Course Title: Principles of Management

Course Code: HS 16101

Course Coordinator: Mr. Dipayan Das

Text books
• Koontz, H. and Weihrich, H., Essentials of Management: An
International, Innovation and Leadership Perspective, 10th Ed.,
McGraw Hill, 2015.
• Levin, R. I. and Rubin, D. S., Statistical Management, 7th Ed., Prentice
Hall India, 2011.
• Robbins, S. P.; Bergman, R.; Stagg, I. and Coutler M., Management,
7th Ed., Prentice Hall, 2015.
• Aswathapa, A. Organizational Behaviour, 2010.
Definition of Management
• Management controls the various activities in an organisation.
• Harold Koontz defined Management as “the process of designing and
maintaining an environment in which individuals, working together in
groups efficiently to accomplish selected aims”.
• Management of resources –
I. Human – managerial talent and labor
II. Financial – capital
III. Physical – raw materials, machines and offices
IV. Information – data for decision making
Example
Organization Human resource Financial resource Physical resource Information
resource

Royal Dutch/Shell Drilling workers Profits Refineries Sales forecast

group Corporate executives Stockholder investments Office building

NIT Sikkim Faculty Alumni contributions Computers Research reports

Administrative staff Government grants Campus facilities Govt. publications

Sikkim state Police officers Tax revenue Municipal Economic forecasts

Municipal employees Government grants buildings Crime statistics

Grocery store Grocery clerks Profits Building Price list from

Owner’s investment Display shelves suppliers
Newspaper ads for
competitors
Management in organization

Planning
&
Organizing
Decision
Inputs from environment
- Human resources making
Goals attained
- Financial resources - Efficiently
- Physical resources - Effectively
- Information resources
Controlling Leading
Industrial Management vs. Production
Management

Industrial Management Production Management

• Deals with the analysis, design • Deals with the concepts and
and control of a productive techniques specific to the
system. analysis and management of a
production activity.
Characteristics of Management
• Management is –
 Universal
 Dynamic
 A group of managers
 Purposeful
 Goal oriented
 Integrative function
 Social process
 Multi-faceted discipline
 Continuous process
 A system of authority
 A resource
 Intangible
Management as an Art
• A manager applies his knowledge and skills to coordinate the efforts of
his people.
• Management seeks to achieve concrete practical results.
• Management is creative as it brings out new situations and converts it
into outputs.
• Mastery in management requires a sufficiently long experience in
managing.
Management as Science
• A systemized body of knowledge.
• Underlying principles and theories developed through continuous
observation, enquiry, experimentation and research.
• Uses tools and techniques in decision making and achieving goals.
Techniques of Scientific Management
• Work study
- Method study or Motion study
- Work measurement or Time study
• Scientific task planning
• Standardization and simplification
• Differential piece rate system
• Functional foremanship
Techniques of Scientific Management
• Work study
- Method of investigating the work being carried out in an organisation.
• Scientific task planning
- Method of determining the standard task for an average worker.
• Standardization
- Method of producing maximum variety of products from the minimum variety (i.e.,
standardized) of materials, parts, tools and processes.
• Simplification
- Process of reducing the variety of products manufactured.
• Differential price rate system
- Method of wage payment.
• Functional foremanship
- Divide work according to specialization.
Levels and areas of management

