Unit 1 Introduction to Management PDF

UNIT 1: INTRODUCTION TO MANAGEMENT Introduction: Management is the force that unifies human as well as non-human resources in the service of organizational goals. Management is needed whenever people work together in an organization. Thus managerial functions must be performed by anyone who manages...

UNIT 1: INTRODUCTION TO MANAGEMENT Introduction: Management is the force that unifies human as well as non-human resources in the service of organizational goals. Management is needed whenever people work together in an organization. Thus managerial functions must be performed by anyone who manages organized efforts, whether it is a business enterprise, religious organization, military outfit or a social institution- such as planning, organizing, directing, staffing, controlling and coordinating. These functions are performed at all levels in an organization, regardless of its type or size. Definition of Management: In the words of George R. Terry, “Management is a distinct process consisting of planning, organizing, actuating and controlling performance to determine and accomplish the objectives by the use of people and resources.” According to Harold Koontz and Heinz Weihrich, Management is “the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims.” Meaning: Management is a process through which all the resources are organized and utilized to attain maximum output with minimum input. Management is the art of getting things done through people. Nature of Management: Management is a distinct activity having the following salient features or characteristics: 1. Universal Application The principles of management have universal application. Managers perform more or less the same functions irrespective of their position and nature of organisation. The principles of management can be applied in all organisations and managerial positions irrespective of their.nature, size and location of the organisation. 2. Purposeful and working towards achieving certain goals Management is aimed at achieving definite organisational goals or objectives. It aims to achieve economic and social objectives utilising its resources in a systematic manner. 3. A social process Management is concerned with dealing with people. It essentially involves managing people at work. Managers are required to direct, co-ordinate and regulate human efforts to achieve the desired goals. Therefore, management is regarded as a social process. 4. A co-ordinated Effort Management involves co-ordinating the efforts of employees and departments of the organisation. It balances the individual goals and organisational goals and integrates human and physical resources. 5. Decision Making Management process involves decision making at various levels. Decision making basically involves selecting the most appropriate alternative out of several alternatives available. 6. A group activity Management is always concerned with group efforts and not individual efforts. It Plans, organises, directs and controls the group efforts to achieve the organisational objectives. 7. Intangible Management is intangible, it is an unseen force. The performance of the management can be felt in the form of employee satisfaction, high employee morale, orderliness etc. 8. System of authority  Management exercises authority or power while directing the efforts of the group. Management cannot perform its functions in the absence of authority: 9. Has a separate identity Management has a separate identity in the organisation. Activities in the organisation are classified into 'Managerial' and 'non-managerial'. The identity of "Thinkers' (managers) is different from the identity of 'Doers' (workers). 10. Working through others Management involves working through others to accomplish organisational goals. Management has to appoint the right people for the job, assign the duties, motivate and control their subordinates to accomplish the work. 11. A continuous function Management is on-going process, continues to operate as long as the organisation exists to achieve certain goals. 12. Management is a science as well as an art Management is a science because it has definite principles which are universally applicable. It is a social science. Manager applies certain knowledge and skill while dealing with the people to achieve the desired results. Therefore, Management is an art. 13. Management is a profession Today's management is professionally trained. Like other professions, managers to apply management principles, techniques and skills to solve the problems organisation. 14. Needed at every levels of the organization Management functions are performed at all levels of the organisation i.e., at t level, the middle level and the lower level. Importance of Management 1. Effective utilisation of resources Every business need to manage efficiently important M's men, material, money, machine, methods, market and management for the success of the organisation. It is the management which tries to bring together and make effective utilisation of all other resources. 2. Development of abilities of managers Management involves developing the abilities of executives to handle their jobs effectively. It also creates future managers of the changing business organisations. 3. Integration of interests of stakeholders Stakeholders of the organisation or various interest groups such as shareholders, employees, government, suppliers, customers etc. expect maximum benefit from the business enterprise. Management has to integrate the interest of all these interest groups and try to balance these pressures for the smooth conduct of the organisation. 4. Provides market stability Today's business is highly competitive. Changes taking place in unprecedented manner in the consumer behaviour and market environment. Management has to identify he needs of consumers/markets and makes effort to meet their needs and thereby creates stability in the market. 5. Meet the challenges of change Change is the need of the day and expected by every business. After foreseeing the future business environment, management introduces new products, new ideas, brings in w technology and adopt itself to the changes. Adoptability of the management to the anges keeps the organisation alive and efficient.  