Principles

of
Management (ECE)
By
Jebah Shanthi P
1

MG6851 - PRINCIPLES OF MANAGEMENT

OBJECTIVES:
To enable the students to study the evolution of
Management, to study the functions and principles
of management and to learn the application of the
principles in an organization.

UNIT I - INTRODUCTION TO MANAGEMENT AND

ORGANIZATIONS (9)
- Definition of Management
- Science or Art
Manager Vs Entrepreneur types of managers managerial roles and skills
Evolution of Management Scientific, human relations ,
system and contingency approaches
Types of Business organization Sole proprietorship,
partnership, company-public and private sector
enterprises
Organization culture and Environment
Current trends and issues in Management.
3

UNIT II - PLANNING (9)

- Nature and purpose of planning
planning process types of planning
- objectives setting objectives
policies Planning premises
Strategic Management
Planning Tools and Techniques
Decision making steps and process.

UNIT III - ORGANISING (9)

-Nature and purpose
Formal and informal organization
organization chart
organization structure types
Line and staff authority - departmentalization
delegation of authority centralization and
decentralization
Job Design Human Resource Management
HR Planning, Recruitment, selection,
-Training and Development,
-Performance Management ,
-Career planning and management.

UNIT IV - DIRECTING
- Foundations of individual and group behaviour
motivation motivation theories motivational
techniques
job satisfaction job enrichment
leadership types and theories of leadership
communication process of communication barrier
in communication effective communication
communication and IT.

UNIT V - CONTROLLING
-System and process of controlling
-budgetary and non-budgetary control techniques
- use of computers and IT in Management control
- Productivity problems and management
- control and performance direct and preventive
control
- reporting.

UNIT V CONTROLLING
Process of controlling - Types of control - Budgetary
and non-budgetary control techniques - Managing
Productivity - Cost Control - Purchase Control
Maintenance Control - Quality Control - Planning
operations.
TOTAL= 45 PERIODS
TEXT BOOKS:
1. Stephen P. Robbins and Mary Coulter, 'Management',
Prentice Hall of India, 8th edition.
2. Charles W L Hill, Steven L McShane, 'Principles of
Management', McGraw Hill Education, Special Indian
Edition, 2007.

REFERENCES:
1. Hellriegel, Slocum & Jackson, ' Management - A
Competency Based Approach', Thomson South
Western, 10th edition, 2007.
2. Harold Koontz, Heinz Weihrich and Mark V
Cannice, 'Management - A global &
Entrepreneurial Perspective', Tata McGraw Hill,
12th edition, 2007.
3. Andrew J. Dubrin, 'Essentials of Management',
Thomson Southwestern, 7th edition, 2007.

ORGANIZATION
An Organization is a systematic arrangement of
people brought together to accomplish some
specific purpose

What three
common
characteristics
do all
organizations
Share?

Purpose or GOAL

People
Structure or
Grouped

10

 What titles do Managers have in

Organization? / Organizational Hierarchy
Responsible for making decisions, establishing
objectives . Eg, President, CEO, CMD etc

Top
Managers

Middle
Managers
First-Line
Managers
Operatives

Represent levels of
management between
First-line and Top Level Mgmt

Also called as supervisors,

Responsible for
directing day to day
activities of operative
employees
People who work
directly
On a job or task

11

 How do we define Management?

The term Management refers to the process of
getting things done, effectively and efficiently,
through and with other people.
Process represents the primary
Activities managers perform

Efficiency refers to the relationship

Between inputs and outputs, minimize resource cost

Effectiveness doing the right things

12

 Management
Management is the process of designing and
maintaining an environment in which
individuals, working together in groups,
efficiently accomplish selected aims.
Expanded as follows
1. As managers, people carry out managerial
functions of planning, organizing, staffing,
leading, and controlling.

13

2. Management applies to any kind of Organization

3. It applies to managers at all organizational levels
4. The aim of all managers is the same : to create
surplus
5. Managing is concerned with productivity; this
implies effectiveness and efficiency
14

 Efficiency and Effectiveness

Means
Efficiency
R
E
S
O
U
R
C
E
USUAGE

ENDS
Effectiveness
GOAL

GOALS
LOW
WASTE

High
Attainment

A
T
T
A
I
N
M
E
N
T
15

Management process

16

Different experts have classified functions of management

According to George & Jerry, There are four

fundamental functions of management i.e. planning,
organizing, actuating (put into action) and controlling.
According to Henry Fayol, To manage is to forecast and
plan, to organize, to command, & to control.
Whereas Luther Gullick has given a keyword
POSDCORB where
P stands for Planning,
O for Organizing,
S for Staffing,
D for Directing,
Co for Co-ordination,
R for reporting &
B for Budgeting.

17

 But the most widely accepted are functions of

management given by KOONTZ and ODONNEL
i.e. Planning, Organizing, Staffing, Directing
and Controlling.

18

1. Planning

It is the basic function of management. It deals with

chalking out a future course of action & deciding in
advance the most appropriate course of actions for
achievement of pre-determined goals.
According to KOONTZ, Planning is deciding in
advance what to do, when to do & how to do. It
bridges the gap from where we are & where we
want to be.
A plan is a future course of actions. Planning is
determination of courses of action to achieve
desired goals.
It is all pervasive, it is an intellectual activity and it
also helps in avoiding confusion, uncertainties,
risks, wastages etc.
19

2. Organizing

It is the process of bringing together physical, financial and

human resources and developing productive relationship
amongst them for achievement of organizational goals.
According to Henry Fayol, To organize a business is to provide
it with everything useful or its functioning i.e. raw material,
tools, capital and personnels.
To organize a business involves determining & providing
human and non-human resources to the organizational structure.
Organizing as a process involves:
Identification of activities.
Classification of grouping of activities.
Assignment of duties.
Delegation of authority and creation of responsibility.
Coordinating authority and responsibility relationships. 20

3. Staffing

It is the function of manning the organization structure and

keeping it manned.

Staffing has assumed greater importance in the recent years

due to advancement of technology, increase in size of
business, complexity of human behavior etc.

The main purpose o staffing is to put right man on right job

i.e. square pegs in square holes and round pegs in round
holes.

