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Principle of management

Part A
Chapter 1
Concept of management Meaning, nature, scope and importance,
roll of management. Management and administration, Management as
profession, Management as science and an art.

In the present day industrial word, management has

become universal. With the increase in complexities of business,
the importance of management has increased enormously. The
principle of management and its techniques are universally
applied at all places and for all organizations and the society in
general. The term management has been interpreted in various
ways depending upon the context and the purpose of for which it
is used. There is no universally accepted standard definition
management. The term management has been interpreted as a
‘Group of People’ entrusted with responsibility of managing the
business. It is also interpreted as a ‘ Process’ or an ‘Activity’
including functions of planning, organizing, directing and
controlling. It is also used to refer to a ‘ Discipline’ having an
organized body of language. Further it has also been interpreted
as an ‘Art’ of doing thing things done though others.
Definitions and Meaning
As already discussed, different authorities have interpreted
define management according to their perception the following
are the some of the important definitions on Management:

1. “Management is a distinct process consisting of planning,

organizing, actuating and controlling the performances to
determine and accomplish the objectives by the use of
people and resources”.- George R . Terry
2. In the words of Herald Koontz, “management is art of
getting the things done through and with people in formally
organized groups. It is the art of creating an environment in
which people can perform as individuals and yet, co-
operate towards attainment of group goals. It is the art of
removing blocks to such performance a way of optimizing
efficiency in reaching goals”.
3. According to Peter Drucker, “management is an
organization, organs can be described and defined only
through their functions”.
4. In the words of Henry Fayol, “To manage is to plan, to
organize, to command, to co-operate and to control”.
5. According to Lawrence, “management is getting the thins
done through the effort of others. It is, primarily, executive
function of determine what you want, people to
accomplish, to check periodically how they are
accomplishing and to develop methods by which they
perform more effectively”.

Having reference to the above definitions on the

concept of management one can come to conclusion that
management is a distinct on-going process of allocating
inputs both human and physical by typical managerial
functions like planning, organizing, directing and
controlling for the purpose of achieving pre-determined
purpose. Management is concerned with ideas things and
people. Therefore, it can perceived as a process of
converting ideas into result by getting things done through
others in an organized setting.
It is a process wherein work is performed with and
through the people in an organization ever changing
environment. As a process, management refers to an
integrated set of functions designed to create an unified
group of efforts in a meaningful manner to achieve
common goals. It is technical and social function, because,
it has to deal with productivity of physical resource and the
productivity of human resources.
Characteristic Features
The definitions analyzed also indicate different
characteristics of Management. they bring out the nature of
management as a Process as and art, as a discipline and as a
group of people the following are some of the important
characteristic feature management.
1. Management is a universal process because the principle
and practices of management can be applied at all places
and in all situations.
2. Management is a purposeful activity because it refers to
integrated set of functions directed towards
accomplishment of certain predetermined purpose.
3. It is a creative and integrative process. Because
management seeks to secure objectives with highest
efficiency and economy by creating favorable
environment. Further it is an integrative process because
essence of management lies in co-ordination of the
activities of individuals and groups to arrive at minimum
clash between persons and activities.
4. It is a group of phenomenon because it involves the use
of group efforts for the achievement of common
objectives and is concerned with getting things done
through others.
5. It is a social process, because, it is done by people,
through the people and for the people it involves
planning, organizing, leadership and motivation wherein
efforts of people are involved.
6. It is multi-disciplinary. Because, it has to deal with
human behavior under dynamic conditions and obtains
the knowledge from other subjects like Sociology,
Psychology, Economics Etc.
7. Management is a continuous process, because, the cycle
of Management continuous to operate so long as there is
organized action for achievement of goals.
8. Management is both science and art because it has not
only organised body of knowledge but also involves the
application of knowledge and skills for the solution to
the problems of organization.
Management as Science
Management is a science. ‘Science’ refers to a
systematic body of knowledge logically analyzed,
explained and understood. It is the systematic knowledge
developed through continuous research and study. Science
can be taught and learnt. In this sense management is a
science, because, it has Systematic body of knowledge
relating to the principles and techniques developed through
continuous research. The principles and techniques of
management can be taught and learnt. Therefore, it can be
concluded that management is a science which explains
why and how of human behaviors and shows how they can
be integrated with other resources for the accomplishment
of common goals.
Management as an Art
Management is also an art. Management is art,
because, it involves application of knowledge and skills for
the solutions to the organizational problems. An art is
generally a creative and result-oriented process. Further, an
art is always personalized work and calls for dynamism,
ability and skill to translate the scientific knowledge into
meaningful practice. An art can be perfected by experience.
Management, as an art, requires knowledge and skills to
present solutions to the problems of Sheldon, Haimann,
Mcfarland etc. They opine that management and
administration are two different concepts and different
activities by themselves. According to them, administration
refers to determination of major aims and policies.
