CBSE Class 12 Business Studies Principles Of Management Notes

CONCEPT MAPPING

Concept : Principles of management are general guidelines which can be used
under certain situations. Nature : (a) universal applicability (b) formed by practice (c) flexible (d) mainly behaviou
ral (e) cause and effect relationships (f) general guidelines contingent

Importance: (a) useful insights into reality (b) optimum utilisation of resources (c) scientific decisions (d) meeting changing environment (e) management training and research (f) fullfilling socia responsibility

Principles of Scientific Management : (a) science not rule of thumb (b) harmony not discord (c) cooperation not individualism (d) maximum not restricted output (e) developerat
pment of each son to gretes efficiency.

Techniques of Scientific Management: (a) functional foremanship (b) differential piece rate system (c) work study ‐ time study, motion study, fatigue study, method study (d) standardisation and simplification of work.

Fayol's Principles : (a) division of work (b) authority and responsibility (c) discipline (d) unity of command (e) unity of direction (f) subordination of individual interest to common interest (g) remuneration (h) centralisation and decentralisation (i) scalar chain (j) order (k) equity (I) stability of tenure (m) initiative (n) esprit de corps

Taylor vs. Fayol : Their contributions are complementary in nature despite several differences.

IMPORTANT POINTS : -

1. Concept of Principle of Management :-

It is broad and general guideline for managerial decision making; are different from principles of science as they deal with human behaviour; are different from techniques of management as techniques are method whereas principles are guidelines to action and decision making; are different from values which are formed as generally accepted behaviour in society and having moral coordination where as principles are formed through research having technical nature.

2. Nature of Principles of Management :

The nature of principles of management can be described in the following points :-
- Universal applicability i.e. they can be applied in all types of organizations
- General Guidelines to action which however do not provide readymade solutions as the business environment is very changing or dynamic.
- Formed by practice and experimentation.
 Flexible which have to be modified by the practicing manager as per the demands of the situations.
- Mainly Behavioral since the principles aim at influencing human behavior.
- Cause and Effect relationship which can be used in similar situations in a large number of cases.
- Contingent as their applicability depends upon the prevailing situation.

3. Significance of the Principles of Mangement : -

The significance of principles of management can be derived from their utility which can be understood from the following points :-
- Providing managers with useful insights into reality.
- Optimum untilization of resources and effective administration.
- Scientific decisions.
- Meeting the changing environmental requirements.
- Fulfilling social responsibility.
- Management training, education and research.

4. Taylor’s Scientific Management :

F.W. Taylor (1856-1915) was an American mechanical engineer who believed in analyzing the work scientifically and finds one best way to do any work. His book “Principles of Scientific Management” was published in 1911.

5. Principles of Scientific Management :-

Taylor gave the following principles of scientific management :-
- Science and not the rule of thumb which implies developing one standard method through work study unifying the best practices globally which would result in optimum resource utilization.
- Harmony, Not discord which implies that there should be mental revolution on part of managers, workers and owners to respect each other’s role and eliminate any class conflict to realize organizational objectives.
- Cooperation not individualism is an extension of the Principle of Harmony, Not discord whereby constructive suggestions of workers should be adopted and they should not go on strike as both management and workers share responsibility and perform together.
- Development of Each and Every Person to His or Her greatest Efficiency and Prosperity which implies development of competencies of all persons of an organization after their scientific selection and assigning work suited be to their temperament and abilities.

6. Techniques of Scientific Management :-
These include Functional Foremanship ; Standardization and
SImplification of Work; Method study; Motion Study; Time-Study; Fatigue Study and Differential Piece Wage System. These are briefly discussed below :-
- Functional Foremanship is a technique in which Planning and Execution are saparated.There are 8 types of specialized professionals 4 each under planning and execution who keep a watch on all workers to extract optimum performance.
- Standardization refers to developing standards for every business activity whereas Simplification refers to eliminating superfluous varieties of product or service.
- Method study aims to find one best way to do a job.
- Motion study seeks to eliminate unnecessary motions in the execution of a job to enable it to be completed in less time efficiently.
- Time Study determines standard time taken for a well defined job.
- Fatigue study seeks to determine amount and frequency or rest intervals in completing a task.
- Differential Piece Wage system seeks to reward a more efficient worker by giving him/her more wages for more quantity of standard production achieved.

