BCA -S103

PRINCIPLES OF MANAGEMENT

UNIT 2

Frederick W. Taylor Contribution to Scientific Management

The Scientific Management Theory owes its origin to Frederick W. Taylor who is regarded as
“The Father of Scientific Management.”

He spent a large part of his life in Midvale Steel Company, Philadelphia, U.S.A. as an ordinary
worker engaged in metal cutting. In 1833, he got an engineering degree and became an operating
manager in the same company after some time.

He placed stress in his philosophy on the following things for enhancing the productivity of the
workers:

i. Science, not rule of thumb.

ii. Harmony, not discord.

iii. Co-operation, not individualism.

iv. Maximum output, in place of restricted output.

v. The development of each man to his greatest efficiency and prosperity.

Principles of scientific management

1. Replacing the rule of thumb with science:-it requires scientific study and analysis of each
element of job in order to replace the old rule of thumb approach. Only through scientific
investigation and standardization better way of work can be developed. Scientific selection of
employees requires that decisions to make on facts rather than on opinions and beliefs.
2. Harmony in group activities:- in the past there was only discord. Taylor has emphasized
harmony among employee and employer to attain common goals which could help to contribute
to the maximum limit.
3. Cooperation:- cooperation between management and labor is the major foundation of
scientific management. It creates a sense of mutuality through which maximum prosperity can be
guaranteed.
4. Development of employees:- personnel management must be backed up by scientific
selection of employees along with proper training to them. Efforts should be made to develop
each employee to achieve efficiency and prosperity.
5. Division of responsibility:- introduction of functional foremanship made division of
responsibility. Many foremen should be appointed out of which 4 for planning and 4 for doing.
In planning they were route clerk, instruction cord clerk, time and cost clerk and disciplinarian.
And for doing they were speed boss, gang boss, repair boss and inspector. This promoted
division of work which promoted division of responsibility.
6. Maximum output:- Taylor was more concerned with continuous increase in production and
productivity. It maximum output is derived from optimum utilization of resources than surely it
will bring higher profits and better benefits to the employer and employees.

Advantages of scientific management :-

To employees
a. Better utilization of resources through scientific techniques
b. Scientific selection and training of employees leads to better workforce which ensures
increase in efficiency
c. Harmonious relationship between the workers and the management
d. Standardization of tools, materials, techniques , equipments for increasing efficiency
e. Reduction of production cost
To workers
a. Opportunity for scientific training and development to increase skills knowledge and
competency
b. Better working conditions
c. Application of scientific methods and techniques in better working conditions to reduce
fatigue
d. Higher wages to the workers for higher productivity
To society
a. People get better quality products at lower cost
b. Increase productivity in the country by utilizing resources properly
c. Improve standard of living of people through better products
d. Scientific investigation promotes technological development

Limitations of scientific management: -

a. It is based upon one best way and is applicable for simple organizations than that for
today’s dynamic and complex organization
b. It focuses on individual performance than group efforts and divides the workers into
efficient and inefficient categories
c. It is focused on specialization and repetition of jobs to increase the productivity which
reduces innovation and creativity and promotes monotony
d. It neglects human factor because it motivates workers to work for monetary benefits rather
than human resource development and resources
e. There is no scope for creativity of employees because they are developed by manager
which promotes frustration.

Henry Fayol’s administrative management theory

Henry Fayol was born in 1841 as French. He is the industrialist who developed the
administrative theory. He is also known as father of general management. He got his engineering
degree and joined a French company as an junior executive in 1860 and senior executive in
1888. He published his classic book on general and industrial administration in 1928, which
explained the first complete theory of management. He emphasized on 14 principles of general
management and attempted to provide guidance and direction to other management.

