhibited
by a manager
Henry Mintezberg pointed out that managers play ten basic managerial roles and these roles
fall into three basic categories.
 • They are:
1. Interpersonal roles
2. Informational role and
3. Decisional role

1. The interpersonal roles

-are ones that involve people (subordinates and persons outside the organization) and other
duties that are ceremonial and symbolic in nature. The three interpersonal roles include
figurehead, leader, and liaison.

A. Figurehead role: representing the organization as the ceremonial and symbolic functions,
acting as public official for the organization. Or performing ceremonial duties important for
the organization’s image and success. e.g.

a. taking visitors to dinner; attending ribbon-cutting ceremonies;

b. The mayor who presents a key of a city to a local hero.
c. The supervisor who attends the wedding of the mechanic operator.
d. The sales manager who takes important customer to lunch; and the like.
o Are the most basic and the simplest of other roles?
B. Leadership role: is directing and coordinating the activities of subordinates to accomplish
objectives. it include some aspects like

a. Creating a vision that employees can identify with.

b. Doing with staff:- hiring, training, promoting.
c. Motivating subordinates to meet organizational needs.
C. Liaison role: Relationship made outside the areas of command or interacting/ dealing with
managers, people/ peers outside the organization. It helps to seek support from people who can
affect the organization’s success.

 Managers are asked to serve as figurehead, leader and liaison. Figurehead and liaison roles
give access to great deal of important information to managers.

2. The Informational Roles: is the processing of information and flow naturally from the
interpersonal roles?

 are activities that focus on obtaining and disseminating data important for the decisions that
managers need to make.
 The process of carrying out this role places a manager at a strategic point to gather and
disseminate information. Effective managers build networks of contacts for sharing
information, i.e. managers emerge as the nerve system centers of their organization.
 It can be classified as
A. Monitor role: Involves actively seeking out, receiving and securing information that may be
of value. Here managers, just as radar, scan their environment. It is like a nerve center.

o managers seek information to

a. detect problems or opportunities
b. build general knowledge about the work situation
c. make necessary changes
o Information comes from
a. Formal mechanisms, such as report, news media’s, public forecasts etc…
b. Informal conversations with both organization’s members and those external to the
organization.
Much information received is oral (from hearsay, gossip, formal meeting). Hence managers must
evaluate and decide whether to use this information.
B. Disseminator role is transmitting or providing relevant information back to others in the
workplaces. i.e. sharing/ sending information found from internal and external sources to
others both internal and external to the organization.
C. Spokesperson role: Focuses on external communication. It is representing an organization to
outside party on the behalf of members of the organization, or transmitting information about
 the work group to others especially outside the organization. E.g. to public, press, customer
group, etc…

o Manager is a person who speaks for his organization to people outside the organization.
3. The Decisional Roles: entail making decisions or choices.
 Related making decision, and the most important of the three categories of roles.
 Are activities dealing with the allocation of resources to reach organizational objectives?
 Manager’s informational role typically leads to decisional roles. Managers use information to
make decision to commit their organization to new actions or objectives.
 It can be classified into:

A. Entrepreneurial role: Making change that is important for the improvement and betterment
of the organization, i.e. acting as designer and initiator of change within the group to improve
organization’s position.

o Managers play this role when they initiate new project; launch a survey; test new market; or
enter a new business; etc…
B. Disturbance handler role: Making decisions or taking corrective actions in response to
situations that are beyond their control, or dealing with problems and changes beyond
manager’s immediate control.

o Type of problems/ disturbances includes strikes, bankruptcy, breaking of contracts, etc…

o Disturbances may arise when poor manager ignores the situation until it becomes a crisis.
If disturbance occurs, solution must be found.
C. Resource-allocator role: It is critical role. Refers to the allocation of resources. It is both
protecting and using organizations assets/ money, material, HR equipment, data reputation,
time/. Managers decide how resources are distributed, and with whom they will work most
closely.
D. Negotiator Role: Mediating internal conflicts and negotiating with others for the advantage of
the unit. It focuses on reaching an agreement with others outside the work group on work
related issues or materials or agreement with other units within the organization
 o Manager enters into negotiations with other groups or organization as a representative of the
organization. They meet and discuss their differences with individuals or groups for the
purpose of reaching an agreement. Negotiations are an integral part of a manager’s job.
o Closely linked to Resource allocator role
Summary of the ten managerial roles

