Unit-1 Introduction To Management and Organizations

MG5451- PRINCIPLES OF MANAGEMENT
Dr.C.Ramji
MG54511- PRINCIPLES OF MANAGEMENT 1

OBJECTIVE:
 To enable the students to study the evolution of Management, to study the
functions and principles of management and to learn the application of the
principles in an organization .
OUTCOME:
 Upon completion of the course, students will be able to have clear
understanding of managerial functions like planning, organizing, staffing,
leading & controlling and have same basic knowledge on international
aspect of management.

 UNIT I INTRODUCTION TO MANAGEMENT AND ORGANIZATIONS
Definition of Management – Science or Art – Manager Vs Entrepreneur - types of managers -managerial roles and skills –
Evolution of Management – Scientific, human relations, system and contingency approaches – Types of Business
organization - Sole proprietorship, partnership, company-public and private sector enterprises - Organization culture and
Environment – Current trends and issues in Management.
 UNIT II PLANNING
Nature and purpose of planning – planning process – types of planning – objectives – setting objectives – policies –
Planning premises – Strategic Management – Planning Tools and Techniques – Decision making steps and process.
 UNIT III ORGANISING
Nature and purpose – Formal and informal organization – organization chart – organization structure – types – Line and
staff authority – departmentalization – delegation of authority – centralization and decentralization – Job Design - Human
Resource Management – HR Planning, Recruitment, selection, Training and Development, Performance Management,
Career planning and management
 UNIT IV DIRECTING
Foundations of individual and group behaviour – motivation – motivation theories – motivational techniques – job
satisfaction – job enrichment – leadership – types and theories of leadership –communication – process of communication
– barrier in communication – effective communication –communication and IT.
 UNIT V CONTROLLING
System and process of controlling – budgetary and non-budgetary control techniques3 – use of computers and IT in
Management control – Productivity problems and management – control and performance – direct and preventive control
– reporting.
TEXTBOOKS:
 1. Stephen P. Robbins & Mary Coulter, ―Management‖, Prentice Hall
(India) Pvt. Ltd., 10th Edition, 2009.
 2. Harold Koontz & Heinz Weihrich ―Essentials of management‖ Tata
McGraw Hill,1998.
REFERENCES:
 1. Stephen A. Robbins & David A. Decenzo & Mary Coulter,
―Fundamentals of Management‖ Pearson Education, 7th Edition, 2011.
 2. Robert Kreitner & Mamata Mohapatra, ― Management‖, Biztantra, 2008.

 UNIT I INTRODUCTION TO MANAGEMENT AND ORGANIZATIONS
Definition of Management – Science or Art – Manager Vs Entrepreneur - types of
managers -managerial roles and skills – Evolution of Management – Scientific,
human relations, system and contingency approaches – Types of Business
organization - Sole proprietorship, partnership, company-public and private sector
enterprises - Organization culture and Environment – Current trends and issues in
Management.

UNIT I -INTRODUCTION TO MANAGEMENT AND ORGANIZATIONS
Definition of Management :
 According to Harold Koontz, “Management is an art of getting things done through and with the
people in formally organized groups.
 It is an art of creating an environment in which people can perform and individuals can co-
operate towards attainment of group goals”.
DEFINITION OF MANAGEMENT: ITS NATURE AND PURPOSE
Management is the process of designing and maintaining an environment in which individuals,
working together in groups, accomplish their aims effectively and efficiently.
This definition implies the following:
(a) Management is a process. It is a process of carrying out the essential functions of planning,
organizing, staffing, leading and controlling.
(b) Management applies to every kind of organization, whether it is government, profit making or
non profit making organizations.
(c) It applies to managers at all levels in the organization.
(d) The aim of all managers is the same: to create surplus.
(e) Managing is concerned with productivity: this implies effectiveness and efficiency.
Functions of Management
 The process of management can be better understood by breaking it down into

the five basic functions of a manager- planning, organizing, staffing, leading and
controlling.
 All the management concepts, principles, theory and techniques can be grouped
under these five essential functions.
 This framework of management functions is time-tested, though occasionally
some management experts prefer to interpret them slightly differently.
 Some scholars have organized managerial knowledge around the roles of
managers. Indeed, this approach has made some valuable contributions to the
study of management. It focuses on what managers do. It provides evidence of
planning, organizing, staffing, leading and controlling.
LEVELS OF MANAGEMENT
The three levels of management are as follows:

 The Top Management
 Middle Level Management
 Lower Level Management

The Top Management
 It consists of board of directors, chief executive or managing director.
 The top management is the ultimate source of authority and it manages goals and policies for an
enterprise.
 It devotes more time on planning and coordinating functions.
The role of the top management can be summarized as follows –
a. Top management lays down the objectives and broad policies of the enterprise.
b. It issues necessary instructions for preparation of department budgets, procedures, schedules etc.
c. It prepares strategic plans & policies for the enterprise.
d. It appoints the executive for middle level i.e. departmental managers.
e. It controls & coordinates the activities of all the departments.
f. It is also responsible for maintaining a contact with the outside world.
g. It provides guidance and direction.
h. The top management is also responsible towards the shareholders for the performance of the enterprise.