Therefore it is policy making or decision making activity to
be undertaken by to level management, whereas
management is concerned with implementation or
execution of plans and policies formulated by
administration. Therefore, it is middle level and lower level
activity. Thus, these authorities emphasize that
administration is always above the management.
3. Management being the most comprehensive term
including administration
This view has been expressed by British scholors.
Experts like Kimbal, Richman, Copen etc view
management as a generic term including the total process
of executive control involving the responsibility of
effective planning, guidance and control of operations.
Administration is that part of management which is
concerned with decision making. Therefore, this past of
management may be called administrative management.
Another part of management includes organizing, directing
and control of activities, which is termed as ‘executive
management’. Therefore, from this point of view,
management may be divided into two divisions namely, 1.
Administrative Management, 2. Executive or Operational
Scope of Management
Management as a theory and practice includes
different areas in its scope. These areas can be brought
under two aspects, namely,
1. Subject matter of management.
2. Functional areas of management.
1. Subject Matter
The subject matter of management includes various
functions of management, its techniques and principles.
Important functions of management are planning,
organizing, staffing, directing, controlling etc. There are
different principles which are universally accepted. some of
them are division off work, discipline, order, scalar chain,
delegation of authority etc.
2. Functional Areas
Management, in its scope, includes different
functional areas. As a matter of fact, any activity, in order
to be conducted effectively, requires management.
Therefore, there are innumerable functional areas of
management. They are
A) Financial management including financial
controls costing controls management
accounting etc.
B) Human resources management including
different personnel activities like selection,
training, employee services, industrial
relations etc.
C) Production management dealing with planning
and control of production.
D) Marketing management concerned with
marketing of goods.
E) Office management concerned with Office
administration and Control.
In addition to these, different other areas of
management have also been developed to suit different
types of necessities. They are:
1. Transport management
2. Materials management
3. Maintenance management
4. Time management etc.
Importance of management
It is an established truth that effective management is
necessary for an organization to move in a smooth manner.
Management is a must for all types of organisations,
whether commercial, social or any other type. Importance
of management can be identified by referring to different
areas covered by management. The following analysis
provides the importance of management from different
points of view.
1. From Societal point of view
Management plays a vital role in the modern society.
It regulates productive activities by organizing factors of
production. According to Drucker, management is a
creative force which makes it possible to utilize human and
material resources on an optimum scale. It is a life-giving
element and a coordinating force without which production
becomes impossible. The wellbeing of the society is largely
dependent upon the quality of management. It is also
described as catalyst (mediator) which gives momentum to
the development of individual, group and nation at large. In
the words ‘Yrwick and Brech’, no ideology, no ism
(theory) and no political theory can win greater output with
less efforts from a given complex of human and material
resources. It is only a sound management that can bring out
proper utilization of these resources.
2. From business point of view
Running a modern business has become complex
matter due to different factors like size, structure, changing
conditions of markets, Governmental regulations etc.
Because of these, management which consists of scientific
thinking, accurate planning, proper leadership, motivation
and careful control, plays a vital role in the management of
modern business. Leadership provided by management acts
as a very important driving force similar to that of brain in
human body. Sound management helps in minimizing cost
and maximizing profits and output. It maintains a dynamic
equilibrium between organization and ever-changing
3. From the point of view of other organizations
Management is not only needed for business organization,
but also required for social organizations, like education,
religious and other non-business institutions. The efficiency
and effectiveness of their organizations entirely depend
upon the quality of management.
4. From the point of view of Government
Management is equally essential for proper
administration of a country or a state. It is essential for
effective administration of different departments of local,
state and central Governments. Therefore, President
Roosevelt of U.S.A has aptly said that Government without
sound management is as good as a house built on sand, To
put it in nutshell, management is essential for all types
group activities and it is creative and co-coordinative force
in all those activities.
1. Bring out the different meanings of the term
2. Is management a science, Arts or Profession?
3. Discuss the nature and importance of Management.
4. What are the different opinions regarding
management v/s Administration?
5. Write a note on Scope of Management.
Chapter 2
Evolution of Management – Taylor’s Scientific Management –
Fayol’s Theory – Elton Mayo and Hawthrone experiments.

Theories of organization and management have

evolved through stages. The art of management has ancient
of roots. The moment people began to live and work
together, organization and management came in to
existence. Therefore, the management owes its origin to the
dawn of civilization. The management thought or theory in
the current economic situation can be best understood in
the light of its historical growth. In past, it took the forms
of personnel leadership. Evidences of organized principles
of management in public life can be traced back to Vedas,
periods of ancient Greeks and romans. For the purpose of
studying historical development of management, the
evolution of management thought can be broadly divided
into two stages:
1. Pre-scientific Era (Up to 1880)
2. Development of modern management thought (after
1. Pre-scientific Era
This stage is also knoen as pre-scientific stage because
during 1880, F.W TAYLOR has introduced the principles
of scientific management and as such the period before this
development is known as pre-scientific stage. During the
period prior to TAYLOR, many persons contributed to the
development of management thought. Notable names are
METCALFE etc. They emphasized improved working
conditions for workers, system of feedback, system of
control and exchange and experience between
organizations etc., for the improvement of productivity.
