PRINCIPLES AND PRACTICES OF MANAGEMENT

UNIT-1
Concept of Management

Management is a universal phenomenon. All types of organizations are involved in management

According to an author ―Management is an art of getting things done through and with the
people in formally organized groups.

Good management is both effective and efficient.

Being effective means doing the appropriate task or doing the right things

Being efficient means doing the task correctly or doing the things right, at least possible cost
with minimum wastage of resources.

Management can be defined in detail in following categories:

1. Management as a Process
2. Management as an Activity
3. Management as a Discipline
4. Management as a Group
5. Management as a Science
6. Management as an Art
7. Management as a Profession
Management as a Process:

As a process, management refers to a series of interrelated functions. It is the process by which

management creates, operates and directs purposive organization through systematic,
coordinated and co-operated human efforts.

As a process, management consists of three aspects:

1. Management is a social process - It is the duty of management to make interaction

between people - productive and useful for obtaining organizational goals.

2. Management is an integrating process - Management undertakes the job of bringing

together human, physical and financial resources so as to achieve organizational purpose.

3. Management is a continuous process - It is a never ending process and is considered as

an on- going process.

Management as an Activity:
Management is also an activity because a manager is one who accomplishes the objectives by
directing the efforts of others. Management as an activity includes -

1. Informational activities - In the functioning of a business enterprise, the manager

constantly has to receive and give information orally or in writing.

2. Decisional activities - Practically all types of managerial activities are based on one or
the other types of decisions. Therefore, managers are continuously involved in decision
making.

3. Interpersonal activities - Management involves achieving goals through people. They

must maintain good relations with them.

Management as a Discipline:

Management as a discipline refers to that branch of knowledge which is connected to study of

principles & practices of basic administration. Any branch of knowledge that fulfills
following two requirements is known as discipline:

1. There must be scholars & thinkers who communicate relevant knowledge through
research and publications.
2. The knowledge should be formally imparted by education and training programmes.
Management: Art and Science
As a science: - In order to be organized as a science, a discipline should have the following
characteristics:

1) Systematized body of knowledge- It should have a systematic body of knowledge

including concepts, principles and theories.
2) Scientific observation- It should have scientific methods of observation and enquiry.
There should be no scope of personal likes and dislikes of the scientist.
3) Experimentation- Scientific principles are evolved through observation and tested by
repeated experimentation to check their validity.
4) Verifiable principles- Once an observation is confirmed by repeated experimentation
and testing, it takes the form of a scientific principle. Anybody can verify the principle by
repeating the experiment.
5) Universal application- The scientific principles have universal validity and application.
They give the same results everywhere if the prescribed conditions are satisfied.

Management has been given the shape of an organized body of knowledge. Its study helps in
gaining a rational approach to the development of means for accomplishing certain goals. That is
why management is called a science. However, management is not a perfect science. The
theories and principles of management are situation bound. That is why Ernest Dale has called
management a ‘Soft Science’.

As an art: Art signifies the application of knowledge and personal skills to bring about desired
results.

Art has following features:

1) Body of knowledge- Art is based on theoretical knowledge of concepts, principles and

application about a particular field such as music, painting, etc.
2) Personalized application of knowledge and skills- Art implies personalized application
of knowledge and skills about a particular field
3) Practice- Art is learnt and refined through continuous practice.
4) Creativity- Art is creative in nature. An artist uses his skills and style to create better
results.

Management is also an art because it uses know-how and skills and creates new situations
needed for further improvement.
Thus, management is considered as a science because it has a systematized body of knowledge
and as an art because managing requires certain skills.
Science teaches one ‘to know’ and an art ‘to do’
 Management as both Science and Art:

Management is both an art and a science. It is considered as a science because it has an organized
body of knowledge which contains certain universal truth. It is called an art because managing
requires certain skills which are personal possessions of managers.

A manager to be successful in his profession must acquire the knowledge of science & the art of
applying it. Therefore management is a judicious blend of science as well as an art because it
proves the principles and the way these principles are applied is a matter of art.

Management as a profession
The term profession may be defined as an occupation backed by a specialized body of
knowledge and training and to which entry is regulated by a representative body. The essential
requirements of a profession are:

1) Specialized field of knowledge: Management is widely taught in the universities and

management institutes as a discipline
2) Restricted entry based on formal training: Entry to a profession is based on formal
training. E.g.: To be a doctor, one requires prescribed qualification i.e. MBBS degree.
But entry to the management profession is not restricted
3) Representative association: For the development and regulation of any profession, the
existence of a representative body is a must. For e.g.: ICAI, BCI, AIMA .
4) Ethical code: Every profession has a code of conduct which prescribes norms and
professional code of ethics for its members.
5) Social responsibilities: There is a growing concern for social responsibilities of
management. Managers of today recognize their social responsibilities towards
customers, workers and other groups.
6) Charging of fee: The managers who act as consultants charge professional fees for the
services provided to their clients as in the case of doctors.

There are two views of management:

a. Traditional View

Traditionally, management is defined as an art of getting things done through others. The
various drawbacks in traditional concept are:

● It does not give the functions which a manager has to perform to get results from
others.
● It gives the impression of the manipulative character of the practice of
 management.
● The employees are merely treated as means for getting results.
● The needs of the workers are ignored.

b. Modern View

The modern concept of management considers management as the process of utilization

of human resources and physical resources (i.e. capital, machines, materials etc.) in such
a manner that organizational objectives are achieved effectively and efficiently.
The modern concept of management has the following features:
● Management is goal-oriented. Its purpose is to accomplish the objectives of the
organization.
● It involves effective and efficient utilization of human and other resources like
capital, machines, materials etc.
● It performs the functions of planning, organizing, staffing, directing and
controlling. Thus, management could be viewed as a process consisting of these
functions.

Effectiveness vs. Efficiency

Effectiveness Efficiency
It refers to accomplishment of organizational It refers to efficient utilization of resources to
goals. accomplish organizational goals.
Its focus is on end results Its focus is on getting maximum output using
minimum of resources.
It is a multi-dimensional concept. It is It is uni-dimensional in nature. It is concerned
concerned with satisfaction of customers, with the efficient use of resources only.
employees, investors and other stakeholders of
the business.

Functions of Management
1. Planning: Planning is a mental process requiring the use of intellectual faculties,
foresight and sound judgment. The process of planning involves the following steps:-

a) Determination of goals or objectives of the enterprise.

b) Forecasting of the future environment.
c) Search for an alternative course of action.
d) Evaluation of various alternatives and formulation of a plan.
e) Formulation of strategies, policies, procedures and methods.
 f) Preparation of schedules, programmes and budgets.