Middle Level Management

 The branch managers and departmental managers constitute middle level. They are responsible to the
top management for the functioning of their department. They devote more time to organizational and
directional functions.
 In small organization, there is only one layer of middle level of management but in big enterprises, there
may be senior and junior middle level management.
 Their role can be emphasized as –
a. They execute the plans of the organization in accordance with the policies and directives of the top
management.
b. They make plans for the sub-units of the organization.
c. They participate in employment & training of lower level management.
d. They interpret and explain policies from top level management to lower level.
e. They are responsible for coordinating the activities within the division or department.
f. It also sends important reports and other important data to top level management.
g. They evaluate performance of junior managers.
h. They are also responsible for inspiring lower level managers towards better performance.
Lower Level Management
 Lower level is also known as supervisory / operative level of management.
 It consists of supervisors, foreman, section officers, superintendent etc.
 “Supervisory management refers to those executives whose work has to be largely with personal oversight and direction of operative
employees”. In other words, they are concerned with direction and controlling function of management.
 Their activities include:
a. Assigning of jobs and tasks to various workers.
b. They guide and instruct workers for day to day activities.
c. They are responsible for the quality as well as quantity of production.
d. They are also entrusted with the responsibility of maintaining good relation in the organization.
e. They communicate workers problems, suggestions, and recommendatory appeals etc to the higher level.
f. They help to solve the grievances of the workers.
g. They supervise & guide the sub-ordinates.
h. They are responsible for providing training to the workers.
i. They arrange necessary materials, machines, tools etc for getting the things done.
j. They prepare periodical reports about the performance of the workers.
k. They ensure discipline in the enterprise.
l. They motivate workers.
m. They are the image builders of the enterprise because they are in direct contact with the workers.
 Taylor's Scientific Management
 Frederick Winslow Taylor well-known as the founder of scientific management was the first to
recognize and emphasis the need for adopting a scientific approach to the task of managing an
enterprise.
 He tried to diagnose the causes of low efficiency in industry and came to the conclusion that much
of waste and inefficiency is due to the lack of order and system in the methods of management.
 He found that the management was usually ignorant of the amount of work that could be done by
a worker in a day as also the best method of doing the job. As a result, it remained largely at the
mercy of the workers who deliberately shirked work.
 Elements of Scientific Management: The techniques which Taylor regarded as its essential
elements or features may be classified as under:
 1. Scientific Task and Rate-setting, work improvement, etc.

 2. Planning the Task.
 3. Vocational Selection and Training
 4. Standardization (of working conditions, material equipment etc.)
 5. Specialization
 6. Mental Revolution.

Scientific Task and Rate-Setting (work study): Work study may be defined as the systematic, objective and
critical examination of all the factors governing the operational efficiency of any specified activity in order
to effect improvement.
Work study includes.
(a) Methods Study: The management should try to ensure that the plant is laid out in the best manner and
is equipped with the best tools and machinery. The possibilities of eliminating or combining certain
operations may be studied.
(b) Motion Study: It is a study of the movement, of an operator (or even of a machine) in performing an
operation with the purpose of eliminating useless motions.
(c) Time Study (work measurement): The basic purpose of time study is to determine the proper time for
performing the operation. Such study may be conducted after the motion study. Both time study and
motion study help in determining the best method of doing a job and the standard time allowed for it.
(d) Fatigue Study: If, a standard task is set without providing for measures to eliminate fatigue, it may
either be beyond the workers or the workers may over strain themselves to attain it. It is necessary,
therefore, to regulate the working hours and provide for rest pauses at scientifically determined intervals.
(e) Rate-setting: Taylor recommended the differential piece wage system, under which workers performing
the standard task within prescribed time are paid a much higher rate per unit than inefficient workers who
are not able to come up to the standard set.
2. Planning the Task: Having set the task which an average worker must strive to perform to get wages at
the higher piece-rate, necessary steps have to be taken to plan the production thoroughly so that there is
no bottlenecks and the work goes on systematically.
3. Selection and Training: Scientific Management requires a radical change in the methods and procedures
of selecting workers. It is therefore necessary to entrust the task of selection to a central personnel
department. The procedure of selection will also have to be systematized. Proper attention has also to be
devoted to the training of the workers in the correct methods of work.

 4. Standardization: Standardization may be introduced in respect of the
following.
 (a) Tools and equipment: By standardization is meant the process of bringing
about uniformity. The management must select and store standard tools and
implements which will be nearly the best or the best of their kind.
 (b) Speed: There is usually an optimum speed for every machine. If it is
exceeded, it is likely to result in damage to machinery.
 (c) Conditions of Work: To attain standard performance, the maintenance of
standard conditions of ventilation, heating, cooling, humidity, floor space,
safety etc., is very essential.
 (d) Materials: The efficiency of a worker depends on the quality of materials
and the method of handling materials.
 5. Specialization: Scientific management will not be complete without the
introduction of specialization. Under this plan, the two functions of 'planning'
and 'doing' are separated in the organization of the plant. The `functional
foremen' are specialists who join their heads to give thought to the planning
of the performance of operations in the workshop. Taylor suggested eight
functional foremen under his scheme of functional foremanship.
 (a) The Route Clerk: To lay down the sequence of operations and instruct the workers
concerned about it.
 (b) The Instruction Card Clerk: To prepare detailed instructions regarding different
aspects of work.
 (c) The Time and Cost Clerk: To send all information relating to their pay to the
workers and to secure proper returns of work from them.
 (d) The Shop Disciplinarian: To deal with cases of breach of discipline and absenteeism.
 (e) The Gang Boss: To assemble and set up tools and machines and to teach the workers
to make all their personal motions in the quickest and best way.
 (f) The Speed Boss: To ensure that machines are run at their best speeds and proper
tools are used by the workers.
 (g) The Repair Boss: To ensure that each worker keeps his machine in good order and
maintains cleanliness around him and his machines.
 (h) The Inspector: To show to the worker how to do the work.
 6. Mental Revolution: At present, industry is divided into two groups – management and
labour. The major problem between these two groups is the division of surplus. The
management wants the maximum possible share of the surplus as profit; the workers
want, as large share in the form of wages. Taylor has in mind the enormous gain that
arises from higher productivity. Such gains can be shared both by the management and
workers in the form of increased profits and increased wages.
Henry Fayol's 14 Principles of Management:
 The principles of management are given below:

