CHAPTER 1

NATURE AND SIGNIFICANCE OF MANAGEMENT

MANAGEMENT
Management is essential for all organisations big or small, profit or non-profit,
services or manufacturing. Management is necessary so that individuals make their best
contribution towards group objectives. No organization can work smoothly and efficiently
without management. The success of an organization largely depends upon the
efficiency of its management.
The word ‘management’ can be styled as—Management (i.e., manage-men- tactfully).

DEFINITION
>Management is an art of getting things done through other people – Marry Parker
Follet.
>Management is the coordination of all resources through the process of planning,
organising, directing and controlling in order to attain stated objectives. —Henry L. Sisk.
>To manage is to forecast and to plan, to organise to command, to coordinate and
to control. —Henry Fayol

Effectiveness Vs Efficiency:
The two terms ‘Effectiveness’ and ‘Efficiency’ are different but they are inter
related.Effectiveness means accomplishment of goals whereas efficiency means
accomplishment of goals at minimum possible cost through optimum utilization of
resources.
For Example a company’s targeted production is 18000 units per year. The
manager is able to produce 18000 units but higher production cost (more salary & wages,
material cost etc). In this case manager is effective but not efficient. On the other hand, if
the manager produces goods at lower cost but not achieves the target, the manager is
efficient but not effective.
Therefore, it is important to the management to achieve goals (effective) with
minimum resources (efficiency).

CHARACTERISTICS OF MANAGEMENT:
1)Management is a group activity:Management always refers to a group of people
involved in managerial activities. The management functions cannot be performed in
isolation.
2)Management is goal oriented process: Management always aims at achieving the
organisational objectives. Management achieves these objectives through the process of
planning,organizing,staffing,directing and controlling.
3)Management is a continuous process: Management is a continuous or never ending
process. Management functions like planning,organizing,staffing,directing and controlling
are performed by all managers all the time.
4)Management is pervasive(Universal application): Management is a universal
phenomenon. The use of management is not restricted to business firms only it is
applicable in profit-making, non-profit-making, even a hospital, school, club and house has
to be managed properly. Concept of management is used in the whole world whether it is
USA, UK or India. 5)Management is an intangible force:Management function cannot be
physically seen but its presence can be felt. The presence of management can be felt by
seeing the orderliness and coordination in the working environment.
6)Management is a dynamic function:Management is a dynamic function and has to
adapt itself to the changing environment. Management has to make changes in goal,
objectives and other activities according to changes taking place in the environment.
7)Management is multi dimensional:
Management does not mean one single activity but it includes three main activities:
a)Management of work:All organizations are engaged in doing some work
in order to accomplish some task. The task or work depends upon the nature of Business
for example, work to be accomplished in hospital is to treat patient, in industry to
manufacture some product.
b)Management of people:People refer to Human resources and Human
resources are the most important assets of an organisation. An organization can win over
it competitor with efficient human resources.
c)Management of operations:Operations refer to activities of production
cycle such as buying inputs, converting them into semi-finished goods, finished goods.
Management of operations concentrates on mixing management of work with
management of people, i.e., deciding what work has to be done, how it has to be done
and who will do it.

OBJECTIVES OF MANAGEMENT
Management objectives can be classified into three

1)Organizational objectives
2)Social objectives and
3)Personal objectives.

1)Organizational objectives:Management is responsible for setting and achieving

objectives for the organisation.It aims at maximum result with minimum resources. The
three important organizational objectives of a manager are:
a)Survival –Survival is the basic objective of every organization. It is possible only
when it is able to cover its cost and earn profit
 b)Profit:Management has to ensure that the organization makes a profit. Profit
provides a vital incentive for the continued successful operation of the enterprise.
c)Growth: To remain in the industry, management must exploit fully the growth potential of
the organization.
2)Social objectives : As a part of society, every organisation whether it is business or
non-business, has a social obligation to fulfill. This includes s
a)Supply quality goods at reasonable price
b)Generation of employment opportunities
c)Pays reasonable wages to workers. etc
3)Personal objectives:Organization consists of different types of individual who joins it to
satisfy their diverse needs. As employees are most important resources of every company
and satisfied and motivated employees contribute maximum for the organization. The
main individual objectives of management are:
a)Competitive salary and perks
b)Provide good and healthy working conditions to employees.
c)Personal growth and development (Promotion, training etc)

IMPORTANCE OF MANAGEMENT

1. Management helps in achieving group goals: Management gives a common

direction to individual effort in achieving group goals of an organistion. Proper
management of all individuals in an organization is very essential for the accomplishment
of organizational objective.