Therefore early contributions to management thought
were made by writers on the basis of their experiences. All
those writers were practitioners and tried to generalize their
experiences as management principles. They brought out
integration of management with engineering, economics,
sociology etc. But no clear-cut body of management
thought was developed during this period.
2. Development of modern management thought
Modern management thought has developed through
different stages. These stages can be broadly categorized
into classical approach, Neo-classical approach, and
modern theories. Some of those approaches are analyzed
1. Taylor’s Scientific management
Scientific management came into picture because of
the need to increase the productivity. F.W Taylor was first
to insist on introduction of scientific methods in
management. He started his carrier as a machine shop
laborer and went up to the position of chief engineer. He
was sad to see that organizations were involved in
conducting wasteful ways of doing jobs. He was convinced
that there was science for doing jobs to optimize efficiency.
He advocated application of scientific methods and detailed
study of each job to ascertain the best ways of doing the
Therefore, he brought out scientific approach in the
place of rule of thumb method or trial and error method.
Taylor’s scientific management is based on the
following principles:
1. Determining the best method of performing the
each task using scientific methods, instead of trial
and error method.
2. Job specialization or division of labor so as to have
proper accountability and higher productivity.
3. Scientific selection, training and development of
workers to make them physically and mentally fit
and satisfied with jobs.
4. Spirit of friendly co-operation between management
and workers in order to have harmony of interest.
5. Maximum output in place of restricted output
through proper utilization of both physical and
human resources.
Techniques of scientific Management
The Taylor had conducted many experiments to find
out how the workers could be made more efficient and how
the principles of scientific management could be achieved.
He has laid down certain important techniques for the
same. They are as follows:
a. Separation of Planning from Executive Function
F.W Taylor advocated for separation of planning
function from executive function. He has stated that the
same worker should not plan and implement activity. The
planning should be done by top management and the
worker has work according to plan under supervision.
b. Scientific Task Setting
This technique refers to allotment of work to each
worker on the basis of the capacity of the worker and the
physical conditions of the work. This can make
differentiation between average workers, above average
workers and below average workers. Taylor has also
prescribed that there should be fair compensation in
conformity of the standard of work.
c. Work Study, Time and Motion Study
F.W Taylor has emphasized that there should be
critical analysis of each job so as to have the scientific
approach for the job. He also introduced time and motion
study for finding out the minimum time and efforts
required for the completion of the job. These studies are
conducted for the elimination wastage of time and energy
while performing the job.
d. Functional Foremanship
This principle or technique has been developed by
Taylor for bringing out effective supervision. Under this
technique, instead of one supervisor supervising the
particular job, there should be different supervisors to
supervise different aspects of the work. He has
recommended 8 supervisors like route clerk, cost clerk,
speed bass etc. for supervising different aspects of work.
e. Other Techniques
In addition to these techniques, F.W Taylor has given
number of other techniques like scientific selection and
training of workers, fatigue study, financial incentives,
mental revolution among management and workers et. For
betterment of workers’ productivity. Managerial ability and
overall well-being of the organization.
Critical Appraisal of scientific management Theory
Taylor’s ideas caught the imagination of several
individuals and organisations in many countries of the
world. On the philosophical side, Taylor diverted attention
on the application of scientific investigation and
experiment to the problems of management. He advocated
the replacement of ‘rule of thumb’ by scientific
management. He also highlighted co-operation research,
standardization, planning, allocation of work, control, co-
ordination etc. for effective management, which are
considered as mechanical dimensions of scientific
management. He has also brought out time and motion
study and functional foremanship for elimination of waste
and optimum utilization of resources. He has also proposed
effective administration of salary, wages and incentives.
But the theory of scientific management has been
criticized by social scientists and also workers on the fact
that it promotes mechanistic assumptions to human
behaviors. It has been criticized that it ignores human
element in production treats man as machine. It is
considered to have unrealistic assumption that people are
rational economic beings and as more extension of
machines. Further, this theory has a narrow view of
management, because, it concentrates itself mainly on
production management and not on the other branches of
management. Again scientific management is also
criticized on the grounds of impartibility of application at
all circumstances. Increase in production, specialization
and standardization which are expected to increase
productivity, may make the jobs monotonous.
