Chapter 1 Nature and Scope of Mangement PDF

CHAPTER 1: NATURE & SCOPE OF MANAGEMENT PRINCIPLES OF MGT FYBBA SEMESTER 1: PRINCIPLES OF MANAGEMENT  CHAPTER 1: NATURE & SCOPE OF MANAGEMENT Topics to be covered: Topic 1: Concept / Meaning of Management Topic 2: Four Definitions of Managemen...

CHAPTER 1: NATURE & SCOPE OF MANAGEMENT PRINCIPLES OF MGT FYBBA SEMESTER 1: PRINCIPLES OF MANAGEMENT  CHAPTER 1: NATURE & SCOPE OF MANAGEMENT Topics to be covered: Topic 1: Concept / Meaning of Management Topic 2: Four Definitions of Management Topic 3: Features / Characteristics of Management Topic 4: Management as a Science or Art or Both? Topic 5: Management as a Profession Topic 6: Universality of Management Topic 7: Various Approaches to Study Management 7a. Social Systems Approach 7b. Decision Theory Approach 7c. Human Behaviour Approach 7d. Systems Approach 7e. Contingency Approach Topic 8: Code of Conduct suggested by All India Management Association (AIMA) Topic 9: Functions / Process of Management (POSDCORB Classification) Topic 10: Henry Fayol & his administrative Management *************************************************************************** Topic 1: Concept of Management / Introduction to Management  Management is a discipline which makes the use of various other disciplines like economics, sociology, psychology, anthropology, statistics etc. so giving precise and exact meaning or definition is very difficult because the term management is used in variety of ways.  For example economists have used the term Management as a factor of production, sociologists have treated management term as group of people and some others 2  have defined Management as process composed of various functions in it. So, together by taking viewpoint of all into consideration, we can give a brief idea of management in the following ways. 1. Management as a discipline 2. Management as a group of people 3. Management as a process Management as a discipline  Discipline refers to the study of knowledge having well defined concepts and principles, rules, regulations, definitions, laws etc.  Management is a discipline because it is also having relevant concepts, laws, rules and principles which can be helpful in managing an organisation. Management as a group of people  Management can also be considered as a group of people in which we include all those people who are involved in performing the managerial functions in an organisation and not those people who do actual work in the organisation.  For example, when we talk about a manager and a worker who is working in an organisation, we refer to two distinct classes of people.  Firstly, those people who are responsible for performing managerial tasks (managers) and secondly, those who are engaged in doing non-managerial (actual) work in a company (employees and workers). Management as a Process  Management can also be considered as a process consisting of different steps like Planning, Organising, Staffing, Directing, Coordinating, Motivating, Supervising and Controlling.  Management is a very complex and dynamic process, rather than a static one facing changes from External Environmental factors. Along with that Management is a process of performing various activities and sub-activities. *************************************************************************** Topic 2: Four Definitions of Management Louis Allan defined Management as “Management is what managers do.”This was the simplest approach to define the management but this limitation was suffering from two limitations. 1. One cannot say who can be considered as Managers on the basis of above mentioned definition. 3  2. If one could still know about who are the managers, then it would be difficult to say what they do on the basis of this definition. In order to overcome the above limitations we can divide the total activities of the organizations into two parts. Firstly, we talk about those activities which are of operative in nature through which we can achieve the actual work of an organisation. Like handling machines by workers, putting materials in the machines, going in to the market to make a sales call etc. Secondly, we talk about those activities which are done to get the work done by others. Like motivating employees to achieve the target, instructing the worker to perform his work, train the executive how to complete a sales call etc. Broadly, management can be defined in various approaches by the following ways. A. Production/Productivity/Efficiency Oriented B. Decision Making Oriented C. People Oriented D. Functions Oriented Production/Productivity/Efficiency Oriented Definition of Management “Management is an art of knowing what you want to do and then seeing that it is done in the best & cheapest way.” - Fredrick Winslow Taylor Decision Making Oriented Definition of Management “Management is simply the process of Decision Making and control over the actions of human beings for the expressed purpose of attaining pre-determined goals.”  Stanley Vance People Oriented Definition of Management “Management is an art of getting things done through and with people in formally organised group.” - Harold Koontz “Management is the accomplishment of results through the efforts of other people.”  Lawrence Appley Functions Oriented Definition of Management “Management is a process involving planning, organising, staffing, directing and controlling human efforts to achieve the stated objectives in an organisation.” *************************************************************************** 4 Topic 3: Characteristics / Features of Management* *(Students are requested not to confuse this answer with “Features of Management as a System”, as both are different answers) Management is Intangible  According to George Terry, management is intangible  Management is intangible in a sense that it cannot be seen but its effects are felt in the form of efficiency & effectiveness in various functions of an organisation like production, marketing, finance and like.  