6. Handle Human Resource issues Human resource is complex, its expectations, education and attributes are changing faster rate. Management must satisfy their needs through its effective leadership. Management serves as friend, philosopher and guide to the human resource, tries to minimize the employee dissatisfaction and unrest by creating cordial relations between management and human resource. 7. Management directs the organisation to achieve organisational goals Management coordinates and directs the activities of the organisation to achieve its red goals. It leads and guides the organisation while solving the problems. The problems may be related to the market, labour, finance or related to the statutory requirements. 8. Management is important for the growth of a country Peter F. Drucker defined Management as "Management is an economic organ of an industrial society ". Drucker explained that 'without management, a country's resources of production remain resources and never become production'. An efficient management brings together and co- ordinates capital, manpower and other natural resources and enables a country to achieve its economic objectives. Management principles and techniques are applied to various other types of organisations like educational, social, military and government for the growth of the country. 9. Other uses of Management Achieving business objectives and see that the business earns capacity to compete in the business world for its survival and growth Provides leadership in the organisation and directs and motivates the group for good performance Establish an effective/successful organisational structure with clear authority and responsibility Fulfill corporate social responsibilities (CSR), comply with the statutory requirements of CSR activities. Functions of Management or Elements of Management Process: The subject matter of management comprises the various functions of management or managerial activities. Managers are known by the work they do, the functions they perform. Management is called a process because it comprises a series of functions that leads to the achievement of certain objectives. The activities undertaken to get the work done through the efforts of others are called Managerial Functions, Functions of Management or Elements of Management Process. These functions of management have been identified by different management thinkers differently. Planning: Planning is deciding in advance the future course of operations for a given period. It implies decision making as to what to do, when to do it, where to do it, how to do it, who is to do it and how to evaluate the result. The process of planning involves determination of goals or objectives of the organization, forecasting, formulation of plans, policies and procedures, preparation of schedules, programmes and budgets. Organizing: Organizing means bringing together manpower and material resources like men, money, machines, materials, managerial personnel etc. and putting them into working order. It also involves the determination of activities to be performed, grouping them and assigning them to various individuals and creating a structure of authority and responsibility among the individuals to achieve the organizational goals.  Staffing: Staffing means ensuring that right type of personnel is available to man and execute the various activities required to attain the objectives. Staffing function ensures that the various positions created in the organization structure are filled up by qualified and competent persons. Directing: Directing is responsible for the effective execution of the pre-determined plans. Directing is concerned with those activities which deal with instructing, influencing, guiding, motivating and supervising the subordinates in their jobs. Co-ordinating: Co-ordination is bringing together the efforts of the people working in an organization. It is blending of the activities of the different departments and the different specialists for the achievement of desired ends. Communicating: Communication is the exchange of facts and viewpoints among persons in an organization or between organizations which bring out commonness of interest, purpose and effort. It is the fundamental function of management. Controlling: Controlling is related to all other managerial functions or activities. It is concerned with seeing that all the activities of the enterprise are being conducted in agreement with the plans. It is the process of measuring actual results, comparison of actual results with expected results, identification of variances or deviations between the actual results and pre-determined results and taking corrective action to ensure pre- determined results are met. CLASSICAL MANAGEMENT THEORIES FREDERICK.W. TAYLOR AND SCIENTIFIC MANAGEMENT: F.W.Taylor was born in Pennsylvania, USA in 1856. He had his early schooling in France and Germany. He could not continue his studies and in 1874 he went to work at Midvale Steel Company as a labourer. Later he became a machinist in the same company in 1878. In course of time, he acquired degree in engineering and became chief engineer of the company. In 1898, Taylor was employed by the Bethlehem steel company to increase output of one of the large machine shops which had serious production problems. He invented high speed steel cutting tools and spent most of his life as a consulting engineer. Thus Taylor worked in different capacities in different companies. He worked as an apprentice, a common labourer, a foreman, a master mechanic and then chief engineer of a steel company. Based on his observation and large number of experiments on the method of work at the shop floor and the attitude of the management towards the workers, Taylor advocated the principles of scientific management for improving the quality of management. For his contribution to the development of scientific management, he is acknowledged as “the father of scientific management”. F.W. Taylor was very much concerned about increasing the efficiency in production. He observed that the problem of productivity was because of ignorance on the part of management and the workers. Both managers and workers were concerned about how the surplus should be divided among them rather than increasing the surplus. He came to the conclusion that much of waste and inefficiency is due to lack of order and system in the method of management. Therefore, Taylor suggested the application of scientific method to increase productivity rather than more human energy or effort. F.W. Taylor defined scientific management as, “the art of knowing exactly what you want men to do and then seeing that how they do it in the best and cheapest way”. Principles of Scientific Management F.W. Taylor has summarized the whole idea of labour, management co-operation in the following words, Replacement of old rule of thumb method: scientific investigation should be used for taking managerial decisions instead of basing decisions on opinion, intuition or rule of thumb.  