According to Koontz & O'Donnell, Managerial function of

staffing involves manning the organization structure through
proper and effective selection, appraisal & development of
personnel to fill the roles designed un the structure.
21

 Staffing involves:
Manpower Planning (estimating man power in terms
of searching, choose the person and giving the right
place).
Recruitment, selection & placement.
Training & development.
Remuneration.
Performance appraisal.
Promotions & transfer.
22

4. Directing
It is that part of managerial function which actuates
the organizational methods to work efficiently for
achievement of organizational purposes.
Direction is that inert-personnel aspect of
management which deals directly with influencing,
guiding, supervising, motivating sub-ordinate for
the achievement of organizational goals.
Direction has following elements:
Supervision
Motivation
Leadership
Communication
23

 Supervision- implies overseeing the work of

subordinates by their superiors. It is the act of watching
& directing work & workers.
Motivation- means inspiring, stimulating or
encouraging the sub-ordinates with zeal to work.
Positive, negative, monetary, non-monetary incentives
may be used for this purpose.
Leadership- may be defined as a process by which
manager guides and influences the work of
subordinates in desired direction.
Communications- is the process of passing
information, experience, opinion etc from one person
to another. It is a bridge of understanding.
24

5. Controlling

It implies measurement of accomplishment against

the standards and correction of deviation if any to
ensure achievement of organizational goals.

The purpose of controlling is to ensure that

everything occurs in conformities with the
standards. An efficient system of control helps to
predict deviations before they actually occur.

According to Theo Haimann, Controlling is the

process of checking whether or not proper progress
is being made towards the objectives and goals and
acting if necessary, to correct any deviation.
25

Therefore controlling has following steps:

a. Establishment of standard performance.
b. Measurement of actual performance.
c. Comparison of actual performance with the
standards and finding out deviation if any.
d. Corrective action.

26

Objectives of Management
ximum
Getting Ma
h
Results wit
fforts
Minimum E
Increas
i ng t he
Efficien
cy
of facto
rs
of Prod
uction

Objectives
of
Management

Human
betterm
ent
& Socia
l Justice

Max
i m um
for E Prospe
ri
m
& Em ployer ty
p l oy
ees
27

Objectives of Management
The main objectives of management are:
1. Getting Maximum Results with Minimum Efforts
The main objective of management is to secure
maximum outputs with minimum efforts & resources.
Management is basically concerned with thinking &
utilizing human, material & financial resources in such
a manner that would result in best combination. This
combination results in reduction of various costs.
2. Increasing the Efficiency of factors of Production
Through proper utilization of various factors of
production, their efficiency can be increased to a great
extent which can be obtained by reducing spoilage,
wastages and breakage of all kinds, this in turn leads to
saving of time, effort and money which is essential for
the growth & prosperity of the enterprise.
28

3. Maximum Prosperity for Employer & Employees

Management ensures smooth and coordinated
functioning of the enterprise. This in turn helps in
providing maximum benefits to the employee in the
shape of good working condition, suitable wage
system, incentive plans on the one hand and higher
profits to the employer on the other hand.
4. Human betterment & Social Justice
Management serves as a tool for the upliftment as
well as betterment of the society. Through increased
productivity & employment, management ensures
better standards of living for the society. It provides
justice through its uniform policies.
29

Importance of Management
It helps in Achieving Group Goals

Optimum Utilization of Resources

Reduces Costs
Importance
of
Management

Establishes Sound Organization

Establishes Equilibrium

Essentials for Prosperity of Society

30

Importance of Management
1. It helps in Achieving Group Goals
It arranges the factors of production, assembles
and organizes the resources, integrates the resources
in effective manner to achieve goals. It directs
group efforts towards achievement of predetermined goals. By defining objective of
organization clearly there would be no wastage of
time, money and effort. Management converts
disorganized resources of men, machines, money
etc. into useful enterprise. These resources are
coordinated, directed and controlled in such a
manner that enterprise work towards attainment of
goals.
31

2. Optimum Utilization of Resources

Management utilizes all the physical & human
resources productively. This leads to efficacy in
management. Management provides maximum
utilization of scarce resources by selecting its best
possible alternate use in industry from out of various
uses. It makes use of experts, professional and these
services leads to use of their skills, knowledge, and
proper utilization and avoids wastage. If employees
and machines are producing its maximum there is no
under employment of any resources.

32

3. Reduces Costs
It gets maximum results through minimum input by
proper planning and by using minimum input & getting
maximum output. Management uses physical, human and
financial resources in such a manner which results in best
combination. This helps in cost reduction.
4. Establishes Sound Organization
No overlapping of efforts (smooth and coordinated
functions). To establish sound organizational structure is
one of the objective of management which is in tune with
objective of organization and for fulfillment of this, it
establishes effective authority & responsibility
relationship i.e. who is accountable to whom, who can
give instructions to whom, who are superiors & who are
33
subordinates.

5. Establishes Equilibrium

It enables the organization to survive in

changing environment. It keeps in touch with the
changing environment. With the change is external
environment, the initial co-ordination of
organization must be changed. So it adapts
organization to changing demand of market /
changing needs of societies. It is responsible for
growth and survival of organization.

34

6. Essentials for Prosperity of Society

Efficient management leads to better economical
production which helps in turn to increase the welfare
of people. Good management makes a difficult task
easier by avoiding wastage of scarce resource. It
improves standard of living. It increases the profit
which is beneficial to business and society will get
maximum output at minimum cost by creating
employment opportunities which generate income in
hands. Organization comes with new products and
researches beneficial for society.
35

EVOLUTION/ GROWTH OF MANAGEMENT THOUGHT

EVOLUTION OF MANAGEMENT THOUGHT

Management thought has a long history. It is as old as human
civilization itself.
Organized activities and management have existed for
thousands of years. Egyptian pyramids and the Great Wall of
China are evidence that projects of tremendous scope were
done in those time. The huge pyramids of Egypt stand a mute
testimony to the managerial and organizational abilities of the
ancient Egyptian civilization. One pyramid required 1,00,000
men working for 20 years, covering 13 acres, using 2.3 million
blocks, each weighing an average of 2.5 tons. To produce such
a monument required proper planning, work allocation,
organizing, directing, controlling and decision making.
These historical examples demonstrate that organized activities
and managers have been with us since before the Industrial
Revolution.
37