2. Organizing: organizing involves identification and grouping the activities to be

performed and dividing them among the individuals and creating authority and
responsibility relationships among them for the accomplishment of organizational
objectives.
Organizing involves the following steps:-

a) Identification of activities required for the achievement of objectives and

implementation of plans.
b) Grouping of activities so as to create well-defined jobs.
c) Grouping of jobs into sections, departments and divisions.
d) Assignment of jobs to employees.
e) Delegation of authority to subordinates.
f) Establishment of authority-responsibility relationships throughout the
organization.

3. Staffing: The staffing function of management pertains to recruitment, selection,

training, development and appraisal of personnel. The personnel department is set up to
provide the necessary help to managers in performing their staffing or personnel function
efficiently.
4. Directing/ Leading: Directing involves determining the course, giving orders and
instructions and providing dynamic leadership‖. It relates directly to those activities
which deal directly with influencing, guiding, supervising and motivating subordinates in
their jobs.

a) Communication: It is the process of passing information and understanding from

one person to another. This process is necessary for making the subordinates
understand what the management expects from them.

b) Leadership: A manager must perform the function of leadership if he has to

guide the people effectively for the achievement of organizational objectives.

c) Motivation: A manager can get the desired results from the people working in the
organization through proper motivation. Motivation means inspiring the
subordinates with zeal to do work for the accomplishment of organizational
objectives.

d) Supervision: It means overseeing the functions of subordinates.

5. Controlling: The function of controlling deals with the measurement and correction of
the performance of subordinates against the predetermined standards.

The process of control involves the following steps:

a) Establishment of Standards: The management must establish standards with which

the actual performance of the subordinates will be compared with the standards of
performance should be laid down in proper manner and should be understood by
everyone in the establishment.
b) Measurement of Performance: The actual performance of each unit and employee
has to be measured in terms of quality, quantity, cost and time.
c) Appraisal of Performance: The establishment of standards has no meaning unless
they are used in actual practice.
d) Taking corrective Actions: When the deviations occur, the management must take
corrective actions so that such deviations do not occur again.
Nature/Features of Management
The basic features or characteristics of management are as follows:

1. Management is Goal-oriented: The purpose of management is to achieve the goals of

the organization. The success of management is judged by the extent to which
organizational goals are achieved.
2. Continuous process: Management is a continuous process i.e. its functions are repeated
time and again. Management does not stop anywhere. It is an ongoing process.
3. Coordinative force: The essence of management is the coordination or integration of
human and other resources for effective performance.
4. Intangible force: management has been called the unseen force. Its presence is evident
by the results of its efforts-orderliness, informed employees, buoyant spirit and higher
output.
5. Group effort: Management is an integral part of any group activity. It involves the use of
group efforts in the pursuit of well defined goals or objectives. It cannot exist
independent of the group or organization it manages.
6. Management accomplishes results through the cooperation of others: The managers
cannot do everything themselves. They must have the necessary ability and skills to get
work accomplished through the efforts of others.
7. Management balances effectiveness and efficiency: Sound management requires that
all organizational activities are performed effectively and efficiently.
8. Dynamic Discipline or Multi-Disciplinary: Management is a field of study which is
taught in universities and management institutes. Management is multi-disciplinary in
nature as it contains principles drawn from many social sciences like anthropology,
psychology, Sociology etc.
9. Science as well as an Art: Management has an organized body of knowledge consisting
of distinct concepts, principles and techniques which have wide application. So, it is
treated as a science. The application of these concepts, principles and techniques require
specialized knowledge and skills on the part of the manager. Since the skills acquired by
a manager are his personal possession, management is viewed as an art.
10. Pervasive or Universal: Management is essential for effective performance of any
organized activity. Thus, it is universal in nature. They can be applied to all types of
organizations.

Objectives of Management
Objectives are the goals or ends towards which the activities of a business are directed.

1. Organizational objectives

These objectives serve as a common purpose or direction towards which the whole
organization moves. These include:
 a) Survival: The basic objective of any business is survival. The management must earn
enough revenues to cover costs of operations.
b) Profit: Mere survival is not enough for the business. Management has to ensure that the
business makes reasonable profits. Profits provide the incentive for the continued
successful operation of the enterprise.
c) Growth of a business may be measured in terms of increase in annual production, sales
turnover, capital investment etc.

2. Social Objectives

Management is an organ of the society and so it must have social objectives.

a) Supply of quality goods at reasonable prices.

b) Generation of employment opportunities.
c) Providing financial support to community projects.

3. Personal Objectives

These objectives pertain to individual employees and managers. Each individual has some
personal goals or objectives along with those organizational objectives which are required from
them to achieve.

a) Good salary and other benefits.

b) Opportunities for training, promotion etc.
c) Recognition of meritorious work.
d) Good and healthy working conditions.
Importance of Management
Management is the thinking organ that provides vision to the business. The importance of
management for a modern business can be explained as follows:

1. Accomplishment of Goals: It is the management which determines the goals of the

organization and of various departments and functional groups. The goals are
communicated to the employees to seek their cooperation. All organization activities are
directed towards the organizational objectives. Clear-cut definition of goals is essential
for the success of any organization.
2. Effective/Optimum utilization of resources: Management ensures optimum utilization
of resources. Through planning and organization, management eliminates all types of
wastages and achieves efficiency in all business operations.
3. Sound Organization: Management establishes sound organization for the
accomplishment of the desired objectives. It clarifies authority responsibility
relationships among various positions in the organization.
4. Providing vision & foresight: Management keeps itself in touch with the external
environment so that it can meet the demands of the changing environment and supplies
vision and foresight to the enterprise.
5. Harmony in work: In an organization, employees come from different backgrounds,
they have different attitudes, style of working, and if everyone starts following his own
style, it can lead to chaos and confusion at the workplace. By giving directions,
managers bring uniformity & harmony in the action of employees.
6. Help the employees in achieving personal objectives: Every manager motivates and
leads his team in such a manner that individual members are able to achieve personal
goals while contributing to the organizational objectives.
7. Development of society and nation: Management plays a pivotal and crucial role in
economic and social development of a country.
Coordination as essence of Management
Coordination has been viewed by different management experts in different ways.

Coordination is the orderly arrangement of group efforts to provide unity of action in the pursuit
of a common purpose.

The features of coordination are as follows:

a) It is an essential managerial activity. It is needed at all levels of management.

b) It involves an orderly arrangement of group efforts.
c) It is a continuous process carried on by the managers.
d) Its purpose is to secure unity of action towards common objectives.

Importance of Coordination:
 1. Better results: Coordination helps to avoid duplication of efforts. The time and energy
thus saved are better utilized in creative tasks.

2. Economy and efficiency: Coordination leads to economy and efficiency in the

organization by avoiding wastage of resources and duplication of efforts.
3. Better utilization of human resources: Modern organizations employ specialists in
diverse fields for achieving better results.
4. Meeting environmental challenges: The modern business environment (Technological,
social, legal, political) is very complex.
5. High morale: Coordination in organization and staffing leads to job satisfaction of
employees. This improves the morale of different groups.

