Principles of Management Developed By P.M.Bendre Henri Fayol F. W. Taylor Peter F. Drucker About this Book The idea of writing this book was to have a fresh outlook at the subject considering that: • There are so many new developments, thoughts and ideas about the subject. • During last years, there have been so many changes in the business scenario. Further, the book is meant for PDGM-hybrid learning students who are already the working professionals in various age groups. These students are from different backgrounds. They will be pursuing their studies along with their professional careers. The book must create tremendous interest in their minds. Therefore, the language of this book has been kept as easy to understand as possible, and attempt has been made that from chapter to chapter, more and more interest and enthusiasm should get built into the students’ mind, and they think seriously about the subject. The purpose of this book is to help the students to implement Principles of Management in their profession and to positively advance their progress and make them successful entrepreneurs as well as responsible citizens, family members, employees, occupiers/directors and what not. While writing this book, I have referred to lectures of Prof. Venkat Iyer, which give us superlative guidance because of number of years of his valuable experience. I am thankful to him from my heart. I have also taken help of so many existing books as well as the Internet in order to make the subject complete in all respects and practically useful to the students. I have used my knowledge and my 33 years industrial experience, which I earned in organizations like Bosch and Kirloskar as Chief of Production as well as Quality. Prof. Rajesh Aparnath has offered me a valuable opportunity to write this book and also given me most valuable guidance, for which I am thankful to him from the bottom of my heart. I also thank Ms Amandeep Kaur and the staff of Welingkar Institute of Management Development and Research. I wish all the best to the students. With Best Regards, P.M.Bendre [email protected] i C HAPTER 1 - NATURE OF MANAGEMENT Principles of Management Objectives At the end of the chapter, you will be able to understand meaning and definitions, functions and importance of management and you will start giving a serious thought to becoming a good manager. 2 Chapter 1 - Nature of Management Structure 1.1 My dear students, a warm and hearty welcome to all of you! 1.2 Introduction to Management 1.3 Meanings and Definitions of Management 1.4 Management as a Process, coordination, and function 1.5 Five M’s in the business 1.6 Activities for the students 1.7 Necessity of Management and SMART Goals 1.8 Activities for the students 1.9 Functions of Management 1.10 Importance of Management 1.11 Conclusion of the chapter 1.12 Summary 1.13 Self-Assessment Questions 1.14 Multiple Choice Questions 3 Chapter 1 - Nature of Management 1.1 My dear students, a warm and hearty Welcome to all of you! According to Peter F. Drucker, the emergence of Management as an essential, a distinct and leading social institution is a pivotal event in social history. Rarely has a new basic institution, a new leading group, emerged as fast as Management since the turn of this century. Rarely in human history has a new institution proved indispensable so quickly and even less often has a new institution arrived with so little opposition, so little disturbance and so little controversy. PETER F. DRUCKER, American Management Consultant, Educator, and Author My young friends, you are welcome to this institution of Management, the career in which will certainly prove not only fruitful in your personal as well as professional life, but also will enhance the meaningfulness and joy of living the life. Management is an art. It is in the sense of possessing managing skill by an individual. Management is science too. It involves developing certain principles or laws applicable in a place where a group of activities are coordinated. All of you would certainly like to master this art as well as science of Management. Further, leadership qualities are developed in the persons who are working in the top-level management. According to Ralph C. Davis, Management is the function of executive leadership everywhere. I am sure, all of you would be dreaming to become a successful leader. Management has been developed as a career par excellence. It is focused on certain specialization. Specialists are appointed in key posts of top management. I am sure you would like to be one of them. Therefore, come one, come all, and let us roam around in this wonderful garden of Management! 4 Chapter 1 - Nature of Management 1.2 Introduction to Management The subject of Principles of Management is the backbone of your course. Application of these principles into action in your life as well as on your workplace, every day, correlating these principles with your personal life situations is called internalization. The best way to learn any subject is to internalize it. This subject has a tremendous self-development potential. Learn this subject, put it into your system, convert the concept into experience, convert abstract into concrete by systematic approach. It will improve your thinking process. You should ask yourself, “Am I managing my life daily?”, “Have I added values to myself?”, “Have I set up any goals for me to achieve?” This thinking process will take you a long way. You will put your learning into action; utilize your resources in the best possible way. Those who have consciously applied this learning in their lives have benefitted tremendously and have made major changes in their lives. Management involves a set of processes that come into play whenever we want to achieve something, that is, our preset goal, by thinking process and utilizing the inputs such as man, machine, materials, money etc. in a coordinated fashion. Our life is full of activities through which we constantly try to achieve something. Some people want to get admission to school for their children, some people want to get into a better job, and some people want to find their life partner. While doing this, due to lack of systematic approach, they are in a chaotic situation. This is because principles of management are not the part of their life. Once you start practicing these principles, your life rocks. We can solve complex problems by systematic approach. Every input from principles of management helps us to have a relook at our life. Before we dream to become a manager, we have to learn to self-manage our personal life situations. Convert learning into thoughts and action by systematic approach, internalization, focusing on the goals to begin with. Every activity becomes meaningful when it has a purpose, direction and GOAL. For example, if we are managing an event like marriage ceremony, while performing various activities like booking of hall, sending invitations, receiving guests and putting them into hotels etc., we must ensure that proper time table, schedule, allocation of work to various persons are done systematically and in time. Otherwise, we will be stressed and then will make mistakes because of leakage of energy. 