Scientific selection and training of workers: the procedure for the selection of workers should be designed scientifically. Co-operation between labour and management: there should be co-operation between the management and the workers. This requires change of mental attitudes of the workers and the management towards each other. Taylor called it mental revolution. Maximum output: the management and the workers should try to achieve maximum output in place of restricted output. Equal division of responsibility: there must be equal division of responsibility between the managers and the workers. However the contributions of F.W.Taylor are presented in the form of scientific management as follows: 1. Separation of planning and doing: Taylor emphasized separate planning section in the factory. This planning department will properly plan the day’s work. This department receives detailed instructions and information about the type and quality of products to be produced, the time by which work must be completed, material and machine to be used by the workers etc. When the labour comes to factory, he gets clear instructions about what exactly he has to do. Therefore, Taylor advocated that planning function and manual operations must be separated. Workers must concentrate the actual performance of work so that their productivity can be increased. Planning function must be done by a specialist. 2. Functional foremanship: Taylor suggested the scheme of functional foremanship to supervise and give directions to the workers. Under this scheme, a worker has to receive orders and instructions from eight different foremen. Out of these eight foremen, four belong to the planning function and four are concerned with operating function. Foremen to operate at the planning room are, Time and Cost Clerk: lays down the standard time for the completion of the particular work and calculate the cost of that piece of work. Instruction Card Clerk: he lays down exact method of doing a piece of work. Route Clerk: will determine the path of material in various processes of manufacture. He lays down the route through which production process shall pass from one machine to another. Disciplinarian: he enforces the rules and regulations of the company. He deals with the cases of indiscipline and absenteeism. Foremen at the shop level, Gang Boss: will assemble and set up machines and tools for a particular job. Speed Boss: he determines the appropriate speed at which the machine should be run. It is his duty to see that the work is completed at specified standard time. Repairs Boss: he is responsible for keeping the machines and equipments in proper working conditions. Inspector: inspector would check the quality of the work done. He should see that the work done is according to the specified standard and quality. 3. Job analysis: Job analysis is concerned with determining a method of work which takes least time, least cost and least movements. It is the process of determining standard task for every worker through careful investigation. Management will conduct time study, motion study and fatigue study to decide about the best method of doing a job. Job analysis helps in finding the one best way of doing any given job Time Study: involves analyzing and measuring the time taken to complete various parts of the job. It helps to determine the standard time for performing the operation and to decide a day’s work.  Motion Study: involve close observation of the movements of an operator while performing his job. Fatigue Study: workers feel tired after a continuous work for certain period. He must be provided with rest intervals. Therefore, fatigue study is undertaken to provide rest at appropriate intervals. 4. Standardization: Standardization signifies quality and uniformity. It involves the use of standard tools and equipments, standard machines, standard raw materials, good working conditions, determining optimum speed for every machine and standard method of handling machines and materials. Standards must be fixed in advance on the basis of work study. 5. Scientific selection and training: Scientific management emphasized the principle of right man for the right job. Therefore, workers must be selected on scientific basis. Qualification, experience, aptitude, physical strength etc. must be considered while selecting the workers. Workers must be selected through scientific recruitment and selection procedure. After the selection, they must be trained properly to take up the allotted task. Scientific selection and training helps the workers to take up the responsibility for which he is best suited. 6. Financial incentives: Taylor advocated workers motivation through financial incentives. If an industry provides higher wages for the most efficient worker, workers work more to earn more wages. So, Taylor suggested differential piece rate system of wage payment to motivate the workers for higher productivity. He advocated that wages should be based on individual performance and the position he occupies. 7. Economy: Taylor argued that along with scientific approaches and methods adequate attention must be given to the profit and economy. Necessary measures must be taken to reduce the wastages. Therefore, Taylor suggested an efficient system of cost accounting to estimate and control costs on various items of expenses with manufacturing operations. 