Sometimes management has been referred to as ‘intangible factor of production’. Management has Objectives / is goal oriented  Every Organisation is a deliberate and purposive creation and therefore they must have some objectives.  The objectives are the desired state of affairs which an organisation attempts to achieve.  Every activity in an organisation is done to achieve some objectives because without objectives, it becomes very difficult to define direction where organised group activities would lead to.  Objectives in an organisation may be to earn maximum revenue, to achieve efficiency in production, to make good brand image in market, to get maximum ROI (Return on Investment) Management is working with & through the people  Management process involves working with people and getting organizational objectives achieved through them.  Working through the people means assigning the activities to subordinates and getting the work done. By this superior-subordinates relationship will created.  Working with people involves doing managerial work for and with employees including planning, organising, staffing, directing, co-coordinating and controlling. Management involves decision making  Decision making means selecting the best alternative among the several available alternatives.  A manager needs to take numerous amounts of decisions throughout the life of an organisation and the quality of decision determines the success or the failure of an organisation. Even success or failure of managers can also be judged by the quality of decisions they make. 5 In Management, there are organised activities  Management is a process of organised activities. Without organised activities, two groups of people cannot be involved in the performance of activities.  Management comes into existence when groups of people are working towards achieving the common objectives. Management includes interrelationship among resources  Resources include Man, Machine, Material, Method, Money and Market. All these resources are given to those who manage the activities in an organisation.  These people would apply their knowledge, expertise, and experience for getting the desired results using all these resources.  But the major concern is to integrate these resources i.e. what resource should be used at what time, in what quantity and should be delegated to whom. Workers or employees do their work by using these resources but the main thing is to utilize and allocate these resources in a way to get maximum output from them. Management is a Dynamic Process  An organisation is affected by two types of environment; Internal and External.  Internal Environment and External environment both are subject to change. They cannot remain stable.  Hence, management practices also should not remain static. The process and practices of management will also change as and when internal and external environment changes. Management is Multi-Disciplinary  Management takes the knowledge and concepts of several other disciplines; makes use of them and apply them to explain many concepts of Management itself.  Management makes use of psychology, sociology, economics, mathematics, accounting, statistics, econometrics, anthropology, ecology, operation research etc. to explain the concepts of management.  Management integrates the ideas from these disciplines and suggests new knowledge which can be put into practice for managing an organisation. Management is Science as well as an Art too  Management in itself uses various rules, laws, principles and theories to explain its concepts. In this regards it is considered to be as a systematic body of knowledge. And hence we can consider it as a science.  But, it would be completely immaterial to know these principles of management unless and until they are applied in real life in a better way. 6  So management is not only dealing with what and why of a phenomena but along with that it deals with how of a phenomena too.  Hence, we can say that Applied Knowledge is power. Management is Universal  The fundamentals & theories of management are universally applicable but its techniques and practices are not universally applicable. Management is Profession  Management can be regarded as a semi-profession / emerging profession too, because it includes specialized knowledge, ethical code of conduct, service motive and professional association like AIMA (All India Management Association). Management is a social process  According to Newman, management is a social process because it deals with people.  To make the best use of human efforts, managers have to create close cooperation among employees in an organisation. *************************************************************************** Topic 4: Management: Science, Art or Both  Introduction:  When we study the nature of management, deciding about management as a science or an art is highly debatable issue. It is very difficult to say whether management is perfectly a science or it is an art.  This controversy is very important based on the fact that earlier managers used to manage their organisations very brilliantly even if they were not professionals.  They did not know science of the management but they used to manage the organisations by using intuitions, commonsense and their prior experience and they proved to be best managers. E.g. Mr. Dhirubhai Ambani had not taken the formal knowledge of management and still they managed his organisation in the most effective and efficient way.  