Class 12 Business Studies Notes Chapter 2 (Principles of Management) – Business Studies-I Book

Alright class, let's get straight into Chapter 2: Principles of Management. This is a foundational chapter, crucial not just for your board exams but also for understanding how management operates effectively, which is often tested in various government exams.

Chapter 2: Principles of Management - Detailed Notes

1. Concept of Principles of Management

• Meaning: Management principles are broad and general guidelines for managerial decision-making and behaviour. They are not rigid rules but provide a framework for action.
• Distinction:
  • Principles vs. Pure Science Principles: Management principles are not as rigid as pure science principles (like physics). They deal with human behaviour, which is complex and dynamic, making them more flexible and applied creatively depending on the situation.
  • Principles vs. Techniques: Techniques are procedures or methods involving a series of steps to accomplish a desired goal (e.g., Time Study). Principles are guidelines for decision-making based on cause and effect.
  • Principles vs. Values: Values are general rules for behaviour in society, formed through common practice, having moral connotations (e.g., honesty). Principles are formed through research in work situations and are technical in nature.

2. Nature/Features/Characteristics of Management Principles

• (i) Universal Applicability: Applicable to all types of organizations (business, non-business, small, large, public, private) across the globe. However, their extent of applicability may vary depending on the nature, size, and situation of the organization.
• (ii) General Guidelines: They provide guidelines to action but do not offer ready-made solutions to all managerial problems, as real business situations are complex and dynamic.
• (iii) Formed by Practice and Experimentation: Developed over time through observation, analysis, and experimental studies based on the experiences of managers.
• (iv) Flexible: They can be modified by managers according to the specific situation. They are not rigid prescriptions. Managers have discretion in their use.
• (v) Mainly Behavioural: Aimed at influencing human behaviour within organizations. They enable a better understanding of the relationship between human and material resources in achieving organizational goals.
• (vi) Cause and Effect Relationship: They establish a relationship between cause and effect, helping predict the likely outcome if a particular principle is applied in a given situation. However, since they apply to human behaviour, these relationships are not absolute.
• (vii) Contingent: Their application depends upon the prevailing situation at a particular point in time. The effectiveness relies on the specific circumstances, requiring careful assessment by the manager.

3. Significance/Importance of Management Principles

• (i) Providing Managers with Useful Insights into Reality: Help managers understand real-world situations better, learn from past mistakes, and conserve time by solving recurring problems quickly.
• (ii) Optimum Utilisation of Resources and Effective Administration: Principles guide managers in allocating resources (human and material) efficiently, minimizing wastage, and ensuring systematic, effective administration.
• (iii) Scientific Decisions: Encourage logical, thoughtful, and fact-based decision-making rather than relying on blind faith or guesswork (rule of thumb).
• (iv) Meeting Changing Environment Requirements: While principles are general guidelines, their flexibility allows managers to adapt them to dynamic business environments.
• (v) Fulfilling Social Responsibility: Some principles guide managers in fulfilling their commitments towards society (e.g., Equity, Fair remuneration).
• (vi) Management Training, Education, and Research: Form the core of management theory, providing a basis for management training, education, and further research. They help identify areas for future study.

4. Fayol's Principles of Management (Henri Fayol - Father of General Management/Administrative Theory)

Fayol identified 14 principles based on his experience as a mining engineer and director.

