NCERT Class 12 Business Studies Chapter 2 Principles of Management

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NCERT Class 12 Business Studies Chapter 2 Principles of Management

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Principles of Management

Chapter: 2

PART – Ⅰ  PRINCIPLES AND FUNCTIONS OF MANAGEMENT

EXERCISE

VERY SHORT ANSWER TYPE

1. What makes principles of management flexible?

Ans: The principles of management are not rigid prescriptions, which have to be followed absolutely. They are flexible and can be modified by the manager when the situation demands. They give the manager enough discretion to do so. For example, the degree of concentration of authority (centralisation) or its dispersal (decentralisation) will depend upon the situations and circumstances of each enterprise.

2. State the main objective of time study. 

Ans: It determines the standard time taken to perform a well-defined job. Time measuring devices are used for each element of task. The standard time is fixed for the whole of the task by taking several readings. The method of time study will depend upon volume and frequency of the task, the cycle time of the operation and time measurement costs. The objective of time study is to determine the number of workers to be employed; frame suitable incentive schemes and determine labour costs.

3. Name the principle that is an extension of the ‘harmony, not discord’. 

Ans: Cooperation, Not Individualism: There should be complete cooperation between the labour and the management instead of individualism. This principle is an extension of principle of ‘Harmony not discord’. Competition should be replaced by cooperation. 

4. State any two causes of fatigue that may create hindrance in the employee’s performance.

Ans: There can be many causes for fatigue like long working hours, doing unsuitable work, having uncordial relations with the boss or bad working conditions etc.

5. SanakLal and Gagan started their career in Wales Limited (a printing press) after going through a rigorous recruitment process. Since they had no prior work experience, the firm decided to give them one year to prove themselves. Name the principle of management followed by Wales Limited. 

Ans: The principle of management followed by Wales Limited is “Stability of Personnel”.

6. Which technique is used by Taylor for distinguishing efficient and inefficient workers?

Ans: The technique used by Frederick Winslow Taylor for distinguishing efficient and inefficient workers is “Differential Piece Wage System.”

SHORT ANSWER TYPE

1. How is the Principle of ‘Unity of Command’ useful to management? Explain briefly.

Ans: The Principle of Unity of Command, given by Henri Fayol, states that an employee should receive orders from only one superior at a time. According to Fayol there should be one and only one boss for every individual employee. If an employee gets orders from two superiors at the same time the principle of unity of command is violated. The principle of unity of command states that each participant in a formal organisation should receive orders from and be responsible to only one superior. Fayol gave a lot of importance to this principle. He felt that if this principle is violated “authority is undermined, discipline is in jeopardy, order disturbed and stability threatened”. 

2. Define scientific management. State any three of its principles. 

Ans: Scientific management refers to an important stream of one of the earlier  schools of thought of management referred to as the ‘Classical’ school. The other two streams belonging to the classical school are Fayol’s Administrative Theory and Max Weber’s Bureaucracy. We will not be describing bureaucracy here. A discussion of Fayol’s principles, however, will follow the discussion of scientific management. 

The three principles of scientific management are:

(i) Science not Rule of Thumb: Taylor pioneered the introduction of the method of scientific inquiry into the domain of management practice. We have already referred to the limitations of the rule of thumb approach of management.

(ii) Harmony, Not Discord: Factory system of production implied that managers served as a link between the owners and the workers.  

(iii) Cooperation, Not Individualism: There should be complete cooperation between the labour and the management instead of individualism. This principle is an extension of the principle of ‘Harmony not discord’. 

3. If an organisation does not provide the right place for physical and human resources in an organisation, which principle is violated? What are the consequences of it? 

Ans: According to Fayol,“People and materials must be in suitable places at appropriate times for maximum efficiency.” The principle of order is violated if an organisation does not provide the right place for physical and human resources. 

A significant amount of time will be wasted in locating various resources, resulting in delayed decision-making. This will also lead to unnecessary energy expenditure, causing inefficiency and production delays.

4. Explain any four points regarding significance of principles of management. 

Ans: The significance of principles of management can be discussed in terms of the following points: 

(i) Providing managers with useful insights into reality: The principles of management provide the managers with useful insights into real world situations. Adherence to these principles will add to their knowledge, ability and understanding of managerial situations and circumstances. 