Adam Smiths Contribution to the field of Management

Adam Smiths name is typically cited in economics course
for his contributions to classical economic doctrine, but his
discussion in Wealth of Nations (1776) included a brilliant
argument on the economic advantage that organizations and
society would reap from the division of labour.
He used the pin-manufacturing industry for his examples.
Smith noted that 10 individuals, each doing a specialized
task, could produce about 48,000 pins a day among them.
However, if each worked separately and independently,
those 10 workers would be lucky to make 200 or even 10
pins in one day.
Smith concluded that division of labour increased
productivity by increasing each workers skill and dexterity,
by saving time that is commonly lost in changing tasks, and
by the creation of labour-saving inventions and machines.
38

Industrial Revolution influence in Management

Practices
Possibly the most important pre-twentieth influence
on management was the Industrial Revolution. The
Industrial Revolution provided the impetus for
developing various management theories and
principles. Pre classical theorists like Robert Owen,
Charles Babbage, Andrew Ure, Charles Dupin, and
Henry R. Towne made some initial contributions that
eventually led to the identification of management as
an important field of inquiry.
This led to the emergence of approaches to
management: classical, behavioral, quantitative and
modern.
39

I. CLASSICAL APPROACH

SCIENTIFIC
MANAGEMENT

CLASSICAL
APPROACH

1. Frederick W. Taylor
2. Frank and
Lillian Gilbreth
3. Henry Gantt

BUREAUCRATIC
MANAGEMENT

Max Weber

ADMINISTRATIVE
MANAGEMENT

Henry Fayol
40

I. CLASSICAL CONTRIBUTIONS (1900 to 1930)

The classical management approach had three major
branches: scientific management, administrative
theory and bureaucratic management.
Scientific management emphasized the scientific
study of work methods to improve worker efficiency.
Bureaucratic management dealt with the
characteristics of an ideal organization, which
operates on a rational basis.
Administrative theory explored principles that could
be used by managers to coordinate the internal
activities of organizations.
41

Contribution of F. W. Taylor to Management

Thought
F. W. Taylor (1856-1915) is rightly treated as the
father of scientific management. He suggested the
principles of scientific management. His concept of
scientific management developed into a movement
and dominated the industrial management for several
decades after him.
His concepts and principles were refined and
popularized by several of his followers, notable
among them being Henry Gantt, The Gilbreths and
Emerson.
42

Principles of Scientific Management

According to Taylor, scientific management in its
essence consists of a philosophy which results in a
combination of four important underlying principles
of management. The basic principles of Taylor
philosophy of scientific management are as noted
below. These principles of scientific management are
most crucial aspects of scientific management.
First, the development of a true science,
Second, the scientific selection of the workers,
Third, their scientific education and development,
Fourth, intimate co-operation between management
and their men,
43

The main elements of his theory were:

1. Management is a true science.
The solution to the problem of determining fair
work standards and practices could be discovered by
experimentation and observation. From this, it
follows, that there is "one right way" for work to be
performed.
2. The selection of workers is a science.
Taylor's "first class worker" was someone
suitable for the job. It was management's role to
determine the kind of work for which an employee
was most suited, and to hire and assign workers
accordingly.
44

3. Workers are to be developed and trained.

It is management's task to not only engineer a job
that can be performed efficiently, but management is
responsible for training the worker as to how the
work is to be performed and for updating practices as
better ones are developed. This standardizes how the
work is performed in the best way.
4. Scientific management is a collaboration of
workers and managers.
Managers are not responsible for execution of
work, but they are responsible for how the work is
done. Planning, scheduling, methods, and training are
functions of the manager.
45

Principles (Features) of Scientific Management

1. Separation of Planning and Doing
Taylor suggests the Separation of Planning from
actual doing
Taylor says that supervisor should do the planning
The workers should concentrate on doing the work
Functional Foremanship
--illustrated in the next slide
46

47

a. Taylor advocated functional foremanship for

achieving ultimate specification.
b. This technique was developed to improve the
quality of work as single supervisor may not be an
expert in all the aspects of the work.
c. Therefore workers are to be supervised by
specialist foreman.
d. The scheme of functional foremanship is an
extension of principle pf specialization at the
supervisory level.
e. Taylor advocated appointment of 8 foramen, 4 at
the planning level & other 4 at implementation
level.

48

f. The names & function of these specialist foremen are: Instruction card clerk concerned with tagging down of
instructions according to which workers are required to perform
their job
Time & cost clerk is concerned with setting a time table for
doing a job & specifying the material and labor cost involved in
it.
Route clerk determines the route through which raw materials
has to be passed.
Shop Disciplinarians are concerned with making rules and
regulations to ensure discipline in the organization.
Gang boss makes the arrangement of workers, machines, tools,
workers etc.
Speed boss concerned with maintaining the speed and to remove
delays in the production process.
Repair boss concerned with maintenance of machine, tools and
equipments.
Inspector is concerned with maintaining the quality of product.
49

2. Job Analysis

Every job that requires minimum movements, less cost and

least time is the best way of doing the job. This can be
determined by motion, time and Fatigue study.

Time Study
It is a technique which enables the manager to ascertain
standard time taken for performing a specified job.
Every job or every part of it is studied in detail.
This technique is based on the study of an average
worker having reasonable skill and ability.
Average worker is selected and assigned the job and then
with the help of a stop watch, time is ascertained for
performing that particular job.
Taylor maintained that Fair days work should be
determined through observations, experiment and
analysis by keeping in view an average worker.
50
Standard Time Working Hours = Fair Days Work

(B) Motion Study

In this study, movement of body and limbs required to
perform a job are closely observed.
In other words, it refers to the study of movement of
an operator on machine involved in a particular task.
The purpose of motion study is to eliminate useless
motions and determine the bet way of doing the job.
By undertaking motion study an attempt is made to
know whether some elements of a job can be
eliminated combined or their sequence can be changed
to achieve necessary rhythm.
Motion study increases the efficiency and productivity
of workers by cutting down all wasteful motions.
51

(C) Fatigue Study

Fatigue study indicates the amount and frequency of rest
required in completing the job. Taylor suggests a fair days
work requiring certain movements and rest periods to
complete it.