• (1) Division of Work: Work should be divided into small tasks/jobs. Each job performed by a specialist leads to greater efficiency, specialization, and productivity.
  • Positive: Specialization, improved efficiency.
  • Violation: Lack of efficiency, duplication of effort, wastage of time.
• (2) Authority and Responsibility: Authority is the right to give orders and obtain obedience. Responsibility is the obligation to perform the assigned task. There should be a balance between the two. Giving authority without responsibility leads to misuse; giving responsibility without authority makes the person ineffective.
  • Positive: No misuse of authority, effective task completion.
  • Violation: Misuse of authority (if excess), inability to perform duties (if less authority).
• (3) Discipline: Obedience to organizational rules and employment agreements, necessary for smooth functioning. Requires good superiors, clear agreements, and judicious application of penalties.
  • Positive: Systematic working, improved efficiency.
  • Violation: Chaos, confusion, delay, wastage of resources.
• (4) Unity of Command: Each subordinate should receive orders from and be responsible to only one superior. Avoids confusion, conflict, and ego clashes.
  • Positive: No confusion, clear accountability, improved effectiveness.
  • Violation: Confusion, ego clashes, divided loyalty, difficulty in fixing responsibility.
• (5) Unity of Direction: All units of an organization should move towards the same objectives through coordinated and focused efforts. "One head and one plan" for a group of activities having the same objective. Prevents overlapping of activities.
  • Positive: Achievement of goals, coordination of efforts.
  • Violation: Lack of coordination, wastage of resources, difficulty in achieving goals.
• (6) Subordination of Individual Interest to General Interest: The interests of the organization must supersede the interests of any one individual employee. Managers should set an example.
  • Positive: Achievement of organizational goals, coordination.
  • Violation: Difficulty in achieving goals, potential for organizational failure if individual interest prevails.
• (7) Remuneration of Employees: Overall pay and compensation should be fair to both employees and the organization, providing a reasonable standard of living and within the organization's paying capacity.
  • Positive: Good employee relations, motivation, reduced labour turnover.
  • Violation: Dissatisfaction, demotivation, increased labour turnover, poor relations.
• (8) Centralisation and Decentralisation: Centralisation means concentration of decision-making authority with top management. Decentralisation means its dispersal among more than one person. There should be a balance depending on the organization's size and nature. Small orgs = more centralisation; Large orgs = more decentralisation.
  • Positive: Fast decisions (centralisation), employee development & better control (decentralisation), balanced decision-making.
  • Violation: Delay in decisions (complete centralisation), loss of control (complete decentralisation).
• (9) Scalar Chain: The formal line of authority from highest to lowest ranks. Communication should generally follow this chain. Fayol allowed for a shortcut called 'Gang Plank' for communication between employees at the same level in emergencies, provided superiors are informed.
  • Positive: Systematic communication flow, clear authority-responsibility relationships.
  • Violation: Communication gap, lack of clarity in authority.
• (10) Order: A place for everything (material order) and everyone (social order), and everything/everyone in its/their appointed place. Leads to increased productivity and efficiency.
  • Positive: Smooth functioning, no hindrance, efficient use of resources.
  • Violation: Wastage of time searching, hindrance in operations.
• (11) Equity: Kindliness and justice in the behaviour of managers towards workers. No discrimination based on sex, religion, language, caste, belief, etc. Ensures loyalty and devotion.
  • Positive: Cordial relations, motivated employees.
  • Violation: Dissatisfaction, unhealthy relations, potential for high turnover.
• (12) Stability of Personnel: Employee turnover should be minimized. Frequent transfers/rotations are bad. Employees need time to settle into jobs. Provides a sense of job security.
  • Positive: Job security, reduced recruitment/training costs, efficiency.
  • Violation: Wastage of resources (recruitment/training), frustration, insecurity among employees.
• (13) Initiative: Encouraging employees to take the first step in thinking out and executing a plan within the prescribed limits of authority. Creates satisfaction and motivation.
  • Positive: Employee motivation, development of employees, achieving goals faster.
  • Violation: Demotivation, employees not working to full potential.
• (14) Espirit De Corps: Management should promote team spirit, unity, and harmony among employees. Replacing 'I' with 'We'. Avoids divide and rule.
  • Positive: Team spirit, coordination, mutual trust, achievement of group goals.
  • Violation: Lack of coordination, goals may not be achieved, unhealthy relations.

5. Taylor's Scientific Management (F.W. Taylor - Father of Scientific Management)

• Concept: Applying scientific methods to management decisions and practices to increase efficiency. Finding the 'one best way' to perform a task. Focus on shop-floor level activities.

Principles of Scientific Management:

• (1) Science, Not Rule of Thumb: Replace old 'rule of thumb' (trial and error, intuition) methods with scientifically studied and developed methods. Each job should be based on scientific study, not guesswork.
• (2) Harmony, Not Discord: Complete harmony between management and workers. Both should realize their importance. Requires a 'Mental Revolution' – a change in attitude where both management and workers cooperate for mutual benefit (prosperity for both).
• (3) Cooperation, Not Individualism: Extension of 'Harmony, Not Discord'. Competition should be replaced by cooperation. Management should involve workers in decision-making that affects them, workers should not strike unnecessarily. Open communication and reward for suggestions.
• (4) Development of Each and Every Person to His/Her Greatest Efficiency and Prosperity: Focus on scientific selection, training, and development of workers. Assign work based on capabilities. Ensures efficiency for the company and growth for employees.

