Management Science Chapter 1 PDF

MANAGEMENT SCIENCE CHAPTER 1: Introduction to Management and Organisation PROF. Monicah Alexandra Patricia C. Mariano Introduction to Management and Organisation:  Concepts of Management and organization  Nature,  Importance and  Functions of Management,  Sys...

MANAGEMENT SCIENCE CHAPTER 1: Introduction to Management and Organisation PROF. Monicah Alexandra Patricia C. Mariano Introduction to Management and Organisation:  Concepts of Management and organization  Nature,  Importance and  Functions of Management,  Systems Approach to Management  Taylor's Scientific Management Theory  Fayal's Principles of Management  Maslow's theory of Hierarchy of Human Needs  Douglas McGregor's Theory X and Theory Y  Hertzberg Two Factor Theory of Motivation  Leadership Styles, Social responsibilities of Management, Designing Organisational Structures: Basic concepts related to Organisation - Departmentation and Decentralisation,  Types and Evaluation of mechanistic and organic structures of organisation and suitability. INTRODUCTION  In the present context, managing has become one of the most important areas of human activity because of increasing role of large and complex organisations in the society. Because of their increasing role, the organisations have attracted the attention of both practitioners and academicians to find out the solutions for business problems.  Defining the term management precisely is Concept not so simple because the term management is used in a variety of ways. Being a new discipline, it has drawn concepts and principles from a number of disciplines such as economics, sociology, psychology, anthropology, and statistics and so on. Each group of contributors has treated management differently. For example, economists have treated management as a factor of production; sociologists have treated it as a class or group of persons; practitioners have treated it as a process comprising different activities. DEFINITIONS from Different Entrepreneur MANAGEMENT- is the art of MANAGEMENT- is the getting things done through accomplishment of results and with people in formally through the efforts of other people organized groups MANAGEMENT- is the art of MANAGEMENT- is a process knowing what you want to do involving planning, and then seeing that it is done in organizing, staffing, directing the best and cheapest way and controlling human efforts to achieve stated objectives in an organization. MANAGEMENT- is the art of securing maximum results MANAGEMENT- is simply the with minimum effort so as to process of decision making secure maximum prosperity and and control over the action of happiness for both employer and human beings for the expressed employee and give the public the purpose of attaining pre- best possible service determined goals  MANAGEMENT is the process to get the maximum results of the things that you want to be done with minimum effort by simply making a decision and control over the human effort. NATURE OF MANAGEMENT  The study and application of management techniques in managing the affairs of the organization have changed its nature over a period of time. The following points will describe the nature of management:  1) Multidisciplinary  2) Dynamic nature of Principles  3) Relative, Not absolute Principles  4) Management: Science or Art  5) Management as profession  6) Universality of management MULTIDISCIPLINAR DYNAMIC NATURE Y  Management has been OF PRINCIPLES developed as a separate discipline, but it draws  Principle is a knowledge and concepts fundamental truth which from various disciplines establishes cause and like psychology, sociology, effect relationships of a anthropology, economics, function. Based on statistics, operations integration and research etc.,. supported by practical Management integrates the idea and concepts evidences, management taken from these has framed certain disciplines and presents principles. However, newer concepts which can these principles are be put into practice for flexible in nature and managing the change with the changes organisations in the environment in which an organization exists.  RELATIVE, NOT MANAGEMENT: ABSOLUTE PRINCIPLES SCIENCE OR ART  There is a controversy whether  Management principles are relative, not absolute, and they management is science or art. should be applied according to  An art is personal skill of business affairs. the need of the organization. Art is characterized by practical knowledge, Each organization may be personal creativity and skill. The more one different from others. The difference may exist because of practices an art, the more professional one time, place, socio-cultural becomes. Management can be considered factors, etc.,. as an art because it satisfies all these criterion of an art.  A science is a systematized body of knowledge of facts. It can establish cause- and-effect relationships among various factors. It involves basic principles, which are capable of universal application. Management can be considered as science because it satisfies all these criterion of a science. MANAGEMENT AS UNIVERSALITY OF PROFESSION MANAGEMENT  Management has been regarded  Management is a universal phenomenon. as a profession by many while However, management principles are not many have suggested that it has universally applicable but are to be not achieved the status of a modified according to the needs of the profession. Profession refers to a situation. vocation or a branch of advanced learning such as engineering or medicine. Importance of Management  Management has been important to the daily lives of people and to the organizations. The importance of management may be traces with the following:  Effective utilization of Resources  Development of Resources  It ensures continuity in the organization  Integrating various interest groups  Stability in the Society Effective utilization of Resources  Management tries to make effective utilization of various resources. The resources are scarce in nature and to meet the demand of the society, their contribution should be more for the general interests of the society.  