Principles of business management

Principles of Business Management
B.Com II
Ms. Reba Das

Definition of Management
• “Management is the process of designing and
maintaining an environment in which
individuals working together in groups,
efficiently accomplish selected item”
• “Management is the process of getting things
done, through & with people in organization”

Nature of Management
Management is Goal-oriented.
Management is Universal.
Management is an Integrative Force.
Management is a Social Process.
Management is Multidisciplinary.
Management is Continuous Process.
 Management is Intangible.
Management is an Art as well as Science.

Principles of Management
• The Principles of Management are the essential,
underlying factors that form the foundations of
successful management.

MANAGEMENT FUNCTIONS (OR)
PROCESS OFMANAGEMENT
There are five types of functions in management:
 Planning-Defines the goal & establishing strategy.
 Organizing- Includes determining what task has to be
done, who is to do them.
 Staffing-Includes recruitment of people and training
them towards the project.
 Leading-Includes the motivating the employees and
directing the activities.
 Controlling-It is the process of monitoring the
performance.

Who is the person responsible for
supervising the use of an organization’s
resources to meet its goals?
A. Team leader
B. Manager
C. President
D. Resource allocator

A Manager
A person who plans, organizes,
directs and controls the allocation
of human, material, financial, and
information resources in pursuit of
the organization’s goals.

Managerial Skills
There are three types of skills required by a
manager,
Conceptual Skills-These skills are required by the
employee who are in top level management.
Human Relations Skills-These skills are required
by the employee in the supervisory level.
Technical skills- These skills are required by the
employee who are in middle level Management.

Different Managerial Levels
Supervisory
Level Technical Skills
Middle Management
Human Relations Skills
Top Management
Conceptual Skills

Top Level Management
The top level management is generally
occupied by the ownership group. It is
the highest level in the managerial
hierarchy and the ultimate source of
authority in the organisation.

Middle Level Management
In order to fill up the gap which exists
between functional and operative level,
some managerial positions are created
at the middle level of management.
Middle level management consists of
departmental managers, deputy
managers, foreman and administrative
officers etc.

Lower Level or Supervisory Level
Management
It consists of factory supervisors,
superintendents, foremen, sales
supervisors, accounts officers etc. They
directly guide and control the
performance of rank and file workers.
They issue orders and instructions and
guide day to-day activities.

Scope of Management
Production Management:
a) Designing the product
b) Location and layout of plant and building
c) Planning and Control of factory operations
d) Operation of purchase and storage of
materials
e) Inventory cost and Quality Control
f) Research and Development etc.

Marketing Management:
a) marketing research to determine the needs
and expectation of consumers
b) planning and developing suitable products
c) setting appropriate prices
d) selecting the right channel of distribution,
and
e) promotional activities like advertising and
salesmanship to communicate with the
customers

Financial Management:
a) Selecting the appropriate source of funds
b) Raising the required funds at the right time
c) Administration of earnings
d) Estimating the volume of fund.

Personnel Management:
a) manpower planning
b) recruitments,
c) selection,
d) training
e) appraisal,
f) promotions and transfers,
g) compensation,
h) employee welfare services, and
i) personnel records and research, etc.

System Approach
• Definition of System:
“A set of detailed methods, procedures, and
routines established or formulated to carry
out a specific activity, perform a duty, or
solve a problem.”

Nature of System
A system is a combination of parts and sub
systems.
Parts and sub parts of a system are mutually
related to each other.
Arrangement in a system is more important.
System transforms inputs into outputs.
Prevalence of boundary.
Closed and open system.

Classification of Systems
Open System
Closed System

Open system: An open system actively interacts
with its environment. By interacting with
other systems, it tries to establish exchange
relationships.
Ex: Open systems have feedback Mechanism.
Closed systems : Closed System have no
interaction with environment, closed system
are self contained and self maintaining Closed
systems are mechanical.
Ex: Closed systems are like closed loops.

Meaning of Planning
• Planning is deciding in advance what to do,
how to do it, when to do it and who to do it.
Choosing the future course of action.
• “According to Haimann, Planning is the
function that determines in advance what
should be done.

