Chapter 1

Management and Nature of

Organisation
 Definition
• Management is a multipurpose organ that manages a
business and manages manager, and worker and
work.
--------[Link]
• Management is the development of people and not the
direction of things.
-----------Appley L.
• Management is knowing exactly what you want men to
do and seeing that they do it in the best and cheapest
way.
----------[Link]
 Management
The attainment of organizational goals in an
effective and efficient manner through
planning, organizing, directing, and
controlling organizational resources

Organization
A formally structured collection of
individuals working toward common
(shared) goals.
 Organizational Performance
Effectiveness : the degree to which the
organization achieves a stated goal
Efficiency : the use of minimal resources (input)
to produce a desired volume of output.
Efficient, but not Effective:
- Goals not achieved
Effective, but not Efficient
- Wasted Resources
(You may have to choose between the two.)
 Functions of Management
Planning
Select goals &
ways to attain
Coordination them
Integration of Organizing
various parts of
the organisation Assign responsibility fo
r
tasks

Controlling
Monitor
activities &
Directing
make
corrections Use of influence to staffing
motivate,supervise Filling an
d
Lead,and keeping
fille
communicate positions d, the
in the
organisa
tion
 Management Skills
Conceptual Skills : cognitive ability to see the
organization as a whole and the relationship
among its parts.
Human Skills : ability to work with and through
other people and to work effectively as a group
member
Technical Skills : understanding of and proficiency
in the performance of specific tasks.
 Management Skills
Conceptual Skills
CEO

Which level needs

conceptual skills the VP VP VP
most?
Mgr Mgr Mgr

Mgr Mgr

Op Op Op Op Op
 Management Skills
Human Skills
CEO

To what degree do various

levels of management VP VP VP
need human skills?
ALL need high degree. Mgr Mgr Mgr

Mgr Mgr

Op Op Op Op Op
 Management Skills
Technical Skills
Least CEO
Mo
re
Mo
st VP VP VP
To what degree do the
various levels need
technical skills? Mgr Mgr Mgr

Mgr Mgr

Op Op Op Op Op
 ROLES OF A MANAGER

• INFORMATIONAL
• INTERPERSONAL
• DECISONAL
 Mintzberg
Managers engage in 3 General
Roles
Formal Authority & Status of
Manager

Interperson Informationa Decision

al l al
Roles Roles Roles
 10 Specific Roles within 3 General
Roles
Interpersonal Decisional Roles
Roles Entrepreneur
Leader Handles
Figurehead Disturbances
Liason Allocates
Resources
Informational Negotiates
Roles
Monitor
Disseminator
Spokesperson
Informational Roles to develop and
maintain information network
The monitor seeks current information from many sources.
i.e. Scanning Industry reports to stay abreast of
developments.

The disseminator transmits information to others both inside

and outside the organization.
i.e. Sending memos outlining new organizational initiatives.

The spokesperson provides official statements to people

outside the organization about company policies, actions, or
plans.
i.e. Making a speech to discuss growth plans.
 Interpersonal Roles pertain to
relationships with others

The figurehead engages in ceremonial activities

i.e. Attending ribbon cutting ceremony for new plant.

The leader motivates, communicates, and influences

subordinates.
i.e. Encouraging employees to improve productivity.

The liaison develops relationships outside his/her unit

both inside and outside the organization.
i.e. Coordinating activities of two project groups.
 Decisional Roles to make choices requiring
conceptual & human skills.
The entrepreneur initiates change.
i.e. Developing new ideas for innovation.
The resource allocator allocates resources to
achieve outcomes.
i.e. Reviewing and revising budget requests.
The negotiator bargains for his/her unit.
i.e. Reaching agreement with a key supplier or labour
union.
The disturbance handler resolves conflicts.
i.e. Resolving conflict between two subordinates.
 Successful Managers’ Attributes
Leadership Oral Communication
Team-Building Skills Written Communication
Self-objectivity Personal Impact
Analytic Thinking Resistance to Stress
Creative Thinking Tolerance of Uncertainty
Behavioral Flexibility
 EVOLUTION OF MANAGEMENT
THOUGHT

• PRE-CLASSICAL ERA
• CLASSICAL ERA
• NEO CLASSICAL ERA
• MODERN ERA
 Pre-Classical Management

Anything before about 1900:

e.g., Robert Owen, Charles Babbage
 Classical Theory of Management
Emphasized a rational, scientific approach to study
the management and sought to make workers and
organizations like efficient operating machines
Chief Characteristics
o Oraganisation is a machine
o Ignores the role of human element
o People at work could be motivated by economic
rewards.
o Making each individual efficient to increase
organisational efficiency.
 Classical Theory of Management
❑ Classical Theory of Management

1. Scientific Theory of Management

Frederick Taylor
Frank and Lillian Gilbert

2. Bureaucracy Theory of Management

Max Weber

3. Administrative Theory of Management

Henri Fayol
Scientific Theory of Management

An approach that emphasizes that scientific

study of work in order to improve worker
efficiency.
 PRINCIPLES
Science not rule of thumb.
Harmony and cooperation.