(ii) Optimum utilisation of resources and effective administration: Resources both human and material available with the company are limited. They have to be put to optimum use. By optimum use we mean that the resources should be put to use in such a manner that they should give maximum benefit with minimum cost.

(iii) Scientific decisions: Decisions must be based on facts, thoughtful and justifiable in terms of the intended purposes. They must be timely, realistic and subject to measurement and evaluation. Management principles help in thoughtful decision-making. They emphasise logic rather than blind faith. 

(iv) Meeting changing environment requirements: Although the principles are in the nature of general guidelines but they are modified and as such help managers to meet changing requirements of the environment. You have already studied that management principles are flexible to adapt to dynamic business environment. 

5. Explain the principle of ‘Scalar Chain’ and gang plank. 

Ans: An organisation consists of superiors and subordinates. The formal lines of authority from highest to lowest ranks are known as scalar chain. According to Fayol, “Organisations should have a chain of authority and communication that runs from top to bottom and should be followed by managers and the subordinates.”

One line consists of B-C D-E-F. Another line of authority under ‘A’ is L-M-N-O-P. If ‘E’ has to communicate with ‘O’ who is at the same level of authority then she/he has to traverse the route E-D-C-B-A-L-M-N-O. This is due to the principle of scalar chain being followed in this situation. According to Fayol, this chain should not be violated in the normal course of formal communication. However, if there is an emergency then ‘E’ can directly contact ‘O’ through ‘GangPlank’ as shown in the diagram.

6. A production manager at top level in a reputed corporate, Mr. Rathore holds the responsibility for ordering raw material for the firm. While deciding on the supplier for the financial year 2017-18, he gave the order to his cousin at a higher price per unit instead of the firm’s usual supplier who was willing to lower the rates for the order. Which principle of management was violated by Mr. Rathore? What are the positive impacts of following the above identified principle?

Ans: Mr. Rathore violated the Principle of Subordination of Individual Interest to General Interest, given by Henri Fayol.

The interests of an organisation should take priority over the interests of any one individual employee according to Fayol. Every worker has some individual interest in working in a company. The company has got its own objectives. For example, the company would want to get maximum output from its employees at a competitive cost (salary). On the other hand, an employee may want to get the maximum salary while working the least. In another situation an individual employee may demand some concession, which is not admissible to any other employee like working for less time. 

In all the situations the interests of the group/company will supersede the interest of any one individual. This is so because larger interests of the workers and stakeholders are more important than the interest of any one person.

LONG ANSWER TYPE

1. Explain the Principles of Scientific management given by Taylor. 

Ans: In the words of Taylor, “Scientific management means knowing exactly what you want men to do and seeing that they do it in the best and cheapest way. The Bethlehem Steel company where Taylor himself worked achieved a three-fold increase in productivity by application of scientific management principles. Therefore, it would be in order to discuss these principles. 

(i) Science not Rule of Thumb: Taylor pioneered the introduction of the method of scientific inquiry into the domain of management practice. We have already referred to the limitations of the rule of thumb approach of management.

(ii) Harmony, Not Discord: Factory system of production implied that managers served as a link between the owners and the workers. Since as managers they had the mandate to ‘get work done’ from the workers, it should not be difficult for you to appreciate that there always existed the possibility of a kind of class-conflict, the managers versus workers.

(iii) Cooperation, Not Individualism: There should be complete cooperation between the labour and the management instead of individualism. This principle is an extension of the principle of ‘Harmony not discord’. Competition should be replaced by cooperation. Both should realise that they need each other. 

(iv) Development of Each and Every Person to His or Her Greatest Efficiency and Prosperity: Industrial efficiency depends to a large extent on personnel competencies. As such, scientific management also stood for worker development. Worker training was essential also to learn the ‘best method’ developed as a consequence of the scientific approach. Taylor was of the view that the concern for efficiency could be built in right from the process of employee selection. 

2. Explain the following Principles of management given by Fayol with examples:

(a) Unity of direction.

