Principles of Management Class 12 Notes: CBSE Business Studies Chapter 2

Principle

A principle is a statement that provides a guide to thought and action. Principle serves as the foundation for a system of belief or behaviour or a chain of reasoning.

Principles of Management

• Principles of management are broad and fundamental truths that establish a relation between cause and their effects. 

• These principles serve as guidelines for managerial decision-making and their course of action. 

• It is through principles that management predicts the result of their actions.

• Management principles are not as rigid as principles of science as they deal with human behaviour and thus are to be applied creatively as the situation demands.

Nature of Principles of Management

The nature of the principles of management is given below:

• Universality: Principles of management have universal validity. These apply to all types of organisations, business as well as non-business, small as well as large enterprises, and at different levels of authority. As these principles are universal, they can be applied in different managerial situations.

• Human Behaviour: Management has to deal with human behaviour, therefore the principles aim at influencing human behaviour. They are general guidelines for action and can be applied according to the situation as they are based on complex human behaviour which cannot be controlled.

• Created by Practice and Experimentation: Scientists through research, experiments, knowledge, and expertise have developed the principles.  The principles are used to solve different managerial problems with the help of observation, analysis, and experience.

• Dynamic & Flexible: These principles are not rigid and can be adapted and modified by practising managers depending upon the situation and changes in the business environment. They are flexible and dynamic. 

• Cause and Effect Relationship: They establish a relationship between cause and effect so that they can be used in different situations.

• Contingent: The principles are relative and not absolute. Depending upon the current situation at a certain point in time, the principles are applied.

Significance of the Principles of Management

• Providing Managers with Useful Insights into Reality: Through principles of management, managers get insights into real work situations. The use of principles will increase their knowledge, ability, and understanding of various managerial situations and circumstances.

• Optimum Utilisation of Resources and Effective Administration: Optimum utilisation of resources means maximum benefit with minimum cost. The principles have been developed from the experience of various experts to improve managerial efficiency. The principles guide managers to work systematically without wastage of time and resources to avail maximum benefit.

• Scientific Decisions: Decisions must be based on facts, and should be justified in terms of intended purpose. They should be realistic, practical, and able to be measured and evaluated. Principles are free from bias and prejudice.

• Meeting the Changing Environmental Requirements: Principles of Management are flexible and dynamic and thus help the organisation to achieve its goal even in the changing business environment.

• Fulfilling Social Responsibility: Principles of management also provide direction to the managers in fulfilling social responsibilities along with helping them in achieving organisational goals. Principles help managers to make optimum use of human and material resources. With efficient use of resources, there is an improvement in the quality of work and an increase in the standard of living of society.

• Management Training, Education, and Research: Principles of management are an important aspect for managers and help enhance their knowledge, which forms the basis for management training and research.

Taylor’s Scientific Management

“Scientific management is the art of knowing exactly what you want your men to do and then seeing that they do it in the best and cheapest way.” — F.W. Taylor

F.W. Taylor also known as the ‘Father of Scientific Management’ was the first expert to lay down the foundation of management as a science consisting of fundamental principles and the use of these scientific methods to solve managerial problems.

Principles of Scientific Management:

The basic principles of scientific management are as follows:

• Science, Not Rule of Thumb: Every task performed in an organisation should be based on a scientific study and analysis instead of the hit-and-trial method. There should be a scientific plan along with standardised equipment to do work efficiently and effectively.  Hence to simplify the tasks, and promote ease in its performance, new techniques and methods need to be developed and the management should not keep using the age-old methods and techniques.

• Harmony, Not Discord: There should be complete harmony between management and workers to achieve the organisational goals. It implies that there should be a healthy working environment. To respect each other’s roles and avoid any kind of conflict, Taylor brought a complete revolution in management policies (Mental Revolution). 

• Cooperation, Not Individualism: There should be complete cooperation and coordination between the labour and management to achieve organisational goals instead of individualism. Constructive suggestions from employees must be encouraged which will also refrain workers from going on a strike and making unreasonable demands.

• Development of Every Person to His or Her Greatest Efficiency and Prosperity: Taylor suggested management on scientific planning of operational work and that the workers should focus on the performance of quality work. The principle suggests taking action for the development of competencies of all people working in the organisation.

They should be selected through a proper scientific process and should be given rigorous training and thereafter as per the ability of the person, work should be assigned. This will increase overall productivity by utilising the skills of the workers completely.