• Marketing
• Finance
• Operations
• Human resources
• Administration
• Supply chain
• Others
Management hierarchy
Top level management
• Board of Directors, MD, Owners, Chief executives
- To analyse, evaluate and deal with the environmental factors.
- To establish long term goals and broad policies of the company.
- To appoint departmental and other key executives.
- To represent the company to the outside world.
- To coordinate the activities and efforts of different department.
Middle level management
• Department head, Branch manager, Sales head
- To interpret and explain the policies framed by Top management.
- To compile and issue detailed instructions regarding operations.
- To integrate various parts of a department.
- To motivate the lower level personnel to work for the organisation’s goals.
- To train the lower level personnel .
Low level management
• Supervisor, Foreman, Superintendent
- To play day to day activity within the goals lay down by higher authority.
- To assign jobs to the workers and to make arrangement for their training and
development.
- To evaluate and control workers and to maintain personal contact with them.
Importance of Management
• Achievement of group goals
• Optimum utilization of resources
• Economic growth
• Stability
• Human development
• Meet the challenge of change
Principles of Management
• Henry Fayol (1841 – 1925): Father of Management
• 14 principles of management
1. Division of work
2. Authority
3. Discipline
4. Unity of command
5. Unity of direction
6. Subordination of individual interests to general interest
7. Remuneration
8. Centralization
9. Scalar chain
10. Order
11. Equity
12. Stability of tenure of personnel
13. Initiative
14. Esprit de corps
Principles of Management
1. Division of work
- When employees are specialized, output can increase because they become
increasingly skilled and efficient.
2. Authority
- Managers must have the authority to give orders, but they must also keep in
mind that with authority comes responsibility.
3. Discipline
- Disciplines must be upheld in organisations, but methods for doing so can vary.
4. Unity of command
- Employees should have only one direct supervisor.
Principles of Management
5. Unity of direction
- Teams with the same objective should work under the direction of one
manager, using one plan. This will ensure that action is properly coordinated.
6. Subordination of individual interests to the general interest
- Interest of one employee should not be allowed to become more important than
those of the group.
7. Remuneration
- Satisfaction of employees depend upon fair remuneration for everyone.
8. Centralization
- The principle refers to how close employees are to the decision-making process.
Principles of Management
9. Scalar chain
- Employees should be aware of where they stand in organisation’s hierarchy.
10. Order
- The workplace facilities must be clean and safe for employees.
11. Equity
- Managers should be fair to the all staffs.
12. Stability of tenure of personnel
- Managers should strive to minimize employee turnover.
13. Initiative
- Employees should be given the necessary level of freedom to create and carry out
plans.
14. Esprit de corps
- Organisations should strive to promote team spirit and unity.
Evolution of Management Theory
• Approaches to management theory
I. Classical approach
- Scientific management
- Administrative management
- Bureaucratic management
II. Behavioural approach
- Human relations
- Human resources
- Behavioural science
III. Quantitative approach
- Operations research
- Production and operations management
IV. Systems approach
- Open systems
- Closed systems
V. Contingency approach
VI. Contemporary and other approaches
- Total Quality Management
- Excellence approach
- Indian management style
- Japanese management style
Classical approach
• Scientific management
 Frank W. Tayor is the father of Scientific Management.
 Management’s responsibility is in knowing what it wants the workers to do
and then seeing that they do it in the best and cheapest way.
 It focuses on the best way to do a job.
 Application of the scientific methods to work in order to determine the best
method for accomplishing each task (Method study).
 Workers should scientifically selected based on their qualifications and
trained to perform their jobs in optimal manner (Functional foremanship).
 Scientific development of performance standards and the implementation of a
pay-for-performance incentive plan based on work standard (Time study,
Differential price rate system).
Classical approach
• Administrative management
 Henry Fayol developed the framework of administrative management.
It emphasizes the role of the manager and the functions of management.
 Planning and decision making, Organizing, Leading, and Controlling.
 14 principles of management.
• Bureaucratic management
 Max Weber developed the concept of bureaucracy and a major contributor to
bureaucratic management.
 It focuses on the ideal form of organization.
 Division of labour and chain of command.
 Disadvantages are – rejection of innovative ideas and poor customer service.
Behavioural approach
• Human relations
 Whenever employees are given attention, productivity is likely to change irrespective
working conditions.
 An employee’s complaint frequently is a symptom of some underlying problem on the
job, at home or in the person’s past.
 Establish and maintain an effective communication system; hire and retain effective
personnel; and motivate those personnel.
• Human resource
 Employees want to do meaningful work, contribute, and participate in decision
making and leadership functions.
 Job rotation, Job enlargement, Job enrichment.
• Behavioural science
 Focuses on applying conceptual and analytical tools to the problem of understanding
and predicting behaviour of employees in the workplace.
Quantitative approach
• Operations research
 Linear programming – An algebraic method to determine the optimal
allocation of resources; Inventory control theory; Goal programming; Queuing
models; Game theory; and Simulation
⁓Specific identification and quantification of system goal/goals.
⁓Specific identification and quantification of all variables that affect the
attainment of goal/goals.
⁓Construct a mathematical model to represent the situation being studied.
⁓Appropriate technique to derive the feasible optimal solution, and
implementation of solution.
Quantitative approach
• Example of operation research problem
 Maximize the profit by producing 2 products A and B, where A requires 10, 6,
5 hr of processing on machine P, Q, R, respectively and B requires 7.5, 9, 13
hr on machine P, Q, R, respectively. The maximum weekly hr available for 3
machines P, Q, R are 75, 54, 65, respectively. Profit per unit of A and B are
Rs. 60 and Rs. 70, respectively.
 x = no. of product A; y = no. of product B
Max. Z = 60x + 70y
P: 10x + 7.5y ≤ 75
Q: 6x + 9y ≤ 54
R: 5x + 13y ≤ 65
Quantitative approach
• Production and operations management
 Emphasizes on the enhancement of productivity and quality of both the
manufacturing and service organisations.
 Major areas are –
 Capacity planning
 Facilities location
 Facilities layout
 Materials requirement planning
 Scheduling
 Purchasing and inventory control
 Quality control
 Just-In-Time inventory system
Systems approach
• Open system
 An open system interacts with its environments through giving and receiving
information.
 It takes inputs from within and from outside the organisation, and its actions
will produce outputs that impact the internal environment and the environment
outside of the organisation.
 More flexible compared to closed system.
 Example: Marketing and HR departments require external information.
• Closed system
 There is very little sharing between the various components of the
organisation and certainly little to no interaction with the environment outside
of the organisation.
 Example: Research & Development department
Contingency approach
 There is no one best way to manage.
 It depends on the situation i.e., external environment, technology,
organisational characteristics, characteristics of the manager,
characteristics of the subordinates.
Contemporary approach
TQM