As Essence of Managing:

Coordination is an all-inclusive function of management and not just one of its functions.
Coordination is required in every function of management as discussed below:

1) Coordination through Planning: Planning leads to formulation of objectives, policies

and procedures which are essential to bring coordination in the organization.
2) Coordination through Organizing: All the different activities which are required to
achieve objectives of the organization must be properly grouped and assigned to the right
people.
3) Coordination through Staffing: A balance must be attained between manpower
requirements and the qualities of the personnel. Manpower planning is the most
important tool of coordination.
4) Coordination through Direction: The direction function in management is an attempt in
achieving coordination through supervision, leadership, communication and motivation.
This helps to secure unity in action in a group or organization.
5) Coordination through Controlling: The purpose of comparing actual performance with
standards and taking corrective action in case of any deviation is to achieve coordination.

That is why management is called the essence of management.

Management vs. Administration

Basis Management Administration

Definition Management means getting the work
done through and with others by
leading and motivating them.
Nature of functions Management refers to execution of
decisions. It is a function.
Stage of performance It is concerned with implementation of
policies laid down by administration.
Leading of human It is actively concerned with direction
efforts of human efforts at the operative level.
Type of authority Management has operational authority
to execute administrative decisions.
Levels in the Management is relevant at lower levels
organization of management.
Decision-making Management decides who shall
implement the administrative
decisions.
Usage The term management is widely used
in business organizations in the private
sector.
Administration is concerned with
the formulation of objectives, plans
and policies of the organization.
Administration relates to decision-
making. It is a thinking function.
It is concerned with determination
of major objectives and policies.
It is not directly concerned with
direction of operative personnel.
Administration has authority to
take strategic and policy decisions.
Administration refers to higher
levels of management.
Administration determines what is
to be done and when it is to be done.
The term ‗administration‘ is
associated with non-business
organizations such as government
departments, public enterprises,
military organizations, socio-
cultural organizations, etc.
Designations General manager, managing director, Minister, secretary, commissioner,
in organizations Plant supervisor, branch director, vice-chancellor, registrar,
manager, etc.
controller, etc.
Influencing factors Managerial decisions are influenced Administrative decisions are
mainly by organizational mission, influenced by economic
objectives, policies values and beliefs environment, social forces,
of managers. government policies, etc.

Levels of Management
The term ‗level‘ means arrangement of persons in series. Thus, the term ‗levels of management‘
refers to the arrangement of managerial positions in an organization.

They are:

1. Top Management: Top management is the head of an organization. It consists of the

Board of Directors and Chief Executives or the Managing Directors. The functions
include:
a) Determining objectives of the enterprise.
b) Preparing policies and plans for the enterprise.
c) Appointing executives for the middle level.
d) Building and maintaining relations with the outside public.

2. Middle Management: It generally consists of heads of functional departments. The

functions include:
a) Executing plans in accordance with the policies and directives of top
management.
b) Assigning duties and responsibilities for timely execution of plans.
c) Evaluating the performance of the junior managers.

3. Lower Management (Supervisory Level): It consists of supervisors, foremen, account

officers, sales officers etc. The functions include:
a) To plan activities of their sections.
b) To issue orders and instructions to the workers.
c) To provide training.
d) To solve problems.

Who is a Manager?
A manager is a person who performs the functions of planning, organizing, staffing, directing
and controlling for the accomplishment of the objectives of an undertaking.

Role of a Manager
Management involves various functions. While performing these functions, a manager has to
play multiple roles. A role consists of the behavior patterns displayed by a manager within an
organization or a functional unit.

Henry Mintzberg identified ten basic roles performed by managers at all levels from foreman to
chief executives and classified them under three heads: (1) Interpersonal, (2) Informational and
(3) Decisional.

A. Interpersonal Roles
1) Figurehead: executive managers perform a number of ceremonial duties. Lower
level managers have ceremonial duties as well, perhaps on a lesser scale such as
attending employees‘ weddings, greeting visitors and hosting customers.
2) Leader: This consists of a range of duties including motivating workers, guiding
work-related behavior, and encouraging activities that help achieve organizational
objectives.
3) Liaison: Managers act as liaison between groups and individuals which are a part
of or come in contact with an organization.

B. Informational Roles
1) Monitor: Managers monitor activity, solicit information, gather data, and observe
behavior.
2) Disseminator: Rather than receive information, managers transmit information.
This is a crucial aspect of management.
3) Spokesperson

C. Decisional Roles
1) Entrepreneur: Managers in complex organizations act in an entrepreneurial way
by constantly trying to improve their operations. They seek new ways of using
resources, new technologies for enhanced performance.
2) Disturbance Handler: Managers have the primary responsibility for resolving
problems. It may also be the most stressful role as managers seem to find
themselves constantly dealing with disturbances that threaten the harmony and
effectiveness of their organizations.
3) Resource Allocator: This role links planning and organizing functions. Managers
must plan to meet their objectives and distribute resources accordingly.
4) Negotiator: The allocation process bears on the role of negotiator. When scarce
resources must be shared among many operating units, managers with superior
negotiating skills will have advantage over others.
Management Skills
The term managerial skills means the personal ability put to use by a manager for the
accomplishment of organizational goals. The job of a modern manager has become very
complex. He requires different skills to manage a large organization in the fast changing
environment.
1. Technical skills: Technical skill implies proficiency in a specific kind of activity
particularly the one involving methods, processes, procedures or techniques.

2. Human skills: Human skill is the manager‘s ability to work effectively as a group
member and to build cooperative effort within the team he leads.

3. Conceptual skills: Conceptual skill is the ability to see the organization as a whole, to
recognize inter-relationships among different functions of the business and external
forces and guide effectively the organizational efforts.

There are two other managerial skills which are also required at various levels of the
organization:

1. Analytical skills: These refer to abilities to proceed in a logical, step-by-step manner, to

examine the various aspects of specific issues to understand complex characteristics of a
phenomenon.