Nature of Planning
Planning is goal-oriented
Planning is a primary function
Planning is all-pervasive
Planning is a continuous process
Planning is forward-looking
Planning involves choice
Planning is directed toward efficiency

Process of Planning
Step 1- DEFINE THE TASK
Step 2- IDENTIFY RESOURCES
Step 3- CONSIDER ALTERNATIVE
Step 4- CREATE THE PLANNING
Step 5- WORK THE PLAN
Step 6- EVALUATE

Importance of Planning
Focuses attention on objectives and result
Reduces uncertainty and risk
Provides sense of direction
Encourages innovation and creativity
Helps in co-ordination
Guides decision-making
Provide efficiency in operation

Types of Planning
• Operational Planning: This type of planning
typically describes the day-to-day running of the
company. Operational plans are often described
as single use plans or ongoing plans. Single use
plans are created for events and activities with a
single occurrence.
• Strategic Planning: Strategic planning includes a
high-level overview of the entire business. It’s
the foundational basis of the organization and
will dictate long-term decisions. Important
components of a strategic plan are vision,
mission and values.

• Tactical Planning: Tactical planning
supports strategic planning. It includes
tactics that the organization plans to use
to achieve what’s outlined in the
strategic plan.
• Contingency Planning: Contingency
plans are made when something
unexpected happens or when something
needs to be changed. Business experts
sometimes refer to these plans as a
special type of planning.

Meaning of Decision Making
• A decision is a choice made between
two or more available alternatives.
Decision making is the process of
choosing the best alternative for
reaching objectives.

Characteristic of Decision Making
Process
• It is always related to situation in which a
manager may take one decision in a
particular set of circumstances and another
in a different set of circumstances.
• This involves certain specific purpose in
which these may just be decisions not to
decide.

Six C's of Decision Making
1. Construct.
2. Compile.
3. Collect.
4. Compare.
5. Consider.
6. Commit.

Construct a clear picture of precisely what
must be decided.
Compile a list of requirements that must be
met.
Collect information on alternatives that meet
the requirements.
Compare alternatives that meet the
requirements.
Consider the "what might go wrong" factor
with each alternative.
Commit to a decision and follow through with
it.

Types of Decision Making
o Basic Decision or Strategic Decisions
o Administrative Decisions
o Organisational or Personal Decisions
o Policy of Decisions
o Individual & Group Decisions
o Routine Decisions
o Adaptive Decisions

Management by objectives (MBO)
• Management by objectives (MBO) is
a strategic management model that aims to
improve the performance of an organization
by clearly defining objectives that are agreed
to by both management and employees.
According to the theory, having a say in goal
setting and action plans encourages
participation and commitment among
employees, as well as aligning objectives
across the organization.

Need for Management by Objectives
• The Management by Objectives process helps
the employees to understand their duties at the
workplace.
• The employees are clear as to what is expected
out of them.
• Management by Objectives ensures effective
communication amongst the employees. It leads
to a positive ambience at the workplace.
• Employees in their own way contribute to the
achievement of the goals and objectives of the
organization.
• Management by Objectives process leads to
satisfied employees. It avoids job mismatch and
unnecessary confusions later on.

Process of Management by Objectives

Environmental Analysis
• Environmental analysis is a strategic tool. It is a
process to identify all the external and internal
elements, which can affect the organization’s
performance. These evaluations are later translated
into the decision-making process. The analysis helps
align strategies with the firm’s environment.
Environmental Analysis
External Environmental
Analysis
Internal Environmental
Analysis

Factors of
Environmental
Analysis

Meaning of Organizing
The term ‘organising” refers to the process of
identifying and grouping of activities to be
performed and dividing them among the
individuals and creating authority and
responsibility relationship among them for the
accomplishment of organisational objectives.
“Organising in a general sense means
systematic arrangement of activities”

Characteristics of Organising
Organising is a basic function and a sub-process
of management
Organising is a continuous process
Organising is a function of all managers
Organising involves coordination
Goal-oriented
Group effort
Establishes authority-responsibility relationship

Elements of Organisation Structure
Work specialisation
 Departmentation
Establishing Reporting Relationships
Distributing Authority
Coordinating Mechanisms
Differentiating between positions

Authority
Authority, in simple words, is the right way of
commanding subordinates, issuing orders
and instructions, and exacting obedience
from the team. It is also the right of the
manager to make decisions. Also, to act or
not to act depends on how he perceives the
objectives of the organization.

Responsibility
Responsibility means state of being
accountable or answerable for any obligation,
trust, debt or something or in other words it
means obligation to complete a job assigned
on time and in best way.

CENTRALIZATION AND
DECENTRALIZATION OF AUTHORITY
• ‘Centralization’ means concentration of power of
decision-making. Concentration is the systematic
and consistent reservation of authority in the
central hands in the organization.
• ‘Decentralization’ on the other hand, means
delegation of business decisions by the owners to
their subordinates, and then the others further
down in the management hierarchy.