Techniques of Scientific Management

Functional Foremanship: Functional foremanship is a technique in which planning and execution are considered different. Supervision is divided into several specialised functions and each function is to be entrusted to a foreman. This principle is an extension of Fayol’s principle of division of work and specialisation. It takes place through eight personnel, namely divided under heads of Planning and Production Incharge:

• Planning Incharge: The Planning Incharge is responsible for developing and coordinating production plans to ensure that all operations align with the company's goals and timelines. They forecast resource needs, schedule tasks, and monitor progress to ensure that production targets are met efficiently.

• Instruction Card Clerk: This role involves preparing detailed instruction cards for workers, outlining the steps, tools, and techniques required to perform specific tasks. The Instruction Card Clerk ensures that workers have clear and accurate guidance to carry out their duties effectively.

• Route Clerk: The Route Clerk is responsible for determining the most efficient workflow or sequence of operations within the production process. They map out the optimal routes for materials and tasks to move through the production line, minimising delays and maximising efficiency.

• Time and Cost Clerk: This role focuses on tracking and recording the time taken for various tasks and calculating the associated costs. The Time and Cost Clerk ensures that production stays within budget and schedules, providing data that supports efficient resource management and cost control.

• Disciplinarian: The Disciplinarian maintains order and ensures adherence to company policies and procedures within the workplace. They are responsible for enforcing rules, addressing misconduct, and promoting a culture of discipline and respect among workers, which is essential for maintaining a productive work environment.

• Production Incharge: Responsible for overseeing the entire production process, ensuring that all operations are carried out efficiently and on schedule. They coordinate with various departments to meet production targets and maintain quality standards.

• Speed Boss: Focuses on ensuring that workers maintain the required speed of work, avoiding delays and maximising productivity without compromising on quality.

• Gang Boss: Supervises a group of workers, ensuring they have the necessary tools, materials, and instructions to perform their tasks effectively. The Gang Boss also coordinates activities to maintain workflow and efficiency.

• Repair Boss: Manages the maintenance and repair of machinery and equipment to minimise downtime. They ensure that all machines are in optimal working condition to prevent disruptions in production.

• Inspector: Responsible for quality control, the Inspector ensures that products meet the required standards and specifications. They conduct regular checks and identify any defects or inconsistencies in the production process.

• Standardisation and Simplification of Work: Standardisation involves creating consistent standards for every business activity to maximise efficiency and output. Simplification aims to eliminate unnecessary varieties and sizes of products or services, thereby reducing costs associated with labour, machinery, and tools. Together, these processes lead to optimal resource utilisation and increased turnover.

• Method Study: The method study aims to identify the most efficient ways of performing a task to maximise productivity and resource utilisation while improving product quality and customer satisfaction.

• Motion Study: A motion study is the systematic analysis of workers' movements to eliminate wasteful motions and enhance efficiency. By reducing unnecessary or unproductive actions, tasks can be completed in less time, increasing overall productivity.

• Time Study: A time study establishes the standard time required to complete a specific task. It helps in determining the number of workers needed, designing appropriate incentive schemes, and calculating labour costs, ensuring efficiency in operations.

• Fatigue Study: A fatigue study assesses the necessary rest intervals for workers during their tasks. By allowing workers to recharge, this study helps prevent accidents, reduce rejections, and minimise industrial illnesses, leading to better overall performance.

• Differential Piece Wage System: This system distinguishes between efficient and inefficient workers by linking wages to productivity. Workers who meet or exceed the standard output receive higher wages, while those who fall short receive lower rates. This approach rewards efficiency and motivates underperforming workers to improve.

For example, the standard output per worker per day is 20 units, and the workers who produce more than the standard will get Rs. 100 per unit, and the ones who will produce less than the standard will be paid Rs. 80 per unit. An efficient worker making 21 units will get 21x100= Rs. 2100 per day whereas a worker who makes 18 units will get 18×80 = Rs. 1440 per day. The difference of Rs 660 will motivate the inefficient worker to work more efficiently and get higher wages.

Fayol’s Principles of Management

Henry Fayol, a French Industrialist through his experience and study developed the general theory of management. He suggested fourteen principles of management.

Principles of Management Developed by Fayol

• Division of Work:  Division of work means a division of the total task into smaller jobs and allocating it to employees. The entire work is divided into small tasks and a trained specialist who is competent enough to perform that job does each work. Thus, it results in greater efficiency, specialisation, and increased productivity.

For example, to open a bank account, there are different counters in a bank, and each employee handles a different task in the same procedure.

• Authority and Responsibility: Authority refers to the power or right to make decisions and get the work done whereas responsibility refers to the obligation to complete the job assigned on time. 

These two always go hand in hand. Mere responsibility without authority makes an executive less interested in discharging duties. Similarly, giving authority without assigning responsibility may lead to misuse of power.