Management not only decides in which particular alternative a particular resource should be used, but also takes actions to utilize it in that particular alternative in the best way. Development of Resources  Management develops various resources. This is true with human as well as non-human factors. Most of the researchers for resource development are carried on in an organized way and management is involved in these organized activities. It ensures continuity in the organization  Continuity is very important in the organisations. Where there are no proper guidelines for decision making continuity can not be guaranteed. It is quite natural that new people join while some others retire or leave the organization. It is only management that keeps the organization continuing. Integrating various interest groups  In the organized efforts, there are various interest groups and they put pressure over other groups for maximum share in the combined output. For example, in case of a business organization, there are various pressure groups such as shareholders, employees, govt. etc. these interest groups have pressure on an organization. Management has to balance these pressures from various interest groups. Stability in the Society  Management provides stability in the society by changing and modifying the resources in accordance with the changing environment of the society. In the modern age, more emphasis is on new inventions for the betterment of human beings. These inventions make old systems and factors mostly obsolete and inefficient. Management provides integration between traditions and new inventions, and safeguards society from the unfavorable impact of these inventions so that continuity in social process is maintained. SCOPE OF MANAGEMENT  Generally, the scope of management hovers around the following functional areas :  1. Production management  2. Marketing management  3. Financial management  4. Personnel management PRODUCTION MANAGEMENT  Production means creation of utilities by converting raw material into final product by various scientific methods and regulations. It is very important field of management. Various sub-areas of the production department are as follows.  Plant lay out and location: this area deals with designing of plant layout, decide about the plant location for various products and providing various plant utilities Production planning: Managers have to plan about various production policies and production methods.  Material management: this area deals with purchase, storage, issue and control of the material required for production department.  Research and Development: this area deals with research and developmental activities of manufacturing department. Refinement in existing product line or develop a new product are the major activities.  Quality Control: quality control department works for production of quality product by doing various tests which ensure the customer satisfaction. MARKETING MANAGEMENT  Marketing management involves distribution of the product to the buyers. It may need number of steps. Sub areas are as follows  Advertising: this area deals with advertising of product, introducing new product in market by various means and encourage the customer to buy these products.  Sales management: sales management deals with fixation of prices, actual transfer of products to the customer after fulfilling certain formalities and after sales services.  Market research: It involves in collection of data related to product demand and performance by research and analysis of market. FINANCE AND ACCOUNTING MANAGEMENT  Financial and accounting management deals with managerial activities related to procurement and utilization of fund for business purpose. Its sub areas are as follows:  Financial accounting: It relates to record keeping of various financial transactions, their classification and preparation of financial statements to show the financial position of the organization.  Management accounting: It deals with analysis and interpretation of financial record so that management can take certain decisions on investment plans, return to investors and dividend policy  Taxation: this area deals with various direct and indirect taxes which an organization has to pay.  Costing: costing deals with recording of costs, their classification, and analysis and cost control. PERSONNEL MANAGEMENT  Personnel management is the phase of management which deals with effective use and control of manpower. Following are the sub areas of personnel management  Personnel planning: this deals with preparation inventory of available manpower and actual requirement of workers in organization.  Recruitment and selection: this deals with hiring and employing human being for various positions as required. ;  Training and development: training and development deals with process of making the employees more efficient and effective by arranging training programs. It helps in making team of competent employees which work for growth of an organization.  Wage administration: It deals in Job evaluation, merit rating of Jobs and making wage and incentive policy for employees.  Industrial relation: It deals with maintenance of overall employee relation. FUNCTIONS OF MANAGEMENT:  To achieve the organisational objectives managers at all levels of  Planning organization should perform different  Organizing functions. A function is a group of similar activities. The list of  Staffing management functions varies from  Directing author to author with the number of functions varying from three to eight.  Controlling  Different authors presented different variations. By combining some of functions, these are broadly grouped into Planning, Organising, Staffing, Directing, and Controlling. PLANNING  Planning is the conscious determination of future course ofaction. This involves why an action, what action, how to take action, and when to take action. Thus, planning includes determination of specific objectives, determining projects and programs, setting policies and strategies, setting rules and procedures and preparing budgets. ORGANIZING  Organising is the process of dividing work into convenient tasks or duties, grouping of such duties in the form of positions, grouping of various positions into departments and sections, assigning duties to individual positions, and delegating authority to each positions so that the work is carried out as planned. It is viewed as a bridge connecting the conceptual idea developed in creating and planning to the specific means for accomplishment these ideas. STAFFING  Staffing involves manning the various positions created by the organizing process. It includes preparing inventory of personal available