CBSE Class XII Business Studies

Chapter 1 Nature & Significance Of Management

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1.1 MEANING, DEFINITIONS AND FEATURES OF MANAGEMENT
According to Theo Heimann, management has three different meanings, viz.,
1 Management as a Noun: refers to a Group of Managers.
2 Management as a Process: refers to the Functions of Management i.e. Planning, Organising,
Directing, Controlling, etc.
3 Management as a Discipline: refers to the Subject of Management.
Management is an individual or a group of individuals that accept responsibilities to run an
organisation. They Plan, Organise, Direct and Control all the essential activities of the organisation.
Management does not do the work themselves. They motivate others to do the work and co-
ordinate (i.e. bring together) all the work for achieving the objectives of the organisation.
Management brings together all Six Ms i.e. Men and Women, Money, Machines, Materials, Methods
and Markets. They use these resources for achieving the objectives of the organisation such as high
sales, maximum profits, business expansion, etc.
DEFINITIONS OF MANAGEMENT:
Management is the art of knowing what you want to do and then seeing that it is done in the
best and cheapest way. F.W. Taylor
To manage is to forecast and to plan, to organise to command, to coordinate and to control.
Henry Fayol
Management is defined as the process of planning, organising, actuating and controlling an
organisations operations in order to achieve coordination of the human and material resources
essential in the effective and efficient attainment of objectives. Robert L. Trewelly and M.
Gene Newport
Management is a multipurpose organ that manages a business and manages Managers and
manages Workers and work. Peter Drucker
FEATURES OF MANAGEMENT:
1. Continuous and never ending process: Management is a Process. It includes four main functions,
viz., Planning, Organising, Directing and Controlling. The manager has to Plan and Organise all the
activities. He had to give proper Directions to his subordinates. He also has to Control all the
activities. The manager has to perform these functions continuously. Therefore, management is a
continuous and never ending process.
2. Getting things done through people: The managers do not do the work themselves. They get the
work done through the workers. The workers should not be treated like slaves. They should not
be tricked, threatened or forced to do the work. A favourable work environment should be
created and maintained.
3. Result oriented science and art: Management is result oriented because it gives a lot of
importance to "Results". Examples of Results like, increase in market share, increase in profits,
etc. Management always wants to get the best results at all times.
4. Multidisciplinary in nature: Management has to get the work done through people. It has to
manage people. This is a very difficult job because different people have different emotions,
feelings, aspirations, etc. Similarly, the same person may have different emotions at different
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times. So, management is a very complex job. Therefore, management uses knowledge from
many different subjects such as Economics, Information Technology, Psychology, Sociology, etc.
Therefore, it is multidisciplinary in nature.
5. A group and not an individual activity: Management is not an individual activity. It is a group
activity. It uses group (employees) efforts to achieve group (owners) objectives. It tries to satisfy
the needs and wants of a group (consumers). Nowadays, importance is given to the team (group)
and not to individuals.
6. Follows established principles or rules: Management follows established principles, such as
division of work, discipline, unity of command, etc. These principles help to prevent and solve the
problems in the organisation.
7. Aided but not replaced by computers: Now-a-days, all managers use computers. Computers help
the managers to take accurate decisions. However, computers can only help management.
Computers cannot replace management. This is because management takes the final
responsibility. Thus Management is aided (helped) but not replaced by computers.
8. Situational in nature: Management makes plans, policies and decisions according to the
situation. It changes its style according to the situation. It uses different plans, policies, decisions
and styles for different situations. The manager first studies the full present situation. Then he
draws conclusions about the situation. Then he makes plans, decisions, etc., which are best for
the present situation. This is called Situational Management.
9. Need not be an ownership: In small organisations, management and ownership are one and the
same. However, in large organisations, management is separate from ownership. The managers
are highly qualified professionals who are hired from outside. The owners are the shareholders of
the company.
10. Both an art and science: Management is result-oriented. Therefore, it is an Art. Management
conducts continuous research. Thus, it is also a Science.
11. Management is all pervasive: Management is necessary for running a business. It is also
essential for running business, educational, charitable and religious institutions. Management is a
must for all activities, and therefore, it is all pervasive.
12. Management is intangible: Management is intangible, i.e. it cannot be seen & touched, but it
can be felt & realised by its results. The success or failure of management can be judged only by
its results. If there is good discipline, good productivity, good profits, etc., then the management
is successful and vice-versa.
13. Uses a professional approach in work: Managers use a professional approach for getting the
work done from their subordinates. They delegate (i.e. give) authority to their subordinates. They
ask their subordinates to give suggestions for improving their work. They also encourage
subordinates to take the initiative. Initiative means to do the right thing at the right time without
being guided or helped by the superior.
14. Dynamic in nature: Management is dynamic in nature. That is, management is creative and
innovative. An organisation will survive and succeed only if it is dynamic. It must continuously
bring in new and creative ideas, new products, new product features, new ads, new marketing
techniques, etc.