In the final analysis, it can be said that despite these
limitations, Taylor’s scientific management has made
lasting contributions to the management thought and it
paved way for making the jobs more efficient and
productive. Nevertheless, Taylor’s approach is marked by
logical methodology and classical simplicity and it has laid
foundation for new industrial management.
2. Fayol’s Administrative Theory
As the organizations grew and become more complex
need for understanding management as a comprehensive
activity was felt. Functional theorists have given a new
shape to the management and they consider the
management as a comprehensive process or function
including different elements. Among them Henry Fayol is
very important. He published a book in which he has
brought out a number of aspects of administrative theory.
Fayol has identified different aspects of the theory which
can be outlined was fallow:
1) Classifications of Activities: Fayol classified
business activities into the following categories:
a) Technical activity (Production activity)
b) Commercial activity (Exchange activity)
c) Financial activity (Capital activities)
d) Security activity (Protection of physical and human
e) Accounting activity (Recording activity)
f) Management activity
The first five categories are known as operating
activities and the last category which was neglected until
then is the managerial activity. Fayol concentrated on this
activity. According to him managerial activity includes a
series of activities which have to be undertaken by the
managers what all levels, at all organizations for the proper
performance of operating activities. According to Fayol,
managerial activity includes planning, organizing
commanding, co-ordination and controlling. These
activities are to be performed for the smooth and effective
functioning of business. Many others like Mooney, Urwick,
Gullick etc., have also contributed to administrative theory.
According to Prof. Gullick who has coined the word
‘POSDCORB’, management includes the function of
planning, organizing, staffing, directing co-ordination,
reporting and budgeting.
2) Management Principles
Fayol gave 14 principles, which according to him are
universal in nature. They are:
a. Division of labor
This is the principle of specialization. It is necessary
for promoting efficiency in the utilization of labor. It is
necessary not only in shop labor (i.e., production or
technical work) but also in other types of work, such as
managerial work.
b. Authority and Responsibility
This principle implies that authority and responsibility
should be related to each other. Responsibility without
authority is meaningless. When the work is divided and
different individuals are made responsible for different
jobs, they must also be provided with the necessary powers
to do those jobs. The extent of authority to be given to the
personnel should correspond to the amount of
c. Discipline
This is the respect for agreements which are directed
at achieving obedience, application, energy and outward
marks of respect. It requires good superiors at all levels,
clear and fair agreements and judicious application of
d. Unity of command
This principle means that an employee should receive
orders from one superior only to avoid confusion and
conflicts in the minds of subordinates.
e. Unity of direction
This principle implies that each group of activities
having the common objective much has one head and one
f. Subordination of individual interest to group
This principle emphasizes the necessity for protecting
group or common interest as against individual interest.
This will facilitate unity and avoid clashes among different
g. Remuneration of personnel
This principle means that the method of employee
remuneration should be just and fair and should afford the
maximum satisfaction on both employer and employee.
h. Centralization
This principle implies that the degree of concentration
of authority should vary according the needs of the
individual situation.
i. Scalar chain
This is the line of authority or chain of superiors
running from the highest rank to the lowest rank. The line
of authority should be followed ordinarily or normally.
However, when the strict following of the line of authority
becomes detrimental, the chain can be short-circuited.
j. Order
This is the principle of organization in the
arrangement of things and persons. According to this
principle, there must be a place for everything (and every
one), and everything (and everyone), must be in its (and
his) place.
k. Equity
This principle implies that the managers of an
undertaking should enlist the loyalty and devotion from the
employees by showing kindliness and justice in dealing
with them (i.e. subordinates).
l. Stability of tenure of personnel
This principle implies that every employee must be
assured of security of service. When an employee is
assured of security of service, he will take keen interest in
giving the best performance. So, unnecessary labor
turnover (i.e., termination of laborers) should be avoided.
m. Initiative
This principle implies that the managers of an
undertaking should permit their subordinates to take some
initiative in thinking out and executing plans. This will give
them (i.e., the subordinates) much satisfaction.
n. Espirit de corps
This principle means “Union is Strength”. So there
must be team-work and proper communication among the
members of the team.
Fayol, was strong supporter of universality of
managerial functions and principles. The functions and
principles are applicable in all types of organizations,
because, every concern has to take up proper utilization of
resources and every concern has to get optimum use of
resources in ever-changing environment.
3) Managerial Qualities
Fayol recognized the need for managers to acquire and
learn certain abilities and skills. Ha has also identified
different qualities for a successful manager. They are:
1. Physical qualities like health, strength et.,
2. Mental qualities like capacity to understand,
capacity to judge etc.,
3. Moral qualities like initiative, loyalty etc.,
4. Other qualities like general and special
knowledge, experience etc.
According to Fayol, these skills may be born skills and
can be acquired also.