Fayol’s management principles

1) Division of work: - This principle implies on dividing the total task into compact jobs and
thus allocating them to different individuals which promotes specialization and efficiency in both
technical and managerial level. It helps to acquire speed and accuracy in performance.
2) Authority and responsibility: - Authority means to give order and power to exert
obedience whereas responsibility means obligations to perform work in the manner directed and
desired. Authority and responsibility are co existed and leads to responsive behavior and
efficiency.
3) Discipline :- Discipline implies obedience, respect and establishment and regulations
which are essential for smooth running of all organizations for good supervision and built in
system of reward an punishment
4) Unity of command: - Subordinates should receive orders from single superior at a time
and all subordinates should be accountable to that superior. More superior leads to confusion,
delay and so on.
5) Unity of direction: - One plan must be formulated for a group of activity and all the
related activities should be put under one group show that efforts of managers of a single group
can be directed towards achievement of common goal.
6) eSpirit de corps : - This term comprises of two principles namely union is strength and
team spirit is most essential. There should be cooperation and team work among members of the
organization. The managers should always make effort to ensure harmony among the
subordinates.
7) Equity: - Subordinates should be treated with justice, equity and kindness so that there can
not be nepotism and favoritism while selection of workers, treating the workers which helps to
promote friendly environment between superior between superior and subordinates.
8) Centralization: - It implies concentration of authority at the top level. No hard fast rules
can be laid down regarding the extension of authority to be retained at the top level.
Centralization and decentralization should be proportionately decided.
9) Scalar chain: - It refers to chain of superior ranging from top to low ranks in a
management. It determines the clear line of authority from top to bottom linking managers at all
levels. All communication should flow the established chain of command.
10) Order: - It refers to arrangement of resources in the organization. It implies right place for
everything. It stresses upon proper utilization of physical, natural, capital and organizational
resources.
11) Stability of tenure: - It takes time to learn and get a job therefore a reasonable time should
be provided to all employees for securing better results and guarantee of service. Stability of
employees promotes team work, loyalty to the organization
12) Initiative: - It means eagerness to initiate action in work related matters without being
asked to do so .it is a powerful motivator of human behavior and is a source of strength for the
organization.
13) Remuneration of personnel:- The remuneration payable to employees should be fair and
reasonable .management must ensure a fair reward for the work and decide the equitable method
of calculating wages
14) Superiority of organizational interest: - Personal interest must be discarded and general
interest must be maintained. Organization is bigger than an individual .therefore the interest of
the organization must prevail upon the interest of an individual.

Chester Barnard

Chester Barnard was one of the Harvard Circle of American management theorists, of which
Elton Mayo was another prominent member. At a time when communism seemed a real threat,
Barnard came to believe that social science could be the key to establishing a stable society. His
work centred on a description of the organisation as a co-operative system, and described an
optimal organisation structure, focusing on the role of executives in creating the conditions for
effectiveness and efficiency.

Although he was not an academic but a practising business leader, Barnard wrote a book called
The functions of the executive in 1938, which Andrea Gabor has described as the century's
seminal book on corporate leadership (in Capitalist philosophers, Wiley, 2000). Barnard also
authored several papers, a selection of which were published in Organization and
management: selected papers (1948).