 1. Division of work: Division of work or specialization alone can give maximum productivity and
efficiency. Both technical and managerial activities can be performed in the best manner only
through division of labour and specialization.
 2. Authority and Responsibility: The right to give order is called authority. The obligation to
accomplish is called responsibility. Authority and Responsibility are the two sides of the
management coin. They exist together. They are complementary and mutually interdependent.
 3. Discipline: The objectives, rules and regulations, the policies and procedures must be
honoured by each member of an organization. There must be clear and fair agreement on the
rules and objectives, on the policies and procedures. There must be penalties (punishment) for
non-obedience or indiscipline. No organization can work smoothly without discipline -
preferably voluntary discipline.
 4. Unity of Command: In order to avoid any possible confusion and conflict, each member of an
organization must received orders and instructions only from one superior (boss).
 5. Unity of Direction: All members of an organization must work together to accomplish
common objectives.
 6. Emphasis on Subordination of Personal Interest to General or Common Interest: This is
also called principle of co-operation. Each shall work for all and all for each. General or
common interest must be supreme in any joint enterprise.

 7. Remuneration: Fair pay with non-financial rewards can act as the best incentive or
motivator for good performance. Exploitation of employees in any manner must be eliminated.
Sound scheme of remuneration includes adequate financial and nonfinancial incentives.
 8. Centralization: There must be a good balance between centralization and decentralization
of authority and power. Extreme centralization and decentralization must be avoided.
 9. Scalar Chain: The unity of command brings about a chain or hierarchy of command linking
all members of the organization from the top to the bottom. Scalar denotes steps.
 10. Order: Fayol suggested that there is a place for everything. Order or system alone can
create a sound organization and efficient management.
 11. Equity: An organization consists of a group of people involved in joint effort. Hence, equity
(i.e., justice) must be there. Without equity, we cannot have sustained and adequate joint
collaboration.
 12. Stability of Tenure: A person needs time to adjust himself with the new work and
demonstrate efficiency in due course. Hence, employees and managers must have job security.
Security of income and employment is a pre-requisite of sound organization and management.
 13. Esprit of Co-operation: Esprit de corps is the foundation of a sound organization. Union is
strength. But unity demands co-operation. Pride, loyalty and sense of belonging are
responsible for good performance.
 14. Initiative: Creative thinking and capacity to take initiative can give us sound managerial
planning and execution of predetermined plans.

Who Are Managers?
• Manager
• Someone who coordinates and oversees the work
of other people so that organizational goals can
be accomplished.

Classifying Managers
 First-line Managers
 Individuals who manage the work
of non-managerial employees.
 Middle Managers
 Individuals who manage
the work of first-line
managers.
 Top Managers
 Individuals who are responsible
for making organization-wide
decisions and establishing plans
and goals that affect the entire
organization.
What Is Management?
• Managerial Concerns
Efficiency
“Doing things right”
– Getting the most
output for the least
inputs
Effectiveness
“Doing the right things”
– Attaining
organizational goals

Effectiveness and Efficiency in
Management

What Managers Do?
 Functions Manager’s Perform
 Planning
 Defining goals, establishing strategies to achieve
goals, developing plans to integrate and coordinate
activities.
 Organizing
 Arranging and structuring work to accomplish
organizational goals.
 Leading
 Working with and through people to accomplish goals.
 Controlling
 Monitoring, comparing, and correcting work.
Management Functions

Is Management Science or Art ?
 Managing, like all other practices—whether medicine, music composition,
engineering, accountancy, or even baseball—is an art.
 The managers can work better by using the organized knowledge about
management. It is this knowledge that constitutes a science.
 Thus, managing as practice is an art; the organized knowledge underlying
the practice may be referred to as a science. In this context, science and art
are not mutually exclusive; they are complementary.
 As science improves, so should art, as has happened in the physical and
biological sciences. To be sure, the science underlying managing is fairly crude
and inexact because the many variables that managers deal with are extremely
complex. Nevertheless, such management knowledge can certainly improve
managerial practice.
 Executives who attempt to manage without management science must trust
luck, intuition, or do what they did in the past.
 In managing, as in any other field, unless practitioners are to learn by trial and
MG54511- PRINCIPLES OF MANAGEMENTerror, there is no place they can turn to for meaningful 24 guidance other than
the accumulated knowledge underlying their practice.
Manager Vs Entrepreneur
 Who is an Entrepreneur?
Very basically speaking, an entrepreneur is a one-man show
that runs entrepreneurship. However, such a person usually
has some unique attributes that allow him to be successful in
his endeavours. He is essentially an initiator and a leader. He
brings business ideas to fruition thus starting off his venture.
 Who is a Manager?
A manager, on the other hand, is not an owner of an
enterprise. Instead, he is the one that is responsible for the
management and administration of a group of people or a
department of the organization. His day to day job is to
manage his employees and ensure the organization runs
smoothly.
 The main difference between Entrepreneur and Manager is
their role in the organization. An entrepreneur is the
owner of the company whereas a Manager is the employee
of the company. Entrepreneur is a risk taker, they take
financial risk for their enterprise. The entrepreneur has a
MG54511- PRINCIPLES OF MANAGEMENT vision and focuses on achievements 25and profit.
What Managers Do?
 Roles Manager’s Play