2. Administrative skills: These center around the ability to act in a pragmatic manner, get
things done by implementing decisions and plans, to mobilize and organize resources and
efforts, to coordinate diverse activities and to regulate organizational events in an orderly
manner.
Characteristics of quality managers

Following are some important traits of a successful manager:

a) Ability to think: He must be a rational thinker.

b) Broad vision: a manager must be able to take into consideration the overall effect of his
functioning on the company as a whole.
c) Technical ability: Thought a manager need not to be a technician, it is necessary that he
possesses the necessary degree of technical competence relating to his filed. Technical
skills are important at the supervisory level.
d) Human relation skills: A manager must possess adequate knowledge of the factors and
forces which go to ensure good relations motivate people for best of their performance
and generate cooperative and competent human behavior.
e) Dynamic personality/Flexibility: A manager must possess the desire to move ahead, to
introduce change for better, to do something new. He must always look for doing
something bigger and better.
f) Integrity: A manager must enjoy the confidence of both his superiors and subordinates.
Both as a person and in his actions, he must be known as a person of high moral integrity.
g) Discipline/Focus: Discipline is the ability to choose and live from what one pays
attention to. Discipline as self-mastery can be exhilarating! Role model the ability to live
from your intention consistently and you'll role model an important leadership quality.
h) Creativity: Creativity is what separates competence from excellence. Creativity is the
spark that propels projects forward and that captures peoples' attention. Creativity is
the ingredient that pulls the different pieces together into a cohesive whole, adding zest
and appeal in the process.
i) Structure: The context and structure we work within always have a set of parameters,
limitations and guidelines. A stellar manager knows how to work within the structure
and not let the structure impinge
j) Knowledge: A thorough knowledge base is essential. The knowledge base must be so
ingrained and integrated into their being that they become transparent, focusing on the
employee and what s/he needs to learn, versus focusing on the knowledge base. The
excellent manager lives from a knowledge base, without having to draw attention to it.
 School of thoughts/Evolution of management

A. CLASSICAL THEORY:
The Classical Theory is the traditional theory, wherein more emphasis is on the organization
rather than the employees working therein. According to classical theory, the organization is
considered as a machine and the human beings as different components/parts of that machine.

The classical theory has the following characteristics:

1. It is built on an accounting model.

2. It lays emphasis on detecting errors and correcting them once they have been committed.
3. It is more concerned with the amount of output than the human beings.
4. It is assumed that employees are relatively stable in terms of the change, in an organization.

Classical theories are:

1. Scientific Management
2. Administrative Management
3. Bureaucratic theory of management
 I. Scientific Management Theory:

Scientific Management is an art of knowing exactly what you want your men to do and seeing
that they do it in the best and cheapest way.

a) Development of Science for each part of men’s job (replacement of rule of thumb)
● This means replacement of odd rules of thumb by the use of methods of enquiry,
investigation, data collection, analysis and framing of rules.

b) Scientific Selection, Training & Development of Workers

● There should be scientifically designed procedures for the selection of workers.
● Workers should be selected & trained to make them fit for the job.

c) Co-operation between Management & workers or Harmony not discord

● Taylor believed in co-operation and not individualism.
● It is only through cooperation that the goals of the enterprise can be achieved
efficiently. There should be no conflict between managers & workers.

d) Division of Responsibility
● This principle determines the concrete nature of roles to be played by different levels
of managers & workers
e) Mental Revolution
● The workers and managers should have a complete change of outlook towards their
mutual relation and work effort.
● It requires that management should create suitable working conditions

f) Maximum Prosperity for Employer & Employees

● The aim of scientific management is to see maximum prosperity for employers and
employees.
● Maximum output & optimum utilization of resources will bring higher profits for the
employer & better wages for the workers.

TECHNIQUES OF SCIENTIFIC MANAGEMENT

1. Time Study
● It is a technique which enables the manager to ascertain standard time taken for
performing a specified job.
Standard Time × Working Hours = Fair Day‘s Work

2. Motion Study
● In this study, movement of body and limbs required to perform a job are closely
 observed.
● The purpose of motion study is to eliminate useless motions and determine the bet
way of doing the job.
● Motion study increases the efficiency and productivity of workers by cutting down all
wasteful motions.

3. Functional Foremanship
● Taylor advocated functional foremanship for achieving ultimate specification.
● Taylor advocated appointment of 8 foramen, 4 at the planning level & other 4 at
implementation level.

4. Standardization
● It implies the physical attitude of products should be such that it meets the
requirements & needs of customers.
● Standardization is a means of achieving the economics of production.

5. Differential Piece Wage Plan

● The efficient workers are paid more wages than the inefficient ones.
● This system is a source of incentive to workers who improve their efficiency in
order to get more wages.

CRITICISM OF SCIENTIFIC MANAGEMENT

Although it is accepted that the scientific management enables the management to put resources
to its best possible use and manner, yet it has not been spared of severe criticism.

Critical Evaluation:-

● Mechanistic Approach
● Unrealistic Assumptions
● Narrow View
● Impracticable
● Exploitation of Labor
 II. Administrative Theory:
The Administrative Theory is based on the concept of departmentalization, which means the
different activities to be performed for achieving the common purpose of the organization should
be identified and be classified into different groups or departments, such that the task can be
accomplished effectively.

Henry Fayol’s 14 Principles of Management are:

1. Division of Work: The work should be divided among the individuals on the basis of their
specializations, so as to ensure their full focus on the effective completion of the task assigned to
them.
2. Authority and Responsibility: The authority and responsibility are related to each other.
Authority means the right to give orders while the responsibility means being accountable. Thus,
to whomsoever the authority is given to exact obedience must be held accountable for anything
that goes wrong. Authority & responsibility are co-existing. If authority is given to a person, he
should also be made responsible. In a same way, if anyone is made responsible for any job, he
should also have concerned authority. There should be a balance between the two i.e. they must
go hand in hand. Authority without responsibility leads to irresponsible behavior whereas
responsibility without authority makes the person ineffective.
3. Discipline: The individuals working in the organization must be well-disciplined. The discipline
refers to the obedience, behavior, respect shown by the employees towards others.
4. Unity of Command: According to this principle, an individual in the organization must receive
orders from only one supervisor. In case an individual has the reporting relationship with more
than one supervisor then there may be more conflicts with respect to whose instructions to be
followed.
5. Unity of Direction: Unity of direction means, all the individual or groups performing different
kinds of a task must be directed towards the common objective of the organization.
6. Subordination of Individual to General Interest: According to this principle, the individual
and organizational interest must coincide to get the task accomplished. The individual must not
place his personal interest over the common interest, in case there a conflict.
7. Remuneration of Personnel: The payment methods should be fair enough such that both the
employees and the employers are satisfied. The quantum and method of remuneration to be paid
to the workers should be fair, reasonable, satisfactory & rewarding of the efforts. Wages should
be determined on the basis of cost of living, work assigned, financial position of the
 business, wage rate prevailing etc. Fayol also recommended provision of other benefits such as
free education, medical & residential facilities to workers.
8. Centralization: Fayol defines centralization as the means of reducing the importance of
subordinate‘s role in the organization, and the extent to which the authority is centralized or
decentralized depends on the organization type in which the manager is working.
9. Scalar Chain: This means there should be a proper hierarchy in the organization that facilitates
the proper flow of authority and communication. It suggests that each individual must know
from whom he shall get instructions and to whom he is accountable to. Also, the communication
either going up or down must pass through each level of authority. In certain circumstances
where the quick flow of communication is required, the rigidity of a scalar chain can pose
problems. Thus, Henry Fayol has suggested ―gang plank‖ which means anybody in the
hierarchy can interact with each other irrespective of their authority levels. Gang Plank clarifies
that management principles are not rigid rather they are very flexible. They can be moulded and
modified as per the requirements of situations.
10. Order: This principle is related to the systematic arrangement of things and people in the
organization. This means every material should be in its place, and there should be a place for
every material. Likewise, in the case of people, a right man should be in the right job.
Arrangement of things is called material order and placement of people is called social order.