8. Mental revolution: There should be intimate and friendly co-operation between management and workers. Complete mental revolution is necessary on the part of both workmen and management to derive the benefits of scientific management through harmony and co-operation rather than individualism and conflict. Benefits of Scientific Management: 1. It secures maximum prosperity for both employers and employees. 2. It increases the efficiency and productivity of workers through time and motion studies 3. Incentive method of payment of wages eliminates go slow policy and absenteeism on the part of labourers 4. It facilitates professionalization of management 5. Scientific selection, training, and development of workers help to produce future managers. 6. It helps to maximize profits by eliminating all kinds of wastages. Limitations of Scientific Management: 1. Workers refused to accept the scientific management as it treats them like machines, makes work too monotonous and uninteresting 2. Scientific management emphasize the importance of production only. 3. Scientific management believes that workers can be motivated by monetary rewards only. No importance is attached to the social and psychological needs of workers 4. Important issues of wages and working conditions are decided by the management. No importance is given to the labour unions. 5. Taylor’s differential piece rate system of wage payment divides the workers into efficient and inefficient workers. This system of wage payment advantageous only to few exceptionally good workers. Thus it leads to exploitation of workers  HENRY FAYOL AND ADMINISTRATIVE MANAGEMENT THEORY Henri Fayol (1841-1925), a French industrialist developed his Administrative Management theory. As a director of coal mining company in France, he made a systematic analysis of process of management. He was the first man to systematize the managerial activities. He was recognized as the “real father of modern management theory” for his great contribution to the theory of management. F.W.Taylor was basically concerned with organizational functions. Henri Fayol was interested in the total organization. Fayol believed that with scientific forecasting and proper methods of management. Satisfactory results could be achieved. Every organization must perform various activities to accomplish its goal. Fayol classified the activities of an organization into six categories as follows: 1. Technical- producing and manufacturing products 2. Commercial- buying raw materials and selling products 3. Financial- acquiring and using capital 4. Security- protecting employees and property 5. Accounting- recording transactions and preparing balance sheet 6. Management- functions of planning, organizing, commanding, co-ordinating, controlling etc. Of those above six activities, Fayol focused primarily on management. Henri Fayol advocated that a manager must develop his skills and abilities to perform their activities at different levels of the organization. He argued that administrative skills are more important for higher level managers. While technical skills are required more at the lower level positions. However according to Fayol, a manager must possess the following qualities: 1. Physical- health, vigor and address 2. Mental- ability to understand and learn judgment, mental vigor and adaptability. 3. Moral- energy, firmness, willingness to accept responsibility, initiative, loyalty, dignity 4. Educational- knowledge about general functioning of the organization 5. Technical- knowledge of the job being performed 6. Experience- arising from the work Henri Fayol formulated a setoff fourteen principles of management as guidelines for implementing the process of management. These principles are not rigid, and can be applied in all organizations at most occasions. Following are the principles of management laid down by Fayol: 1. Division of Labour: This principle emphasizes the importance of specialization at all levels of industrial organization. Fayol applied this principle to all kinds of work, managerial and non-managerial. The more people specialize, the more efficiently they can perform their work 2. Authority and Responsibility: Fayol argued that authority and responsibility must be related. Authority is the official right of a manager to give orders to his subordinates. Responsibility is the duty which the manager is expected to perform by virtue of his position in the organization. Whenever, authority is used responsibility arises and the two are co-extensive 3. Discipline: It is the sense of respect for rules and agreements that governs the organization. Fayol emphasized the need for discipline among the personnel for smooth functioning of the organization and advocated penalty to prevent its violation. He said that discipline requires good superiors at all levels 4. Unity of Command: Each employee must receive orders and instructions from one boss only. This is the “one boss one subordinate” principle. When an employee receives orders and instructions from more than one manager, confusion and conflict of authority would arise. 5. Unity of Direction: According to this principle, each group of activities having the same objectives must have one head and one plan. In other words, those operations within the organization that have same objectives should be directed only one manager using one plan of action. 6. Subordination of Individual Interest to Group Interest: The collective common interest of the organization should prevail over the self interest of its members. It means, selfish attitude of an individual should be surrendered if its affects the interest of the whole group or enterprise. 7. Remuneration: Remuneration methods of payment should be just and fair and provide maximum satisfaction to both employees and employers. 8. Centralization: Decreasing the role of subordinates in decision making is centralization and increasing their role in decision making is decentralization. Top management must decide the extent to which authority is to be dispersed in the organization to the lower levels or retained at higher levels. Fayol believed that managers should retain final responsibility and their subordinates must be given enough authority to accomplish the task. The degree of centralization and decentralization should vary according to the needs of the situation. 