Ans: All the units of an organisation should be moving towards the same objectives through coordinated  and focussed efforts. Each group of activities having the same objective must have one head and one plan. This ensures unity of action and coordination. For example, if a company is manufacturing motorcycles as well as cars then it should have two separate divisions for both of them. Each division should have its own incharge, plans and execution resources. On no account should the working of two divisions overlap. Now let us differentiate between the two principles of unity of command and unity of direction.

Examples of Unity of Direction:

(i) Automobile Company: A car manufacturing company has different departments like design, production, and sales. All these departments follow a single plan to launch a new car model successfully.

(b) Equity.

Ans: Good sense and experience are needed to ensure fairness to all employees, who should be treated as fairly as possible,” according to Fayol. This principle emphasises kindliness and justice in the behaviour of managers towards workers. This will ensure loyalty and devotion. Fayol does not rule out use of force sometimes. Rather he says that lazy personnel should be dealt with sternly to send the message that everyone is equal in the eyes of the management. There should be no discrimination against anyone on account of sex, religion, language, caste, belief or nationality etc. 

Examples of Equity:

(i) Equal Pay for Equal Work: In a company, two employees working in the same role with similar experience and performance should receive equal salaries and benefits.

(c) Esprit de corps.

Ans: Management should promote a team spirit of unity and harmony among employees, according to Fayol. Management should promote teamwork especially in large organisations because otherwise objectives would be difficult to realise. It will also result in a loss of coordination. A manager should replace ‘I’ with ‘We’ in all his conversations with workers to foster team spirit. This will give rise to a spirit of mutual trust and belongingness among team members.

Examples of Esprit de Corps:

(i) Sports Team: A football team works together with strong team spirit, supporting and encouraging each other to win matches.

(d) Order.

Ans: According to Fayol, M N O P “People and materials must be in suitable places at appropriate time for maximum efficiency.” The principle of order states that ‘A place for everything (everyone) and everything (everyone) in its (her/his) place’. Essentially it means orderliness. If there is a fixed place for everything and it is present there, then there will be no hindrance in the activities of business/ factory. This will lead to increased productivity and efficiency.

Examples of Order:

(i) Office Setup: In an organization, files, documents, and office supplies are arranged systematically so employees can easily find them, saving time and increasing efficiency.

(e) Centralisation and decentralisation. 

Ans: The concentration of decision-making authority is called centralisation whereas its dispersal among more than one person is known as decentralisation. According to Fayol, “There is a need to balance subordinate involvement through decentralisation with managers’ retention of final authority through centralisation.” The degree of centralisation will depend upon the circumstances in which the company is working.

Examples of Centralisation:

(i) Military Organization: In the army, all major decisions are made by top commanders, and soldiers follow orders without independent decision-making.

(f) Initiative.

Ans: Workers should be encouraged to develop and carry out their plans for improvements according to Fayol. Initiative means taking the first step with self-motivation. It is thinking out and executing the plan. It is one of the traits of an intelligent person. Initiative should be encouraged. But it does not mean going against the established practices of the company for the sake of being different. A good company should have an employee suggestion system whereby initiative/suggestions which result in substantial cost/time reduction should be rewarded.

Examples of Initiative:

(i) Employee Suggestion Program: A company allows employees to propose new ideas for improving production processes, and the best suggestions are implemented.

3. Explain the technique of ‘Functional Foremanship’ and the concept of ‘Mental Revolution’ as enunciated by Taylor.

Ans: Taylor concentrated on improving the performance of this role in the factory set-up. In fact, he identified a list of qualities of a good foreman/supervisor and found that no single person could fit them all. This prompted him to suggest functional foremanship through eight persons. Taylor advocated separation of planning and execution functions. This concept was extended to the lowest level of the shop floor. It was known as functional foremanship. Under the factory manager there was a planning incharge and a production incharge. Under planning incharge four personnel namely instruction card clerk, route clerk, time and cost clerk and a disciplinarian worked. These four personnel would draft instructions for the workers, specify the route of production, prepare time and cost sheet and ensure discipline respectively.

Functional foremanship is an extension of the principle of division of work and specialisation to the shop floor. Each worker will have to take orders from these eight foremen in the related process or function of production. Foremen should have intelligence, education, tact, grit, judgment, special knowledge, manual dexterity, and energy, honesty and good health. Since all these qualities could not be found in a single person, Taylor proposed eight specialists. 