Critical appraisal of Fayol’s Theory
Fayol’s contributions to management are both large
and invaluable. He provided a conceptual network for
analyzing managerial job. He differentiated between
managerial functions and operative functions. He has also
given universal functions and universal principles for
management which have got universal relevance even in
the present day organizational activities. He was first to
systematize the classical school. His theory retains much of
its force to this day also. These principles of administrative
theory have potential cope with the complexities of ever
changing organizations. Therefore, this theory has not only
consistencies but also flexibility.
But, this theory has been criticized on several grounds.
It has been criticized the theory too formal and power
centered. It does not give opportunity for individual
development. It has also been objected to that many of the
concepts of this theory are vague (confusing) and not
properly defined. This theory does not make clear
distinction between structure and process of organization
with organizational authority and design being over
stressed. Further this theory does not pay attention to the
workers’ behaviors and treats workers as biological
machines. Therefore, more or less this theory suffers from
the limitations of other classical theory. In-spite of these
limitations, it can be concluded that Fayol established
pattern of Management thought and practice.
3. Elton mayo and Hawthorne experiments (Human
Relations Theory)
Classical theories stressed on better methods of
production and more efficient forms of organization and
management. But, these theories failed to recognize the
importance of human element in management and treated
people in purely mechanistic terms and ignored the social
and physiological aspects. Therefore, workers began to
resist this formal and impersonal approach. This resistance
lead to development of new approach to the management
called human relations approach. The basic philosophy of
human relations approach is that worker is not purely
rational economic being but, is with emotions, feelings,
aspirations, etc. It is the responsibility of the management
to recognize and satisfy the social and psychological needs
of workers in order to win the willing co-operation
workers. Human relations approach states that when the
workers are satisfied and motivated to have high morale,
the productivity and efficiency of workers would increase.
Therefore, the human relations approach focused on the
workers in the jobs as against the jobs of workers in case of
classical approach. Human relation approach was evolved
during 1900’s and it was pioneered by Elton Mayo. He laid
the foundations for relation approach and conducted
experiments during 1924-1932
At Hawthorne plant in U.S.A. these experiments were
related to the effects of illumination on workers, effects of
social and human relationship among workers on their
productivity, effects of freedom of workers on productivity
and effects of salary and performance relationship on the
performance levels of workers etc. The important
conclusions of these experiments are as follows:
a) An organization is more than arrangement of
persons and functions, but, it is a social system and
human factor is very important in an organization.
b) An organization member is not purely a rational
economic being but he is a social and psychological
individual with emotions, feelings, moods etc.
c) Behavior of workers and their performance is not
only a product of the working conditions, but
mainly a product of their morale and happy and
satisfied workers only contribute for higher
d) Management should consider the social and
psychological needs to motivate workers.
e) Social environment of work place, particularly,
informal work group, inter-personal and inter-group
relations influence the performance of workers.
Critical Appraisal
Human relation approach although was started by
Elton Mayo, several other experts like Oliver Sheldon,
Maslow etc., have made significant contributions to human
relations approach. This approach became a landmark in
the evolution of management thought. The experts of this
approach have made significant contributions towards
humanizing organization and management. These
experiments directed the attention towards social and
physiological needs, informal groups, motivation and
morale of workers etc. This approach has lead to
development of new disciples like industrial psychology,
social psychology etc. Human relations approach focused
the social man as against the economic man.
But, this approach has been criticized on different
grounds. The main criticism against this approach is that it
suffers from lack of scientific validity, because, the
generalizations have been made with irrepresentative and
empirically inadequate group of workers. Further, this
approach is also criticized on the ground of being
unrealistic, short-sighted and too much emphasizing on
workers and social points. Nevertheless, this approach has
been thoroughly a new approach and brought out the
necessity of consideration of human element for higher
1. Explain the concept of scientific management.
2. Explain briefly the techniques of scientific
3. Make out a critical appraisal of scientific
4. Explain the principles of Management as discussed
by Fayol.
5. Make out a critical evaluation of Fayol’s theory.
6. Write a note on human relations approach.
Chapter 3
Planning – Meaning and significance – Types of plans, Different
approaches to plans – strategy, objectives and policies.

Planning is the most fundamental function of

management. Without setting the goals to be reached and
the course of action to be followed, organizing, staffing,
directing and controlling cannot be effective. Planning
provides the framework with in which coordination,
motivation and control are undertaken. Planning implies
looking ahead and deciding the course of action which
offers answers for the questions like what is to be done,
when and where to be done, how and why to be done and
who are the persons to take up the activities. Planning
governs survival, growth and prosperity of any
organization, in a competitive and ever-changing
Definitions and Meaning
There are many definitions on the planning given by
different authorities. Some of them are as follows:
1. In the words of Alfred and Betty, “Planning is a
thinking process in an organized foresight and
vision based on facts and experience which are
required for intelligent action.
2. According to Niles, “Planning is a conscious
process of selecting and developing best course of
action to accomplish the objective. It is the basis
from which future management decision spring”.