52

3. Standardization
It implies the physical attitude of products should be such
that it meets the requirements & needs of customers.
Taylor advocated that tools & equipments as well as
working conditions should be standardized to achieve
standard output from workers.
Standardization is a means of achieving economics of
production.
It seems to ensure The line of product is restricted to predetermined type,
form, design, size, weight, quality. Etc
There is manufacture of identical parts and components.
Quality & standards have been maintained.
Standard of performance are established for workers at
all levels.
53

4. Scientific Selection, Training & Development of

Workers
There should be scientifically designed procedure for
the selection of workers.
Physical, mental & other requirement should be
specified for each and every job.
Workers should be selected & trained to make them
fit for the job.
The management has to provide opportunities for
development of workers having better capabilities.
According to Taylor efforts should be made to
develop each employee to his greatest level and
efficiency & prosperity.
54

5. Differential Piece Wage Plan (Financial Incentives)

This tech of wage payment is based on efficiency of
worker.
The efficient workers are paid more wages than
inefficient one.
On the other hand, those workers who produce less
than standard no. of pieces are paid wages at lower
rate than prevailing rate i.e. worker is penalized for
his inefficiency.
This system is a source of incentive to workers who
improving their efficiency in order to get more
wages.
It also encourages inefficient workers to improve
their performance and achieve their standards.
It leads to mass production which minimizes cost and
maximizes profits.
55

6. Mental Revolution
The workers and managers should have a complete change
of outlook towards their mutual relation and work effort.
It requires that management should create suitable working
condition and solve all problems scientifically.
Similarly workers should attend their jobs with utmost
attention, devotion and carefulness. They should not waste
the resources of enterprise.
Handsome remuneration should be provided to workers to
boost up their moral.
It will create a sense of belongingness among worker.
They will be disciplined, loyal and sincere in fulfilling the
task assigned to them.
There will be more production and economical growth at a
faster rate.
56

 Criticism

Criticism

Criticism from Employers

Criticism from Workers

and Trade Unions

1. Huge investment required

2. Sudden change may disturb
existing working arrangements
3. Unsuitable to small units
4. Benefits after a long period
5. Huge overhead expenses required

1. Heavy burden on workers

2. Reduces initiative among workers
3. Possibility of unemployment
4. Exploitation of workers
5. Possible adverse effects
on workers unity
57

Contribution by Frank and Lillian Gilbreth

Frank and Lillian Gilbreth were associates of Frederick Winslow Taylor.

The Gilbreths, unlike Taylor, had experience in unionized industry,

Which presumably limited their enthusiasm for timing jobs.
Together they were partners in the management consulting
firm of Gilbreth, Inc.

58

 Frank and Lillian Gilbreth continued their motion

study and analysis in other fields and pioneered in the
use of motion pictures for studying work and
workers.
They originated micro-motion study, a breakdown of
work into fundamental elements now called therbligs
(derived from Gilbreth spelled backwards).
These elements were studied by means of a motionpicture camera and a timing device which indicated
the time intervals on the film as it was exposed.
59

Therbligs
In their study of hand movements, the Gilbreths found
that terms such as "move hand" were too general to
allow detailed analysis.
They split hand movements into 17 basic units of
motion that could then, through various combinations,
form the hand movements being monitored.
The movements include select, grasp, search,
and hold. These units were known collectively as
"therbligs"--Gilbreth spelled backwards, with the
`th' transposed
60

Contribution by Henry L Gantt

Around the time that the Gilbreths began working,
Henry Laurence Gantt, A.B., M.E. (1861-23
November 1919) was a mechanical engineer and
management consultant who is most famous for
developing the Gantt chart in the 1910s, developed
the ideas that grew into what came to be known as the
`Gantt chart'--a system of recording the planning and
controlling of work in progress. Frank and Lillian
used a Gantt chart in their work and in their turn, they
added process charts and flow diagrams. These new
tools graphically demonstrated the constituent parts
that need to be carried out to complete a task.
61

 Henry L. Gantt also contributed to the concept of

Industrial Efficiency, by applying scientific analysis
to all aspects of the work in progress.
The industrial management role is to improve the
system by eliminating chance and accidents. His
concept of the Task and Bonus System linked the
bonus paid to managers and employees to how well
they improve performance.
Henry L. Gantt also believed that businesses have a
social responsibility to promote the welfare of the
society in which they operate.
62

2. Bureaucratic Management ( Max Weber)

Max Weber

is best known as one of the leading scholars

and founders of modern sociology, but Weber also
accomplished much economic work in the style of the
"youngest" German Historical School.
Max Weber was a German Sociologist. He developed a
theory of authority structures and described organizational
activity on the basis of authority relations.
He described an ideal type of organization that he called
bureaucracy, characterized by division of labour, clearly
defined hierarchy, detailed rules and regulations
and impersonal relationships.
His theory became the design prototype for
many of todays large organizations.

63

 Administrative Management - Henry Fayol

Fayol divided total industrial activities
into six categories,
1. Technical (Production, Manufacture)
2. Commercial (Buying, selling, Exchange)
3. Financial (Search for and optimum use of capital)
4. Security ( Protection of property and persons)
5. Accounting ( Balance Sheets, cost statistics)
6. Management ( Planning, Organizing,
Co coordinating, Directing and Controlling)

"Fourteen principles identified as general rules that a

successful organizations ought to follow:
1. Division of work.
This principle is the same as Adam Smith's 'division of
labour'. Specialization increases output by making
employees more efficient.
2. Authority.
Managers must be able to give orders. Authority gives
them this right. Note that responsibility arises wherever
authority is exercised.
3. Discipline.
Employees must obey and respect the rules that govern
the organization. Good discipline is the result of
effective leadership, a clear understanding between
management and workers regarding the organizations
rules, and the judicious use of penalties for infractions
of the rules.

4. Unity of command.
Every employee should receive orders from only one
superior.
5. Unity of direction.
Each group of organizational activities that have the same
objective should be directed by one manager using one
plan.
6. Subordination of individual interests to the general
interest.
The interests of any one employee or group of employees
should not take precedence over the interests of the
organization as a whole.
7. Remuneration.
Workers must be paid a fair wage for their services.