Mental revolution involves a change in the attitude of workers and management towards one another from competition to cooperation. Both should realise that they require one another. Both should aim to increase the size of the surplus. This would eliminate the need for any agitation. Management should share a part of the surplus with workers. Workers should also contribute their might so that the company makes profits. This attitude will be good for both of them and also for the company. In the long run only worker’s well-being will ensure prosperity of the business. 

4. Discuss the following techniques of Scientific Work Study: 

(a) Time Study.

Ans: It determines the standard time taken to perform a well-defined job. Time measuring devices are used for each element of the task. The standard time is fixed for the whole of the task by taking several readings. The method of time study will depend upon volume and frequency of the task, the cycle time of the operation and time measurement costs. The objective of time study is to determine the number of workers to be employed; frame suitable incentive schemes and determine labour costs.

For example, on the basis of several observations it is determined that the standard time taken by the worker to make one cardboard box is 20 minutes. So in one hour she/he will make 3 boxes. Assuming that a worker has to put in 8 hours of work in a shift and deducting one hour for rest and lunch, it is determined that in 7 hours a worker makes 21 boxes @ 3 boxes per hour. Now this is the standard task a worker has to do. Wages can be decided accordingly.

(b) Motion Study.

Ans: Motion study refers to the study of movements like lifting, putting objects, sitting and changing positions, etc., which are undertaken while doing a typical job. Unnecessary movements are sought to be eliminated so that it takes less time to complete the job efficiently. For example, Taylor and his associate Frank Gailberth were able to reduce motions in bricklaying from 18 to just 5. Taylor demonstrated that productivity increased to about four times by this process. On close examination of body motions, for example, it is possible to find out: 

(i) Motions which are productive.

(ii) Motions which are incidental (e.g., going to stores).

(iii) Motions which are unproductive.

(c) Fatigue Study.

Ans: A person is bound to feel tired physically and mentally if she/he does not rest while working. The rest intervals will help one to regain stamina and work again with the same capacity. This will result in increased productivity. Fatigue study seeks to determine the amount and frequency of rest intervals in completing a task. For example, normally in a plant, work takes place in three shifts of eight hours each. Even in a single shift a worker has to be given some rest interval to take her/his lunch etc. If the work involves heavy manual labour then small pauses have to be frequently given to the worker so that she/he can recharge her/his energy level for optimum contribution.  

(d) Method Study.

Ans: The objective of method study is to find out one best way of doing the job. There are various methods of doing the job. To determine the best way there are several parameters. Right from procurement of raw materials till the final product is delivered to the customer every activity is part of method study. Taylor devised the concept of assembly line by using method study. Ford Motor Company used this concept very successfully. Even now auto companies are using it. 

The objective of the whole exercise is to minimise the cost of production and maximise the quality and satisfaction of the customer. For this purpose many techniques like process charts and operations research etc are used. For designing a car, the assembly line production would entail deciding the sequence of operations, place for men, machines and raw materials etc. All this is part of method study.

(e) Simplification and standardisation of work.

Ans: Taylor was an ardent supporter of standardisation. According to him, scientific methods should be used to analyse methods of production prevalent under the rule of thumb. The best practices can be kept and further refined to develop a standard which should be followed throughout the organisation. This can be done through work-study techniques which include time study, motion study, fatigue study and method study, and which are discussed further in this chapter. It may be pointed out that even the contemporary techniques of business process including reengineering, kaizen (continuous improvement) and benchmarking are aimed at standardising the work. Standardisation refers to the process of setting standards for every business activity; it can be standardisation of process, raw material, time, product, machinery, methods or working conditions. 

5. Discuss the differences between the contributions of Taylor and Fayol. 

Ans: 

Basis of difference	Henri Fayol	F. W. Taylor
Perspective	Top level of management	Shop floor level of a factory
Unity of Command	Staunch Proponent	Did not feel that it is important as under functional foremanship a worker received orders from eight specialists.
Applicability	Applicable universally	Applicable to specialised situations
Basis of formation	Personal experience	Observations and experimentation
Focus	Improving overall administration	Increasing Productivity
Personality	Practitioner	Scientist
Expression	General Theory of Administration	Scientific Management

6. Discuss the relevance of Taylor and Fayol’s contribution in the contemporary business environment.

Ans: Fayol, theories deal with organisation of production in the context of a competitive enterprise that has to control its production costs. Fayol was the first to identify four functions of management – Planning, Organising, Directing and Controlling although his version was a bit different – Plan, Organise, Command, Coordinate and Control. According to Fayol, all activities of an industrial undertaking could be divided into: Technical; Commercial; Financial; Security; Accounting and Managerial. He also suggested that qualities a manager must possess should be — Physical, Moral, Education, Knowledge and experience. He believed that the number of management principles that might help to improve an organisation’s operation is potentially limitless.