3. According to Allen, “Planning is trap laid down to
capture the future. Management planning involves
development of forecast, objectives, programs,
procedures, schedules and budgets. Therefore it is
essentially deciding about the future”.
4. According to ‘Koontz’ and O’ Dennel’,”Planning is
deciding in advance what to do, how to do it, where
to do it and also who is to do it. It begins with
forecast, bridges gap from where we are to where
we want to go. It makes it possible for things to
occur which could not otherwise happen”.
The analysis of the above definitions, reveals that
planning is thinking process which involves conscious
determination of objectives and results, selection of best
possible course of action to achieve the derived results, co-
ordination of activities and deciding the time sequence of
activities and the resources required for performing the
activities. Therefore, planning is a decision making process
which answers what, where, how and why of activities and
who are the persons to complete activities. Planning,
therefore, analyses the present situation and decides about
the future situation of the business.
Characteristics of Planning
On the basis of the facts discussed in the above
definitions, one can visualize the nature of planning. The
important features which are going to constitute the nature
of planning are as follows:
a. Focus on Objectives and Purpose
Basically speaking, planning has its focus on
objectives and results. It is a means towards
accomplishment of objectives. Managerial planning seeks
to achieve consistent and coordinated structure of
operations focused on desired goals. Therefore, planning is
goal oriented.
b. Prime Function
Planning is the basis of management process. All the
other functions, namely, organizing, staffing, directing and
controlling are designed to attain the goals set under
planning. Without planning there will be nothing to
organize and to control.
c. Intellectual Process
Planning is a mental process involving imagination,
foresight and sound judgement. It is not guess work and
requires disposition of thinking. Planning is an
intellectually demanding process requiring conscious
determination of course of action with purpose, knowledge
and facts.
d. Pervasive Process
Planning is an ongoing process, which is required at
all levels and at all branches. Top level management is
converted with strategy planning whereas middle and lower
levels are concerned with departmental and sectional
planning respectively. It is because decision-making has to
be under taken at all levels.
e. Choice Making
Planning is basically a problem of decision making or
choosing the best course of action from among different
alternatives. Planning loses its ground if there is only one
course of action.
f. Integrative process
The Basic purpose of planning is to bring about
harmony between activities and between persons. There
should be unity of action and unity of plans between
different departments and between different activities.
Planning helps to bring about effective integration of
people, activities and resources.
g. Close Relationship between Planning and
The basic function of planning is to provide sound
basis for controlling operations. Plans provide targets and
standards for measuring the performance. Therefore, the
activity of control is based on planning.
h. Continuous Process
Planning is an ongoing function and it is a dynamic
exercise. The activities are not going to end on the
completion of planning process. There should be follow-up
actions for implementation of plans. On the basis of the
results of implementation, the planning is to be revised for
next year. Therefore, it is continuous process.
Importance of Planning
Planning is of paramount importance both for
organization and for economy. Sound planning ensures
survival, growth and property of business. Planning acts as
a guide for business activities. The following points
highlight the importance of planning.
1. Focus on Objectives and Results
Every organization has its own objectives. Planning is
an instrument to achieve consistent and coordinated
structure of operations focused on desired goals. Planning
can, however, focus attention on the purposes and results to
be achieved. It forces the members of organization to take
actions for achievement of established objectives and
secures unity of purpose and action. Planning is, therefore,
concerned with determination of objectives, strategies,
policies, procedures etc.
2. Reduction in Uncertainties
Uncertainties and risks are inevitable for every
business. Planning, although, cannot eliminate them, but,
enables the management to cope up with uncertainties and
change. It helps management to identify potential threats
and opportunities and keeps management alert to the
changing environment. Thereby, it reduces uncertainties in
the business.
3. Decision Making Force
Business has got a number of branches, lavels and
activities. It is necessary that decisions are made at
different levels, different branches and for different
activities. By proper prediction, planning helps in taking
future oriented decisions and promotes rationality in
executive thinking. Thus, planning eliminates the need for
trial and error method in decision making.
4. Encouragement for Innovation and Creativity
Innovation and creativity are the essential things for
continuous progress and prosperity. Sound planning alone
can bring out innovative and creative activities for
business. Planning is forward looking activity and makes
business open and adaptive to the technological and other
developments. It tunes business organization to the
conditions of environment.
5. Co-Ordination
The essence of planning is to integrate the diverse
forces at work. Planning inter-relates all the activities and
resources of organization and relates internal conditions
with external sources. It leads to consistent and coordinated
structure of operations and avoids dangers of
misunderstandings, which may be caused by the lack of
6. Sense of Direction
Planning saves an organization from actions without
purposes and directs human efforts towards
accomplishment of goals. It provides the sense of direction
to the employees. It makes the work more meaningful. It
helps to bridge the gap between where we are and where
we want to go.