8. Centralization.
Centralization refers to the degree to which
subordinates are involved in decision making. Whether
decision making is centralized (to management) or
decentralized (to subordinates) is a question of proper
proportion. The task is to find the optimum degree of
centralization for each situation.

9. Scalar chain.
The line of authority from top management to the
lowest ranks represents the scalar chain.
Communications should follow this chain.
However, if following the chain creates delays,
cross-communications can be allowed if agreed to
by all parties and superiors are kept informed.

10. Order. People and materials should be in the

right place at the right time.
11. Equity. Managers should be kind and fair to
their subordinates.
12. Stability of tenure of personnel.
High employee turnover is inefficient.
Management should provide orderly personnel
planning and ensure that replacements are
available to fill vacancies.

13. Initiative.
Employees who are allowed to originate and carry
out plans will exert high levels of effort.
14. Esprit de corps.
Promoting team spirit will build harmony and
unity within the organization.

II. BEHAVIOURAL
APPROACH

GROUP
INFLUENCES

HAWTHORNE
STUDIES
BEHAVIOURAL
APPROACH

MASLOWS NEED
THEORY

THEORY X and
THEORY Y

MODEL I and
MODEL II
VALUES

Mary Parker Follet

Elton Mayo

Abraham Maslow

Douglas McGregor

Chris Argyris
70

A. GROUP INFLUENCES - Mary Parker Follet

Mary Parker Follett advocated for a human relations emphasis
equal to a mechanical or operational emphasis in management.
Her work contrasted with the "scientific management" of
Frederick W. Taylor (1856-1915) and evolved by Frank and
Lillian Gilbreth, which stressed time and motion studies.

Mary Parker Follett stressed the interactions of

management and workers.
she identifies a leader as someone who
sees the whole rather than the particular.
Follett was one of the first (and for a long time, one of the few)
to integrate the idea of organizational conflict into management theory,
and is sometimes considered the "mother of conflict resolution."

B. HAWTHORNE STUDIES Elton Mayo

General Electric, the major manufacturer of light bulbs, had

preliminary evidence that better lighting of the work place
improved worker productivity, but wanted to validate these
findings to sell more light bulbs, especially to businesses.

 AT&T's Western Electric Hawthorne plant located in Cicero,

Illinois, was chosen as the laboratory.
Beginning with this early test, the Hawthorne Experiments
were a series of studies into worker productivity performed at
the Cicero plant beginning in 1924 and ceasing in 1932.
Illumination Studies, 1924 -1927
The group examined the relationship between light intensity
and worker efficiency.
The hypothesis was that greater illumination would yield
higher productivity.
Two work groups of female employees were selected for
control and experimental groups.
By comparing the changes on worker productivity by
manipulating lighting in the experimental group with the
production of the control group, the researchers could validate
and measure the impact of lighting.

 The study, however, failed to find any simple

relationship as poor lighting and improved lighting
seemed in increase productivity.
Indeed, in the final stage, when the group pretended to
increase lighting the worker group reported higher
satisfaction.
The preliminary findings were that behavior is not
merely physiological but also psychological. This was
a break with the Scientific Management school that
saw work productivity as mechanical, and led to the
decision to learn more about worker behavior.

Relay Assembly Test Room Experiments, (1927-1929)

An experimental group was established of five young women from

the Relay Assembly room of the plant.
The experiments involved the manipulation of a number of factors,
to include pay incentives, length of workday and workweek,
and use of rest periods, to measure impact on productivity and fatigue.
Again, the relationship between pay, incentives, rest, and working
hours seemed to have little effect on productivity, even when the
original, more demanding conditions were re-implemented.

 Plant-wide Interview program, 1928-1931

As early findings indicated that concern for workers
and willingness to listen impacted productivity,
Western Electric implemented a plant-wide survey of
employees to record their concerns and grievances.
From 1928 to 1930, 21,000 employees were
interviewed.
This data would support the research of the Harvard
team for years and lead them to conclude that work
improved when supervisors began to pay attention to
employees, that work takes place in a social context in
which work and non-work considerations are
important, norms and groups matter to workers.

 Bank Wiring Observation group, 1931-1932

The final Hawthorne experiment was conducted studying
14 male workers assigned to the Bank Wiring factory.
The objective was to study the dynamics of the group when
incentive pay was introduced.
The finding was that nothing happened! The work group
had established a work norm a shared expectation
about how much work should be performed in a day and
stuck to it, regardless of pay.
The conclusion: informal groups operate in the work
environment to manage behavior.

Four general conclusions were drawn from the

Hawthorne studies:
1. The aptitudes (ability or skill) of individuals are imperfect
predictors of job performance. Although they give some indication
of the physical and mental potential of the individual, the amount
produced is strongly influenced by social factors.
2. Informal organization affects productivity. The Hawthorne
researchers discovered a group life among the workers. The studies
also showed that the relations that supervisors develop with workers
tend to influence the manner in which the workers carry out
directives.
3. Work-group norms affect productivity. The Hawthorne researchers
were not the first to recognize that work groups tend to arrive at
norms of what is "a fair day's work," however, they provided the best
systematic description and interpretation of this phenomenon.
4. The workplace is a social system. The Hawthorne researchers came
to view the workplace as a social system made up of interdependent
parts.

 Abraham Maslows Hierarchy of needs

We each have a hierarchy of needs that ranges from
"lower" to "higher."
As lower needs are fulfilled there is a tendency for
other, higher needs to emerge.
Maslows theory maintains that a person does
not feel a higher need until the needs of the
current level have been satisfied.

Maslow's basic needs are as follows:

Achieve full potential
Fulfillment

Self-Actualization
Self Respect,

Esteem

Respect from others)

Belonging

Belonging
(Affection,
Affection)
Safety

Safety
(Protection,
Stability, Pain Avoidance)
Physiological
(Food, Air, Water, Clothing)

THEORY X and THEORY Y - Douglas McGregor

 Douglas McGregor, (an American social psychologist,) his

XY Theory remains central to organizational development,
and to improving organizational culture.

Theory x ('authoritarian management' style)

The average person dislikes work and will avoid it
he/she can.
Therefore most people must be forced with the threat
of punishment to work towards organizational
objectives.
The average person prefers to be directed; to avoid
responsibility; is relatively not ambitious, and wants
security above all else.