Advantage of Centralization &
Disadvantage of Centralization
Advantages
• Reduced cost
• Uniformity in action
Of
• Personal leadership
• Flexibility
Centralization
• Improved quality of
work
• Better co-ordination
Disadvantages
• Delay in work
• Remote control
Of
• No loyalty
• No Secrecy
Centralization
• No special
attention

Departmentation
‘Departmentation’ is the process of grouping
the activities of an enterprise into several
units for the purpose of administration at all
levels.
The administrative units so created may be
designated as departments, divisions, units,
branches, sections, etc.

Need for and Importance of Departmentation
• Advantages of Specialisation
• Feeling of Autonomy
• Expansion
• Fixation of Responsibility
• Upliftment of Managerial Skill
• Facility in Appraisal
• Administrative Control

Types of Departmentation
• Departmentation by Functions

Departmentation by Process or Equipment

Meaning of Motivation
Motivation is derived from the Latin word
‘movere’ which means ‘to move’ or ‘to
energize’ or ‘to activate’ .
Motivation is the process of arousing the
action, sustaining the activity in process and
regulating the pattern of activity.
Motivation refers to the states within a
person or animal that drives behaviour
toward some goals.

MOTIVATIONAL CONCEPTS
Intrinsic motivation & Extrinsic motivation

Theories of Motivation
Herzberg
McGregor
Ouchi

Herzberg Two Factor Theory of
Motivation

McGregor Theory X & Y of Motivation

Financial and Non-Financial Incentives

Meaning of Leadership
• Leadership is a process by which an executive
can direct, guide and influence the behavior
and work of others towards accomplishment
of specific goals in a given situation.
Leadership is the ability of a manager to
induce the subordinates to work with
confidence and zeal.

Theories of Leadership
• Charismatic Leadership Theory
• Trait theory
• Behavioural Theory
• Situational Theory

Charismatic Leadership Theory:
Etymology helps to understand and define
"charismatic." The word “charisma” is rooted
in the ancient Greek word “kharisma,”
meaning “favor or divine gift.” It has come to
refer to a specific set of personal traits that
have profound effects on other individuals.

Trait theory
The trait model of leadership is based on the
characteristics of many leaders - both successful and
unsuccessful - and is used to predict leadership
effectiveness.
Successful leaders definitely have interests, abilities,
and personality traits that are different from those of
the less effective leaders. Among the core traits
identified are:
• Achievement drive
• Leadership motivation
• Honesty and integrity
• Self-confidence
• Cognitive ability
• Knowledge of business
• Emotional Maturity

Behavioural Theory
Behavioural theory of leadership emphasises that
strong leadership is the result of effective role
behaviour. Leadership is shown by a person’s acts
more than his traits.
Situational Theory
According to this theory, the most effective leaders
are those that are able to adapt their style to the
situation and look at cues such as the type of task,
the nature of the group, and other factors that
might contribute to getting the job done.

Meaning of Communication
Communications is fundamental to the
existence and survival of humans as well as
to an organization. It is a process of creating
and sharing ideas, information, views, facts,
feelings, etc. among the people to reach a
common understanding. Communication is
the key to the Directing function of
management.

Barriers to Communication
1. Semantic Barriers
2. Psychological Barriers
3. Organizational Barriers
4. Personal Barriers
5. Physical Barriers
6. Technological Barriers

Meaning of Control
Control is a management process to aim at
achieving defined goals within an established
timetable, and comprises of three
components:
(1) setting standards,
(2) measuring actual performance, and
(3) taking corrective action.

Characteristics of Control
• Control is a Managerial Process
• Control is forward looking
• Control exists at each level of Organization
• Control is a Continuous Process
• Control is closely linked with Planning
• Purpose of Controlling is Goal Oriented and
hence Positive

Meaning of Change
Change is basically a variation in pre-existing
methods, customs, and conventions. Since all
organizations function in dynamic
environments, they constantly have to
change themselves to succeed.

Causes of Change
(A) External Pressures:
i. Change in Technology and Equipment
ii. Market Situation
iii. Social and Political Changes
(B) Internal Pressures
i. Changes in the Managerial Personnel
ii. Deficiencies in the Existing Organization

Resistance to Change
Organizational culture and structure change
is inevitable due to the constant change in
technology, customer and markets, social and
political pressures, as well as demographic
characteristics. Resistance to change is an
emotional and behavioural response by the
affected employees to actual or imagined
threats to an established work routine.
Organizations must manage change and
subsequent resistance to survive.

Reason for Resistance to Change

Method of Overcoming Resistance to Change

Principles of business management

Principles of business management

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