● Material order- There should be safe, appropriate and specific place for every article and
every place to be effectively used for specific activity and commodity.
● Social order- Selection and appointment of most suitable person on the suitable job.
There should be a specific place for everyone and everyone should have a specific place
so that they can easily be contacted whenever need arises.

11. Equity: All the employees in the organization must be treated equally with respect to the justice
and kindliness. Equity means combination of fairness, kindness & justice. The employees should
be treated with kindness & equity if devotion is expected of them. It implies that managers
should be fair and impartial while dealing with the subordinates. They should give similar
treatment to people of similar position.
12. Stability of Tenure: The employees should be retained in the organization, as new appointments
may incur huge selection and training cost. Fayol emphasized that employees should not be
moved frequently from one job position to another i.e. the period of service in a job should be
fixed. Therefore employees should be appointed after keeping in view principles of recruitment
& selection but once they are appointed their services should be served.
13. Initiative: The manager must motivate his subordinates to think and take actions to execute the
plan. They must be encouraged to take initiatives as this increase the zeal and energy among the
individuals. Workers should be encouraged to take initiative in the work assigned to them. Fayol
advised that management should provide opportunity to its employees to suggest ideas,
experiences& new method of work. It helps in developing an atmosphere of trust and
understanding.
14. Esprit de Corps: This means ―unity is strength‖. Thus, every individual must work together to
gain synergy and establish cordial relations with each other. It refers to team spirit i.e. harmony
in the work groups and mutual understanding among the members. Fayol cautioned the managers
against dividing the employees into competing groups because it might damage the moral of the
workers and interest of the undertaking in the long run.

Thus, Henry Fayol emphasized on the managerial activities and classified these further into five
sub-activities Viz. Planning, Organizing, Directing, coordinating and controlling and for the
better understanding of these he had proposed 14 principles of management.

Basis Taylor Fayol

Human aspect Taylor disregards human Fayol pays due regards on human
elements and there is more element. E.g. Principle of initiative,
stress on improving men, Espirit De‘ Corps and Equity recognizes
materials and methods a need for human relations

Status Father of scientific management Father of management principles

Efficiency & Stressed on efficiency Stressed on general administration
administration

Approach It has micro-approach because it It has macro-approach and

is restricted to factory only discuses general principles of
management which are applicable in
every field of management.
Scope of principles These principles are restricted to These are applicable in all kinds of
production activities. organization regarding their management
affairs.

Achievement Scientific management Administrative management

III. Bureaucratic Theory:

Bureaucratic Theory is related to the structure and administrative process of the organization.
What is Bureaucracy? The term bureaucracy means the rules and regulations,
processes,procedures, patterns, etc. that are formulated to reduce the complexity of an
organization's functioning.
Also, there is a hierarchy in the organization, which represents the clear lines of authority that
enable an individual to know his immediate supervisor to whom he is directly accountable. This
shows that bureaucracy has many implications in varied fields of organization theory.

Max Weber Theory gave three types of authority

1. Rational Legal authority– People obey due to legally established position or rank.
2. Traditional authority– People obey a person because he belongs to a specific class.
3. Charismatic Authority– People obey them because they believe that the person has
some special power.
Features of theory:
1. Division of work: There is a high degree of specialization or division of labour in a
bureaucratic organization. Tasks are divided into very specialized jobs and each member
performs his specialized function in a predictable manner.
2. Rules and regulations: Detailed and rigorous rules and regulations are laid down to specify
and govern the work behavior, rights and duties of job holders to ensure consistency and
predictability in work performance.
3. Hierarchy of authority: Each level controls the level below and is controlled by the level
above. A formal hierarchy is the basis of central planning and centralized decision making.
Each superior exercises supervision and control on his subordinates with provision for
appeal to higher authorities in the prescribed manner.
4. Technical competence: Selection and promotion of job holders are based on their technical
competence. Qualifications are prescribed for each job/ position.
5. Record–keeping: Every decision and action is recorded in a wide array of written documents
and preserved in its original as well as draft form.
6. Impersonal relations: The idea is to treat all employees equally and customers equally, and
not be influenced by individual differences. There is a rational personal administration
people are selected on their prudential and merits are paid according to their position in the
organization.

Merits:
● Proper delegation of authority in the organization.
● All actions are taken carefully because of rules and regulations.
● Behavior of the employees is rational.
● Behavior of employees is predictable.
● Leads to efficiency in the organization

Limitations of Bureaucratic approach

1. Rigidity: Rules and regulations in bureaucracy are often rigid and inflexible. Rigid
compliance with rules and regulations discourage initiative and creativity.
2. Goal displacement: Rules framed to achieve organizational objectives at each level
become an end in themselves.
3. Impersonality: A bureaucratic organization stresses the mechanical way of doing things.
The office a person holds is more important than the person himself. Contractual
obligations are given primacy over human relations.
4. Compartmentalization of objectives: Jobs are divided into watertight categories which
restrict people from performing tasks that they are capable of performing.
5. Paperwork: Bureaucracy involves excessive paperwork as every decision must be put in
writing. All documents have to be maintained in their draft and original forms. This leads
to great wastage of time, stationery and space.
6. Red Tape: Bureaucratic procedures involve inordinate delays and frustration in the
performance of tasks. The procedures are nevertheless valued, perpetuated and multiplied
for their own sake as also to pass the buck.

Criticism:
● Too much emphasis on rules and regulations.
● No importance is given to informal groups.
● Bureaucracy involves a lot of paperwork.
 ● There will be unnecessary delay in decision-making due to formalities and rules.
● There is difficulty in coordination and communication.

B. NEO CLASSICAL THEORY:

Neo- classical theory is also referred to as a behavioral science approach to modifying and
improving the classical theory. While classical theories focused more on structure and physical
aspects of the worker, Neo-classical theory gives importance to human and social aspects of
the worker and his relations in the organization.

Features:

1. Business organization is a social system.

2. Individuals are the part of informal groups in the organization.
3. Only economic rewards cannot motivate the individual employees, their social and
psychological needs should be met.
4. It is a cooperative attitude which can bring better results.
5. Management must aim at building social and leadership skills.
6. Productivity will be high only when the motivation is high.