Theory y ('participative management' style)

Effort in work is as natural as work and play.
People will apply self-control and self-direction in the
pursuit of organizational objectives, without external
control or the threat of punishment.
Commitment to objectives is a function of rewards
associated with their achievement.
People usually accept and often seek responsibility.
The capacity to use a high degree of imagination,
ingenuity and creativity in solving organizational
problems is widely, not narrowly, distributed in the
population.
In industry the intellectual potential of the average
person is only partly utilized.
83

Research Work Of Chris Argyris

Personality and
Organization (1957) and
Integrating the Individual and the
Organization(1964)

Early research explored the impact of formal organizational

structures, control systems, and management on individuals
(and how they responded and adapted to them).
MATURITY-IMMATURITY THEORY

Interpersonal Competence and

Organizational
Effectiveness (1962) and
Organization
and Innovation(1965)

Shifted his focus to organizational change, in particular exploring

the behavior of senior executives in organizations

Intervention Theory and

Method(1970);
Inner ontradictions of Rigorous
Research (1980) and Action
Science (1985) - with Robert
Putnam and Diana McLain Smith

Moved onto a particularly fruitful inquiry into the role of

the social scientist as both researcher and actor
Theories Of Action
DOUBLE LOOP LEARNING
MODEL I-MODEL II LEARNING

Research and theorizing in

significant part undertaken
with Donald Schn

Here the interest lies in the extent to which human

reasoning, not just behavior, can become the basis for
diagnosis and action
LADDER OF INFLUENCE
84

Maturity-Immaturity Theory

Individuals progress at different rates from the total

immaturity of early childhood (being passive, dependent,
shallow, limited activity) to maturity (active, independent,
deeper thoughts, more varied interests).

85

Model I
Argyris has claimed that just about all the participants
in his studies operated from theories-in-use or values
consistent with Model I (Argyris et al. 1985: 89).
It involves making inferences (conclusion or
assumption) about another persons behavior without
checking whether they are valid and advocating ones
own views abstractly without explaining or
illustrating ones reasoning
86

 Model II
The significant features of Model II include the ability
to call upon good quality data and to make
inferences.
It looks to include the views and experiences of
participants rather than seeking to impose a view upon
the situation. Theories should be made explicit and
tested, positions should be reasoned and open to
exploration by others.

It looks to:
Emphasize common goals and mutual influence.
Encourage open communication, and to publicly test
assumptions and beliefs.
87

III. QUANTITATIVE APPROACH

MANAGEMENT
SCIENCE

QUANTITATIVE
APPROACH

OPERATIONS
MANAGEMENT

MANAGEMENT
INFORMATION
SYSTEM (MIS)
88

What is Management Science?

Management Science is concerned with developing and
applying models and concepts that may prove useful in
helping to illuminate management issues and solve
managerial problems.
The models used can often be represented
mathematically, but sometimes computer-based, visual
or verbal representations are used as well or instead.
It includes scheduling airlines, both planes and crew,
deciding the appropriate place to site new facilities such
as a warehouse or factory, managing the flow of water
from reservoirs, identifying possible future development
paths for parts of the telecommunications industry,
establishing the information needs and appropriate
systems to supply them within the health service, and
identifying and understanding the strategies adopted by
companies for their information systems.
89

What is Operations Research?

Operations research (O.R.) is the discipline of applying
advanced analytical methods to help make better
decisions.
By using techniques such as mathematical modeling to
analyze complex situations, operations research gives
executives the power to make more effective decisions
and build more productive systems based on:
More complete data
Consideration of all available options
Careful predictions of outcomes and estimates
of risk
The latest decision tools and techniques
90

Management Information System (M.I.S.)

MIS is concerned with processing data into

information. which is then communicated to the various
Departments in an organization for appropriate decisionmaking.
Data

Information

Communication

Decisions

Data collection involves the use of Information

Technology (IT) comprising: computers and
telecommunications networks (E-Mail, Voice Mail,
Internet, telephone, etc.)
Computers are important for more quantitative, than
qualitative, data collection, storage and retrieval;
Special features are speed and accuracy, and storage of
large amount of data.
91

IV. MODERN APPROACHES

THE SYSTEMS
THEORY

MODERN
APPROACHES

CONTINGENCY
THEORY

EMERGING
APPROACHES : Theory Z
And Quality
Management
92

A. The System Theory

System theory was first applied in the field of science and engineering.
A system is essentially a set of things interconnected or dependent,
so as to form a complex unity
Just as a doctor effective manager should collect information about all
parts of the organization in order to diagnose a problem and take
necessary corrective action.
Key Concepts
Sub system: While an organization as a whole is a system, the various
components or parts within it are called the subsystem.
Closed system: A system that does not interact with its environment.
Open system: A system which interacts with its environment.
Synergy: Synergy means that departments that interact cooperatively
are more productive than would be if they operated in isolation.
93

Open System Model of an Organization

External Environment

Inputs
Output
Human
Machines
Money
Technologies

Transformation
Goods
Services

Information
Feedback

94

B. CONTINGENCY THEORY
Contingency theory is a class of behavioral theory that claims
that there is no best way to organize a corporation, to lead a
company, or to make decisions. Instead, the optimal course of
action is contingent (dependent) upon the internal and external
situation. Several contingency approaches were developed
concurrently in the late 1960s.
They suggested that previous theories such as Webers
bureaucracy and Taylors scientific management had failed
because there could not be "one best way" for leadership or
organization.

C. (i) EMERGING APPROACHES : Theory Z

Management Concept

William Ouchi (Theory Z)

Motivation

Believes that people are innately self motivated to

not only do their work, but also are loyal towards
the company, and want to make the company
succeed.

Leadership

Theory Z managers would have to have a great

deal of trust that their workers could make sound
decisions. Therefore, this type of leader is more
likely to act as "coach", and let the workers make
most of the decisions.

Power &
Authority

The manager's ability to exercise power and

authority comes from the worker's trusting
management to take care of them, and allow them
to do their jobs. The workers have a great deal of
input and weight in the decision making process.
96

 EMERGING APPROACHES : Theory Z

Conflict

Performance
Appraisals

Conflict in the Theory Z arena would

involve a great deal of discussion,
collaboration, and negotiation. The
workers would be the ones solving the
conflicts, while the managers would play
more of a "third party arbitrator" role.