7. Foyol’s Principles of Management :-
Henri Fayol (1841-1925) was a French Mechanical engineer who gave 14 general principles of Management which are as under :-
- Division of Work :- Work is divided into small tasks / jobs and each one is done by a trained specialist which leads to greater efficiency.
- Authority and Responsibility : - Managers are empowered with authority to give orders and obtain obedience and responsible for the accomplishment of task for which they are granted authority.
- Discipline - It is the obedience to organizatinal rules and employment agreement which are necessary which are necessary for working of the organization.
- Unity of Command :- There should be only one boss for every employee.
- Unity of Direction : - Each group of activities having the same objective must have one haad and one plan.
- Subordination of Individual Interest to General Interest : - The interest of an organization should take priority over the interests of any one individual employee.
- Remuneration of Employees :- The overall pay and compensation should be fair to both employees and the organization.
- Centralization and Decentralization : - The concentration of decision making authority is called centralization whereas its dispersal among more than one person is known as decentralization. Both should be balanced.
- Scalar Chain : The formal lines of authority between superiors and subordinates from the highest to the lowest ranks is known as scalar chain.
- Order :- A place for everything (everyone) and everything (everyone) in its place.
- Equity :- The working environment of any organization should be free from all forms of discrimination and the principles of Justice and fair play should be followed.
- Stability of Personnel : After being selected and appointed after due and rigorous procedure the selected person should be kept at the post for a minimum period decided to show result.
- Initiative :- Workers should be encouraged to develop and carry out their plans for improvements.
- Espirit De Corps :- Management should promote team spirit, unity and harmony among employees.

8. Fayol versus Taylor :-
While the work of Taylor concerned shop floor the work of Fayol concerned General Principles applicable to all types of situations.

KEY CONCEPTS IN A NUTSHELL:

1. MEANING:

The principles are broad statement of fundamental truth which provide guide lines for management decision and action. These guidelines are derived through experimentation and observation 

2. NATURE OF PRINCIPLES OF MANAGEMENT

1. Universal application can be applied to all kind of organisations, irrespective of their size and nature.
2. General guidelines the formulated guidelines to action which need to be adjusted and used as per the demands of the situation.
3. Formed by practice and experimentation derived through experimentation and Observation.
4. Flexible principles are not rigid like science but are modified according to the business environment needs.
5. Behavioural the principles aim to influence the unpredictable, complex and dynamic human behaviour.
6. Cause and effect relation they aid in predicting the outcome of management actions.
7. Contingent the management principles are dependent upon the prevailing Conditions/situations at that particular time hence amended accrdingly.

3. SIGNIFICANCE/ IMPORTANCE OF MANAGEMENT PRINCIPLES

i. Provides managers with useful insights into reality through improved knowledge, ability, understanding and. improved guidance to the managers
ii. Optimum utilisation of resources and effective administration through coordinated use of phy sical, financial and human resources.

iii. Scientific decision they lend to be more realistic, thoughtful, justifiable and free from personal bias.
iv. Meet the changing environmental requirements by providing effective and dynamic leadership in imp lementing changes.

v. Fulfils social responsibility guides the manager in fulfilling the social responsibility.
vi. Management training, education and research the principles help in increasing knowledge which is used as the basis for management training and research.

4. FAYOL’S PRINCIPLES OF MANAGEMENT

1. Division of labour work could be divided into small specialised task and performed by a trained specialist
2. Authority and responsibility there must be a right balance between authority (right to give orders) and responsibility (obligation to perform the assigned task).  
5. Unity of Direction ­ all the units of the organisation should aim and move towards achieving the organisational goal.
6. Subordination of individual interest to general interest ­ the organisation interest to be prioritised over individual interes
7. Remuneration ­ pay should be fair and satisfying to both employee and the
8. Centralisation and decentralisation ­ there should be a proper balance between centralisation (concentration of decision making powers with top management) and decentralisation (dispersal of decision making power among more than one person).
9. Scalar chain ­ orders or communication should pass from top to bottom and follow the official line of
10. Orders ­ A place for everything/ everyone and every one in its place
11. Equality ­ kindness, empathy and justice in the behaviour of manager towards workers.
12. Tenure stability ­ frequent displacement of employee from their position should be avoided. They should be given sufficient time to show their results
13. Initiative ­ Employees to be encouraged to develop and carry out their improvement plans
14. Espirit de corps ­ need for team work, spirit and harmony.

5. SCIENTIFIC MANAGEMENT:

Meaning:Conduct of business activities according to standardised tools, methods and trained personal so as to have increased output through effective and optimum utilisation of resources. Hence it stresses that there is always one best way of doing things.