I. Hawthorne experiments
The objective of the experiment was to find out the behavior and attitude of workers at the
workplace under better working conditions. In the company, when management provides the
benefits of medical allowance and pension with recreational facilities. Even though workers get
all facilities, the productivity was not up to expectations.
Four Phase of Hawthrone experiments:

1. Illumination Experiment The object of this experiment was to assess the effect of
illumination on employee output.
2. Relay assembly Test Room Studies These studies were conducted in three different
groups. The test group consisted of six female workers. Frequent changes were made in
working conditions such as shorter working hours, rest periods, hot lunch, friendly and
informal supervisors, free interaction among members of the group, etc. Productivity of
the group increased even when the improvements in working conditions were withdrawn.
It was concluded that socio-psychological factors, e.g., special attention, recognition,
sense of group pride and belonging exercise a greater influence on productivity than
 working conditions.
3. Mass Interview Programme A large number of workers were interviewed to judge their
attitudes and opinions on the factors influencing productivity.
4. Bank Wiring Observation Room Study In this experiment, a group of fourteen
workers was put under close observation. The pay of every member was made dependent
on the performance of the group as a whole.

The main findings of Hawthorne Experiments are as follows:

a) A work group is not merely a techno-economic unit. It is also a social system with a
culture of its own.
b) Workers are not merely rational economic beings motivated simply by money. They are
also socio-psychological beings and respond to the total work situation.
c) Social and psychological factors exercise a greater influence on employee behavior and
performance than physical conditions of work.
d) Workers act or react not as individuals but as members of a group. The informal groups
have their own norms and beliefs. These groups and their leaders exercise an overriding
influence on the attitudes, behavior and performance of individual employees.
e) Workers respond to the total work situation. Their behavior and performance are
conditioned by factors inside and outside the workplace.

Hawthorne Experiments have been criticized on the following grounds:

● Pro-management bias
● Wider Social Context Overlooked
● Unscientific
● No Mention of Trade Unions

Conclusions of Hawthorne studies:

1. Social Unit:

2. Group Influence:

3. Group Behaviour:

4. Motivation
5. Supervision:

6. Working Conditions:

7. Employee Morale:

8. Communication:

9. Balanced Approach:

II. HUMAN RELATIONS MOVEMENT

Hawthorne Experiments laid the foundations for the human relations movement in management.
Human relations school is a socio psychological approach to management. It suggests that a
business enterprise is a social system in which group norms exercise significant influence on the
behavior and performance of individuals. The human relations school is based on the following
ideas:

● The Individual: According to the human relations school, each person is unique. He
brings certain attitudes, beliefs, values, skills, etc. to the job situation. Therefore, an
individual is motivated by not only economic factors but by several social and
psychological factors.
● The work Group: Work is a social experience and most workers find satisfaction in
social or informal groups. The norms of such groups determine to a great extent the
attitudes and performance of workers. Therefore, managers should maintain good inter-
personal and inter-group relations to maximize productivity.
● The leader: As the leader of a work group, a supervisor/manager should provide a
pleasant work climate wherein employees are allowed to have a say in the decision
making process. He can gain respect and obedience by adjusting to various personalities
and situations.
● The work Environment: A positive work environment enables employees to satisfy
their needs as well as to achieve organizational goals. Positive work environment consists
of clearly defined goals, performance linked rewards, etc.

Contributions of human relations Approach:

● Human relations school has a normal justification. Employees are human beings and they
are entitled to be treated with respect and dignity.
● Human relations approach helps to satisfy the social and psychological needs of
employees.
● Human relations school highlights the people's side of organized. It therefore avoids the
imbalance caused by over emphasis on technical and administrative aspects under
 scientific management and administrative theory.
● A true concern for workers (those vital machines would yield rich dividends).
● Human relations school focuses attention on inter personal relations and dynamics of
work groups.
● It revolutionized management training by stressing people management skills and
managerial styles.

The human relations movement quickly attracted wide attention in both academic and industrial
circles. Many firms significantly changed their approach to management. They started employee
welfare programmes to put greater attention on the human factor.

Human relations approach, has, however, been criticized on the follow points:

● Unscientific- critics have questioned the scientific validity of the human relations
approach. Hawthorne experiments on which the approach is based stamps from a clinical
bias as they discounted theory. A group of American workers is representative of the total
work force. Experimental groups cannot be equated the work groups
● Short-sighted- human relation approach is based on over liberal assume assumptions
about people. It soft paddles the requirements of organizations and management and
neglects the real issue of the work situation.
 ● Over concern with happiness- The assumption is that happy workers productive workers.
But research has revealed no direct co-relation between moral and productivity. Human
relations approach suggests that group decision making is superior to individual decision
but this may not necessarily be true in all cases.
● Negative view of conflict- human religionists believed that conflict is ways bad and must
be avoided. They failed to recognized conflict as the creative force.

C. MODERN APPROACH TO MANAGEMENT:

Relating to the present or recent times. Characterized by or using the most up-to-date techniques,
equipment, etc. Management: The process of managing: administer and regulate (resources
under one‘s control).

The theory includes:

1. System Approach
2. Contingency Approach
3. Total Quality Approach
4. Decision Theory

I. System Approach:

They viewed organization as an organic and open system, which is composed of interacting and
interdependent parts, called subsystems. The system approach is top took upon management as a
system or as ―an organized whole” made up of sub- systems integrated into a unity or orderly
totality

Systems approach is based on the generalization that everything is inter-related and inter-
dependent. A system is composed of related and dependent element which when in interaction,
forms a unitary whole. A system is simply an assemblage or combination of things or parts
forming a complex whole.

In the systems approach, attention is paid towards the overall effectiveness of the system rather
than the effectiveness of the sub-systems. The interdependence of the sub-systems is taken into
account. The idea of systems can be applied at an organizational level.

In Appling system concepts to the organization, organizations are taken into account and not
only the objectives and performances of different departments (sub-systems).
One its most important characteristic is that it is composed of hierarchy of sub-systems. That is
the parts forming the major system and so on. For example, the world can be considered-to be a
system in which various national economies are sub-systems.

In turn, each national economy is composed of its various industries, each industry is composed
of firms‘ and of course a firm can be considered a system composed of sub-systems such as
production, marketing, finance, accounting and so on.

Contribution:

It has real significance to the practicing manager in the sense that managers operate in social
system and the organization is likely to succeed if the demands of the society in which it
operates are fully recognized.

Features of Systems Approach:

1. A system consists of interacting elements. It is set of inter-related and inter-dependent parts

arranged in a manner that produces a unified whole.
2. The various sub-systems should be studied in their inter-relationships rather, than in isolation
from each other.
3. An organizational system has a boundary that determines which parts are internal and which
are external.
4. A system does not exist in a vacuum. It receives information, material and energy from other
systems as inputs. These inputs undergo a transformation process within a system and leave
the system as output to other systems.
5. An organization is a dynamic system as it is responsive to its environment. It is vulnerable to
change in its environment.

