RBSE Class 12 Business Studies Notes Chapter 3 Principles and Techniques of Management

Rajasthan Board RBSE Class 12 Business Studies Notes Chapter 3 Principles and Techniques of Management

A statement or fact related to a subject which is given after adequate proofs and discussion and which proves itself on the criteria of time, experience and verification, is known as Principle.

However, these principles are not rules or rigid laws. If principles are not followed, it does not invite any punishment but there remains a risk of uncertainty of results of the action.

Alongwith the change in environment or situations, some modification, improvements are done in these principles from time to time to make them practicable in current situations. This flexibility in the principles makes their application universal.

In practice, application of principles of management will depend on the needs or situation of a country, society or an organisation.

Some principles may be fully applicable or not applicable to some organisations or may be partially applicable.

RBSE Class 12 Business Studies Notes Chapter 3 Principles and Techniques of Management

Earlier, the goal of organisation, society, etc. used to be the service and welfare of all. The organisations were run with motto ‘Vasudhev Kutumbkam’, which increases cooperation and equality in the society.

Now, the aim or goal of organisation has shifted from “Vasudhev Kutumbkam’ to survival of the fittest, which means every person or organisation attempts to prove itself the best in its every work and this results into a competition crisis.

It has become a challenging task to achieve the desired results (maximise profits and market leadership) and to successfully operate the business in a globally competitive, modem environment. To make this challenging task easy and convenient, modern management and management principles are of high utility.

Modern management is also known as Scientific Management. The concept of scientific management has originated from the Administration Management Model, developed by Henry Fayol in which Henry Fayol propounded 14 principles of management.

Principles of management ye a boon to managers. They serve as roadmaps for managers which, using they can think and perform their managerial jobs systematically and smoothly.

RBSE Class 12 Business Studies Notes Chapter 3 Principles and Techniques of Management

Henry Fayol has formulated a set of 14 principles which are universally accepted and applicable.

These are as follows :

  1. Division of work
  2. Authority and responsibility
  3. Discipline
  4. Unity of command
  5. Unity of direction
  6. Subordination of individual interest to general interest
  7. Remuneration
  8. Centralisation
  9. Scalar chain or hierarchy of authority
  10. Order
  11. Equity
  12. Stability of personnel
  13. Initiative
  14. Espirit-de-Corps.

Contribution of Henry Fay of in Development of Management :

1. Henry Fayol’s book “Administration Industrille Generalle” Published in 1917 in French was his major contribution to management, explaining different concepts of management

2. In 1949, it was published in English with the title “General and Industrial Management” and it is widely considered as a foundational work in classical management theory!

3. For his contribution, he is popularly known as the “Father of General Management.”

Fayol divided all activities of an industrial undertaking into six parts:

  • Technical activities
  • Commercial activities
  • Financial activities
  • Security activities
  • Accounting activities
  • Managerial activities

Fayol classified his views related to managerials activities into three main parts :

Managerial qualities and training
Elements of management
Principles of management

4. Fayol was the first to identify the qualities of a manager. He suggested the following six qualities, a manager should possess :

  • Physical,
  • Intellectual,
  • Ethical,
  • Knowledge,
  • Technical,
  • Experience

5. According to Fayol, management is a process having five essential junctions-pfanning, organising, direction, coordinating and controlling.

RBSE Class 12 Business Studies Notes Chapter 3 Principles and Techniques of Management

Main Functions of Management By Peter F. Drucker :

  1. Specific purpose and mission
  2. Productive work and workers’ achievement
  3. Social impact
  4. Social responsibilities
  5. In 1954, Drucker defined management by objective concept or scientific technique in his book ‘Practice of Management’. Since then, MBO/management by .exception theory and practice has mushroomed and spread around the world.

New Techniques of Management/Modern Trends :

  1. Management by objectives
  2. Management by exception
  3. Strategic management
  4. Productivity management
  5. Technology management
  6. Management information system
  7. Management of changes
  8. Management of struggles
  9. Operational management
  10. Management of knowledge
  11. Systems approach
  12. Contigency or conjunction approach

RBSE Class 12 Business Studies Notes Chapter 3 Principles and Techniques of Management

Management by Objectives (MBO) :

  1. In 20th century, development of many new approaches and techniques of management enriched the management sector. One of the most important and loop technique is Management by Objective (MBO). Peter F. Drucker was the first to disuss the philosophy of MBO in his book.
  2. MBO is a process whereby both superior and subordinate managers jointly identify their common goals of their work unit (department) and define each employee’s major areas of responsibility and goals with their active participation.

Nature of MBO :

  1. Functional approach
  2. Setting goals
  3. Result oriented

Merits of MBO Merits / Advantages to Organisation :

  1. Efficient management
  2. Effective planning
  3. Clarification of organisational roles
  4. Encourages commitment
  5. Facilitates control

RBSE Class 12 Business Studies Notes Chapter 3 Principles and Techniques of Management

Advantages of MBO to Superiors :

  1. It facilitates guidance and direction to subordinates.
  2. It provides a base or aid for evaluating the performance of subordinates.
  3. By MBO, superiors can motivate the subordinates towards achievement of goals.
  4. MBO helps in coordinating the individual efforts and group efforts.