• Discipline: Discipline means obedience, respect for authority, and following the rules and regulations. It is necessary to ensure a smooth working environment in an organisation. Good supervision at all levels and an established system of penalties will help to maintain discipline in the organisation.

• Unity of Command: According to Fayol, for every individual employee there should be only one superior who can assign him responsibilities and to whom he is accountable. This will avoid confusion, conflict, and duplication of work.

For example, an employee is asked by one superior to accept only cash payments, while the other superior asks him to accept both cash and credit card payments. Hence, no unity of command is there, which adds confusion to the employee’s mind.

• Unity of Direction: All the units of an organisation should move towards the same objectives through coordinated and focused efforts. There should be only one head and one plan for a group of individuals having the same objective. Hence the unity of action is ensured through this principle.

Difference between Unity of Command and Unity of Direction

• Subordination of Individual Interest to General Interest: The interest of an organisation should take priority over the interest of any individual employee. In simple words, the organisation's interest needs to be prioritised over individual interest. 

• For example, the organisational objective to achieve a certain objective should be prioritised over an individual’s objective to get a higher salary with the lowest work.

• Remuneration of Employees: All the employees working in the organisation should have fair pay and compensation. To establish a reasonable standard of living, the employees should be given fair wages. The remuneration should be according to the paying capacity of the organisation.

• Centralisation and Decentralisation: Centralisation means the concentration of decision-making authority within the centre, whereas its dispersal among more than one person is Decentralisation. No organisation can be completely centralised or completely decentralised, so a balance of both must be created.

• Scalar Chain: The formal lines of authority and flow of communication between superiors and subordinates from the highest to the lowest ranks is known as the scalar chain. This chain should not be violated but in case of emergency employees at the same level can contact through GangPlank by informing their immediate superiors to make quick communications.

• Order: In an organisation, there must be material and social order. According to Fayol “People and material should be in suitable places at appropriate times for maximum efficiency”. Material order means a place for everything and everything in the right place and social order means a place for everyone and everyone should be at their designated place.

• Equity: Management should treat employees with justice and equality. Good sense and experience are needed to ensure fairness to all employees who should be treated as fairly as possible without any sort of discrimination. Hence, irrelevant favouritism or penalties should be avoided.

• Stability of Personnel: To preserve organisational efficiency, employee turnover should be kept to a minimum. Personnel should be chosen and appointed after a thorough selection process, and the chosen person should be retained for a certain amount of time to let the employee demonstrate results, as learning and getting accustomed to a new job takes time.

• Initiative: Workers should be motivated to develop and implement improvement plans. Initiative means taking the first step with self-motivation. It entails formulating and carrying out a strategy.

• Esprit De Corps: Management should foster team spirit, unity, and harmony among employees. Hence efforts should be made to ensure group cohesion in the organisation.

Fayol versus Taylor

5 Important Topics of Business Studies Class 12 Chapter 2 you shouldn’t Miss!

Importance of Class 12 Business Studies Chapter 2 Notes PDF

• The Class 12 Business Studies Chapter 2 Notes PDF is an invaluable resource for students preparing for their board exams. 

• These notes provide a concise yet comprehensive overview of the principles of management, making it easier for students to understand and retain key concepts. 

• With clear explanations of Henri Fayol’s principles and F.W. Taylor’s scientific management, the notes help students grasp the practical applications of these theories. 

• The PDF format allows for easy access and quick revision, ensuring that students can efficiently review and solidify their understanding of this important chapter.

Tips for Learning the Class 12 Business Studies Chapter 2 Principles of Management Notes

• Focus on grasping the meaning and application of each of Henri Fayol’s 14 principles of management. Knowing real-life examples can help reinforce these concepts.

• Pay attention to Taylor’s principles and techniques, such as time study, work-study, and standardisation. Understanding how these principles improve efficiency will be beneficial.

• Compare Fayol’s and Taylor’s principles to understand their similarities and differences. This comparison can help you better understand the contributions of both thinkers to management.

• Regular revision is key to retaining the details of each principle. Use Vedantu’s notes for quick reviews before exams.

• Solve questions that require you to apply management principles to real-life business scenarios. This will enhance your understanding and prepare you for exams.

Conclusion

Chapter 2, Principles of Management, is fundamental to understanding the framework that guides effective management practices. Through the study of Henri Fayol’s 14 principles and F.W. Taylor’s scientific management, students gain insights into the essential guidelines for efficient and effective management. These principles are not only theoretical but have practical applications in the business world. Vedantu’s notes provide a simplified and structured approach to these concepts, helping students grasp them easily and prepare thoroughly for their exams. 

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