Category Role Activity

Interpersonal Figurehead Perform ceremonial and symbolic duties such as greeting visitors, signing
legal documents
Leader Direct and motivate subordinates; training, counseling, and communicating
with subordinates.
Liaison Maintain information links both inside and outside organization; use mail,
phone calls, meetings.
Informational Monitor Seek and receive information, scan periodicals and reports, maintain
personal contacts.
Disseminator Forward information to other organization members; send memos and
reports, make phone calls.
Spokesperson Transmit information to outsiders through speeches, reports, memos.
Decisional Entrepreneur Initiate improvement projects; identify new ideas, delegate ideas, delegate
responsibility to others.
Disturbance Take corrective action during disputes or crises; resolve conflicts among
handler subordinates; adapt to environmental crises.
Resource Decide who gets resources; scheduling, budgeting, setting priorities
allocator
Negotiator Represent department during negotiation of union contracts, sales,
purchases, budgets; represent departmental interests.

1.6.2. Managerial skills

Skills: are abilities to do something expertly and well, and they are necessary to operate
activities successfully. Skills are not necessarily inborn but can be developed/ acquired. Robert L.
Katz has proposed that managers need three critical skills in managing an organization. These are
technical, human, and conceptual skills.
• The most fundamental management/ managerial skills are:
 1. Technical skill
2. Interpersonal (human relations) skill
3. Conceptual skill, and
4. Communication skill
1. Technical skill: the skills necessary to accomplish or understand the specific kind of work
being done in an organization or ability to perform work using specific knowledge, methods,
procedures, techniques and resources in a specialized field. E.g. engineers; market
researchers; accountants; musicians; and computer programmers etc…
o Highly important for first line managers.
2. Interpersonal (human relations) skill: focuses on working with people. It is the ability to
communicate with, understand, and motivate both individuals and groups, i.e. ability
 To lead, motivate, manage conflicts and work with others.
 To understand other and to be understood by others.
o Vital part of every manager’s job and important to managers at all levels.
3. Conceptual skill
o Managers need mental capacity to understand the overall workings of the organization and
its environment; to grasp how all the parts of the organization fit together, and to view the
organization in a holistic manner.
o Manager’s ability to think in the abstract. It allows managers to think strategically; to see the
“big picture”, and to make broad-based decisions that serve the overall organization.
o visualizing different parts of an organization as one big whole, and to understand the wholes
interaction with its relevant environment i.e. visualizing
 How organizations various parts / functions depend on each other.
 How changes in one area can affect other areas.
 How each parts contributes to the achievement of the overall
organizational goals.
o Managers use conceptual skills to understand activities and interests of the organization and
how they are related. And to diagnose and assess different types of management problems,
because they depend on the understanding of the relationships of various factors.
Conceptual skill can be further classified in to the following
a. Diagnostic skill
 Refers to the manager’s ability to visualize the most appropriate responses to a situation.
Organizations fail if managers do not have diagnostic skills.
b. Decision making skill
 Refers to the manager’s ability to recognize and define problems and opportunities correctly
and then to select an appropriate course of action to solve problems and capitalize on
opportunities.
 No manager makes the right decision all the time. However, effective manager make good
decisions most of the time. When they do make a bad decision, they usually recognize their
mistakes quickly and then make good decisions to recover with as little cost or damage to their
organization as possible.
c. Time-management skill
 Refers to the manager’s ability to prioritize work; to work efficiently; and to delegate
appropriately. Effective managers have good time management.
o Are the most difficult to develop, but highly important to top level managers.
4. Communication skills
o Refers to the manager’s abilities both to convey ideas and information effectively to others
and to receive ideas and information effectively from others.
o Enable a manager to transmit ideas to subordinates so that they know what is expected; to
coordinate work with peers & colleagues so that they work well together properly; and to
keep higher-level managers informed about what is going on.
o Help the manager listen to what others say and to understand the real meaning behind letters,
reports, and other written communication.
o Ability to send and receive information, thoughts, feelings and attitudes. proficiency
o classified in to verbal (writing and oral) and non-verbal
o Crucial to all managers and it necessary for effective displaying of interpersonal, technical
and conceptual skills.