Key theories

Organisation and communication

Chester Barnard's key ideas centre on the importance of individuals and communication to
organisation structure. His writing, while conveying the practical experience upon which it is
based, is often quite theoretical, and the difficult terminology can make it hard to follow. The
ideas presented are part of a holistic managerialist philosophy proposing that managers in large
organisations should be as dedicated to social reform and modernisation as their governmental
counterparts, with the moral authority to harness technology and markets for the public good.
In The functions of the executive he defines an organisation as a system of consciously co-
ordinated activities or forces of two or more persons. Two key words used in this definition are
system and co-ordinated. Barnard saw a successful organisation as a co-operative system in
which effective communication enables individuals to achieve much more collectively than they
could in isolation. With this view, Barnard was the first to utilise the systems approach to
management. He believed that organisational survival and success depended on the creation of
co-operation by managers, and their navigation of the tension between individuals' personal
motives (which he called efficiency) in order to satisfy the objectives of the organisation (which
he called effectiveness) to achieve a balance between the two.
The functions of the executive
In simple terms, Barnard saw the three main functions of an executive to be:
 Implementation and development of an effective system of communication
 Appointment and retention of effective workers
 Motivation of workers.
Viewing the communication system in an organisation as the key to organisational achievement,
Barnard set out three principles for effective communication:
 Everyone in the organisation must know what the channels of communication are
 Everyone must have access to a formal communication channel
  Lines of communication should be kept short and direct.
As part of his communications theory, Barnard's acceptance theory of authority proposes that a
manager exerts authority from above, and success depends on its acceptance by the employees
managed. In this way, employees determine how authoritative their manager is and, for this
reason, the main focus of an executive needs to be on creating the right conditions to increase
acceptance levels. Barnard suggested that this could be done if:
 Managers are clear in what they ask employees to do,
 employees understand what their manager wants them to do, and
 employees are capable of complying.
Employees must also understand how their work helps to achieve organisational objectives.
Barnard also saw a need for executives to focus on strategy, and in The functions of the
executive he outlined the process of strategic planning, which he saw as vital to putting the
organisation on the road to achieving its overall objectives.
Authority and the informal organisation
One of the most important ways in which Barnard proposed that executives can increase
employees' acceptance of their authority and orders is through their recognition and use of three
zones, setting boundaries within which people evaluate orders, defined as zones of indifference,
neutrality and unacceptability. The Zone of Indifference for orders is the highest acceptable
range within which orders will be obeyed, and Barnard believed that managerial work involved
widening this zone through the use of inducements and incentives. With seemingly modern
insight, he suggested that material incentives were insufficient, and that personal incentives, such
as increased power or prestige, would be more effective.
Gabor claims that Barnard was the first theorist to elaborate on the importance of the informal
organisation, and recognise the influence of what is now understood as corporate culture and its
associated values and rituals. Barnard emphasised the executive's important role in maintaining
the informal organisation through using intangible influence to shape values and promote
conformity and self-discipline. He believed that values should be in-built and coherent with all
the other aspects of the organisation to promote organisational success. This is closely related to
his acceptance theory of authority, since acceptance will be greater where employees believe that
actions will contribute to the common organisational goal.

Elton Mayo

Professor George Elton Mayo (1880-1949) has secured fame as the leader in a series of
experiments which became one of the great turning-points in management thinking. At the
Hawthorne plant of Western Electric, he discovered that job satisfaction increased through
employee participation in decisions rather than through short-term incentives.

The Experiments
The study began in 1924 by isolating two groups of workers in order to experiment with the
impact of various incentives on their productivity. Improvements to levels of lighting produced
increases in productivity, but so too did reversion to standard lighting and even below-standard
lighting in both groups. The initial assumption therefore was that increased output stemmed from
variation alone.
Other incentives - including payment incentives and rest pauses - were manipulated at regular
intervals, and although output levels varied, the trend was inexorably upwards. Whatever
experimentation was applied, output went up. Although it had been fairly conclusively
determined that lighting had little or nothing to do with output levels.

Interpreting Hawthorne experiment findings

For industry to benefit from the experiments at Hawthorne, Mayo first concluded that
supervisors needed training in understanding the personal problems of workers, and also in
listening and interviewing techniques. He held that the new supervisor should be less aloof, more
people-oriented, more concerned, and skilled in handling personal and social situations.

It was only later, after a period of reflection, that Mayo was able to conclude that:
 job satisfaction increased as workers were given more freedom to determine the
conditions of their working environment and to set their own standards of output;
 intensified interaction and cooperation created a high level of group cohesion;
 job satisfaction and output depended more on cooperation and a feeling of worth than on
physical working conditions.
In Mayo's view, workers had been unable to find satisfactory outlets for expressing personal
problems and dissatisfactions in their work life. The problem, as Mayo perceived it, was that
managers thought the answers to industrial problems resided in technical efficiency, when
actually the answer was a human and social one.
Mayo's contribution lies in recognising from the Hawthorne experiments that the formality of
strict rules and procedures spawns informal approaches and groups with their base in human
emotions, sentiments, problems and interactions. The manager, therefore, should strive for an
equilibrium between the technical organisation and the human one and hence should develop
skills in handling human relations and situations. These include diagnostic skills in
understanding human behaviour and interpersonal skills in counselling, motivating, leading and
communicating.

Peter Drucker, born in Austria (1909-2005)-- The Father of Management Theory

Drucker, the man who invented management theory, put great emphasis on listening, asking
questions and letting natural patterns emerge from the answers.

The author of 39 books during his long career, and counselor to titans of business and rulers of
nations, Drucker championed the powers of observation, often formulating simple ideas that
triggered startling results. The Practice of Management (1954) and The Effective Executive
(1966) are considered his landmark works.