 Roles are specific actions or behaviors expected of a
manager.
 Mintzberg identified 10 roles grouped around interpersonal
relationships, the transfer of information, and decision
making.
 Henry Mintzberg is a management expert, author and
academic. Mintzberg believes that skills are learned through
experience and cannot simply be taught in the classroom.

What Managers Do?
 Management Roles (Mintzberg)

 Interpersonal roles
 Figurehead, leader, liaison
 Informational roles
 Monitor, disseminator, spokesperson
 Decisional roles
 Entrepreneur, disturbance handler, resource
allocator, negotiator

Mintzberg’s Managerial Roles
• Interpersonal Roles
• Figurehead
• Leader
• Liaison
• Interpersonal Roles
• Monitor
• Disseminator
• Spokesperson
• Decisional Roles
• Entrepreneur
• Disturbance handler
• Resource allocator
• Negotiator

What Managers Do?
(***)
 Skills Managers Need
 Technical skills
 Knowledge and proficiency in a specific field
 Human skills
 The ability to work well with other people
 Conceptual skills
 The ability to think and conceptualize about abstract
and complex situations concerning the organization

Skills Needed at Different Management Levels

What Is An Organization?
 An Organization Defined
 A deliberate arrangement of people to accomplish
some specific purpose (that individuals
independently could not accomplish alone).
 Common Characteristics of Organizations
 Have a distinct purpose (goal)
 Composed of people
 Have a deliberate structure

Characteristics of Organizations

Why Study Management?
• The Value of Studying Management
• The universality of management
• Good management is needed in all organizations.
• The reality of work
• Employees either manage or are managed.
• Rewards and challenges of being a manager
• Management offers challenging, exciting and
creative opportunities for meaningful and fulfilling
work.
• Successful managers receive significant monetary
rewards for their efforts.

Universal Need for Management

Rewards and Challenges of Being A Manager

EVOLUTION OF MANAGEMENT THOUGHT
 The practice of management is as old as human civilization. The ancient civilizations of Egypt
(the great pyramids), Greece (leadership and war tactics of Alexander the great) and Rome
displayed the marvellous results of good management practices.
 The origin of management as a discipline was developed in the late 19th century.
 Over time, management thinkers have sought ways to organize and classify the voluminous
information about management that has been collected and disseminated.
 These attempts at classification have resulted in the identification of management
approaches.
 The approaches of management are theoretical frameworks for the study of management.
 Each of the approaches of management are based on somewhat different assumptions about
human beings and the organizations for which they work.
 The different approaches of management are
a) Classical approach,
b) Behavioural approach,
c) Quantitative approach,
d) Systems approach,
e) Contingency approach.
The formal study of management is largely a twentieth-century phenomenon.
EVOLUTION OF MANAGEMENT THOUGHT (Contd..)
a) THE CLASSICAL APPROACH:
The classical approach is the oldest formal approach of management thought. Its roots pre-date the twentieth century. The
classical approach of thought generally concerns ways to manage work and organizations more efficiently. Three areas of
study that can be grouped under the classical approach are scientific management, administrative management, and
bureaucratic management.
(i) Scientific Management.
Frederick Winslow Taylor is known as the father of scientific management. Scientific management (also called Taylorism or
the Taylor system) is a theory of management that analyses and synthesizes workflows, with the objective of improving
labour productivity. (jobs and work at the individual level of analysis)
(ii) Administrative Management.
Administrative management focuses on the management process and principles of management. In contrast to scientific
management, which deals largely with jobs and work at the individual level of analysis, administrative management
provides a more general theory of management. Henri Fayol is the major contributor to this approach of management
thought.
(iii) Bureaucratic Management.
Bureaucratic management focuses on the ideal form of organization. Max Weber was the major contributor to bureaucratic
management. Based on observation, Weber concluded that many early organizations were inefficiently managed, with
decisions based on personal relationships and loyalty.
He proposed that a form of organization, called a bureaucracy, characterized by division of labour, hierarchy, formalized
rules, impersonality, and the selection and promotion of employees based on ability, would lead to more efficient
management. Weber also contended that managers' authority in an organization should be based not on tradition or
charisma but on the position held by managers in the organizational hierarchy.
A bureaucracy typically refers to an organization that is complex with multi-layered systems and
processes. These systems
and procedures are designed to maintain uniformity and control within an organization. A bureaucracy describes the
established methods in large organizations or governments.
b) THE BEHAVIORAL APPROACH:

The behavioural approach of management thought developed, in part, because of perceived weaknesses in
the assumptions of the classical approach. The classical approach emphasized efficiency, process, and
principles. Some felt that this emphasis disregarded important aspects of organizational life, particularly as it
related to human behaviour. Thus, the behavioural approach focused on trying to understand the factors that
affect human behaviour at work.
(i) Human Relations.
The Hawthorne Experiments began in 1924 and continued through the early 1930s. One of the major
conclusions of the Hawthorne studies was that workers' attitudes are associated with productivity. Another
was that the workplace is a social system and informal group influence could exert a powerful effect on
individual behaviour. A third was that the style of supervision is an important factor in increasing workers'
job satisfaction.
(ii) Behavioral Science.
Behavioral science and the study of organizational behavior emerged in the 1950s and 1960s. The behavioral
science approach was a natural progression of the human relations movement. It focused on applying
conceptual and analytical tools to the problem of understanding and predicting behavior in the workplace.
The behavioral science approach has contributed to the study of management through its focus on
personality, attitudes, values, motivation, group behavior, leadership, communication, and conflict,
among other issues.
[The study of organizational behaviour gives insight on how employees behave and perform in the
workplace. It helps us develop an understanding of the aspects that can motivate
MG54511- PRINCIPLES OF MANAGEMENT 38 employees, increase their
performance, and help organizations establish a strong and trusting relationship with their employees.]
c) THE QUANTITATIVE APPROACH:

The quantitative approach focuses on improving decision making via the application of
quantitative techniques. Its roots can be traced back to scientific management.
(i) Management Science (Operations Research)
Management science (also called operations research) uses mathematical and statistical
approaches to solve management problems. It developed during World War II as
strategists tried to apply scientific knowledge and methods to the complex problems of
war. Industry began to apply management science after the war. The advent of the
computer made many management science tools and concepts more practical for industry.
(ii) Production And Operations Management.
This approach focuses on the operation and control of the production process that
transforms resources into finished goods and services.
Operations management emphasizes productivity and quality of both manufacturing and
service organizations. W. Edwards Deming exerted a tremendous influence in shaping
modern ideas about improving productivity and quality.
Major areas of study within operations management include capacity planning, facilities
location, facilities layout, materials requirement planning, scheduling, purchasing and
inventory control, quality control, computer integrated manufacturing, just-in-time
inventory systems, and flexible manufacturing systems.
d) SYSTEMS APPROACH- (***)

The simplified block diagram of the systems approach is given below.
 The systems approach focuses on understanding the organization as an open

system that transforms inputs into outputs.
 The systems approach began to have a strong impact on management thought in
the 1960s as a way of thinking about managing techniques that would allow
managers to relate different specialties and parts of the company to one
another, as well as to external environmental factors.

The systems approach focuses on the organization as a 40whole, its interaction
with the environment, and its need to achieve equilibrium.
e) CONTINGENCY APPROACH:
 The contingency approach to management is based on the idea that there is
no single best way to manage. Contingency refers to the immediate
contingent circumstances. Effective organizations must tailor their planning,
organizing, leading, and controlling to their particular circumstances.
 The contingency approach focuses on applying management principles and
processes as dictated by the unique characteristics of each situation.
 It emphasizes that there is no one best way to manage and that it depends on
various situational factors, such as the external environment, technology,
organizational characteristics, characteristics of the manager, and
characteristics of the subordinates.
 Contingency theorists often implicitly or explicitly criticize the classical
approach for its emphasis on the universality of management principles;
however, most classical writers recognized the need to consider aspects of the
situation when applying management principles.

Types of Business organization
A business is an enterprise which distributes or provides services where other members of the
community need and are able and willing to pay for it.
WHAT IS AN ORGANIZATION?
An organization is a deliberate arrangement of people who act together to accomplish some
specific purpose. Your college or university is an organization; so are government departments,
churches, Amazon, your neighbourhood video store, a basketball team, and any Company.
These examples are all organizations because they have three common characteristics:
1. Distinct purpose- This purpose is typically expressed in terms of a goal or a set of goals that the
organization hopes to accomplish.
2. People- One person working alone is not an organization. An organization requires people to
perform the work necessary to achieve its goals.
3. Deliberate structure- Whether that structure is open and flexible or traditional and clearly
defined, the structure defines members’ work relationships.
In summary, the term organization refers to an entity that has a distinct purpose, includes people or
members, and has some type of deliberate structure.
Purpose of Business Organization:
 People need to work together to accomplish goals.
 Goals are too large, too complex, too expensive to be achieved without cooperation.
 By working together, people can produce more & better goods and services.
Types of Business organization (contd..)
 Managers work in a variety of situations, and therefore the people to whom they are
held accountable vary considerably.
 Large organizations in the private sector are often publicly held , which means that
their shares are available on the stock exchange for public trading.
 Managers of publicly held companies report to a board of directors that is responsible to
shareholders (also known as stockholders).
 There are also numerous privately held organizations (whose shares are not available on
the stock exchange), both large and small. Privately held organizations can be
individually owned, family owned, or owned by some other group of individuals.
 A number of managers work in the non profit sector , where the emphasis is on
providing charity or services rather than on making a profit.
 Other organizational forms, such as nongovernmental organizations (NGOs) ,
partnerships, and cooperatives, also require managers. Many of these non profit
organizations are referred to as SMOs (small and medium-sized organizations).
 Many managers work in the public sector as civil servants for the local, provincial, or
federal government. The challenges of managing within government departments can be
quite different from the challenges of managing in publicly held organizations.
 Critics argue that working for governments is less demanding because there are few
measurable performance objectives, allowing employees to feel less accountable for
their actions.
 A business organization is classified in to two types.
 Individualistic institutions
 Government institutions