The Relationship between Managerial Level and Skills

• Communication skills are equally important at all managerial levels.
• Interpersonal (human) skills are more important to top and middle levels than
 lower level managers.
• Conceptual skills are more important to upper level of management
• Technical skills are very important at the operating level.

1.7. Universality of Management

Management is universal in its nature. The functions performed by every manager are
nearly the same. Universality of management is the applicability of the principals of
management in all kinds of organizations, and in all different countries of the world.

Universality means fundamentals, concepts are the same throughout, but the techniques
to achieve/ fulfill these fundamental may be different.
• Management is regarded as universal activity because:
 In all kinds of organizations the basic managerial function are used to make
individuals contribute to group objectives
 i.e. management is applied to all type of organization.
 Managers perform the same basic managerial function in all levels of organizational
hierarchy.
 What differs from level to level is may be the amount of time for each
function, the point of emphasis in each function.
 1.8. Management an art, Science, or profession?

There is great controversy whether management is science or art. It is an art in the sense of
possessing of managing skill by a person. It is a science also because of developing principles or
laws which are applicable in a place where a group of activities are coordinated. In fact
management is both science and art as it clear from the following discussion.

Management as science: Science is a systematized body of knowledge. We call a discipline

scientific if its
(1) Methods of inquiry are systematic and empirical.
(2) Information can be ordered and analyzed; and
(3) Results are cumulative and communicable.

Management as an art or a science has been an issue of debate for a long period of time. In fact,
effective management is a blend of both science and art. And successful executives’ managers
recognize the importance of combing both the science and the art of management as they practice
their craft.

Science: Is a systematized body of knowledge/ systematically organized knowledge derived from

observation, study, and experimentation that carried out to determine the nature and principle of
the subject under study.

Art: is the application of obtained knowledge and skills that constitutes science to bring out the
results. It is based on the knowledge of principles developed by science.
The science of Management
Managers gather data, facts, and objective information, and also can use quantitative methods and
decision making techniques to arrive at “correct” decision. And they need to take such scientific
approach to solve problems whenever possible. Technical, diagnostic & decision making skills are
especially important when practicing the science of management.

Management as science;
 is the structured body of knowledge with its own distinct concepts and principles developed
with reference to the general truth underlying the management practices. Hence management
is a science.
 is based on principles instead of traditional way of doing things, trials and error methods.
 is not as comprehensive or as exact as other sciences, because management mostly deals with
human elements which are very complex variables.
 Human beings are not standardize and their behavior is unpredictable
 Experiments cannot be repeated under standardized conditions.
 Human being cannot be subject of controlled laboratory experiment.
The art of Management
Even though managers may try to be scientific as much as possible, they must often make decisions
and solve problems on the basis of intuition, experience, instinct and personal insights. Relying
heavily on conceptual, communication, interpersonal and time management skills, a manager may
have to decide between multiple courses of action that look equally attractive, and even “objective
facts” may prove to be wrong. Thus managers must blend elements of intuition and personal insight
with hard data and objective facts.

Management as an Art
 Like other practices, it is know-how. It is the application of knowledge. “It is doing things
based on realities of the situation”.
A manager to manage must have both the knowledge of science and art. Managers can work better
by using organized knowledge about management.
 Without science means without structured body of management principles and concepts; and
trusting (reliance) on luck, intuition or what s/he did in the past.
 Without art means trying to manage by memorization of principles, diagnose by the books,
neglecting practical reality.
Management principles are not developed for the sake of knowledge but for their applications to
specific situations. Management as a practice is an art and as an organized knowledge underlying
the practice is a science. Art needs the existence of science and science determines skillful
application of knowledge, i.e. an art. Therefore, both science and art are inseparable and
interconnected; and they are complementary but not mutually exclusive. Accordingly,
management is both an art and science.