9. Scalar chain: Scalar chain is the chain of superiors from the top of the organization to the lower levels of the organization. Fayol suggested very short circuited chain to make the communication fast and effective. 10. Order: This is the principle of systematic arrangement of things and people. Fayol advocated “a place for everything (everyone), and everything (everyone) in its (his/her) place”. Every material should be kept in its proper place and there should be a place for every material. At the same time, people should be in the jobs or positions they are most suited for. 11. Equity: Equity involves kindliness and justice in a manager while dealing with his subordinates. Managers should be both friendly and fair to their subordinates 12. Stability of Staff: High labour turnover is the outcome of bad management. It affects the efficient functioning of an organization. Management must take steps to achieve stability and continuity of tenure of personnel. 13. Initiative: Management must give freedom to the subordinates to take initiative in thinking out and executing their plans, even though some mistake may occur in the initial stages. This provides job satisfaction to the employees. 14. Esprit de Corps: “Unity is Strength ’’. This principle stresses the need for team spirit, cordial relations and co-operation among the members of the organization. Fayol suggested the use of verbal communication instead of formal communication whenever possible. Criticism on Henry Fayol’s Administrative Management Theory: 1. The principle and elements of management suggested by Fayol are not under scientific situations. 2. This theory is a vague theory. Some terms and concepts used by Fayol have not been properly defined. 3. Critics identified this theory as ‘pro-management biased’. This theory is concerned with only what managers must know to do. It does not give any importance to managerial behaviour. 4. Some critics argued that the principles advocated by Fayol are not universally applicable. Some of the principles are too vague and general. These principles cannot be applied to some specific organizational problems. CONTRIBUTION OF PETER F. DRUCKER Peter F Drucker was born in1909 in Vienna. He was educated both in Australia and England. He started his career as a newspaper correspondent in 1929. He was also working as an economist for an international bank for some time. Peter F. Drucker became Professor of Management in the New York University in 1950. The concept of management by objectives were introduced by Peter F. Drucker. According to him, Management is not an exact science or profession. He also criticised scientific management and human relations approach. The main contributions of Peter F. Drucker are summarised below: 1. Creative Management: Peter F. Drucker was against the bureaucratic approach to management. He emphasized Creative Management i.e., the manager should be creative and an innovator. Innovation is a broader concept, includes the development of new ideas, combining of old ideas and new ideas, adaptation of ideas from other fields or even to act as a catalyst and encourage others to carry out innovations. 2. Management is a separate disciple: He treated management as a separate discipline with its own yard-stick for the measurement of performance. Profitability is a good yardstick for measurement. Management as a discipline has its own tools, skills, techniques and approaches. It is a practice rather than a science. 3. Management is independent of ownership: According to Drucker management is independent of ownership. Managers are professionals having skills, talents and abilities to lead the group. Management should be held responsible for group performance. 4. Management is a universal science: He said there are management tools and techniques, there are management concepts and principles and therefore, management is a science with universal application. According to Drucker the philosophy of management is designed not only for business enterprises but also for the ordinary citizen. 5. Organisations are Social Entities: In his opinion, organisations are the backbone of the modern society where society consists of various institutions. He emphasised the role of autonomous institutions. 6. Limited levels in the organisation structure: Drucker recommended an structure with limited number of managerial levels which enables to achieve its goals. He emphasised the necessity of providing training and development to the executives enhance their efficiency and productivity. 7. Peter F. Drucker advocated federal decentralisation: According to him decentralisation is much more than delegation, it creates a new "constitution" and a new "ordering" principle. 8. Drucker identified management through its tasks or functions: A manager has to perform several types of functions with utmost care and competence. He has to set objectives, analyse problems, make decisions and organise and motivate. Drucker has grouped the functions of motivation and communication together. In his words, a manager motivates and communicates. 9. Introduced the concept of "Management by Objectives' in 1964: This concept is a method of planning, setting standards, appraising performance and motivating for better performance. MBO ensures performance converting objective needs into personal needs. MBO is a philosophy. It applies to every manager and to every modern firm. Drucker developed a theory which has vast practical application. He is rightly called an "expert of experts". 10. Drucker was very much concerned with the 'futurity': He said manager must forecast the future on the basis of present happenings and decisions. He believed that mankind must accept change as a challenge and try to cope with it. Therefore, management has to adopt itself to the changes in the society like technological changes, behavioural changes etc.  Criticisms of Classical Management Theory 1. Experts were of the opinion that classical school of the management thought was incomplete as there was little recognition of the importance of workers as human beings, their attitudes, feelings and needs. 