Types of Business organization
(contd..) Sole Proprietorship:
Advantages:
1. Sole Proprietorship: • Low start-up costs.
• Freedom from most regulations.
Characteristics: • Owner has direct control.
• All profits go to owner.
 One man ownership
• Easy to exit business.
 Unlimited liability • Hence efforts and rewards are directly related.
• Owner’s interest and caredirectly affects the
 Enjoyment of entire profit profit of the business.
 No separate legal entity Sole Proprietorship:
Disadvantages:
 Simplicity • Unlimited liability – Owner is entirely responsible for
all the liabilities.
 Self employment
• Death or illness endangers business
 Secrecy • Total responsibility
• More difficult to raise finance for business
• Growth limited to personal 48energies
• Personal affairs easily mixed or confused
2. Partnership:
 A partnership is a form of legal organization in which two or more business
owners share the management, profit and risk of the business.
Characteristics:
 Agreement
 Lawful business
 Sharing of profits
 Contractual relations
 Common management
 Multiplicity of business

2. Partnership:
Types of partners:
 Active Partners – Authorize to manage the business.
 Sleeping or Dormant Partners – Just an investor.
 Nominal Partners – Only lend his name for uplifting the image.
 Partners by estoppels – Behaviour makes other to believe as a partner.
 Secret partner – Name not disclosed to outsiders.
 Minor as a partner – Less than 18.

3. Companies:
 An association of many persons who contribute money / wealth to a common stock and
employ it in some trade and also shares the profit and loss.
Advantages:
 Limited liability
 More stable
 Easy expansion
 Democratic setup
 Large finance
Disadvantages:
 More legal formalities
 Delayed decision
 Difficult to maintain secrets.
Types of companies:
 Private Limited companies – Minimum paid up capital.
 Limited companies – Large scale involvinghuge amount of capital.
3. Companies:
 A private company is a small concern registered under Companies Act 1956.

For a company to be private limited it must satisfy the features:
 Minimum paid up capital is INR 1,00,000.
 Minimum number of members is 2 and maximum is 50 excluding the past employees.
 Restricts to transfer the shares.
 Prohibits public participation.
Advantages:
 Can be incorporated with just two persons.
 Facilitates easy formation and easy functioning.
 No need to file with a registrar to act as a director.
Disadvantages:
 Can’t expect democracy.
 Exempted from conduction statutory meeting.
 Can work with only two directors.

3. Companies:
Limited Company:
 A Limited Company is a large concern registered under Companies Act 1956.
Limited Company: (Private and Public enterprise)
 For a company to be private limited it must satisfy the features:
 Minimum paid up capital is INR 5,00,000.
 Minimum number of members is 7 and maximum is unlimited.
 No restriction to transfer the shares.
 Encourages public participation and capital is collected from public.
 Must have three directors.
 Should send the financial statement to the members and registrar.
 Private enterprise: Public enterprise:

3. Companies:
Cooperative organization:
 Voluntary association of persons for the mutual benefits and aims are accomplished
through self help and collective effort.
 One for all and all for one.
 Every state government has appointed a registrar of cooperative societies for

registering, controlling and supervising.
Types of cooperative societies:
 Producer’s cooperative societies.
 Consumer’s cooperative societies.
 Farmer’s cooperative societies.
 Cooperative marketing societies.
 Cooperative credit societies.

3. Companies:
Cooperative organization:
Advantages:
 Easy to form
 No obstruction for membership
 Limited liability
 Surplus shared by the members
Disadvantages:
 Lack of secrecy
 Cash trading
 Excessive government interference
 Absence of motivation
 Disputes and differences

3. Companies: (***)
Public Corporation:
 Autonomous corporate body created by a special state/central government.
 It acts as a statutory body to serve the general public.
Advantages:
 Financed by government.
 Internal autonomy.
 Free from government interference.
 Serves and protects public welfare.
Disadvantages:
 Misuse of power.
 Lack of interest.
 Inefficient operation.

ORGANIZATION CULTURE AND ENVIRONMENT
 MANAGER – OMNIPOTENT OR SYMBOLIC?

Omnipotent:
 Managers are directly responsible for an organization’s success or failure.
 The quality of the organization is determined by the quality of its managers.
Symbolic:
 Managers are not directly responsible for an organization’s success or
failure. Much losses are due to external factors.
 The ability of managers to affect outcomes is influenced and constrained by
external factors.
In reality, managers are neither all powerful nor helpless. Their decisions and actions are
constrained. Internal constrains comes from the organization’s culture and the external
constrains comes from the organization’s environment.