So, it is really a debatable question whether to consider management as a science or an art.  Management as a Science “Science is a systematized body of knowledge accumulated and accepted with reference to the understanding of general truths concerning a particular phenomenon, subject or object of the study.” 7 Management is said to be a branch of social sciences and the process of developing scientific theory and process of developing management theory is different. So we can not regard Management as a pure of perfect science like natural or physical science but rather we can consider management as a Pseudo Science (Inexact Science). This will become clearer from the following discussions.  Arguments which say that Management is NOT a Pure / Perfect Science 1. Inexact (Pseudo) Science  Science as a structure includes physics, chemistry, biology, mathematics and many others; which includes and gives their own rules, laws, theories, principles and hypotheses and they are internally consistent.  Here Internal consistency means they are consistent throughout the world but this is not so with management.  Management also includes various rules, regulations, laws and principles & hypotheses but all these lack internal consistency. That means they don’t remain constant / same at every time and at every place. 2. Ambiguity (Confusion) in various terms of Management  In Science like physics or chemistry or mathematics, one is always clear about the terms and words which are being talked about, because in such sciences, majorly each and every word provides same meaning and used in only a single way. E.g. Gravity, Calculus, H2O, Hydrogen are such words which have same meaning throughout the world.  So there is no chance of confusion.  But management is such discipline in which different terms gives more than one meaning or used differently in different context. E.g. Management has been defined by various authors from different perspective; Perception in marketing and perception in behavioral science have different meanings. So this may create ambiguity (confusion); Even Plan and Planning carry different meanings altogether. 3. Management principles gives different results at different places and after repetition too  The experiments and theories of science are empirically tested and provide same result at every place, at every time and with repetition too.  E.g. Law of Gravity is applied in same way at USA and at India. Likewise H2O gives pure water at India as well as at USA too even after any number of repetitions.  Such type of empirical confirmation cannot be found in case of management. The reason for this is that the theories and principles of management do not give same kind of result at each and every place, time and under repetition. 8   E.g. Japanese Management practice differs than that of the American Management Practice. Likewise, motivational style to be applied for American workers and motivational style for Indian Workers tend to differ. From the above arguments we can say that Management is not as perfect science as physics, chemistry, biology or mathematics.  Arguments which say that Management is partly a Science / Pseudo Science However from the above discussion, it is clear that management is not a pure science. But, nowadays efforts are made to take management towards pure science. This will be clearer from the following points. 1. Systematized Body of Knowledge  Science gives rules, facts, figures, laws, theories, hypotheses, principles and models to explain various contents which are there in science. As a same way management also uses all such things to explain its various concepts and methodology. 2. Cause & Effect Relationship  In management, to understand some phenomenon, we need to identify cause and effect relationship like it is used in science.  E.g. giving bonus and incentive increases the motivational level of an employee. So here increased motivational level is effect of the cause of extra incentives. 3. More and more use of Mathematics and Statistics  Mathematics and Statistics are the branches of science in which everything is proved and tested.  Management also makes the use of mathematics to explain its concept. Like Transportation Problems and assignment problems can be solved through Linear Programming Problems, Forecasting can be done with the help of regression and time series analysis.  So, from this we can say that Management is half / imperfect / pseudo science.  Management as an Art  Management is regarded as an art also.  An Art is related with bringing desired results through application of skills or knowledge.  To manage effectively one must have the knowledge (Science) of management as well as the skills and art to manage it well.  Science comes through knowledge and art comes through practice. 9   Science deals with ‘what’ and ‘why’ of a phenomenon whereas Art deals with ‘how’ of a phenomenon. Relationship of Management with Art  Knowing the science (Rules, Laws, Principles, Hypotheses) of management is very much necessary but the one who applies this knowledge differently or skillfully ultimately wins.  E.g. Sachin Tendulkar knows the science of cricket and the same knowledge is there with other cricketers, but he has a unique art of playing cricket than other cricketers.  Lata Mangeshkar knows the science of singing and the same knowledge is there with singers, but she has a unique art of singing very beautifully.  By reading a book on swimming, one cannot know swimming; as a same way just by having knowledge of management will not be enough for managing an organising. It needs more of creativity, practice, intuition and experience. So management is more of art than science.  