2.Management increases efficiency:In any organisation, input resources are men,

money, material and machinery. Management uses these inputs efficiently by properly
allocating them to reduce the wastage which ultimately decreases cost and thus leads to
higher profits

3.Management creates a dynamic organisation:All organizations working in an

environment which is changing frequently. The employees in the organization are
generally resists to adapt changes. Efficient management motivates employees to adopt
changes by convincing them about the benefits of it.

4)Management helps in achieving personal objectives:Management not only helps in

achieving the organisational objectives but also the personal objectives of the employees.

5)Management helps in the development of society:An organisation has many

obligations towards different groups that constitute it. The process of fulfilling all the
objectives must help in growth and development of the organisation as well as society.
NATURE OF MANAGEMENT: As an art, a Science & a Profession
Some authors describe management as an art because more practice is required in
management and some authors consider that management is going towards the path of
profession.

To conclude whether management is science, art or profession, we must understand the

features and meaning of science, art and profession and compare them with management
features.
I) MANAGEMENT AS AN ART:
Art means the application of knowledge and personal skill to achieve desired
results.It can be acquired through study, observation and experience. An art may be
defined as a personalized application of general theoretical principles for achieving best
possible results. Art has the following characteristics.

1)Practical Knowledge:Every art requires practical knowledge therefore learning of theory is

not sufficient. It is very important to know the practical application of theoretical principles.
2)Personal Skill (Personalised application):Although the theoretical base may be the
same for every artist, but each one has his own style and approach towards his job.
3)Creativity:Art involves creative practice of existing theoretical knowledge.Every artist
has an element of creativity in line.
4)Perfection through practice:Practice makes a man perfect. Every artist becomes
more and more proficient through constant practice.
5)Goal-Oriented:Every art is result oriented as it seeks to achieve concrete results.

Management can be said to bean art since it satisfies the following criteria-

a)Practical Knowledge:A manager can never be successful just by obtaining

degree or diploma in management; he must have also know how to apply various
principles in real situations by functioning in capacity of manager.
b)Personal Skill(Personalised application):Every manager has his own way of
managing things based on his knowledge, experience and personality, that is why some
managers are known as good managers (like Kumar Mangalam Birla, Rahul Bajaj)
whereas others as bad.
c)Creativity:Management is also creative in nature like any other art. It combines
human and non-human resources in useful way so as to achieve desired results.
d)Perfection through practice:Managers learn through an art of trial and error
initially but application of management principles over the years makes them perfect in the
job of managing
e)Goal-Oriented:Managers use various resources like men, money, material,
machinery & methods to achieve the goal of an enterprise.
 Thus, we can say that management is an art therefore it requires
application of certain principles rather it is an art of highest order because it deals with
moulding the attitude and behaviour of people at work towards desired goals.

II)MANAGEMENT AS A SCIENCE
Science may be defined as a systematic body of knowledge acquired through observation

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XII BUSINESS STUDIES -CHAPTER1
and experimentation. These principles are developed through scientific method of
observation and verification through testing. It is based on logically observed findings,
facts and events. The essential features of science are as follows:

1)Systematic body of knowledge:Science is a systematic body of knowledge. In

science, there is systematic study materials available to acquire the knowledge of science.

2)Principles based on Experimentation & Observation:Scientific principles are derived

through scientific investigation & researching i.e. they are based on logic. E.g. the principle
that earth goes round the sun has been scientifically proved.

3)Universal application:Scientific principles have universal validity and that can be

applied in all situations and will be the same result.

4)Test of Validity & Predictability :Validity of scientific principles can be tested at any
time or any number of times i.e. they stand the test of time. Each time these tests will give
same result. E.g. H2 & O2will always give H2O.

Based on the above features, we can say that management has some
characteristics of science.
a) Systematic body of knowledge( ): Like science in management is also a
systematic body of knowledge and there is systematic and organized study materials.
b) Principles based on Experimentation & Observation ( ): The principles of management
have evolved over a period of time based on repeated experimentation and observation in
different types of organisations.
c)Universal application( ) :Since the principles of management are not as exact as
the principles of science, their application and use is not universal. They have to be
modified according to a given situation.

d)Test of Validity & Predictability( ):We cannot test the validity of management
principle with the help of a laboratory.