ORGANIZATION CULTURE AND ENVIRONMENT (contd..)
Organizational Culture Definition and Characteristics

 Organizational culture includes an organization’s expectations, experiences, philosophy, as
well as the values that guide member behavior, and is expressed in member self-image,
inner workings, interactions with the outside world, and future expectations. Culture is
based on shared attitudes, beliefs, customs, and written and unwritten rules that have
been developed over time and are considered valid.
 Culture also includes the organization’s vision, values, norms, systems, symbols, language,
assumptions, beliefs, and habits.
 Simply stated, organizational culture is “the way things are done around here”.
 While the above definitions of culture express how the construct plays out in the
workplace, other definitions stress employee behavioral components, and how
organizational culture directly influences the behaviors of employees within an
organization.
 Under this set of definitions, organizational culture is a set of shared assumptions that
guide what happens in organizations by defining appropriate behavior for various situations.
 Organizational culture affects the way people and groups interact with each other, with
clients, and with stakeholders.
 Organizational culture may influence how much employees identify with their organization.
 In business terms, other phrases are often used interchangeably, including “corporate
culture,” “workplace culture,” and “business culture.”
HOW IS ORGANIZATIONAL CULTURE CREATED AND

COMMUNICATED?
 Business leaders are vital to the creation and communication of
their workplace culture. However, the relationship between
leadership and culture is not one-sided. While leaders are the
principal architects of culture, an established culture influences
what kind of leadership is possible.
 Leaders must appreciate their role in maintaining or evolving an
organization’s culture. A deeply embedded and established culture
illustrates how people should behave, which can help employees
achieve their goals. This behavioral framework, in turn, ensures
higher job satisfaction when an employee feels a leader is helping
him or her complete a goal. From this perspective, organizational
culture, leadership, and job satisfaction are all linked.

Person Culture and Market Culture:

 In case of Person culture each individual is seen as more valuable than the organization itself. This
can be difficult to sustain, as the organization may suffer due to competing people and priorities.
Market cultures are results-oriented, with a focus on competition, achievement, and “getting the job
done”.
Adaptive Culture and Adhocracy Culture:
 The extent to which freedom is allowed in decision making, developing new ideas and personal
expression are vital parts of adaptive cultures and adhocracy cultures. Adaptive cultures value change
and are action-oriented, increasing the likelihood of survival through time. Adhocracy cultures are
dynamic and entrepreneurial, with a focus on risk-taking, innovation, and doing things first.
Power Culture, Role Culture, and Hierarchy Culture:
 Power cultures have one leader who makes rapid decisions and controls the strategy. This type of
culture requires a strong deference to the leader in charge.
 Role cultures are where functional structures are created, where individuals know their jobs, report
to their superiors, and value efficiency and accuracy above all else.
 Hierarchy cultures are similar to role cultures, in that they are highly structured. They focus on
efficiency, stability, and doing things right.
Task Culture and Clan Culture:
 In a task culture, teams are formed with expert members to solve particular problems. A matrix
structure is common in this type of culture, due to task importance and the number of small teams in
play.
 Clan cultures are family-like, with a focus on mentoring, nurturing, and doing things together.
ORGANIZATION CULTURE AND ENVIRONMENT (contd…)
ORGANIZATION CULTURE:
 Organizational culture is described as the shared values, principles, traditions,
and ways of doing things that influence the way organizational members act.
 “The way we do things around here.”
Seven dimensions / characters:

Source of organization culture:

 Vision and mission of the founder/organization.
 Past practices of the organization.
 Behaviour of the top management.
 Socialization of new employees to adapt to the culture.

Sources to learn culture:

 Stories – Narratives of significant events
 Rituals – Repetitive sequence of activities (annual meet rewards)
 Material symbols – Facilities and freedom to the employees
 Language – Acronyms (PFA, ASAP, ROFL)
Functions of the culture:
 Distinguishes one organization from other.
 Conveys a sense of identity to all employees.
 Facilitates commitment towards organization interest.
 Enhances the stability of the system.
 Control mechanism that shapes and guide the attitudes and behaviour of
employees.

ORGANIZATION ENVIROMENT:
 The events that occur which affects the way a business operates, in either
positive or negative way.
 There are two different types of factors.
a) Internal environment
b) External environment
Internal Environment factors:
 Management
 Organization structures
 Employees
 Organizational cultural change
 Financial changes
External Environment factors:
 Macro / general environment

Micro / task environment 64
Macro / general Environment:
 Technology
 Economic conditions
 Political factors
 Socio cultural factors
Micro / task Environment:
 Suppliers
 Competitors
 Customers

Current Trends and Issues in Management.
 Current Trends in Management

Organizations face rapid change due to globalization or changes in the market
conditions. Organizational change is one of the latest and major trends of the
management, because it deals with a wide range of functions as well as activities
of a company. Simply, organizational change is an approach to
shifting/transitioning individuals, teams, and organizations from a current state
to a desired future state. The main goal of organizational change is to maximize
an organization’s benefits and minimize the change impacts on workers and
avoid distractions.
Simply, the current trends in the organizational change are: globalization,
diversity, flexibility, flat and networks.