“Whether it’s recognized or not, the organization and practice of management today is derived
largely from the thinking of Peter Drucker,

Drucker’s first book, The End of Economic Man, published in 1939, attracted the enthusiastic
praise of British Prime Minister Winston Churchill. That same year, he began teaching part time
at Sarah Lawrence College and, in 1942, joined the faculty at Bennington College in Vermont.
While at Bennington, Drucker got the chance to study General Motors Corp., which led to his
groundbreaking book, Concept of the Corporation. In 1950, he joined the faculty of New York
University’s Graduate Business School as professor of management.

He moved to California in 1971 as the Clarke Professor of Social Science and Management at
the Claremont Graduate University in Claremont, Calif., where he taught for 30 years. During
that time, the Druckers received corporate and social-sector leaders from around the world in
their modest home in Claremont, where they also raised four children and lived for nearly four
decades. In 1987, the university named its management school after him.

Drucker’s track record is impressive, as BusinessWeek summarized upon his death in 2005.

Among his accomplishments:

1. --He introduced the idea of decentralization—in the 1940s—which became a bedrock

principle for virtually every large organization in the world.

2. --He was the first to assert—in the 1950s—that workers should be treated as assets, not as
liabilities to be eliminated.

3. --He originated the view of the corporation as a human community—again, in the

1950s—built on trust and respect for the worker and not just a profit-making machine, a
perspective that won Drucker an almost godlike reverence among the Japanese.

4. --He first made clear—still the ’50s—that there is “no business without a customer,” a
simple notion that ushered in a new marketing mindset.

5. --He argued in the 1960s—long before others—for the importance of substance over
style, for institutionalized practices over charismatic, cult leaders.

6. --He wrote about the contribution of knowledge workers—in the 1970s—long before
anyone knew or understood how knowledge would trump raw material as the essential
capital of the New Economy.

What is Corporate Social Responsibility?

• Business and Society are interdependent. Society depends on business for meeting its
needs and welfare, whereas, Business depends on society for its existence and growth.

• The obligation of any business to protect and serve public interest is known as social
responsibility of business

Why Business should take this obligation ?

• As we know, every business operates within a society. It uses the resources of the society
and depends on the society for its functioning. This creates an obligation on the part of
business to look after the welfare of society. So all the activities of the business should be
 such that they will not harm, rather they will protect and contribute to the interests of the
society. Social responsibility of business refers to all such duties and obligations of
business directed towards the welfare of society. These duties can be a part of the routine
functions of carrying on business activity or they may be an additional function of
carrying out welfare activity.

Social responsibility is a voluntary effort on the part of business to take various steps to satisfy
the expectation of the different interest groups. The interest groups may be owners, investors,
employees, consumers, government and society or community.

Responsibility Towards Different Interest Groups

The business generally interacts with owners, investors, employees, suppliers, customers,
competitors, government and society. They are called as interest groups because by each and
every activity of business, the interest of these groups is affected directly or indirectly.

Responsibility towards owners: Owners are the persons who own the business. They contribute
capital and bear the business risks. The responsibilities of business towards its owners are to:

a. Run the business efficiently.

b. Proper utilisation of capital and other resources.

c. Growth and appreciation of capital.

d. Regular and fair return on capital invested.

Responsibility towards investors: Investors are those who provide finance by way of
investment in debentures, bonds, deposits etc. Banks, financial institutions, and investing public
are all included in this category. The responsibilities of business towards its investors are :

a. Ensuring safety of their investment,

b. Regular payment of interest,

c. Timely repayment of principal amount.

Responsibility towards employees: The employees put their best effort for the benefit of the
business. If the employees are satisfied and efficient, then the only business can be successful.
The responsibilities of business towards its employees include:

a. Timely and regular payment of wages and salaries.

b. Proper working conditions and welfare amenities.

d. Opportunity for better career prospects.

e. Job security as well as social security like facilities of provident fund, group insurance,
pension, retirement benefits, etc.

f. Better living conditions like housing, transport, canteen,etc.

g. Timely training and development.