Management as an Art can be seen from the following facts: o The process of management involves the use of know-how and skills like any other art such as music, painting, singing etc. o Management demands creativity like any other art o Management is based upon the fact that “there is no one best way of managing the things”. Every person has his own art of managing the things. o Management involves getting the desired result / objectives like any other art.  Conclusion (Applied Knowledge is Power) Science and Art both are complementary in nature. Without science, one can not apply anything and without art, just by having the knowledge, it is of no use. Same is the case with management. Just having the knowledge of management is not enough but along with that one must know the art of managing. We should conclude that management is both science as well as an art. We should say “Applied Knowledge is power” rather than just “knowledge is power”. *************************************************************************** Topic 5: Management as a Profession /Characteristics of Management as a Profession Management can also be considered as a profession but although it does not contain all the features of profession. 10 Meaning of Profession: - Profession is an occupation for which specialised knowledge, skills and training is required and the use of these skills is not meant for self satisfaction but for serving to the larger portion of the society than just earning money alone. There are different features of profession but as we earlier said all of them do not applied to management. So let us see which of them are applied and which are not. 1. Existence of Specialized Knowledge  For considering any discipline as a profession there must be an existence of specialized knowledge.  Management there exists a large amount of specialised knowledge / distinct body of knowledge. This specialised knowledge has emerged from the need of managing highly diversified and complex organisations.  So in this regard, management can be considered as a profession. 2. Acquiring the Knowledge  An individual can enter into the profession only after acquiring a particular knowledge. E.g. Only LLB student can become lawyer, only MBBS student can practice a profession of doctor, only a Chartered Accountant can audit the books of account.  In other words, to practice a profession, one must acquire the knowledge of that particular field.  However, this is not the case with management. To practice management or to become a manager, it is not necessary that one must acquire formal knowledge of management or and must have MBA degree to become a manager. In any organisation, entry in managerial cadre need not require formal degree of management.  So in this regard, management cannot be considered to be a profession. 3. Professional Association  Any occupation, which claims to be a profession, must have a professional association with it.  An association regulates and controls the behavior of professionals, takes disciplinary actions if necessary and prescribe the criteria for individuals who want to enter the profession.  A person, who wants to practice a profession, must enter / register with a respective professional association of their field. E.g. A students of Chartered Accountancy must be a member of Institute of Chartered Accountants of India, A medical student must be a member of Indian Medical Association, and a law graduate must be a member of Bar Council of India. 11   In Management also there is an association called All India Management Association (AIMA) in India and some associations are prevailing outside India too. But it is not mandatory to be associated with AIMA to practice management.  In this regards Management cannot be considered to be a profession. 4. Service Motive  This concept suggests that professionals should keep social interest in their mind while charging fees for their professional services.  The service motive concept further lays that the success of any profession is measured not in terms of money it earns but by the amount of social service it provides.  This important contribution of management can’t be measured in terms of money alone because without integrating effort of management, resources worth millions of rupees may be useless.  And in management also there is service motive, so in that regard management can be considered as a profession. 5. Ethical Codes  For every profession, some ethical standard are provided and every individual of the profession is expected to maintain conformity with these standards.  The need for ethical codes arises because of the fact that occupations whose practitioners have mastery over an area of knowledge have a degree of power by virtue of their expertise and this power can be used for the benefit of the professionals at the cost of the society. Conclusion: Management is an emerging Profession From the above discussion shows that management possesses certain characteristics of profession while others are missing. Therefore, it can’t be said to be a profession, though it is an “Emerging Profession” i.e., emerging as a profession. *************************************************************************** Topic 6: Universality of Management / “Theories & Fundamentals of Management are Universal but its Techniques & Practices are not” Introduction: “Is the knowledge of Management Universal?”; “Are the principles of management universal?” these are again controversial questions. Whether the knowledge of management is universally applicable or not is again a debatable issue. Any knowledge can be made universal through transfer of that particular knowledge. Before seeing the 12 universality of management, first we shall see how the knowledge of management can be transferred from one place to another place. Management knowledge can be transferred from one place / country to another place / country