PrinciplesofScientificManagement

1. Science not rule of thumb ­
There should be scientific study and analysis of each element of job rather than adopting old rule of the thumb approach on a hit and miss method. Encourage “thinking before doing”.

2. Harmony not discord ­
There should be complete harmony and proper understanding between management and workers in achieving the organisation goals.

3. Cooperation not individualism 
Taylor emphasised on the importance of cooperative group effort between the management and workers in achieving the organisation’s goals and not individualism.

4. Development of workers to their greatest efficiency and prosperity:
The management should scientifically select the workers; assign job as per their physical, mental and intellectual capability and potential; and train them as per the job requirement.

Techniques of scientific managementa) Functional foremanship
• Supervision is to be divided into several specialized functions and each function to be entrusted to a special foreman.
• Each worker will have to take orders from eight foremen in the related process of function of production.
• Stress on separating planning function from executive function.

b) Standardisation and simplification of work
• Process of setting standards for every business activity to maximise output.
• Simplification is eliminating unnecessary varieties, sizes and grades of product manufactured in the organisation.

c) Method study
• Finding one best way of doing a job.
• Critical analysis is made for plant layout, product design, material handling and work processes using techniques like process charts, operations research etc.

d) Motion study
 • Making a thorough analysis of various motions being performed by a worker while doing a particular task.
• Identifying and determining the ideal productive movement.
• Eliminate the unproductive movements and equipments.

e) Time study
• It is the technique used to determine the standard time taken by the workman with reasonable skill and ability to perform a particular task.
• Here the job is divided into series of elements and the time required to complete each element idealistically is recorded using a stop watch.

f) Fatigue Study
• Determines the amount and frequency of rest intervals required in completing a task.

g) Differential Piece wage system
• Evolve a system wherein the efficient and inefficient workers are paid at different rates, as financial incentives act as motivators.
• First a standard task is established with the aid of time and motion study, then two rates are established. Higher when standard outputs is produced and lower when the standard is not met

VERY SHORT ANSWER TYPE QUESTIONS

1. How are management principles derived?
Ans. Management principles are derived through observation and analysis of events.

2. Give anyone difference between Principle and Technique.
Ans. Principles are guidelines to take decision whereas techniques are methods to take action.

3. What is meant by 'Universality of management principles'?
Or
Why is it said that management principles are universal?
Ans. This it means that they are applicable to all kinds of organizations.

4. The principles of management aren't rigid and can be modified when the situation demands. Which nature of principles is being discussed here?
Ans. Flexibility.

5. Define scientific man
Ans. Application of a scientific approach to managerial decision making.

6. List any two principle of 'Scientific Management' formulated by Taylor for managing an organization scientifically.
Ans. (i) Science, not Rule of Thumb. (ii) Harmony, not Discord.

7. Factory owners or managers relied on personal judgment in attending to the problems they confronted in the course of managing their work. Which principle of Taylor is it referring to ?
Ans. 'Rule of thumb'

8. What do you mean by Mental Revolution?
Ans. Mental Revolution means revolutionary change in the attitude of both

Important Notes for Class 12 Economics Chapter 2 Principles of Management

1. Principles of Management:
Principles of management are broad and general guidelines for managerial decision making and behaviour.

2. Nature of Principles of Management:
• Universal application: The principles can be applied to all kinds of organisations, irrespective of their size and nature.
• General guidelines: The principles are guidelines to action which need to be modified and used as per the demands of the situation.
• Formed by practice and experimentation: The principles are derived through experimentation and observation.
• Flexible: The principles are not rigid like science but are modified according to the needs of the business environment.
• Behavioural: The principles aim to influence the unpredictable, complex and dynamic human behaviour.
• Causes and effect relation: The principles aid in predicting the outcome of management actions.
• Contingent: The management principles are dependent upon the prevailing conditions/situations at that particular time hence amended accordingly.

3. Significance/Importance of Management Principles:
• Provides managers with useful insights into reality: Management Principles provide improved knowledge, ability, understanding and guidance to the managers.
• Optimum utilisation of resources: Effective administration through coordinated use of physical, financial and human resources.
• Scientific decision: Management decisions tend to be more realistic, thoughtful, justifiable and free from personal bias.
• Meet the changing environmental requirements: By providing effective and dynamic leadership in implementing changes.
• Fulfills social responsibility: Guides the manager in fulfilling the social responsibility.
• Management training, education and research: The principles help in increasing knowledge which is used as the basis for management training, education and research.