• Total Quality Management

(TQM) Principles & Practices
Tools &
Techniques

 A philosophy to management
that focuses on managing the Leadership Quantitative Non-quantitative
entire organisation to deliver
quality goods and services to Customer
satisfaction
SPC ISO 9000

customers. Acceptance
Employee ISO 14000
Sampling
involvement

Reliability Benchmarking
Continuous
improvement
Experimental Total
design productive
maintenance
Supplier
partnership
FMEA

Performance
measures QFD
Contemporary approach
• Excellence approach
- It is a management approach which strives to achieve excellence in a fresh and
unconventional method. Example: Decentralization, Innovation,
Experimentation, Customer satisfaction.
• Indian management style
- It is an attitude of detachment to the outcome and focused concentration on the
work in hand that paves the way for success.
• Japanese management style
- It is a participative approach to management that brings in involvement and
commitment of employees of the organisation to contribute their best to
organisational goals.
Organisational Environment
Cultural

Social Legal

Technological Organisation Competitive

Political Economic

Demographic
Organisational Environment
• Economic factor • Demographic factor
- GDP - Age profile
- Interest rate - Gender profile
- Inflation - Income levels
- Taxation - Education level
- Employment and wages paid to - Occupation pattern
labors
- Cost of production
- Production processes
- Prices of goods and services
Organisational Environment
• Technological factor
- Computer-aided designs
- Computer controlled machines
- E-commerce
• Cultural factor
- Language
- Religion
- Heritage and values
• Legal and Political factors
- Govt. rules and regulations
- Govt. policies
• Social factor
- Harmful effects on society
- Environmental pollutions
• Competitive factor
- Price reduction
- Product development
- Advertising
- Packaging
- Supply chain management
- Incentives offered to retailers,
wholesalers
Decision making
• The act of choosing one alternative among a set of alternatives.
• Decisions should be rational.
• Decision making includes recognizing and defining the nature of a
decision situation, identifying alternatives, choosing the best
alternative, and putting it into practice.
• Decisions may be taken to address problems as well as in situations of
opportunity.
Characteristics of decision making
• Decision making implies choice.
• Continuous activity.
• Based on relevant information.
• Goal oriented process.
• Relates to specific problem/opportunity.
• Time consuming activity.
• Needs effective communication.
• Responsible job.
Types of decision
• Programmed decisions
- Structured
- Relies on previously established criteria.
- Applied to routine or frequent problems