Systems theory is useful to management because it aims at achieving the objectives and it views
organization as an open system. Chester Barnard was the first person to utilize the systems
approach in the field of management.
Here we also have the concept of open system and closed system:

Open system: a system which has the active interface with the external environment by
receiving the inputs from the environment and giving the outputs to the market.

Closed system: it is a self dependent system which does not have any interaction with the
external environment. It focuses only on internal relationship and interaction between sub
systems only.

Merits:

• It aims at meaningful analysis of organizations and their management.

• It facilitates the interaction between organization and its environment.
• It guides manager to avoid analyzing problems in isolation and to develop an
integrated approach.
• It analyses the system at different levels and inter-relates and integrates it into a unified
set of direction.
• It synthesizes individual goals and organizational goals
• It provides a framework for effective interaction of parts of the organization

Demerits:

• The approach does not recognize the differences in systems.

• It is theoretical and every time it is difficult to define the systems and subsystem and
understand their difference
• It fails to study the organization from different perspectives
• It fail to specify the nature of interrelation and interdependence
• It does not offer any tools or techniques for analysis
II. Contingency Approach of Management:

The contingency approach to management recognizes the situational nature of management.

According to this theory, management is absolutely situational. Manager practice depends upon
situation. Contingency theory is based upon situation. Contingency theory is based on the nature
and condition of situations. Every situation is unique, different situations demand different
managerial practice. Managerial practice appropriate in one situation cannot be generalized in
other situation.

Contingency approach to management is based upon the premise that there is no one best way
to handle any of the management problems. The application of management principles and
practices are dependent upon the circumstances and the situations.

The contingency approach to management is based on the idea that there is no one best way to
manage and that to be effective, planning, organizing, leading, and controlling must be tailored
to the particular circumstances faced by an organization.

The technique of problem solving appropriate in one situation may not be applicable in other
situation. There is no one best method of doing. There is no one best method of planning,
organizing, directing and controlling, before managing the organization and before handling the
problem. Manager must analyze, situation or conditions according to situation, he \she must
apply managerial practice. This theory does not agree with universal application of
management principles.

Different factors affect this theory or there are 6 major contingency variables. They are: -

1. Size of organization
2. Task technology
3. Environmental uncertainty
4. Geographical spread of organization
5. The type of work being done
6. Individual differences.

Features of Contingency

1. Management is situational in nature. The technique of management depends on complexity

of the situation.

2. Management principles are not universal in nature as there is no best style of management.
3. It helps in understanding the complex organizations as it focuses on multivariate nature of
organizations. It helps an organization to operate under different environmental conditions.
Rather than having a specific solution to solve problems, it provides a framework where
every solution depends upon the environmental conditions.

4. It provides insight into organization‘s adaptability to both internal and external

environment. It is a matter of fitting the internal environment to its external environment.

Advantages:

1. It is an integration of different schools of thought; classical, behavioural and

systems approach. It integrates the principles of different schools of thought and
applies them contingent upon the needs of the situation.
2. It is pragmatic in nature as solution to every problem is found after analysing the situation.

3. It follows the technique of multivariate analysis. It thinks of all possible variables

or factors that affect the situation and adopts the best.
4. It is adaptive in nature. It does not presume a pre-designed structure of the organization
but adopts a structure that helps the organization adapt to the environment.

5. It helps to design the organization structure and plan the information decision systems. A
small-sized organization may be centralized and a large-sized organization may be
decentralized in structure.

Limitations:
1. It does not follow the concept of ‗universality of principles‘ which often apply to
specific management situations.
2. As there is no definite solution to a problem, managers think of alternatives to arrive at
the right choice. This is costly in terms of time and money.
3. It is not possible for managers to determine all the factors relevant to the decision making
situation.
4. It is not possible to establish perfect relationship amongst these factors. Application of this
theory may, therefore, be a complicated task as decisions are based on limited information.
III. Total Quality Management Theory

TQM is a dynamic concept and so is its management. TQM has been accepted throughout the
world. It calls for continuous improvement of quality with the cooperation of workers through
innovation in product and technology so as to meet the changing requirements of the customer.

TQM is philosophy which believes in a company- wide responsibility towards quality. (TQM)
describes a management approach to long–term success through customer satisfaction. It refers
to meet the requirement of the customers consistently by continuously improvement.

In a TQM effort, all members of an organization participate in improving processes, products,

services, and the culture in which they work. Total Quality Management TQM, also known as
total productive maintenance, describes a management approach to long-term success through
customer satisfaction. In a TQM effort, all members of an organization participate in improving
processes, products, services, and the culture in which they work.

Total quality management can be summarized as a management system for a customer-focused

organization that involves all employees in continual improvement. It uses strategy, data, and
effective communications to integrate the quality discipline into the culture and activities of the
organization. Many of these concepts are present in modern quality system, the successor to
TQM.

Here are the 8 principles of total quality management:

1. Customer-focused The customer ultimately determines the level of quality. No matter

what an organization does to foster quality improvement—training employees, integrating
quality into the design process, upgrading computers or software, or buying new measuring
tools—the customer determines whether the efforts were worthwhile.
2. Total employee involvement
All employees participate in working toward common goals. Total employee commitment can
only be obtained after fear has been driven from the workplace, when empowerment has
occurred, and management has provided the proper environment. High-performance work
systems integrate continuous improvement efforts with normal business operations. Self-
managed work teams are one form of empowerment.
3. Process-centered
A fundamental part of TQM is a focus on process thinking. A process is a series of steps that
take inputs from suppliers (internal or external) and transforms them into outputs that are
delivered to customers (again, either internal or external). The steps required to carry out the
process are defined, and performance measures are continuously monitored in order to detect
unexpected variation.
4. Integrated system
Although an organization may consist of many different functional specialties often organized
into vertically structured departments, it is the horizontal processes interconnecting these
functions that are the focus of TQM.
5. Strategic and systematic approach
A critical part of the management of quality is the strategic and systematic approach to achieving
an organization‘s vision, mission, and goals. This process, called strategic planning or strategic
management, includes the formulation of a strategic plan that integrates quality as a core
component.
6. Continual improvement
A major thrust of TQM is continual process improvement. Continual improvement drives an
organization to be both analytical and creative in finding ways to become more competitive and
more effective at meeting stakeholder expectations.
7. Fact-based decision making
In order to know how well an organization is performing, data on performance measures are
necessary. TQM requires that an organization continually collect and analyze data in order to
improve decision making accuracy, achieve consensus, and allow prediction based on past
history.
8. Communications
During times of organizational change, as well as part of day-to-day operation, effective
communications plays a large part in maintaining morale and in motivating employees at
all levels. Communications involve strategies, method, and timeliness.