4. Fayol’s Principles of Management:
• Division of labour: Work should be divided into small specialised tasks and performed by a trained specialist.
• Authority and responsibility: There must be a right balance between authority (right to give orders) and responsibility (obligation to perform the assigned task).
• Discipline: Obedience to organisation rules and employment agreement.
• Unity of command: An employee must receive orders from one boss.
• Unity of direction: All the units of the organisation should aim and move towards achieving the organisational interest.
• Subordination of individual interest to general interest: The organisational interest to be prioritised over individual interest.
• Remuneration: Pay should be fair and satisfying to both; employees and the organisation.
• Centralisation and decentralisation: There should be a proper balance between centralisation (concentration of decision making powers with top management) and decentralisation (dispersal of decision making power among more than one person) levels.
• Scalar chain: Orders of communication should pass from top to bottom and follow the official line of command.
• Order: A place for everything/everyone and everything/every one in its place.
• Equity: Kindness, empathy and justice in the behaviour of manager towards workers.
• Stability of tenure: Frequent displacement of employee from their position should be avoided.
They should be given sufficient time to show their results.
• Initiative: Employees to be encouraged to develop and carry out their plans for prefrances.
• Espirit de corps: Need for team work and harmony.

5. Scientific Management:
According to Taylor, ‘Scientific Management is knowing exactly what you want your men to do and seeing that they do it in the best and the cheapest way’. It includes finding the most efficient methods of production, scientific selection and training of workers, proper allotment of duties and work and achieving cooperation between workers and management.

Principles of Scientific Management:
• Science, not rule of thumb: There should be scientific study and analysis of each element of job rather than adopting old rule of the thumb approach or a hit and trial methods. This encourage thinking before doing.
• Harmony, not discord: There should be complete harmony and proper understanding between management and workers in achieving the organisation goals.
• Cooperation, not individualism: Taylor emphasised on the importance of cooperative group effort between the management and workers in achieving the organisation’s goals and not individualism.
• Development of workers to their greatest efficiency and prosperity: The management should scientifically select the workers; assign job as per their physical, mental and intellectual capability and potential; and train them as per the job requirement.

Techniques of Scientific Management:

(a) Functional foremanship
• Supervision is to be divided into several specialised functions and each function to be entrusted to a special foreman.
• Each worker will have to take orders from eight foremen in the related processes of function of production.
• Stress on separating planning function from execution function.

(b) Standardisation and simplification of work
• Standardisation is the process of setting standards for every business activity to maximize output.
• Simplification is eliminating unnecessary varieties, sizes and grades of product manufactured in the organisation.

(c) Method study
• The scientific study of analysing the various ways of doing a job and selecting the best way of doing the job.

(d) Motion study
• Making a thorough analysis of various motions being performed by a worker while doing a particular task.
• Identifying and determining the ideal of productive movement.
• Eliminating the unproductive superfluous movements.

(e) Time study
• It is the technique used to determine the standard time taken by the workman of reasonable skill and ability to perform a particular task.
• Here the job is divided into series of elements and the time required to complete each element idealistically is recorded using a stop watch.

(f) Fatigue study
• Determines the amount and frequency of rest intervals required by the workers in completing a task.

(g) Differential piece wage system
• Evolve a system wherein the efficient and inefficient workers are paid at different rates, as financial incentives act as motivators.
• First a standard task is established with the aid of time and motion study then two rates are established. Higher rate is applicable when standard output is produced and lower rate when the standard is not met.

Identifying the Concepts
Concepts Key Words/Phrases
• Method Study One best method to maximise efficiency.
• Principle of Initiative Encouraging suggestions from employees.
• Coorperation, Not Individualism Paternalistic style of management.
• Differential Piece Wage System Incentive bonus plan.
• Unity of Direction One head one plan.
• Esprit De Corps Replace ‘I’ with ‘We’.
• Mental Revolution Transformation in the attitude of both; management and workers towards each other.
• Functional Foremanship Separation of planning from execution.
• Discipline Judicious application of penalties.
• Simplification Eliminating unnecessary diversity of products.
• Standardisation Uniformity in materials, machines and tools.
• Science not rule of thumb Method of scientific enquiry.
• Harmony not discard Prosperity of employer accompanied by the prosperity of of employee.
• Motion study Eliminating in productive movements.
• Remuneration Just and equitable compensation.

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