Responsibility towards suppliers: Suppliers are businessmen who supply raw materials and
other items required by manufacturers and traders. The responsibilities of business towards these
suppliers are:

a. Giving regular orders for purchase of goods.

b. Dealing on fair terms and conditions.

c. Availing reasonable credit period.

d. Timely payment of dues.

Responsibility towards government: Business activities are governed by the rules and
regulations framed by the government. The various responsibilities of business towards
government are:

a. Setting up units as per guidelines of government

b. Payment of fees, duties and taxes regularly as well as honestly.

c. Not to indulge in monopolistic and restrictive trade practices.

d. Conforming to pollution control norms set up by government.

h. Not to indulge in corruption through bribing and other unlawful activities.

Responsibility towards society: Business, being a part of the society, also maintains its
relationship with all other members of the society. Thus, it has certain responsibilities towards
society, which may be as follows:

a. to help the weaker and backward sections of the society

b. to preserve and promote social and cultural values

c. to generate employment

d. to protect the environment

e. to conserve natural resources and wildlife

f. to promote sports and culture

g. to provide assistance in the field of developmental research on education, medical science,
technology etc.

Business ethics

Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that
examines ethical principles and moral or ethical problems that arise in a business environment. It
applies to all aspects of business conduct and is relevant to the conduct of individuals and entire
organizations.

Ethics concern an individual's moral judgements about right and wrong. Decisions taken within
an organisation may be made by individuals or groups, but whoever makes them will be
influenced by the culture of the company. The decision to behave ethically is a moral one;
employees must decide what they think is the right course of action. This may involve rejecting
the route that would lead to the biggest short-term profit.

The importance of ethics in business

Ethical behaviour and corporate social responsibility can bring significant benefits to a business:

 attract customers to the firm's products, thereby boosting sales and profits
 make employees want to stay with the business, reduce labour turnover and therefore
increase productivity
 attract more employees wanting to work for the business, reduce recruitment costs and
enable the company to get the most talented employees
 attract investors and keep the company's share price high, thereby protecting the business
from takeover.
 Unethical behaviour or a lack of corporate social responsibility, by comparison, may
damage a firm's reputation and make it less appealing to stakeholders. Profits could fall
as a result.
Shift to ethics
 Business create problems and should therefore help solve them
 Corporations are citizens in our society
 Business often has the resources necessaryto solve problems
 Business is a partner in our society, alongwith the government and general population

Tools of Ethics

Consciously or unconsciously, we engage in some kind of ethical reasoning every day of our
lives. To improve our ethical reasoning, we must analyze it explicitly and practice it daily. The
key terms of the ethical language are values, rights, duties, rules, and relationships. Let’s
consider each in turn.

Values: When you value something, you want it or you want it to happen. Values are relatively
permanent desires that seem to be good in themselves like peace or goodwill.
Values are the answers to the why questions. Why, for example, are you reading this book? You
might reply that you want to learn about management. Why is that important? To be a better
manager. Why do you want that? To be promoted and make more money sooner. Why do you
need more money? To spend it on a VCR. Such questions go on and on, until you reach the point
where you no longer want something for the sake of something else. At this point, you have
arrived at a value. Corporations also have values such as size, profitability, or making a quality
product.

Rights and Duties: A right is a claim that entitles a person the room in which to take action. In
more formal terms, one might call this room a person’s sphere of autonomy or more simply, his
or her freedom. Rights are rarely absolute; most people would agree that the scope of individual
rights is limited by the rights of others. Ordinarily, you have a right to speak your mind freely
until you make slanderous statements about another person.

Moreover, rights are correlated with duties. Whenever someone has a right, someone else has a
duty to respect it. A duty is an obligation to take specific steps to pay taxes, for example and to
obey the law in other respects.

Moral Rules: Moral rules guide us through situations where competing interests collide. You
might think of moral rules as tie breakers guidelines that can resolve disagreements. Moral rules,
which are rules for behavior, often become internalized as values.

Human Relationships: Every human being is connected to others in a web of relationships.

These relationships exist because we need one another for mutual support and to accomplish our
goals. From a small child’s relationship with parents to a manager’s relationship with an
employee, relationships are a pervasive aspect of moral life. We constantly decide how to
maintain and nurture them. These decisions reflect our values and our concern for ethics. So,
when we say that management is about relationships, we are claiming that it has a large ethical
component.