Based largely on his own experience, he developed his concept of administration. The 14 principles of management propounded by him were discussed in detail in his book published in 1917, ‘Administration industrielle et generale’. It was published in English as ‘General and Industrial Management’ in 1949 and is widely considered a foundational work in classical management theory.

Taylor was a strong advocate of piece wage system. He wanted to differentiate between efficient and inefficient workers. Taylor’s prescription of efficiency. Search for efficiency requires the search for one best method and the chosen method must lead to the determination of a fair day’s work. There must be a compensation system that differentiates those who are able to accomplish/exceed the fair day’s work. This differential system must be based on the premise that efficiency is the result of the joint efforts of the managers and the workers. According to Taylor, there should be an almost equal division of work and responsibility between workers and management. All the day long the management should work almost side by side with the workers helping, encouraging and smoothing the way for them. 

The contributions of both Fayol and Taylor. Both of them have contributed immensely to the knowledge of management, which has formed a basis for further practice by managers. It must be pointed out that their contributions are complementary to each other. 

7. ‘Bhasin’ Limited was engaged in the business of food processing and selling its products under a popular brand. Lately the business was expanding due to good quality and reasonable prices. Also with more people working the market for processed food was increasing. New players were also coming to cash in on the new trend. In order to keep its market share in the short run the company directed its existing workforce to work overtime. But this resulted in many problems. Due to increased pressure of work the efficiency of the workers declined. Sometimes the subordinates had to work for more than one superior resulting in declining efficiency. The divisions that were previously working on one product were also made to work on two or more products.  This resulted in a lot of overlapping and wastage. The workers were becoming undisciplined. The spirit of teamwork, which had characterized the company, previously was beginning to wane. Workers were feeling cheated and initiative was declining. The quality of the products was beginning to decline and market share was on the verge of decreasing. Actually the company had implemented changes without creating the required infrastructure. 

(a) Identify the Principles of Management (out of 14 given by Henry Fayol) that were being violated by the company.

Ans: The Principles of Management (out of 14 given by Henry Fayol) that were being violated by the company are:

(i) Unity of command.

(ii) Division of work.

(iii) Discipline.

(iv) Esprit de corps. 

(v) Initiative.

(b) Explain these principles in brief.

Ans: (i) Unity of command: According to Fayol there should be one and only one boss for every individual employee. If an employee gets orders from two superiors at the same time the principle of unity of command is violated. 

(ii) Division of work: Work is divided into small tasks/jobs. A trained specialist who is competent is required to perform each job. Thus, division of work leads to specialisation. According to Fayol, “The intent of division of work is to produce more and better work for the same effort. 

(iii) Discipline: Discipline is the obedience to organisational rules and employment agreement which are necessary for the working of the organisation. According to Fayol, discipline requires good superiors at all levels, clear and fair agreements and judicious application of penalties.

(iv) Esprit de corps: Management should promote a team spirit of unity and harmony among employees, according to Fayol. Management should promote teamwork especially in large organisations because otherwise objectives would be difficult to realise. It will also result in a loss of coordination.  

(v) Initiative: Workers should be encouraged to develop and carry out their plans for improvements according to Fayol. Initiative means taking the first step with self-motivation. It is thinking out and executing the plan. It is one of the traits of an intelligent person. Initiative should be encouraged. But it does not mean going against the established practices of the company for the sake of being different. 

(c) What steps should the company management take in relation to the above principles to restore the company to its past glory?

Ans: (i) Enhance unity of command: Offer training programs to enhance employees’ understanding of unity of command and unity of direction. Ensuring each employee has only one direct supervisor to report to and minimize confusion regarding who to answer to.