Although management has a systematized body of knowledge, they cannot be

compared with the principles of physical science like Physics,Chemistry -etc- which are
definite and exact. It is a flexible science. Therefore, management is an inexact or soft
science or pseudo-science
III)MANAGEMENT AS A PROFESSION:
A profession is an occupation backed by specialized knowledge and training and to
which entry is regulated by a representative body. A profession has the following
characteristics

1)Well-defined body of knowledge: All professions are based on a well-defined body of

knowledge that can be acquired through instruction.

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XII BUSINESS STUDIES -CHAPTER1
2)Restricted entry: The entry to a profession is restricted through an examination or
through acquiring an educational degree.For example a person can practice as Doctor
only when he is having MBBS degree.

3)Professional association:For all the professions, special associations are established

and every professional has to get himself registered with his association before practising
that profession. For example, doctors have to get themselves registered with Medical
Council of India, lawyers with Bar Council of India etc.

4)Ethical code of conduct: All professions are bound by a code of conduct which
guides the behaviour of its members.

Based on the above features, we can say that management has some
characteristics of profession.

a)Well-defined body of knowledge:All over the world there is marked growth in

management as a discipline. It is based on a systematic body of knowledge comprising
well-defined principles. So this feature of profession is present in management also.
b)Restricted entry:There is no legal restriction on appointment of a manager,
anyone can become a manager irrespective of the educational qualification. But now many
companies prefer to appoint managers only with MBA degree. So presently this feature of
profession is not present in management but very soon it will be included with statutory
backing.
c)Professional association:In case of management various management
associations are set up at national and international levels which have some membership
rules and set of ethical codes, for example, AIMA in New Delhi, National Institute of
Personal Management at Calcutta etc., but legally it is not compulsory for managers to
become a part of these organisations by registration. So presently this feature of
profession is not present in management but very soon it will be included and get statutory
backing also.
d) Ethical code of conduct:All India Management Association (AIMA) has devised
a code of conduct for Indian managers. But legally it is not compulsory for all the
managers to get registered with AIMA and abide by the ethical codes.
On comparing the features of profession with management we can conclude that
presently all the features of profession are not present in management but very soon, may
be the next decade, these will be included in the management with statutory backing. So
we can say management is on the path of becoming a profession.

LEVELS OF MANAGEMENT
Management does not refer to a single individual but it refers to a group of persons.
There are several persons in every organization who occupy different positions (levels)
and perform different responsibilities. The term “Levels of Management’ refers to a line of
demarcation between various managerial positions in an organization. There are generally
three levels of management. They are

1)Top Level(Higher/Administrative level

2) Middle Level (Executory level)
3)Lower Level (Supervisory or Operational) Management

1)Top Level(Higher/Administrative level):

The top management is the ultimate source of authority and it manages goals and
policies for an enterprise. It devotes more time on planning and coordinating functions. Top
management is made up of senior level executives of an organization, or those positions
that hold the most responsibility. Top level management consists of Chief Operating Officer
(COO), chief executive officer (CEO), chief financial officer (CFO), President, Vice
president,MD,Chairman,Board of directors etc

Functions of Top Level Management:

1)It lays down the objectives of the business organization.

2)Preparing the plans and policies to achieve the set objectives.

3)They appoint the executives for middle level.

4)Controls all the departments of the organization.

5)Builds and maintain relations with outside public.

6)Controls all the departments of the organization.

7)Co-ordinates the activities.

2) Middle Level (Executory level):

Middle level management consists of departmental heads like production manager,
purchase manager,sales manager,marketing manager,finance manager etc. They are
responsible for implementing the plans and strategies developed by top level managers.
They receive orders and

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XII BUSINESS STUDIES -CHAPTER1
instructions from top managers and get the work done through lower managers. They act
as a link between top management and supervisory management.

Functions of Middle Level Management:

1)Implement the policy decisions made by the top management.
2)Communicating policies of top level to the lower level.

3)Directing the managers at the lower level.

4)Reporting to top level management.

5)Watch day to day results.

6)Organizing the activities of their concerned department.

3)Lower Level (Supervisory or Operational) Management:

Lower level is also known as supervisory / operative level of management. It
consists of supervisors, foreman, section officers, superintendent -etc. They assign
specific jobs to the workers, evaluate their performance and report to the middle level
management.
Functions of Lower Level Management:

1)Assigning duties to individual workers.