7. Decentralization
Planning helps in dispersal of decision-making power
among lower levels of management. It helps to reduce risk
in delegation of authority. By proper planning only
decentralization is possible.
8. Economy in Operations
Planning facilitates optimum utilization of available
resources. It increases effectiveness and efficiency in
activities. Thereby, it improves competitive strength. All
these are going to reduce cost of operation and increase
quality of work. Therefore, economy in operations can be
effectively achieved through planning.
9. Control Facility
A good plan specifies clearly the targets to be achieved.
This becomes a sound basis of control. The control activity,
therefore, starts with setting up of objectives. It includes
ascertainment of actuals, comparison of actuals with
objectives and taking necessary corrective actions for
deviations between targets and actual. Therefore, planning
and control are interrelated.
Limitations of Planning
Planning is not a substitute to executive judgment but
merely an aid to it. It may not guarantee success at all
times. Although the need for planning is unquestionable,
these are certain practical limitations of planning, which are
as follows:
a) Limitations of forecast
Planning is based on forecasts, which are not 100%
accurate. Planning is useful so far as premises of planning
prove substantially accurate. But, in practice, conditions
under which plans are executed may differ from assumed
conditions. If the reliable forecasts are not available,
planning becomes unrealistic.
b) Costly and time consuming
Planning is costly and time-consuming process.
Collection of data, their analysis and interpretation entail a
large expenditure. Further, these activities make planning
highly time consuming.
c) Inflexibility
Planning may result in internal inflexibility and
procedural rigidity, which curb initiative and individual
freedom. Sometimes, planning may also cause delay in
decision making. Detailed and rigid planning may restrict
manager’s capacity to take individual decisions and at the
same time it affects adversely development of subordinates.
d) Ineffectiveness
Planning becomes ineffective because external
environment will be always beyond the control of planners.
The effectiveness of planning may be adversely affected by
external forces like Government interference, natural
calamities, political climate, technological changes and
other unforeseen events.
e) False sense of security
Planning may create false sense of security in the
minds of managers. A manager may feel that the problems
will be solved when once the plans are put into action. But,
in reality, it may not occur. Management has to
continuously revise plans and monitor the execution.
f) People’s resistance
Planning may have to face workers’ resistance. It
makes the activity rigid and calls for discipline. Further,
plans with higher targets may adversely affect the morale
of workers. These factors may generate unwillingness on
part of employees to proceed with plans.
Types of Plans
Plans may be divided into different types on different
bases. From the point of view of time, plans may be short-
term plans, medium term plans and long term plans. On the
basis of levels of management, we have got strategic or top
level management plans, administrative or middle level
plans and functional or lower level plans. On the basis of
persons involved, plans may be individual plans, group
plans and organizational plans. However, the most
important basis of classification is the use of plans.
According to this classification, plans are classified into
two divisions:
1) Standing plans
2) Single use plans
1) Standing plans
Standing plans are also known as repetitive plans or
multi-use plans; these plans are recurring plans and are
used repetitively in situations of similar nature. They are
standing guides to thinking and action and answer recurring
problems. These plans simplify the decision making
process. There are different standing plans namely
objectives, strategies, policies, procedures, methods etc.
2) Single use of plans
These plans are meant for particular period or
particular activity and are not used repetitively. They may
be programs, budgets, projects etc.
1. Objectives
Before initiating any course of action, objectives of
business must be clearly defined. Managing an enterprise
without objectives is as good as driving a vehicle without
knowing the destination. Objectives are also known by
different terms like goals, ends, purposes, missions etc.
according to Macfarland, “Objectives are the goals or the
aims that the organization wishes to achieve over the
varying periods of time”.
Objectives are ultimate end that the organization and
the members try to achieve at different periods of time.
Effective management should be always management by
objectives (MBO). Objectives influence the philosophy and
the practice of business.
Features of Objectives:
The following are some of the importance features of
1) Objectives are pre-determined and stated in written form.
2) Objectives are basic plans and provide justification for
establishment and operation of an organization.
3) Objectives are multiple in nature. Every organization has
several objectives for different branches and for different
4) Objectives are arranged in hierarchy. They differ in
degree of importance. There are corporate, divisional,
departmental, sectional and individual objectives serving
as a means of achieving respective targets.
5) Objectives may be short-term objectives or long term
objectives according to the period covered. However,
both the types of objectives are to be properly integrated
so as to have unity of purpose.
6) Objectives may be general or specific objectives.
General objectives are concerned with growth,
prosperity, facing competition etc. Specific objectives
are concerned with specific activities.
7) Objectives may be independent or integrated.
8) Objectives may tangible or intangible.
Requisites of Sound Objectives
Objectives, to be effective, should possess certain
requisites which are as follows:
a) They should be clear and specific.
b) They must be measurable.
c) They should be result oriented.
d) They have to be well balanced.
e) They must be realistic.
f) They must be valid and acceptable.