Techniques of Scientific Management:

• (i) Functional Foremanship: Extension of Division of Work. Divides the work of a factory manager into two sub-departments: Planning and Production. Under each, there are four functional experts (foremen) giving instructions to workers. Total 8 foremen.
  • Planning Incharge: Instruction Card Clerk, Route Clerk, Time and Cost Clerk, Disciplinarian.
  • Production Incharge: Speed Boss, Gang Boss, Repair Boss, Inspector.
  • Aim: Achieve specialization by having experts supervise specific functions. (Violates Unity of Command).
• (ii) Standardisation and Simplification of Work:
  • Standardisation: Setting standards for every business activity (process, raw material, time, product, machinery, methods, working conditions). Aims to achieve quality, uniformity, and interchangeability.
  • Simplification: Eliminating unnecessary diversity of products (sizes, types). Aims to reduce inventory, labour costs, and machine usage, leading to efficiency.
• (iii) Method Study: Finding the 'one best way' of doing a job by analysing various methods. Minimizes production cost and maximizes quality and satisfaction. Techniques like process charts, operations research are used.
• (iv) Motion Study: Studying movements (lifting, putting objects, sitting, changing positions) undertaken while doing a job. Aims to eliminate unnecessary movements to reduce time and fatigue.
• (v) Time Study: Determining the standard time required to perform a well-defined job. Done using a stopwatch. Sets standard targets, determines number of workers needed, and frames incentive schemes.
• (vi) Fatigue Study: Determining the frequency and duration of rest intervals required to complete a job. Aims to maintain worker efficiency by allowing recovery from tiredness. Long working hours without rest reduce efficiency.
• (vii) Differential Piece Wage System: Paying different rates of wages to efficient and inefficient employees. Workers producing standard output or more get a higher piece rate; those below standard get a lower piece rate. Motivates workers to improve efficiency.

6. Comparison: Fayol vs. Taylor

Conclusion: Both Fayol and Taylor made significant contributions. Their principles are complementary. Fayol focused on improving overall management, while Taylor focused on increasing worker efficiency on the shop floor. Modern management draws heavily from both.

Multiple Choice Questions (MCQs)

1. Which principle of management states that there should be a place for everything and everyone in an organization?
   a) Equity
   b) Order
   c) Initiative
   d) Scalar Chain

2. F.W. Taylor's technique of 'Functional Foremanship' is an extension of which principle of management?
   a) Unity of Direction
   b) Division of Work
   c) Discipline
   d) Unity of Command

3. The concept of 'Mental Revolution', as advocated by Taylor, involves a change in attitude between:
   a) Management and Customers
   b) Workers and Workers
   c) Management and Workers
   d) Management and Suppliers

4. Which feature of management principles suggests that their application depends upon the prevailing situation at a particular point in time?
   a) Flexible
   b) Mainly Behavioural
   c) Contingent
   d) Universal Applicability

5. 'Gang Plank' is a term associated with which principle of management given by Fayol?
   a) Unity of Direction
   b) Equity
   c) Order
   d) Scalar Chain

6. Which technique of Scientific Management aims at eliminating unnecessary diversity of products?
   a) Method Study
   b) Motion Study
   c) Standardisation
   d) Simplification of Work

7. According to Fayol, the interests of ______ should supersede the interests of any one individual employee.
   a) The Top Management
   b) The Shareholders
   c) The Organization
   d) The Department Head

8. Which study under Scientific Management seeks to determine the amount and frequency of rest intervals required in completing a task?
   a) Time Study
   b) Motion Study
   c) Fatigue Study
   d) Method Study

9. Henri Fayol is known as the Father of:
   a) Scientific Management
   b) General Management
   c) Human Relations Movement
   d) Modern Management

10. Which principle of management is violated if an employee receives orders from more than one superior?
    a) Unity of Direction
    b) Unity of Command
    c) Discipline
    d) Authority and Responsibility

Answer Key:

1. b) Order
2. b) Division of Work
3. c) Management and Workers
4. c) Contingent
5. d) Scalar Chain
6. d) Simplification of Work
7. c) The Organization
8. c) Fatigue Study
9. b) General Management
10. b) Unity of Command

Make sure you understand the core concepts behind each principle and technique, not just memorize the names. Government exams often test application and understanding. Good luck with your preparation!