Maximum output.
Improvement of workers.
Division of work & responsibility between
management and workers.
 KEY CONCEPTS
Scientific task planning
It is the amount of work which an average worker can perform during a
day under normal working conditions.
Time and motion studies
Time study would indicate the minimum time required to do a given job.
Motion study is carried out to find out the best sequence of motion to a
given job.
Standardisation
Standards have to be set in advance for the task, material, time etc. This
helps in simplifying the process of production.
Differential piece rate system
It is based on actual performance of workers.
Functional foremanship
Each function is handled by a specialist.
 Bureaucracy Theory of Management
This theory is based on a rational set of guidelines for
structuring organisation.

Essential elements:-
• Hierarchy of authority
• Division of work.
• Rules regulation and procedures.
• Impersonal relationship.
• Standardisation of methods.
• Selection and promotion of employees.
• Legal power and authority.
Bureaucratic Theory of Management

Relatively High in Bureaucracy:

United Parcel Service
U.S. Postal Service

Relatively Low in Bureaucracy:

Hewlett-Packard
Disney Studios
 Administrative Theory of Management
Henri Fayol
This theory focuses on managing the whole organisation rather
than individual
14 Principles
• Division of work. • Scalar chain.

• Authority and responsibility. • Subordination of individual

interest to group interest.
• Discipline.
• Order.
• Unity of command. • Equity.
• Unity of direction. • Stability of tenure.
• Remuneration. • Initiative.

• Centralisation. • Espirit de corps.

 Neo Classical Theory Of Management
This theory placed much more emphasis on individual
attitude and behavior, group process and recognized
the importance of behavioral process in the work
place.
Elements:-
• The individual:
This theory emphasized that individual differences
must be recognized. An individuals has feelings,
emotions, perceptions, and ever changing psychology.
• Informal Organisation:
Workers are social beings. The existence of informal
organisation is natural.
• Participative Management:
Allowing labour or workers to participate in decision
making to increase productivity.
 Neo Classical Theory Of Management
Belief:-
• Organisation as a social system.
• Non financial rewards to employees.
• Democratic leadership.
• Two way communication.
• Employee Development.
• Human importance.
Advocate:-
• Elton Mayo
• McGregor
• [Link]
 Neo Classical Theory Of Management
Neo-Classical Theory
• Human relation approach.
• Behavioral science approach.
A. Human Relation Approach
Hawthorne Studies- Elton mayo and Roethlisberger at the
Harvard business school conducted Hawthorne studies. The
plant engineers conducted illumination experiment to
determine the effect of illumination and other conditions upon
workers and their productivity.
i. Under this experiment two groups were formed. The first group
was termed as test/experimental group and the second group
was termed as control group.
ii. In case of experimental group variations in lighting were made
periodically and results were observed.
 CONTD.

iii. In case of control group there is no in change in the lighting and

the researches were required to work under constant lighting
system.
iv. It was observed that output of both groups increased steadily.
Conclusion:
This experiment revealed that productivity could be increased
not only by improving working conditions (i.e. level of lighting)
but also through informal social relations among the members
of the group.
 Contd.
Relay Assembly Test Room Experiment
• The next experiment to study the workers segregated on the
basis of a definite range of working condition variation.
• The selected variables included work room temperature, work
schedule, rest break and food consumption.
• 5 women were chosen in the relay assembly test room and
kept careful record of the prediction variable as well as output.
• It was discovered that there was no relationship between the
predictor variable and industrial efficiency. Then researchers
realized that employee attitude and sentiments were critically
important variable.
 Contd.
Interviewing Programme
Mayo initiated a long interview programme in 1928 covering
more than 21,000 employees to find out the reasons for
increased productivity.
• Employees were allowed to talk freely and air their opinions in
a friendly atmosphere.
• When researchers began to examine the complaints made by
the employees they found most of the complaints to be
baseless.
•Thus for the first time, the importance of informal work group is
recognised.
 Contd.
Bank Wiring Room Experiment
•In this experiment 14 male workers were formed into a small
work group and observed for 7 months in the bank wiring
room.
•The researcher found that the behavioural norms set by the
work group had a powerful influence over productivity of the
group. It was found that higher the norm, greater is the
productivity and vice-versa.
• This experiment confirmed the effect of the power of the peer
group and importance of group influence on worker’s
productivity.
B. Behavioral science approach
Emphasis was given in the areas of motivation, leadership etc.
i. Need hierarchy theory
According to Maslow, the five needs that people are motivated to
satisfy fall into a hierarchy. Physiological and safety needs are at the
bottom of the hierarchy and at the top esteem and self actualisation
needs.
In general, Maslow said lower order needs must be satisfied before
higher order needs.
ii. Theory X and Theory Y
McGregor developed theory x and theory y. He argued that theory x
best represented the views of scientific management and theory y
represented the human relation approach. He believed that theory y was
the best philosophy for all managers.
 Modern Theory of Management
This theory is an extension of classical and Neo-classical
approaches to management.