• Non-programmed decisions
- Unstructured, novel, and nonrecurring.
- Applied to the problems which occur much less often.
- Most of the decisions are made by the top managers.
decision situation alternatives
Decision making process
Evaluating Selecting the
alternatives best alternative

Converting Following up
decision into action the action taken
Steps Details Example
Defining the decision Recognize the indication of a decision A plant manager sees that employee turnover
situation making situation. has increased by 5%.

Creative alternatives are desired. More

The plant manager can (1) increase wages, (2)
Identifying alternatives important the decision, more alternatives
increase benefits, (3) change hiring standards
should be generated.

Increasing benefits may not be feasible.

Determine the feasibility, satisfactoriness,
Evaluating alternatives Increasing wages and changing hiring
and consequences for each alternatives.
standards may satisfy all conditions.

Consider the situational factors and Changing hiring standards will take an
Selecting the best
choose the best alternative that fits the extended period of time to cut employee
alternative
situation. turnover, so increase wages.

With the permission from corporate

Converting decision into
Implement the chosen alternative. headquarters, the HR department establishes a
action
new wage structure.

The plant manger notes that, six months later,

Following up the action Take feedback regarding the decision
employee turnover dropped to its previous
taken made.
level.
Decision making conditions
• Decision making under certainty
- Management knows:
- What the alternatives are.
- What conditions are associated with each alternative.
- There is little chance of making a bad decision.
• Decision making under risk
- Risk of availability of alternatives, costs etc.
- Chance of making bad decision.
- Decisions are taken based on past experience, relevant information, estimation
of probability, mathematical modeling and simulations.
Decision making conditions
• Decision making under uncertainty
- Management does not know:
- What are the alternatives.
- The risks associated with each alternatives.
- Decisions are made based on past experience, intuition and own judgment.
- Major chances of taking bad decisions.
Decision aids
• Mathematical techniques often used by the decision-maker:
- Decision tree
- Decision matrices
- Linear programming
- Game theory
- PERT (Program Evaluation and Review Technique)
- CPM (Critical Path Method)
- EOQ (Economic Order Quantity)
- Break-even point analysis
Decision Tree - Example
• Decision tree for playing tennis
Decision Matrix - Example
• Decision matrix for choosing car
Game Theory - Example
PERT - Example
CPM - Example
Economic Order Quantity (EOQ)
Problems on EOQ
1. A company’s annual demand is 18000 units and price/unit is Rs. 4. If
ordering cost is Rs. 120/order and the inventory carrying cost is 12%
of unit purchase price. Determine the economic order quantity and
the number of orders to be placed.
2. A company makes bicycles. It produces 450 bicycles a month. It
buys the tires for bicycles from a supplier at a cost of Rs. 20/tire.
The company’s inventory carrying cost is estimated to be 15% of the
cost and the ordering cost is Rs. 550/order. Calculate the EOQ and
the total number of orders per year.
Break-even Point Analysis
Problems on BEP Analysis
• A product can be produced by four process as given below. To produce
100 units which process should be preferred.
Process Fixed cost (Rs.) Variable cost (Rs./unit)
A 20 3
B 50 1
C 10 4
D 30 2
Problems on BEP Analysis
• A company plans to set up a new workshop for the production of
mobile chargers. The fixed cost for the new workshop is Rs. 50,000/-
and the variable cost is Rs. 75/- per unit. If the company decides to sell
its products at Rs. 120/- per unit, what is the break-even quantity and
how many mobile chargers the company need to sell in order to earn a
profit of Rs. 20,000/-.