in one of the following ways. Transfer of the Knowledge of Management: 1. By managers of an industrially developed country (like USA), who work in developing country (like India) 2. By people / By students from a developing country (like India), coming to study and work in Industrially developed country (like USA) and they return back to their own country 3. By Training and Development by the managers of Industrially developed countries for Industrially developing country The knowledge of management can be transferred from one person to another, from one company to another and from one country to another country but this transferability of knowledge of management can be meaningful only when that knowledge can be applied universally or it has universal application. There are two views prevailing for this: Some say the knowledge of Management has no universal applicability and some authors say it has universal applicability. Let us see arguments for both, and we shall then decide whether the knowledge of management is universally applicable or not? ARGUMENTS FOR UNIVERSALITY Many authors & experts in management like Harbinson, Ghisselli, Porter and Richman, through their research (in various countries & from various managers of different countries) on universality of management have come to common conclusion that fundamentals and basics of management are universally applicable. 1. Management as a Process  Management as a process is universally applicable  Management as a process can be found in all organised activities whatever the country, culture or size it may be.  Management as a process includes steps like planning, organising, staffing, directing, coordinating and controlling are universally applicable in all organisations and as a manager one must possess the knowledge of all these function. However, intensity of a particular function differs company to company. 2. Difference between Management fundamentals and Techniques  Management fundamentals are the basic principles & theories but management techniques are the tools for performing management functions. 13   Management fundamentals and theories will remain same they do not change from country to country. But techniques of managing an organisation do not remain same in all the countries and they change country to country.  So, management fundamentals are universal but techniques are not. 3. Difference between Management Fundamentals and Practices  Universality of Management also says that management fundamentals remain same universally but practices differ. The reason behind this is management is both science and art.  Art of managing includes use of / application of the theory and fundamentals of management, which will differ country to country. The fundamentals will remain same but its practice is subject to variations under different situations and conditions.  E.g. Koontz & O’Donnell has exemplified this phenomenon as automobile to be used in desert area and automobile to be used in super highways are obviously not going to be the same even if physical science of automobile engineering tends to be the same.  E.g. American Management Practice and Japanese Management practice tend to differ ARGUMENTS AGAINST UNIVERSALITY Arguments against universality suggest that there are certain factors which affect the application of a principle or a set of principles of management. 1. Cultural Characteristics  The applicability of management principles throughout the world is based on the culture of different countries.  “Culture is a set of beliefs, attitudes and values that are shared commonly by the members of the society.”  Culture affects people’s behavior very significantly and management being a people oriented process is highly affected by the culture. It is obvious that culture of different countries is not going to be the same, so people’s behavior is not going to be the same and as a result management is not going to remain the same throughout the world. 2. Management Philosophy  Philosophy of management means philosophy of founders or philosophy of top managers of the organisations.  Every organisation has its own philosophy (way of thinking) of managing an organisation like an individual. And this philosophy is not going to be the same organisation by organisation. E.gSomeorganisations believe in profit maximization, 14  while some may believe in service to society. So when philosophy changes, management practices will also change.  E.g. Family Based Organizations’ Philosophy will totally differ from that of the professionally Managed Organisations. 3. Organisational Objectives  The type of management will depend the organizational objectives. For different types of objectives the approach of managing an organisation shall differ.  E.g. If Stability is the objective of organisation, management will be different and if the Growth is the objective, then management will totally differ from earlier.  E.g. Profit oriented organisations manage very differently as compared to those which are Service Oriented / NPOs (Non-Profit Organisations) organisations. CONCLUSION Theories & Fundamentals of Management are Universal but its Techniques & Practices are not. *************************************************************************** Topic 7: Various Approaches to Study Management 7A. SOCIAL SYSTEMS APPROACH  The social systems approach was introduced by Vilfredo Pareto, a sociologist. But further development to his approach was made by Chester Bernard.  As per this approach, an organisation is a cultural system made up of people who work in cooperation. To achieve organisational objectives, a cooperative system can be developed by understanding the behaviour of people in the groups. Features of Social Systems Approach: 1. Organisation is a social system, a system of cultural relationships. 