Advantages of MBO to Subordinates :

  1. Employee achievement becomes easy.
  2. Enhances job satisfaction of the employees.
  3. Encourages self direction and self control.
  4. Develops cordial relation between superior and subordinates.

Limitations of MBO :

  1. Difficulty of setting goals
  2. Problem of balancing and coordination
  3. Inflexibility

Other Limitations :

  1. Lack of cooperation and support of top level managers.
  2. Excessive pressure on subordinates.
  3. Lack of suitable motivation.
  4. May create personal conflicts.
  5. It is a time-consuming process.

RBSE Class 12 Business Studies Notes Chapter 3 Principles and Techniques of Management

Management by Exception :

(MBE) is a method or plan of supervision/control under which only significant deviations from normally expected results of conditions are brought to the attention of top management for consideration and decision. The idea behind it is that management attention will be focused only on those areas-rthat-need-inmrediate action.

1. Importance of MBE :

  • It saves time, effort, energy of managers.
  • Complex problems can’t be overlooked.
  • Timely attention and corrective measures for exceptional issues.
  • It extends the scope of managerial performance.
  • It reduces the frequency of making wrong decisions.

2. Limitations of MBE :

  • This approach promotes personalised decisions of an individual.
  • It requires establishment of clear and broad standards of performance.
  • It requires detailed reporting system, which is not so easy.
  • It requires too much paper work.
  • It requires delegation of authority which many managers do not want.

3. Strategic Management :

  • Strategic Management is all about identification and description of the strategies that manager can carry, so as to achieve better performance and a competitive advantage for organisation.
  • Strategy refers to future decision, defining the organisation’s direction and scope in the long run.

4. Features/Characteristics of Strategic Management :

  • It is a Formal Managerial function because under it objectives are determined, strategies are formulated.
  • Organised and systematised method of managing strategic management.
  • Commitment of management for selection of best strategic plans.
  • Consists of plans like strategic plans, etc.
  • Future-oriented process.
  • It is done by top level management.
  • It is a Dynamic process as it involves making changes in organisational objectives, policies and plans of business.

RBSE Class 12 Business Studies Notes Chapter 3 Principles and Techniques of Management

Importance of Strategic Management :

  1. Ensures long-term survival in the marketplace.
  2. Effective and smooth running of business.
  3. Clarification of objectives and providing motivation.
  4. Helpful to cope-up with changing environment.
  5. Helpful in taking the best decisions.

Important Glossary :

  1. Principles : Principles are general statements of truth which act as a guideline to our behaviour, action and decisions.
  2. Principles of Management : For managing any organisation, we have to take many types of decisions, these decisions are based on certain guidelines known as Principles of Management.
  3. Principle of Unity of Command : It states that each subordinate should receive orders from only one boss or superior.
  4. Principle of Unity of Direction : It states that there should be one head and one plan-for the activities having the same objectives.
  5. Principle of Remuneration : It states that remuneration or compensation for work done should be fair to both the employee and the organisation.
  6. Arrangement: It means the placing of objects/resources on the right place so that the work is performed smoothly.
  7. Equity: It states that all the employees should be dealt in a kind, just and fair manner. It means to play fair alongwith justice and friendliness.
  8. Cooperation : It refers to the sense of unity among employees and denotes that every one should cooperate with others in teamwork.
  9. Management by Objective (MBO) : It is a process whereby both superior and subordinate managers jointly identify their common goals of their work unit (department) and define each employee’s major areas of responsibility and goals, with their active participation.
  10. Management by Exception (MBE) : It is a method or technique which holds that subordinates should be authorised to manage all routine matters and superior managers should retain the authority with themselves to take decisions on exceptional matters.
  11. Strategy : Strategy is a working system by which an organisation uses its resources and make efforts to achieve its objectives.

RBSE Class 12 Business Studies Notes Chapter 3 Principles and Techniques of Management

Important Definitions

Management by Objectives :

  1. In the words of Aniny Rays, “ This is a goal-oriented philosophy of management which emphasises on achievement and results.”
  2. In the words of Terry and Franklin, “A managerial objective is the intended goal that prescribes definite scope and suggests directions to the planning efforts of a manager.”
  3. In the words of Carliste, “MBO is a process by which the members of a work unit, individually meet their superiors to establish performance related goals.”

Management by Exception (MBE) :

  1. In the words of Lister R. Bittel, “MBE is an information and control technique that provides management with signals that tell when a condition or operation is within its prescribed standard and when it is not.”
  2. In the words of Stoner and his authors, “MBE principle holds that the controlling manager should be informed about operational progress only when there is a significant deviation from a plan or standard.”

Strategic Management :

  1. In the words of James M. Higgins, “Strategic management is the process of managing the pursuit of original mission while managing the relationship of the organisation to its environment.”
  2. In the words of Lestem A. Digman, “Strategic management is a continuous process that involves attempts to match or fit the organisation with its changing environment in the most advantageous way possible.”

RBSE Class 12 Business Studies Notes