2. It was observed that mechanical approach to work methods will not produce good result in the organisation. It was criticised that the theory overlooked human nature and behaviour. Classical Management theory viewed workers as machines to produce more and more. 3. Classical theories of management can be applied to only in stable and predictable environment. In a complex environment, these theories cannot be applied. 4. It looks management as a much closed system without having connection with the outside world. 5. The Theory is biased. This theory adopts traditional management philosophy of assumptions that workers are weak, incapable of managing themselves, only monetary benefits motivate them and they needs to be controlled. Managers are unselfish and right. 6. Classical management theory is too general and most of the principles of management are contradictory and ridiculous. NEO-CLASSICAL THOERY OF MANAGEMENT DOUGLAS MCGREGOR'S THEORY X AND Y Douglas McGregor is an American Social Psychologist proposed Theory X and Y in 1960 in his book 'The Human Side of Enterprise'. This Theory assumed significance for organisational development and improving organisational culture. It proposes natural rules for managing the people. Theory X assumes that workers are uneducated, average worker dislikes work and given the chance he tries to void the work. He works for money only. People must be forced to work with the threat of punishment. There should be strict control over the workers while performing the work. Manager should be strict disciplinarian. Manager apply the rule 'hold the grip beat the horse' to get the thing done. Manager is intolerant, always keep distance with formal relationship, manager shouts at the workers, a poor listener, one way communication, no trust on the subordinates, no delegation and punish for work failures on the part of subordinates. Theory Y assumes that people are educated, cultured, love to work, employees are self controlled, no threat will work at the work place, people are happy to take up responsibility, people expect good treatment by the superiors. In this situation, people should be given freedom to work and they should be trusted at the work place. People should be rewarded for their performance. Manager should follow the rule 'release the grip and give carrot' to motivate the workers. This theory advocated participative style of management. MODERN MANAGEMENT THOERIES THE SYSTEMS APPROACH Organisation consists of different departments which are interrelated and interdependent. Management must workunder the complex structure of the organisation and its systems and practices. Therefore, modern thinkers on management have emphasised the systems approach to the study for the analysis of management thought. The systems approach to management views the organisation as a unified and purposeful system composed of interrelated and interdependent parts. A set of interconnected and interdependent parts forming an organised entity is called a System. The interconnected and interdependent parts are known as sub- systems. The changes in any one sub-system lead to the changes in the other in the organisation. According to this approach, organisation is considered as a system. Its components like production department, finance department, marketing, human resource departments are interrelated and interdependent subsystems. Management pay its attention towards overall effectiveness of the system. Management must follow an integrated approach to solve the managerial problems. Managers cannot function in isolation. All departments must be coordinated properly to achieve the goals of the enterprise. The following are the features of the systems approach: 1. Management is a system: a. Management has a number of sub-systems or interconnected parts, for e.g. production management, finance management, marketing management, human resource management etc. b. Sub-systems are related to each other. All departmental managers are inter dependent and working to achieve common goal. Any issue with one department affect the other department. c. The sub-systems must be arranged in a systematic order for smooth flow of the activities of the enterprise. d. Each sub-system must co-operate and interact with others to become more productive than each acting in isolation. It is called synergy. For e.g. it is more convenient for each department to deal with one finance department instead of having a separate finance department for each department. e. A system may be open or closed: A system is considered as open system if it interacts with the outside environment. It is considered as a closed system if it does not interact with the outside environment. Management is a system open to the outside environment. Managers have to take into account external variables such as market, technology, laws, social forces and regulations at the time of planning future course of action. f. Each system has a boundary that separates it from its environment. Boundary is the area of functioning of the system which maintains relationship between the system and its environment. Boundary may be clear or vague. g. A system procures inputs from the outside environment and transforms them into output in the form of goods and services: Enterprise (system) procures information, materials and energy from its outside environment. These enter the system as inputs (materials, money energy, information etc.), undergo transformation process within the system and produce output (goods and services). h. Feedback is the key to control the system: Necessary feedback information must be provided to the people to assess their work and if necessary to correct the deviation. The working of open system can be seen in the figure given below: External Environment Input Transformation Process Output Feed back 2. Management as a system is dynamic and adaptive Management attempts to move towards growth and expansion. It adapts itself to the changing internal and external environment. 3. Management is a Social System Management as a social institution provides social justice and social satisfaction by respecting social groups. 