Benefits of TQM
1. TQM brings quality consciousness in the enterprise which and encourages the
production of quality products.
2. TQM helps in providing greater satisfaction to customers by meeting their
requirements. If customers are satisfied, the sales are increased.
3. Create good image of the customers by providing them with better quality goods
and services.
4. Effective and efficient utilization of resources ( men, material, money, machine, method)
5. Reduce wastages to minimum. The cost of production will reduce and profitability
will be increased.
6. Competitive position of the company will be improved.
7. Employees are more committed to higher quality and thus they would be motivated
and be well connected with the system of the organization.
Steps in implementing TQM:

W.E. Deming, is known as the father of Quality management.

The steps in PDCA cycle are:

1) Lay down policies and objectives of TQM. Determine what the customer is supposed
to receive and what they are actually receiving.
2) Chalk out the methods to achieve TQM objectives.
3) Educate and train workers and managers to understand and meet the requirements
of TQM.
4) Start the operation of TQM by introducing new products, machines, procedures etc.
5) Observe results of operation and find out the causes of non-conformance and place
the report before the top management.
6) Analyze the results and determine the consequences of non-conformance and place the
report before the top management.
7) Prevent undesired effects in quality improvement. Establish personal relationships with
employees so that they can voice their concerns and ideas.
8) Suggest measures for improvement of methods and design in future.

Requirements of Success in TQM:

For the successful implementation of TQM, the following guidelines should be followed:

1) The objectives and policies of the firm must reflect its commitment to quality as
a philosophy of customer satisfaction.
2) The TQM philosophy must be effectively communicated to each and every employee and
department, so that it is clearly understood throughout the organization.
 3) The TQM program should be properly designed to meet the requirements of the
customers.
4) The participation of all the employees should be encouraged, so that innovative ideas
are put forward by the employees. TQM should not be imposed upon the employees.
The management should make TQM an employees‘ program through proper training of
workers.
5) Workers and managers should be given the necessary training for the effective
implementation of TQM.
6) TQM must involve product design and improvement, adoption of new technology,
systems and procedures.
7) TQM should be considered a continuous program as the requirements of customers
keep on changing. TQM should also try integrate the operations of various departments.

IV. Decision Theory Approach

This approach was contributed by Simon, Cyert, and Forrester. According to this approach:

● Management is essentially decision-making.

● Members of the organization are decision-makers and problems solvers.
● Organization can be treated as a combination of various decision centers. The level
and importance of organization members are determined on the basis of importance of
decisions, which they make. Quality of decision affects the organization effectiveness.
● All factors affecting decision-making are the subject matter of study of management.
Besides processes and techniques in decision making factors affecting decisions are
information systems, social and psychological aspects of decision-makers.

Contribution:

● It demonstrates how managers can discharge their functions effectively and for
this approach it provides various tools.
● Decision theorists have grappled with decisions pertaining to diagnosis and the
resulting prescriptions for improving communication, incentives, reactions of the
individuals to group and analysis of human values write stated objectives.

Limitations:

● This approach does not take the total view of management. Decision-making is vital in
every school of management. This vital aspect cannot be denied but management is
more than mere decision-making.
Concept of Business ethics and social responsibility
The term ‗ethics‘ refers to value-oriented decisions and behavior. The word ethics comes from
Greek word, ‗Ethos‘, meaning character, guiding beliefs, and standards, ideals that pervade a
group or a community. Thus, ethics is study of moral behavior – the study of how the standards
of moral conduct among individuals are established and expressed behaviorally.

According to Dale S Beach. ―Ethics refer to a set of moral principles which should play very
significant role in guiding the conduct of managers and employees in the operation of any
enterprise‖. Examples:

● To charge fair prices for the customers.

● To use fair weights.
● To be honest with customers.
● To give fair treatment to workers.

Ethics refers to the rules and principles that define right and wrong conduct. There are ethical
dimensions to managerial decisions and actions.

Ethics are the critical examination of the standards of goods and evil, right and wrong, virtue and
vice. It is the study of whatever is right and good for humans. It is the entire body of moral
values that society attaches to the actions of human being.

Business ethics may be defined as moral principles or rules of behavior which should govern the
conducting business enterprises. Business ethics are answered with what is right and what is
wrong in the behavior of businessmen. It provides a code of conduct which can guide
businessmen in performing their jobs. It refers to the application of ethics to business. To be
more specific, business ethics is the study of good and evil, right and wrong and just and unjust
actions of businessmen.

So Business ethics further can be defined as a set of moral standards which people owning and
managing business is expected to follow. These standards are mean to govern the conduct of
business persons.

MANAGEMENT PROCESS AND ETHICS:

Management is defined as the process by which a co-operative group directs actions towards
common goals.

OR

The process of management is identified in asset of functions performed by managers to

accomplish the goals. It involves managerial steps such as planning, organizing, staffing,
directing and controlling.
Social Responsibility:

Social responsibility refers to the overall way in which a business itself tries to balance its
commitments to relevant groups and individuals in its social environment. Most companies strive
to be responsible to five main groups:

● Customers: Critical factors include charging fair prices, honoring warranties, and
standing behind product quality.
● Employees: Treating workers fairly, making them a part of the team, and respecting their
dignity promote a company‘s reputation.
● Investors: Managers must follow proper accounting procedures, provide appropriate
information to shareholders, and manage the organization to protect shareholder
investments.
● Suppliers: Partnership arrangements with suppliers can enhance market image and firm
reputation.
● Local Communities/ environment: Contributing to local programs has a positive impact
on the community.

Areas of Social Responsibility:

1. Responsibility Toward the Environment

● Air Pollution: Under new laws, many companies must install special devices to limit
pollutants they expel into the air.
● Water Pollution. Increased awareness of chemical and waste dumping, and the resulting
dangers, has led to improved water quality in many areas of the country.
● Land Pollution. Proper toxic waste disposal and recycling programs are allowing
companies to help restore land quality and to prevent further contamination.

2. Responsibility Toward Customers

● Consumer Rights. Consumerism is the social activism dedicated to protecting the rights
of consumers in their dealings with businesses.
● Unfair Pricing. Collusion occurs when two or more firms agree to collaborate on such
wrongful acts as price fixing; price gouging occurs when firms respond to increased
demand with steep price increases.
● Ethics in Advertising. Consumers deserve to be given product information that is truthful
and can be proven, as well as information that is not morally objectionable.

3. Responsibility Toward Employees

● Recruiting, hiring, training, promoting, and compensating are the bases for social
responsibility toward employees; a whistleblower is an employee who discovers and tries
to end a company‘s unethical, illegal, or irresponsible actions by publicizing them.

4. Responsibility Toward Investors

● Some wrongful acts include: Improper financial management; check kiting, in which a
check has been written against money that has not yet arrived at the bank; and insider
trading, in which someone uses confidential information to benefit from the purchase or
sale of stocks.