5 Chapter 1 - Nature of Management The advantages of learning Principles of Management are: • Our life gets focus and direction • We know better how to plan and organize our life • We have clarity of thinking and action • Our stresses get reduced tremendously • Our life becomes purposeful and joyous • We start assuming responsibility and accountability for whatever we do. • Our behavior towards others and the world improves drastically • We are not scared of taking decisions • By applying what we learn into skills and actions we grow in our career • We know methods of correcting our mistakes • By knowing, internalizing, becoming a role model we take our people to achieve our goals. Let us make a commitment to learn and instantly apply this learning first into our personal life situations. 1.3 Meanings and Definitions of Management 1.3.1 Meanings: Management is the art of getting things done by a group of people with the effective utilization of available resources. It is the group of activities, which drafts plans, prepares policies, and arranges men, money, machines and materials required to achieve the objectives. Management is the activity of man who struggles for better living in the complex and competitive world. Management is the process consisting of the functions of planning, organizing, staffing, directing and controlling the operations to achieve specified objectives. It rewards those who are engaged in this process to ensure an excellent performance with continual improvement. 6 Chapter 1 - Nature of Management 1.3.2 Various definitions: There are many definitions of management but most perceptive managers are convinced that it is an organized effort of people whose purpose is to achieve the Objectives and Goals of an organization. According to F.W.Taylor, Management is the art of knowing what you want to do, and then seeing that it is done in the best and the cheapest way. F.W.TAYLOR HENRY FAYOL According to Henry Fayol, to manage is to forecast and to plan, to organize, to command, to coordinate and to control. Peter F. Drucker defines Management as the substitution of thought for brawn and muscle (physical strength), substitution of knowledge for folklore and superstition, and substitution of cooperation for force. He also defines Management as an organ; organs can be described and defined only through their functions. As per Donald J. Clough, Management is the art and science of decision making and leadership. As per James D. Mooney and Alan C.Reiley, Management is the art of directing and inspiring people. 7 Chapter 1 - Nature of Management In mid 1940s, academic people from various business schools in the United States gathered together with the sole purpose of deciding whether a definition of Management could be written that businessmen would accept and practice and Academicians would teach. Ultimately, they came up with the following definition. No individual is identified with this definition. The definition reads: “Management is guiding human and physical resources into dynamic organization Units that attain their objectives to the satisfaction of those served and with the high degree of morale and sense of attainment on the part of those rendering the services” After detailed thinking on various definitions, we have adopted the following definition: Management is: Optimum utilization of Available Resources To attain certain pre-set GOALS/Objectives What is the meaning of the word “Optimum utilization”? It means best possible utilization under given circumstances. We will explain this definition by taking an example from our kitchen. We want to make a cup of tea, and we have all the resources such as one jarful of sugar, one jarful of tea leaves, one glass of milk, gas cylinder full of LPG, gas stove, kettle, filter etc. However, we use the raw material only in required proportion, e.g. two spoons of sugar, one spoon of tea leaves etc. and make a proper mix of all the ingredients. We do not put more sugar than required, do we? We will take another example. You are normally getting a pocket money of Rs. 500 for a day, and you are able to spend your day comfortably. One day, you get only Rs. 200 and you have to manage the whole day. You neither have your tiffin nor are you fasting today. In this case, your entire consciousness is on this small amount. You decide the proper course of action and you spend the money very judiciously. E.g., you travel in a crowded train instead of auto; you eat only a rice plate instead of Punjabi dishes and so on. To your surprise, at the end of the day, 8 Chapter 1 - Nature of Management there is an amount of Rs. 40 left in your pocket. You have managed your day by better thinking process, putting it into actions and achieved your goal of reaching home without any cash crunch. However, if you have Rs. 200 and you have spent Rs. 350 by borrowing from your friend, it is mismanagement. We learn best when resources are minimum and scarce. We have saved money when our earnings were meager. Some companies are cash rich but they incur wasteful expenditure, such as heavy transportation cost, travelling expenses etc. and ultimately land in a mess. We must convert our learning/knowledge into skills by utilizing scarce resources to the optimum, and strive to achieve our preset GOALS. 1.4 Management as a Process, coordination, and function Management as a “Process”: McFarland defines management as “A process by which managers create, direct, maintain and operate purposive organization through systematic, coordinated, cooperative human efforts”. An important term in this definition is “Process”. This term emphasizes the dynamic or ongoing nature of management, an activity over varying span of time. The dynamic nature implies that change is reality of organizational life. In managing organizations, managers create changes, adopt organizations to changes and implement changes successfully in their organizations. Businesses fail and become bankrupt because managers fail in their attempt to cope with the change. Management as “coordination”: Donally, Gibson and Ivancevich also support the view of management as a Process but their stress in more on co-ordination. According to them, “Management is a process by which individual and group effort is coordinated towards group goals”. In order to achieve goals, coordination is essential and management involves securing and maintaining this coordination. This coordination effort is also stressed in the definition of Koontz and O’Donnell. According to them, “Management is a process of 9