2)Planning of day to day work

3)Act as a link between middle level management and workers.

4)Provide on the job training to workers.

5)They help to solve the grievances of the workers.

6)They ensure discipline in the enterprise.

7)They motivate workers.

8)Ensure the safety of workers.

“Education is a progressive discovery of our own ignorance.”

Will Durant

FUNCTIONS OF MANAGEMENT:
Different experts have classified functions of management. The most widely
accepted are functions of management given by KOONTZ and O’DONNEL -
i.e.Planning,Organizing,Staffing,Directing and Controlling.

1)Planning:

It is the first function performed by all managers. Planning means deciding in advance
 what to do and how to do it. Planning bridges the gap between where we stand today and
where we want to reach. Planning is a process of thinking before doing.Planning is
concerned with the determination of the objectives to be achieved and the course of action
to be followed to achieve them.

2)Organising:
Organising refers to identification and grouping of activities to be undertaken in the
organization and establishing an organizational structure to execute the plan.Organising
involves the following process
a)Identification & grouping of activities.
b)Bring together all resources.
c)Establish a productive relation.
3)Staffing:
Staffing refers to procure suitable employees to fill various jobs in the enterprise.Its aim is
to
place the right person for the right job and at the right time. Staffing includes recruitment of
employees, their selection, placement, training, promotion, transfer, remuneration etc.

4)Directing:
It is concerned with instructing, guiding, and inspiring people in the organization to
achieve organizational goals. Direction is not only issuing orders and instructions by
superior to subordinate, but also guiding, motivating and leading them.

5)Controlling:
It deals with the measurement and correction of the performance of persons against the
predetermined standard. It involves the following steps:
a) Establishment of standards
b) Measurement of performance
c) Comparing actual performance with standards
d)Find out deviation & its causes
d) Taking corrective actions.

Co ordination:
Coordination refers to the process of integrating the activities of different units of an
organization to achieve the organizational goals. Coordination is needed in all the
functions of management and in all the levels of management, therefore, coordination is
considered as the essence of management.
According to George Terry, “Co-ordination deals with the task of blending efforts in
order to ensure successful attainment of an objective. It is accomplished by means of
planning, organising, actuating and controlling.”
 Coordination is the force that binds all the other functions of management. It is the
common thread that runs through all activities such as – purchase, production, sales, and
finance to ensure continuity in the working of the organisation.

Coordination: The Essence of Management

Coordination brings unity of action and integrates different activities of organization.
Coordination is considered as the essence of management because of following reasons
a)Coordination is needed to perform all the functions of management
b)Coordination is required at all levels of management
c)Coordination is the most important function of an organization

Features of Coordination:
1)Coordination Integrate Group Efforts:Coordination unifies unrelated or diverse
interests into purposeful work activity.

2)Coordination ensures unity of action:It acts as the binding force between

departments and ensures that all action is aimed at achieving the organisational objective.
Eg:Purchase department should purchase enough material which are necessary for the
production department. Imbalance between these two departments will cause loss to
the organization.
3)Coordination is a continuous process: Coordination is not a onetime function, it is a
continuous process.
4)Coordination is a pervasive function: Coordination is a universal function; it is
required at all levels, in all departments and to perform all the functions due to
interdependence of various activities on each other.
5)Coordination is the responsibility of all managers:Top level managers coordinate
the overall plans and policies of organization, middle level try to coordinates the
departmental activities and lower level coordinates the activities of workers.

Importance of coordination:
The need for coordination arises because of the following reasons:
1)Growth in size: The need for coordination increases with the increase in size of
organization because in large organization there are more number of persons working,
each individual has his own needs and objectives, so there is more need to harmony
individual goals and organizational goals through coordination.
2)Functional Differentiation: The functions of an organization are divided into various
departments like production, finance, marketing, human resources etc.Coordination is
needed to ensure unity of action of various departments.
3)Specialization: Now a days many organizations appoint specialists in different
jobs.They do not take advice from others. Here also coordination plays an important role
to bring harmony among these personnel for the benefit of the orgnaisation.
Elements of Co -ordination:
a)Integration,b)Balancing and c)Timing

Management in 21 st Century:
As today the whole world is a global village where countries are exchanging
technologies, goods and services with each other. The modern organisation is a global
organisation that has to be managed in a global perspective.