Characteristics
• Dynamic:
• Multi Disciplinary:
• Adaptive:
• Multi level and multi dimensional:
Modern management is comprising of three streams
1. Quantitative Theory([Link], James March)
2. System Theory([Link], [Link], [Link])
3. Contingency Theory([Link], [Link], [Link])
 Quantitative Theory of Management
Quantitative theory uses a mathematical model for finding solutions to the
problems that were unsolved.
Features:
• Focuses on decision making.
• Use of the computer to solve quantitative problems.
• Use of mathematical models or tools.
Branches:
Three main branches have evolved over the year
1. Management science:
The approach aims at increasing decision effectiveness through the use of
mathematical models and statistical methods.
2. Operational management:
It is the function i.e. responsible for managing the production and delivery of
products or services.
3. Management information system:
It focuses on designing and implementing computer based information systems
for use by management.
 System Theory of Management
A system is an interrelated set of elements functioning as a whole.
Viewing Organisation as a system we can identify four basic elements-
• Input
• Processes
• Output
• Feedback

INPUT PROCESS OUTPUT

•Material
•Technology •Product/Services
•Money
•Operating System •Information
•Men
•Control System •Profits/Losses
•Information

FEEDBACK
 System Theory of Management

Key Concepts
• Open system: A system that interacts with their
environment.
• Closed System: A system that doesn’t interact with their
environment.
• Synergy: Organisational units/Subsystems may often be
more successful working together than working alone.
• Entropy: A normal process that leads to system decline.
 Contingency Theory of Management
This theory suggests that appropriate managerial behavior in a given
situation depends on or is contingent on, unique elements on that
situation.

Features:
• Management is entirely situational. The application of any
technique is contingent on the situations.
• Management should match its approach to the requirement
of a particular situation.
• Managers should understand that there is no best way to
manage.
Ex. Effective leadership style depends upon the nature and size of
the business organisation.
 Management v/s Administration
• The word Administration is derived from the Latin
word ad + ministrare meaning care for or look after
people, to manage affairs.
• Administration is a process of collective and
cooperative effort, directed towards the realization
of a consciously laid down goals & objectives by any
organization.
• Management is a process by which the cooperative
group directs action towards achievements of the
goals.
• Let us examine few definitions of administration and
management.
Administration
• Administration is the activities of groups of people
co-operating to accomplish common goals. -Herbert
A. Simon.
• Administration is an enabling process, it covers the
whole art of carrying into effect in any policy, plan or
undertaking, whether conceived by government,
public or private agency. -H. A. Goddard.
• Administration has to do with getting things done;
with the accomplishment of defined objectives.
-Luther Gullick.
 Management
•Management may be defined as the art of securing maximum
results with a minimum of effort so as to secure maximum
prosperity and happiness for both employer and employee and
give the public the best possible service.-John Mee.
•Management is principally the task of planning, coordinating,
motivating and controlling the efforts of others towards a
specific objective.-James Lunde.
•Management is a process which is involved with executing
different interrelated activities within an organization for
realizing the organizational objectives in accordance with the
organizational plans and policies.
•Management is a discipline which has a systematized body of
knowledge and requires skill and use of available decision
making tools.
• So it is concluded that the administration is ought to
take business decisions while the management need
to execute them to get things done with and through
other functional staff working under them who are
called employees of the same organization(s). For
example, the Board of Directors with the CEO/MD
may be called Administration, while the Managers of
various units like Production, Marketing, Finance,
Accounting, Distribution and Research and
Development may be called Management of the said
organization.