(ii) Proper Division of Work: The challenges of the Division of Work Principle can be managed through effective communication, providing training and development opportunities, ensuring quality control, and efficient coordination.

(iii) Maintain Discipline: Set clear expectations. Setting clear expectations is the foundation of organizational discipline. Implement fair policies and address employee concerns to restore discipline. 

(iv) Encourage Team Spirit: To encourage team spirit within an organization, focus on fostering open communication, recognizing individual and team achievements. Conduct team-building activities and create a positive work environment.

(v) Promote Initiative: These initiatives are the first physical objectives of an organization’s strategy and are essential to the strategy’s execution and development. Allow workers to share ideas and contribute to decision-making to boost morale and motivation.

7. (Further information related to the above question 6) The management of company Bhasin Limited now realised its folly. In order to rectify the situation it appointed a management consultant-Mukti Consultants – to recommend a restructure plan to bring the company back on the rails. Mukti Consultants undertook a study of the production process at the plant of the company Bhasin Limited and recommended the following changes — 

• The company should introduce scientific management with regard to production. 

• Production Planning including routing, scheduling, dispatching and feedback should be implemented. 

• In order to separate planning from operational management ’Functional foremanship’ should be introduced. 

• ‘Work study’ should be undertaken to optimise the use of resources. 

• ‘Standardisation’ of all activities should be implemented to increase efficiency and accountability. 

• To motivate the workers ‘Differential Piece Rate System’ should be implemented. 

(The above changes should be introduced apart from the steps recommended as an answer to Part c – case problem 6 above.)  

It was expected that the changes will bring about a radical transformation in the working of the company and it will regain its pristine glory. 

(a) Do you think that introduction of scientific management as recommended by M consultants will result in intended outcome?

Ans: Yes, the introduction of scientific management will likely result in the intended outcome as it focuses on increasing efficiency, improving productivity, and reducing wastage. “Scientific management means knowing exactly what you want men to do and seeing that they do it in the best and cheapest way. The Bethlehem Steel company where Taylor himself worked achieved three-fold increase in productivity by application of scientific management principles. It implies conducting business activities according to standardised tools, methods and trained personnel in order to increase the output, improve its quality and reduce costs and wastes.

(b) What precautions should the company undertake to implement the changes?

Ans: The company should take the following precautions:

(i) Proper Training: Proper training” refers to the systematic and thorough training of employees based on scientific principles, ensuring they are equipped with the necessary skills and knowledge to perform their jobs efficiently.

(ii) Worker Cooperation: Managers and workers should have mutual cooperation and confidence and a sense of goodwill. The main purpose is to substitute internal competition with cooperation.

(iii) Gradual Implementation: Gradual implementation helps avoid resistance from employees and ensures smooth adaptation.

(iv) Regular Monitoring: Feedback mechanisms should be in place to track progress and address any issues.

(v) Fair Incentive System: It is a compensation structure where employees are rewarded based on their productivity.

(vi) Resource Allocation: Resource allocation is strategically selecting and assigning available resources to a task or project to support business objectives.

(c) Give your answer with regard to each technique separately as enunciated in points 1 through 6 in the case problem.

Ans: (A) Scientific Management: 

(i) Precaution: To prevent resistance employees should be involved in decision – making.

(ii) Outcome: Reduced wastage and better productivity.

(B) Production Planning: 

(i) Precaution: To avoid bottlenecks a systematic approach should be followed.

(ii) Outcome: Reduces delays and improves coordination.

(C) Functional Foremanship:

(i) Precaution: Functional foremanship means separation of planning from execution. Clearly define roles and responsibilities to avoid conflicts between supervisors.

(ii) Outcomes: Improve efficiency and reduce errors.

(D) Work Study:

(i) Precaution: It is a technique to identify non-value adding operations by investigation of all the factors affecting the job.

(ii) Outcomes: Minimize inefficiencies.

(E) Standardization of Activities:

(i) Precaution: Employees should be trained to follow standard procedures without compromising creativity.

(ii) Outcome: Enhances consistency and quality of work.

(F) Differential piece rate system:

(i) Precaution: The system should be fair, employees are rewarded based on their productivity.

(ii) Outcome: Motivates workers and rewards efficiency.