Theory Z emphasizes more frequent

performance appraisals, but slower
promotions

97

C. (ii) TOTAL QUALITY MANAGEMENT

Total Quality Management (TQM) is a management style that
integrates of all functions of a business to achieve a high quality
of product.
The major hall-marks are customer satisfaction, quality as the
responsibility of all employees, and teamwork.
As an integrated method, it involves every aspect of the company.
The entire workforce, from the CEO to the line worker, must be
involved in a shared commitment to improving quality.

199

Managerial Roles
Roles are specific actions or behaviors expected
of a manager.
Mintzberg identified 10 roles grouped around
interpersonal relationships, the transfer of
information, and decision making.

100

1. Interpersonal Roles (Provide

1
Information)101

a. Figurehead

The manager performs ceremonial and symbolic duties as

the head of the organization, greetings visitors or signing
papers.
b. Leader
Direct and motivate subordinates, training, counseling,
and communicating with subordinates .
c. Liaison (link or connection)
develops and maintains a network of external contacts to
gather information, such as business correspondences,
participation in meetings with representatives of other
divisions or organizations.

2. Informational Roles - (Process Information)

1
102

a. Monitor

gathers internal and external information relevant to the

organization; scan periodicals, news, reports, attend seminars.
b. Disseminator
communicates factual and value based information to
subordinates; sends memos and reports, inform staff
c. Spokesperson
represents the unit to outsiders, communicates to the outside
world on performance and policies, transmit information to
outsiders through speeches, reports, memos, participates in
conferences/meetings and report progress

3. Decisional Roles - (Use Information)

a. Entrepreneur

1
103

designs and initiates change in the organization, identify areas of

business development.

b. Disturbance handler
deals with unexpected events and operational breakdowns, takes
corrective action, resolves conflicts among subordinates
c. Resource allocator
controls and authorizes the use of organizational resources,
decides who gets resources, scheduling, budgeting, setting
priorities
d. Negotiator
participates in negotiation activities with other organizations and
individuals, represents the unit during negotiation of union
contracts, sales, purchases, budgets

Managerial Skills
1. Technical Skills
Knowledge and proficiency in a specific field
2. Human Skills
The ability to work well with other people
3. Conceptual & Design Skills
The ability to think and conceptualize about abstract
and complex situations concerning the organization
4. Political Skills

A managers ability to build a power base and

establish the right actions

1
104

1. Technical Skills
Youll probably be hired for your first job based on
your technical skills
the ones you need to perform specific tasks
and youll use them extensively during your early
career.
Technical skills will come in handy when you move up
to a first-line managerial job and oversee the task
performance of subordinates. Technical skills, though
developed through job training and work experience,
are generally acquired during the course of your
formal education.
105

2. Interpersonal Skills
As you move up the corporate ladder,
youll find that you cant do everything yourself:
youll have to rely on other people to help you achieve the
goals for which youre responsible.
Thats why interpersonal skills
the ability to get along with and motivate other people
are critical for managers in mid-level positions.
These managers play a pivotal role because they report to toplevel managers while overseeing the activities of first-line
managers.
Thus, they need strong working relationships with individuals
at all levels and in all areas. More than most other managers,
they must use people skills to foster teamwork, build trust,
manage conflict, and encourage improvement.
106

3. Conceptual Skills
Managers at the top, who are responsible for deciding
whats good for the organization from the broadest
perspective, rely on conceptual skills
the ability to reason abstractly and analyze complex
situations. Senior executives are often called on to
think outside the box
to arrive at creative solutions to complex, sometimes
ambiguous problems.
They need both strong analytical abilities and strong
creative talents.
107

4. Political Skills

108

Organization and its Environment

109

 Micro Environmental Factor/Stakeholder

Analysis

110

Micro Environmental Factors

These are internal factors close to the company that have a
direct impact on the organizations strategy. These factors
include:
a. Customers
Organizations survive on the basis of meeting the needs, wants
and providing benefits for their customers.
Failure to do so will result in a failed business strategy.
b. Employees
Employing the correct staff and keeping these staff motivated is
an essential part of the strategic planning process of an
organization.
Training and development plays an essential role particular in
service sector marketing in-order to gain a competitive edge.
This is clearly apparent in the airline industry.
111

c. Suppliers
Increase in raw material prices will have a knock on affect on the
marketing mix strategy of an organization.
Prices may be forced up as a result.
Closer supplier relationships is one way of ensuring competitive
and quality products for an organization.
d. Shareholders
As organization require greater inward investment for growth they
face increasing pressure to move from private ownership to
public.
However this movement unleashes the forces of shareholder
pressure on the strategy of organizations.
Satisfying shareholder needs may result in a change in tactics
employed by an organization.
Many internet companies who share prices rocketed in 1999 and
early 2000 have seen the share price tumble as they face pressures
from shareholders to turn in a profit. In a market which has very
quickly become overcrowded many have failed.
112

e. Media
Positive or adverse media attention on an organizations product
or service can in some cases make or break an organization..
Consumer programmes with a wider and more direct audience
can also have a very powerful and positive impact, enforcing
organizations to change their tactics.
f. Competitors
The name of the game in marketing is differentiation.
What benefit can the organization offer which is better then
their competitors?
Can they sustain this differentiation over a period of time from
their competitors?.
Competitor analysis and monitoring is crucial if an organization
is to maintain its position within the market.
113

The wider macro-environment

Changes in the wider macro-environment may not be as close to
the marketing firms day-to-day operations, but they are just as
important. The main factors making up these wider macroenvironmental forces fall into four groups.
Political and legal factors
Economic factors
Social and cultural factors
Technological factors
P
A
P
E
S
T