2. Relationship exists among the external as well as internal environment of the organisation. 3. Cooperation among group members is necessary for the achievement of organizational objectives. 4. For effective management, efforts should be made for establishing harmony between the goals of the organisation and the various groups therein. Contribution of Barnard: 1. Concept of Organisation 2. Formal and Informal Organisation 15  3. Elements of Organisation 4. Authority 5. Functions of the executive 6. Motivation 7. Executive Effectiveness 8. Organisational Equilibrium *************************************************************************** 7B. DECISION THEORY APPROACH  Major contributions in this approach were given by Herbert Simon.  Decision theory approach deals with the basic problem of management that is decision making. Decision making involves selection of a suitable course of action out of the available alternatives.  This approach mainly emphasises that decision making is the job of every manager. The manager is a decision maker and organisation is a decision making unit. Therefore, the basic problem in managing is to make rational decision.  From this point of view, decision theory approach has following features: o Management is essentially decision making. o The members of the organisation are decision makers and problem solvers. o Quality of decision affects the organisational effectiveness. o All factors affecting decision making are the subject-matter of management.  CONTRIBUTION OF HERBERT SIMON IN DECISION THEORY APPROACH o Concept of organisation o Decision Making o Bounded Rationality o Administrative Man o Managerial Communication *************************************************************************** 7C. HUMAN BEHAVIOUR APPROACH  Management means getting things done by people, so the study of management must revolve around human behaviour.  This approach is also known as ‘Leadership’, ‘Behavioural Science’ or ‘Human Resource’ approach.  Human behaviour approach puts emphasis on Human Resources more as compared to Physical or Financial Resources. It studies Individual Behaviour as well as Group Behaviour. Contributions in Human Behaviour Approach: 16   Need Hierarchy Theory (A.H. Malsow)  Two Factor Theory (Herzberg)  Theory X and Theory Y (Douglas McGregor)  Blake &Mounton (Managerial Grid Model of Leadership)  ERG Theory (Elderfer)  Contingency Model (Fiedler) etc. ************************************************************************** Topic 8: Code of Conduct suggested by All India Management Association (AIMA) Introduction:  All India Management Association is a professional body for development of management profession and regulation of management profession. A professional manager can be a member of AIMA and can be in touch with latest happenings in management field. AIMA is currently situated at New Delhi.  AIMA has suggested some code of conducts for managers same way like other professional associations (like ICAI, ICSI, Indian Medical Association etc.) have given. These code of conducts act as a guiding principle for managers.  Code of conducts given by AIMA can be broadly divided into 2 parts: o The Basic Code o Guide to Good Management Practice A. THE BASIC CODE A member of AIMA shall……..  Try his best to organize the resources available to him with a view to optimize their use to achieve objectives of the organisation.  Comply (Follow) with the Indian laws relating to the management of his organisation and do his best to operate within the spirit of these laws.  Try to maintain and enhance the reputation of professional management.  Follow the guide to good management practice suggested by AIMA time-to-time. B. GUIDE TO GOOD MANAGEMENT PRACTICE Guide to good management practice says that a manager is primarily responsible to his organisation and then he is responsible to fulfil the expectations of his Stakeholders: 17 Stakeholders: Stakeholders of business are those parties or institutions who are interested in the operations of the business and day to day happenings of the business. Moreover they have some expectation in return from the business itself. Shareholders Society / Govern- Public ment Business Stakeholders Employees / Suppliers Workers Financial Customers Institution 1. Shareholders  A manager should ensure that dividend should is fairly divided amongst all investors of the organisation.  A manager should ensure that they are being given full and correct information regarding financial performance of the organisation. 2. Employees  A manager should pay properly regard to his safety and well being of the personnel for whom he is responsible.  A manager should set an example for his subordinate through his own work capability and performance.  A manager should train people to become qualified for higher duties. 18  3. Customers  A manager should ensure that customers are getting good products and services at fair prices.  A manager is responsible for satisfaction or dissatisfaction of his customers. 4. Suppliers  A manager should ensure that all the terms and conditions of contract with suppliers are written clearly and unambiguously.  A manager should ensure timely payment to his suppliers and healthy relations with the suppliers. 5. Government  A manager should comply with all the taxes to the government.  A manager should conform to the national interest as expressed in government policy. 6. Society  A manager should make the most effective use of all natural resources.  A manager should be ready to help the society.  A manager should ensure that the working of an organisation should be such which doesn’t harm the society. *************************************************************************** 19