4. Management as a system is multidisciplinary Management draws ideas and knowledge from various other disciplines such as psychology, sociology, anthropology, economics, ecology, mathematics, statistics, operation research etc. THE CONTINGENCY APPROACH The major contributors of the contingency approach are Joan Woodward, Fiedler, Lorsch and Lawrence. This approach is also known as Situational Approach. There is no single solution for the problem in all situations. Contingency Approach assumes that here is no one best way of management for all situations. How managers act for the Problem depends upon the situation. Managerial practice applied in one situation may not be suitable or another situation. Therefore, this theory argues that it is the manager's task to identify which technique will be applied in a particular situation under a particular circumstance and at a particular time best contribute to the attainment of management goals. Therefore, managerial acts require that manage must take into account the realities of a given situation when they apply theory or practice. Contingency Theory takes into account not only the given situation but also the influence of that situation on behavioural pattern of the enterprise. On the whole, contingency Approach implies the following: 1. Management is purely situational. There can be no universal principles of management which can be applied in all situations. 2. No organisation structure is suitable for all situations. The organization structure must be designed keeping in mind the requirements of environment, technology, size and people in it. 3. This approach suggests that organisation has to function within the framework of existing social, legal, political, technological and economic conditions. 4. It recommends developing managerial skills according the requirements of the situation. The Contingency Theory emphasises the need to foresee and be aware of the complex situations a manager has to face and be dynamic in solving the problems. The theory has been criticised on the ground of having theoretical complexity without reality. Essence of Managership A manager is responsible for inspiring, motivating, and encouraging employees to work towards common goals. Therefore, a good manager is expected to have certain basic skills, which are the essence of managership. These skills are so valuable, in part, because they are harder to learn. These skills cannot be learnt but are developed through observation, interaction and experience. According to Professor Robert Katz, to manage an organisation, one needs to have the following three skills. However, the degree of these skills may change from organisation to organisation and also from levels of management. Top Level Management Middle Level Management Lower Level Management Conceptual Skills Human Skills Technical Skills Figure shows the managerial skills which are required by managers working at different levels of management. The top level managers require more conceptual skills and less technical skills. The lower level managers require more technical skills and fewer conceptual skills. Human relations skills are required equally by all three levels of management. a. Technical Skill: Technical skill means the skill or knowledge, which is required for performing an operational activity in the best possible manner. Technical skill can also be termed as a technical expertise. Technical skill is an imperative skill for the lower level managers. Unless, lower level managers are well versed with technical aspects, they would not be in a position to direct the operations of their subordinates and lead them towards optimum performance, quantitatively and qualitatively. The upper and middle level managers should have a general acquaintance of technical matters. This helps them to formulate operational planning in a more realistic manner. b. Human Skill: Human skill means an ability to tactfully deal with human beings and mould their behaviour at work in the desired manner to help them to attain the common objectives of the enterprise in the most effective and efficient manner. Human skill requires an understanding of human behaviour, which in turn, necessitates an insight into human needs, and the ways and means of motivating people. Since managers at all levels in an enterprise are supposed to deal with human beings, human skill is equally needed by all managers - from the highest to the lowest authority in the management hierarchy. c. Conceptual Skill: Conceptual skill, as the name suggests, is concerned with concepts or ideas. It means an ability: To view an enterprise as a whole in its totality, appreciating the interrelationship among its diverse components. To analyse the implications of external environmental factors, viz., social, economic, political, technological, etc. on the role of business. To consider the strengths and weaknesses of the enterprise and environmental threats and opportunities. To take a balanced and rational decision based on the understanding of the above-mentioned factors. Conceptual skill is imperative for the top level managers, necessary for the middle level managers and desirable for the lower level managers. The role of manager in the 21st century has become more complex and diverse than ever before. This requires him to possess certain other skills and competencies in addition to the three basic skills suggested by Professor Daniel Katz. These skills are: a. Communication Skill: Communication skills are important at all three levels of management. A manager needs to communicate with his workers, other managers, superiors, competitors, customers, suppliers, government authorities, etc. in dayto-day functioning of business. Thus, a good manager should not only communicate well but also promote two-way communication in the organisation. b. Administrative Skill: Administrative skills are required mostly at the top level management. The top level managers must be aware of how to formulate plans, policies and programmes, and should  have the skills of getting work done. They should be able to achieve co-ordination at the various levels of the organisation. Thus, a good manager should also be a good administrator. c. Leadership Skill: Leadership skill is the ability to motivate human behaviour as desired. A good leadership skill helps the management to get the work done through the management. A good manager should be able to instil