N
A
L
Y
S
I
S

S
T
114

1. The political and legal environment

To many companies, domestic political considerations are likely to
be of prime concern. However, firms involved in international
operations are faced with the additional dimension of international
political developments.
Many firms export and may have joint ventures or subsidiary
companies abroad. In many countries, particularly those in the socalled Third World or more latterly termed Developing Nations,
the domestic political and economic situation is usually less stable
than in the UK. Marketing firms operating in such volatile
conditions clearly have to monitor the local political situation very
carefully.
Many of the legal, economic and social developments, in our own
society and in others, are the direct result of political decisions put
into practice, for example the privatization of state industries or the
control of inflation.
In summary, whatever industry the marketing firm is involved in,
changes in the political and legal environments at both the
domestic and international levels can affect the company and
therefore needs to be fully understood.
115

2. The economic environment

Economic factors are of concern to marketing firms because they
are likely to influence, among other things, demand, costs, prices
and profits. These economic factors are largely outside the control
of the individual firm, but their effects on individual enterprises
can be profound. Political and economic forces are often strongly
related. A much quoted example in this context is the oil crisis
caused by the Middle East War in 1973 which produced economic
shock waves throughout the Western world, resulting in
dramatically increased crude oil prices. This, in turn increased
energy costs as well as the cost of many oil-based raw materials
such as plastics and synthetic fibres. This contributed significantly
to a world economic recession, and it all serves to demonstrate
how dramatic economic change can upset the traditional structures
and balances in the world business environment.
As can be seen, changes in world economic forces are potentially
highly significant to marketing firms, particularly those engaged
in international marketing. However, an understanding of
economic changes and forces in the domestic economy is also of
vital importance as such forces have the most immediate impact.
116

 One such factor is a high level of unemployment, which

decreases the effective demand for many luxury
consumer goods, adversely affecting the demand for the
industrial machinery required to produce such goods.
Other domestic economic variables are the rate of
inflation and the level of domestic interest rates, which
affect the potential return from new investments and can
inhibit the adoption and diffusion of new technologies.
In addition to these more indirect factors, competitive
firms can also pose a threat to the marketing company
so their activities should be closely monitored.
It is therefore vital that marketing firms continually
monitor the economic environment at both domestic and
world levels. Economic changes pose a set of
opportunities and threats, and by understanding and
carefully monitoring the economic environment, firms
should be in a position to guard against potential threats
and to capitalize on opportunities.

3. The socio-cultural environment

This is perhaps the most difficult element of the macro-environment to
evaluate, manifesting itself in changing tastes, purchasing behavior and
changing priorities.
The type of goods and services demanded by consumers is a function of
their social conditioning and their consequent attitudes and beliefs.
Core cultural values are those firmly established within a society and
are therefore difficult to change. They are perpetuated through family,
the church, education and the institutions of society and act as
relatively fixed parameters within which marketing firms are forced to
operate.
Secondary cultural values, however, tend to be less strong and
therefore more likely to undergo change. Generally, social change is
preceded by changes over time in a societys secondary cultural values,
for example the change in social attitude towards credit. As recently as
the 1960s, personal credit, or hire purchase as is sometimes known,
was generally frowned upon and people having such arrangements
tended not to discuss it in public. Today, offering instant credit has
become an integral part of marketing, with many of us regularly using
credit cards and store accounts. Indeed, for many people it is often the
availability and terms of credit offered that are major factors in
118
deciding to purchase a particular product.

 Marketing firms have also had to respond to changes in attitude

towards health, for example, in the food industry people are now
questioning the desirability of including artificial preservatives,
colorings and other chemicals in the food they eat. The decline in
the popularity of smoking is a classic example of how changes in
social attitudes have posed a significant threat to an industry,
forcing tobacco manufacturers to diversify out of tobacco products
and into new areas of growth.
Changes in attitudes towards working women have led to an
increase in demand for convenience foods, one-stop shopping
and the widespread adoption of such time-saving devices as
microwave cookers. Marketing firms have had to react to these
changes. In addition, changes in moral attitudes from the
individualism of the permissive society of the 1960s and early
1970s to the present emphasis on health, economic security and
more stable relationships, are all contributory factors to a
dynamically changing socio-cultural environment that must be
considered by companies when planning for the future.
119

4. The technological environment

Technology is a major macro-environmental variable which has
influenced the development of many of the products we take for
granted today, for example, television, calculators, video recorders
and desk-top computers.
Marketing firms themselves play a part in technological progress,
many having their own research department or sponsoring research
through universities and other institutions, thus playing a part in
innovating new developments and new applications.
One example of how technological change has affected marketing
activities is in the development of electronic point of sale (EPOS)
data capture at the retail level. The laser checkout reads a bar code
on the product being purchased and stores information that is used to
analyze sales and re-order stock, as well as giving customers a printed
readout of what they have purchased and the price charged.
Manufacturers of fast-moving consumer goods, particularly packaged
grocery products, have been forced to respond to these technological
innovations by incorporating bar codes on their product labels or
packaging. In this way, a change in the technological environment has
affected the products and services that firms produce and the way in
which firms carry out their business operations.
120

5. Other macro-environmental factors

The macro-environmental factors discussed are not intended to be an
exhaustive list, but merely to demonstrate the main areas of
environmental change. Other sub-environments may be important to
marketing management, for example, in some countries the religious
environment may pose an important source of opportunities and
threats for firms. In the UK, demographic changes are considered
important by a number of firms.
In general, the UK population has been stable at approximately 56
million for a number of years, but the birth rate is falling, while
people are living longer. Firms that produce goods and services
suitable for babies and small children (e.g. Mothercare) have seen
their traditional markets remain static or decline slightly. Such
companies have tended to diversify, offering products targeted at
older age groups. A larger older sector of the population offers
opportunities for firms to produce goods and services to satisfy their
particular needs.
The over-55 age group is the modern marketers current major
opportunity. In all advanced economies such as the Australia, UK
and USA it is this age group that has the largest disposable income,
and special products and services such as holidays and pensionrelated financial services are being marketed to this sector.
121

Summary
The companys micro-environment has been
discussed in terms of variables over which it has
control relevant to the marketing mix.
The companys proximate (nearby or close) macroenvironment was then examined under supplier,
distributive and competitive environment
environments and finally the wider macroenvironment was examined under the headings:
political and legal, economic, socio-cultural and
technological environments.
This can best be summed up by looking what has
been covered in terms of a number of layers in the
environment from customers, to marketing and
resources of the company, to the organization's
proximate macro-environment and finally to its wider
macro-environment
122

 organization and its macro environment

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