and identifying the sources of people, selecting people, training and developing them, fixing financial compensation, appraising them periodically etc. DIRECTING  when people are available in the organization, they must know what they are expected to do in the organization. Superior managers fulfill this requirement by communicating to subordinates about their expected behavior. Once subordinates are oriented, the superiors have continuous responsibility of guiding and leading them for better work performance and motivating them to work with zeal and enthusiasm. Thus, directing includes communicating, motivating and leading. CONTROLLING  Controlling involves identification of actual results, comparison of actual results with expected results as set by planning process, identification of deviations between the two, if any, and taking of corrective action so that actual results match with expected results. LEVELS OF MANAGEMENT TOP LEVEL MANAGEMENT MIDDLE LEVEL MANAGEMENT LOWER LEVEL MANAGEMENT TOP LEVEL MANAGEMENT ROLES OF TOP MANAGEMENT  It consists of board of  Top management lays down the objectives directors, chief executive and broad policies of the enterprise. or managing director.   It issues necessary instructions for The top management is preparation of department budgets, the ultimate source of procedures, schedules etc.  It prepares strategic plans & policies for the authority and it manages enterprise. goals and policies for an   It appoints the executive for middle level enterprise. It devotes i.e. departmental managers. more time on planning   It controls & coordinates the activities of and coordinating all the departments. functions.   It is also responsible for maintaining a contact with the outside world.   It provides guidance and direction.   The top management is also responsible towards the shareholders for the performance of the enterprise. MIDDLE LEVEL MANAGEMENT ROLES OF MIDDLE MANAGEMENT  The branch managers and  They execute the plans of the organization in departmental managers accordance with the policies and directives of the top constitute middle level. management. They are responsible to  They make plans for the sub-units of the organization. the top management for the functioning of their  They participate in employment & training of lower department. They devote level management. more time to  They interpret and explain policies from top level organizational and management to lower level. directional functions. In  They are responsible for coordinating the activities small organization, there is within the division or department. only one layer of middle  It also sends important reports and other important level of management but data to top level management. in big enterprises, there may be senior and junior  They evaluate performance of junior managers. middle level management.  They are also responsible for inspiring lower level managers towards better performance LOWER LEVEL MANAGEMENT ROLES OF LOWER MANAGEMENT  Lower level is also known as  Assigning of jobs and tasks to various workers. supervisory / operative level  They guide and instruct workers for day to day activities. of management. It consists  They are responsible for the quality as well as quantity of of supervisors, foreman, production. section officers,  They are also entrusted with the responsibility of superintendent etc. maintaining good relation in the organization. According to R.C. Davis,  They communicate workers problems, suggestions, and ―Supervisory management recommendatory appeals etc to the higher level and refers to those executives higher level goals and objectives to the workers. whose work has to be  They help to solve the grievances of the workers. largely with personal  They supervise & guide the sub-ordinates. oversight and direction of  They are responsible for providing training to the operative employees‖. In other words, they are workers.  They arrange necessary materials, machines, tools etc concerned with direction and controlling function of for getting the things done.  They prepare periodical reports about the performance of management. the workers.  They ensure discipline in the enterprise.  They motivate workers.  They are the image builders of the enterprise because they are in direct contact with the workers. FAYOL’S ADMNISTRATIVE MANAGEMENT  Henry Fayol is a French Industrialist and the father of modern operational management.  GENERAL PRINCIPLES OF MANAGEMENT:  Fayol has given 14 principles of management. He has made distinction between management principles and management elements. While management principles is a fundamental truth and establishes cause effect relationship, elements of management denotes the function performed by a manager. While giving the management principles, Fayol has emphasized two things.  1. the list of management principles is not exhaustive but suggestive and has discussed only those principles which he followed on most occasions.  2. principles of management are not rigid but flexible FAYOL’S MANAGEMENT PRINCIPLES the importance of general interest. Therefore, superiors should set an example in fairness and goodness.  1. Division of work: It is helpful to take the advantage of specialization. Here, the work is divided among the members of the  7. Remuneration to Personnel: Remuneration to employees group based on the employees skills and talents. It can be applied at should be fair and provide maximum possible satisfaction to all levels of the organization. employees and employers. Fayol did not favor profit sharing plan for workers but advocated it for managers. He was also in  2. Authority and Responsibility: Fayol finds authority as a favor of non-financial benefits. continuation of official and personal factors. Official authority is derived from the manager’s position and personal authority is derived from personal qualities such as intelligence, experience, moral worth, past services, etc., Responsibility arises out of assignment of activity. In order to discharge the responsibility properly, there should be parity between authority and responsibility.  3. Discipline: All the personal serving in an organization should be disciplined. Discipline is obedience, application, behavior and outward mark of respect shown by employees.  