Current Trends and Issues in Management (contd…)
Globalization:
 It is the major and current trend in the organizational change.
 Globalization can be defined as a process of international integration arising
from the interchange of world views, products, ideas, and other aspects of
culture.
 In today’s global environment, organizations are operating in an international
economy that is characterized by the greater and stronger competition, greater
economic interdependence and collaboration. For instance, most of products and
services produced by the organizations are being consumed outside the nation.
 At the same time, due to the globalization, business organizations are using
corporate business strategies, marketing plans and production efforts to local
domestic markets. Along with this, in order to stay competitive and to increase
the level of profits, most of business organizations are using offshore
outsourcing. It means, companies are adopting and implementing outsourcing
strategies in order to take core competitive opportunities. In this way, business
organizations are also reducing the costs and increasing profitability

Diversity:
 It is another imperative and latest trend in the organizational change. Diversity may be defined in
terms of similarities and differences among employees in terms of age, cultural background,
physical abilities and disabilities, race, religion and sex.
Flexibility:
 Diversity as well as globalization trends of organizational change are also forcing the business
organizations to become more flexible and adaptable. For example, to be able to function globally
and to embrace diversity, leaders and employees in organizations are developing wider range of
skills and strategies to work with diverse groups of people in the workplace as well as in the
marketplace.
 On the other hand, some of businesses organizations allow workers to have very different work
arrangements and payment schedules. Some organizations are treating some workers as
independent consultants rather than employees. For example, in certain occupations, advances in
communication and information technologies have enabled telecommuting working at home via
computer.
 One consequence of this is the blurring of boundaries between work and home and where and when
work occurs. The benefits of greater flexibility may be countered by the negative consequences of
working 24/7 including higher stress and burnout. In order to stay competitive, organizations are
constantly changing and restructuring the organization. This is increasing flexibility and decreasing
costs for the companies.
68

Flat structure:
 In today’s changing commercial era, speed or response time is critical. Business
organizations are developing new technologies to the changes in order to survive in
the competitive environment. In this way, in order to maximize response time,
organizations are flattening their hierarchies and structures.
 On the other hand, flat organizations are making effective decisions more quickly,
because each person is closer to the ultimate decision-makers. At the same time,
there are fewer levels of management and workers are empowered to make
decisions.
Networks:
 As per this trend, organizations are encouraging horizontal communication among
workers rather than working through the organizational hierarchy. It is often faster
for workers who need to coordinate with each other simply to communicate
directly. Such organizations are highly networked.
 Due to the stronger network, organizations have greater flexibility. They are also
more competitive in the global marketplace.

 Changes in socio – economic and political conditions are bound to bring the changes
in environment within the organization.
1. Workforce diversity:
 The biggest challenge for an organization will be accommodating diverse groups of
people at work place.
 If an organization succeeds in this, it can increase the creativity and innovation.
2. Changing demographics of workforce:
 Increase in young workers, friends, women employees, etc.
 Such workforce requires to be handled with circumspection.
3. Changing employee expectation:
 Organization have to redraw new methods of motivation such as job design.
 In terms attractive remuneration (housing, job security, empowerment, etc.)

Current Trends and Issues in Management (contd..)
4. Organization design and structure:

 Designing an organization with foreign concepts such as quality
circles, TQM, etc.
5. Technological up gradation:
 In wake of technological advances, new jobs will be created and
many old jobs will become redundant.
6. Management of human relations:
 Satisfaction of employees.
 Ego based on qualification of employees.
7. Changes in legal environment:
 Change in political situation, women working in night shift.
8. Change in industrial relations:
 Tie up with industries.

9. Expanding globalization:
 Business have crossed national boundaries.
10. Adaptability
Indian business in the globalization:
 New Industrial Policy (NIP) 1991.
 Advances in technology in area of telecommunication,
transportation and IT have made possible the global business.
Globalization:
Globalization means integration of countries through commerce,
transfer of technology, and exchange of information and culture.
Multi National Corporations:
An enterprise operating in several countries but managed from
home country. Any company or group that derives a quarter of its
revenue from operations outside of its home country is considered
as MNC.

Multi National Corporations:
Advantages:
 Inexpensive labour.
 Availability of natural resources.
 Favourable tax arrangements.
 Fresh markets for products.
 New jobs with higher pay and greater challenge.
 Transfer of advanced technology.
 Array of social benefits from sharing.
Disadvantages:
 Competition from MNC affects local industry.
 Utilizes local labour force at low wages to yield high profits.
 Lack of development in local R&D.

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MG5451- PRINCIPLES OF MANAGEMENT

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 The process of management can be better understood by breaking it down into

The three levels of management are as follows:

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Middle Level Management

 1. Scientific Task and Rate-setting, work improvement, etc.

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 The principles of management are given below:

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 Roles Manager’s Play

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 Management Roles (Mintzberg)

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b) THE BEHAVIORAL APPROACH:

c) THE QUANTITATIVE APPROACH:

d) SYSTEMS APPROACH- (***)

 The systems approach focuses on understanding the organization as an open

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 A private company is a small concern registered under Companies Act 1956.

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 Every state government has appointed a registrar of cooperative societies for

MG54511- PRINCIPLES OF MANAGEMENT 54

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MG54511- PRINCIPLES OF MANAGEMENT 56

 MANAGER – OMNIPOTENT OR SYMBOLIC?

MG54511- PRINCIPLES OF MANAGEMENT 57

Organizational Culture Definition and Characteristics

HOW IS ORGANIZATIONAL CULTURE CREATED AND

MG54511- PRINCIPLES OF MANAGEMENT 59

Person Culture and Market Culture:

Seven dimensions / characters:

MG54511- PRINCIPLES OF MANAGEMENT 61

Source of organization culture:

MG54511- PRINCIPLES OF MANAGEMENT 62

Sources to learn culture:

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 Current Trends in Management

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