trust, provide direction and delegate responsibility amongst team members. Leadership skills are equally important for managers at all levels but in different magnitudes. d. Problem-solving Skill: Problem-solving skill is also known as design skill. To manage business is to confront and solve a number of problems. Management must know how to identify problems and come up with the best possible solutions. This requires experience, up-to-date knowledge of latest developments and intelligence. A good manager should be proactive in solving management issues and problems. e. Decision-making Skill: One of the most important functions of managers is to make sound and timely decisions. If decisions are delayed, the organisation will not be able to reap the benefits of opportunities offered by the environment or the threats posing business may become unmanageable. Thus, managers at all levels, especially top level management, should possess decision-making skills. f. Team Building Skill: Management is an integrating force. It integrates non-human factors with human factors. The action of individuals working in organisation at different levels and in different departments needs to be integrated and directed towards the common organisational goals. Thus, a good manager must possess an ability to harmonise the efforts of individuals and departments into a team action. g. Change Management Skill: Changes are a part and parcel of modern business. However, people do not generally take to changes happily. Therefore, it is the manager's responsibility to help the team members cope with changes, listen to their problems and give them solutions. The manager has to see when and what changes are required and accordingly, make efforts to implement them successfully. h. Conflict Resolving Skill: When different types of people work together, it is natural for them to occasionally get into conflicts. Such conflicts affect the individual performance as well as organisational performance in the long run. A manager must be able to understand these conflicts between the team members and resolve them on time before they start affecting organisational performance. MANAGEMENT STYLES Managers perform varieties of functions in the organization as entrepreneur, planners, organisers, liaison officers, leaders, disturbance handlers, resource allocator, problem solver, negotiator and so on. Managers' way of functioning varies from individual to individual and organisation to organisation. Managerial styles indicate the way in which individual managers behave as managers, how they look at the problem and react to the situation and how they perform their functions. The style of management is influenced by many factors as stated below: 1. The position held by the manager and his duties and responsibilities. 2. The authority or power entrusted to the manager. 3. Age, education and the family background of the manager. 4. Ability of the manager and his subordinates. 5. Organisation structure, its goals, plans and policies. 6. The external environment in which organisation is functioning. The following are the major managerial styles: 1. Entrepreneurial style This type of managers is always creative, innovative and hard working. They identify the opportunities and promptly capitalise such opportunities. They possess charismatic personality. These managers are confident, ambitious and result-oriented. They do not bother much about the rules and regulations. They expect the subordinates to be hard working. 2. Conservative style Managers follow traditional and cautious approach. These managers are not much ambitious, but they formulate feasible goals, simple strategies and achieve a reasonable performance. These managers are very formal and indifferent to their subordinates. They are submissive towards their superiors and friendly with their colleagues. They strictly follow the rules and regulations. Managers are risk avoiders and tension free in their position. They always resist changes in the organization. 3. Methodical style This style of managers always aims at perfection and high performance. They follow order and system in their thinking and action. They are very alert on the happening of the environment. This type of managers is always respect and reward hardworking subordinates. 4. Democratic style In this style, manager is friendly and cordial with his subordinates. Instead of taking unilateral decisions, manager consults and gets the opinion of subordinates while taking decision. Democratic manager decentralises managerial authority. 5. Autocratic style In this style of management, decision making power is centralised with the manager. He alone takes decisions without consulting others. He gives orders and instructions to his subordinates and subordinates are expected to follow the orders. Subordinates will be punished if they do not follow manager's order. Autocratic manager works on the assumption that people are lazy, dislike work and can be motivated by money only. Therefore, manager exercises strict control over his subordinates. Autocratic manager may be successful but is always disliked by the employees. 6. Free-rein style Free-rein manager believes in delegation of authority to his subordinates. Manager trusts the ability of subordinates and gives complete responsibility of work to his subordinates. Subordinates themselves workout the strategies accomplish the work assigned to them. Manager just acts as a middleman between his superiors and subordinates and acts as a reporter to his superior. This type of management is applied where subordinates are educated and highly knowledgeable and happy to assume responsibility. 7. Professional style In this style of management, managers are highly educated and Professionals. They try to introduce modern management concepts and techniques in the organisation. Managers are very courageous, firm and flexible in their actions. They are adjustable to the changing environment. They always aim at organisational growth and expansion. This type of managers is always take interest in understanding the needs of the society and the changes taking place in the business world. Professional style of management is practised in all modern industrial and commercial organisations.