4. Unity of Command: Unity of command means that a person should get orders from only one superior. Fayol has considered unity of command as an important aspect in managing an organization. He says that ―should it be violated, authority is undermined, discipline is in jeopardy, order disturbed, and stability threatened.‖  5. Unity of Direction: According to this principle, each group of activities with the same objective must have one head and one plan. It is concerned with functioning of the organization I respect of grouping of activities or planning. Unity of direction provides better coordination among various activities to be undertaken by an organization.  6. Subordination of individual interest to general interest: Individual interest must be subordinate to general interest when there is conflict between the two. However factors like ambition, laziness, weakness, etc., tend to reduce FAYOL’S MANAGEMENT PRINCIPLES  8. Centralization: Everything which goes to by everyone and it brings loyalty in the organization. The application of equity requires good sense, experience and good nature. increase the importance of subordinate’s role is decentralization; every thing which goes to reduce itis centralization. The degree of centralization or  12. Stability of tenure: No employee should be decentralization is determined by the needs of the company. removed within short time. There should be reasonable security of jobs. Stability of tenure is  9. Scalar Chain: There should be a scalar chain of essential to get an employee accustomed to new authority and of communication ranging from the work and succeeding in doing it well highest to the lowest. It suggests that each  communication going up or coming down must flow 13. Initiative: Within the limits of authority and through each position in the line of authority. It can discipline, managers should encourage their be short-circuited only in special circumstances. For employees for taking initiative. Initiative is this purpose, Fayol has suggested. concerned with thinking out and execution of a plan. Initiative increases zeal and energy on the  10. Order: This is a principle relating to the part of human beings. arrangement of things and people. In material  order, there should be a place for everything and 14. Esprit de corps: It is the principle of “union everything should be in its place. Similarly, in social is strength” and extension of unity of command order, there should be the right man in the right for establishing team work. The manager should place. encourage esprit de corps among his employees.  11. Equity: Equity is the combination of justice and kindness. Equity in treatment and behavior is liked Hawthorne experiments and human relations:  CONCLUSIONS: The human relations approach was  Individual workers must be seen as born out of a reaction to classical approach. A lot of members of a group literature on human relations has  The sense of belongingness and effective been developed. For the First time, management were the two secrets an intensive and systematic analysis unfolded by the Hawthorne experiments. of human factor in organisations  Informal or personal groups influenced was made in the form of Hawthorne the behaviour of workers on the job. experiments. To investigate the  Need for status and belongingness to a relationship between productivity group were viewed as more important and physical working conditions, a than monetary incentives or good team of four members Elton mayo, physical working conditions White head, Roethlisberger and  To seek workers cooperation, the William Dickson was introduced by management should be aware of their the company in Hawthorne plant. social needs and cater to them. They conducted various researches Otherwise, there is every danger that the in four phases with each phase workers ignore and turn against the attempting to answer the question interests of the organisation. raised at the previous phase. Monetary and Non-Monetary incentives to motivate work teams:  The motivational factors that motivate a person to work and which can be used to enhance their performance can be classified into two categories— monetary factors and non-monetary factors  Monetary Factors: Monetary factors are extrinsic to work, such as the following:  1. Salary or wages: This is one of the most important motivational factors in an organization. Salaries and wages should be fixed reasonably and paid on time.  2. Bonus: Bonus is an extra payment over and above salary, and it acts as an incentive to perform better. It is linked to the profitability and productivity of the organization.  3. Financial incentives: The organization provides additional incentives to their employees such as medical allowance, travelling allowance, house rent allowance, hard duty allowance and children educational allowance.  4. Promotion (monetary part): Promotion is attached with increase in pay, and this motivates the employee to perform better.  5. Profit sharing: This is an arrangement by which organizations distribute compensation based on some established formula designed around the company‗s profitability.  6. Stock option: This is a system by which the employee receives shares on a preferential basis which results in financial benefits to the employees.  Non-monetary Factors:  Non-monetary factors are rewards intrinsic to work, such as the following:  1. Status: An employee is motivated by better status and designation. Organizations should offer job titles that convey the importance of the position.  2. Appreciation and recognition: Employees must be appreciated and reasonably compensated for all their achievements and contributions.  3. Work-life balance: Employees should be in a position to balance the two important segments of their life—work and life. This balance makes them ensure the quality of work and life. A balanced employee is a motivated employee.  4. Delegation: Delegation of authority promotes dedication and commitment among employees. Employees are satisfied that their employer has faith in them and this motivates them to perform better.  5. Working conditions: Healthy working conditions such as proper ventilation, proper lighting and proper sanitation improve the work performance of employees. 6.Job enrichment: This provides employees more challenging tasks and responsibilities. The job of the employee becomes more meaningful and satisfying.  7. Job security: This promotes employee involvement and better performance. An employee should not be kept on a temporary basis for a long period.