Importance of Objectives
Clearly defined and properly understood objectives
provide the foundation for effective management. The
importance of objectives lies in the fact that objectives
provide legitimacy to the existence of organization.
Without sound objectives, management of the organization
may turn out difficult. The following points throw light on
the need and importance of objectives.
1. Objectives embody the philosophy and the mission
of the organization and therefore, they legitimize
the existence and provide the identity to
organization. Therefore, objectives provide social
sanction for organization.
2. Objectives serve as the basis for formulation of
policies, strategies, procedure, programs etc. They
help to develop integrated structure of plans.
3. Objectives provide direction for thinking and
action. They facilitate delegation and
decentralization of authority. They provide
opportunities for integration of efforts of
4. They not only provide individual motivation by
setting specific and challenging goals but also they
serve as standards for performance appraisal and
performance control.
2. Strategies
The word ‘strategy’ has been borrowed from military
science where it is used for planning and controls of troops.
At present, the concept of strategy has been put to use in a
number of fields, especially, in management.
A strategy has been defined as a special type of plan
prepared for meeting the challenges posed by the activities
of competitors and other environmental forces.
Strategy is also defined as “the complex plan for
bringing the organization from given posture (position) to
the desired position in future period of time”.
The above definitions reveal that the strategy is a
broad plan for deployment of resources is the pursuit of
defined objectives. It is an interpretative plan formulated by
top management to give meaning and shape to other plans.
It reflects the way in which an enterprise will react to its
environment. A strategy links the resources of the
organization with risks and challenges of the business. It
lays down long term direction for the enterprises.
The definitions already discussed reveal different
characteristics features of a strategy. They are as follows:
1. A strategy is a contigent plan and it is designed to
meet demands of particular situation.
2. Strategy provides directions in which human and
physical resource will be deployed for achieving
3. Strategy relates an organization with external
environment and it is interpretative plan to interpet
and give the meaning to other plans.
4. It is the right combination of different factors.
5. It is forwards looking and formulated by top level
6. It is long term in nature and action oriented.
Essentials and importance
There are different requisites of a sound strategy.
There should be internal consistency for every strategy i.e.,
it should be consistent with goals and policies of
organization. It should also be consistent with external
environment. There should be appropriate horizon on every
strategy. A strategy should be realistic and it should have
social sanction and feasible and workable within
constraints and parameters known to the management.
A strategy defines the way in which an organization
will react to its environment. It is a scheme of marshaling
& deploying the resources for achieving organizational
objectives. It helps the business to face environmental
changes. It provides directions for achievement of
objectives and for optimum utilization of resource to
increase competitive strength and facilitates the co-
ordination and control.
Types of strategies
There are different types of strategies which may be
categorized as follows:
1. Master strategy
2. Program strategy
3. Sub strategy
A master strategy refers to entire pattern of company’s
objectives and involves unified direction to the
organization. A program strategy is more specific and
concerned with deployment resources to achieve
organizational purposes. They support master strategy. A
sub strategy is concerned with achieving of specific
objective. It provides guidance to decision making of a sub-
Strategies may also be divided into different types on
the basis of purpose for which they are prepared. According
to this classification, they may be stability strategy, growth
strategy, replacement strategy combination strategy,
competitive strategy etc.
Steps in strategy formulation
The following are important stages in strategy
1. Setting the objectives.
2. Environmental analysis.
3. Strategic decision making.
4. Self-appraisal.
5. Strategy implementation and control.
The strategic procedure starts with determination of
mission and objectives of an organization. When once the
objectives are defined, the next step is to analyze the
internal and external environment to identify opportunities
and threats. The strength and weakness of the organization
are analyzed so as to capitalize on the strength and to
minimize the weakness. Afterwards, the strategic
alternatives are to be formulated and evaluated. An
organization must select the alternative which is best suited
to its conditions. Choice of a strategy depends on
perceptions of management, external environment and past
strategies. When once the strategy is finalized, it should be
translated into tactical and operational plans. The strategy
should be reviewed after it is implemented. Controls should
be developed to evaluate the performance and it should be
modified according to the changes in the environment.
3. Policies
A policy is broad statement formulated to provide
guidance in decision making at lower levels of
management. It provides the framework or limits within
which the decision makers are expected to operate while
making decisions. This provides guidance to thinking and
action of subordinates for the purpose of achieving the
‘Policies’ have been defined by Macfarland as follows:
“Policies are planned expressions of the company’s
official attitude towards the range of behaviors within
which they will permit or desire its employees to act”.
From the above definition, it is clear that policies are
the routes for the realization of objectives. While the
objectives provide the destination to be reached, policies
provide broad paths for reaching them. Policies are both
restrictive and permissive.