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1.2 OBJECTIVES : ORGANISATIONAL, SOCIAL AND PERSONAL
Management seeks to achieve certain objectives which are the desired result of any activity. They
must be derived from the basic purpose of the business. In any organization there are different
objectives and management has to achieve all objectives in an effective and efficient manner.
Objectives can be classified into organisational, social and personal or individual objectives.
(i) Organisational objectives: Management is expected to work for the achievement of the
objectives of the particular organisation in which it exists. Organisational objectives include:
(a) Reasonable profits so as to give a fair return on the capital invested in business
(b) Survival and solvency of the business, i.e., continuity.
(c) Growth and expansion of the enterprise
(d) Improving the goodwill or reputation of the enterprise.
(ii) Personal objectives: An organisation consists of several persons who have their own objectives.
These objectives are as follows:
(a) Fair remuneration for work performed
(b) Reasonable working conditions
(c) Opportunities for training and development
(d) Participation in management and prosperity of the enterprise
(e) Reasonable security of service.
(iii) Social objectives: Management is not only a representative of the owners and workers, but is
also responsible to the various groups outside the organisation. It is expected to fulfill the objectives
of the society which are given below:
(a) Quality of goods and services at fair price to consumers.
(b) Honest and prompt payment of taxes to the Government.
(c) Conservation of environment and natural resources.
(d) Fair dealings with suppliers, dealers and competitors.
(e) Preservation of ethical values of the society.
1.3 IMPORTANCE OF MANAGEMENT
Management seeks to achieve certain objectives which are the desired result of any activity. They
must be derived from the basic purpose of the business. In any organization there are different
According to Peter Drucker, "Management is what the modern world is all about." This statement
means that all the development that has taken place in the world is due to efficient management The
points below bring out the significance or importance of management.
1. Encourages Initiative: Management encourages initiative. Initiative means to do the right thing
at the right time without being told or influenced by the superior. The employees should be
encouraged to make their own plans and also to implement these plans. Initiative gives
satisfaction to employees and success to organisation.
2. Encourages Innovation: Management also encourages innovation in the organisation. Innovation
brings new ideas, new technology, new methods, new products, new services, etc. This makes
the organisation more competitive and efficient.
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3. Facilitates growth and expansion: Management makes optimum utilisation of available
resources. It reduces wastage and increase efficiency. It encourages team work and motivates
employees. It also reduces absenteeism and labour turnover. All this results in growth, expansion
and diversification of the organisation.
4. Improves life of workers: Management shares some of its profits with the workers. It provides
the workers with good working environment and conditions. It also gives the workers many
financial and non-financial incentives. All this improves the quality of life of the workers.
5. Improves corporate image: If the management is good, then the organisation will produce good
quality goods and services. This will improve the goodwill and corporate image of the
organisation. A good corporate image brings many added benefits to the organisation.
6. Motivates employees: Management motivates employees by providing financial and non-
financial incentives. These incentives increase the willingness and efficiency of the employees.
This results in boosting productivity and profitability of the organisation.
7. Optimum use of resources: Management brings together the available resources. It makes
optimum (best) use of these resources. This brings best results to the organisation.
8. Reduces wastage: Management reduces the wastage of human, material and financial resources.
Wastage is reduced by proper production planning and control. If wastage is reduced then
productivity will increase.
9. Increases efficiency: Efficiency is the relationship between returns and cost. Management uses
many techniques to increase returns and to reduce costs. Higher efficiency brings many benefits
to the organisation.
10. Improves relations: Management improves relations between individuals, groups, departments
and between levels of management. Better relations lead to better team work. Better team work
brings success to the organisation.
11. Reduces absenteeism and labour turnover: Absenteeism means the employee is absent without
permission. Labour Turnover means the employee leaves the organisation. Labour absenteeism
and turnover increases the cost and causes many problems in the smooth functioning of the
organisation. Management uses different techniques to reduce absenteeism and labour turnover
in the organisation.
12. Encourages Team Work: Management encourages employees to work as a team. It develops a
team spirit in the organisation. This unity bring success to the organisation.

1.4 MANAGEMENT AS SCIENCE, ART AND PROFESSION
Some authors describe management as an art because management relates to practical application
knowledge and skill as per the needs of a given situation. On the other hand there are authors who
regard management as science because management represents a body of well-tested principles,
which can be universally applied. Management as a Science and Management as an art are discussed
MANAGEMENT AS A SCIENCE: - Science is a systematized body of knowledge pertaining to a specific
field of study and contains general facts that explain a phenomenon. It establishes the cause and
effect relationship between two or more factors and has certain principles governing the
relationship. These principles are developed through the scientific methods of observation of events
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and verification through testing. The principles are absolute facts having universal application. As
such science is characterized by for main features.
(i) Basic facts or general principles capable of universal application
(ii) Developed through scientific enquiry or experiments
(iii) Establish cause and effect relationships between various factors.
(iv) Their Validity can be verified and they serve as reliable guide for predicting future events.
On examination we find that while management has some of these features and it does not have
others. For instance management is systematized body knowledge. Also principles of management
are arrived on the observation and repeated experimentation in various types of organizations. But
the methods of observation followed by management are not cent percent objective because the
subjects are human being whose behaviour cannot be predicted. The Management principles are
flexible and can be used in different situations with modification. So these principles do not have
universal applicability. Thus management may be called an inexact science as is the case with other
social sciences.
MANAGEMENT AS AN ART: Art is concerned with the application of knowledge and skills. Desired
results are achieved through the application of skill. Thus an art has the following characteristics:
(i) It signifies practical knowledge.
(ii) It signifies personal skills in particular fields of human activity.
(iii) It helps in achieving desired/ predetermined results.
(iv) It is creative in nature.
(v) Improvement through continuous practice
Management is also an art since it involves application of knowledge and personal skills to achieve
desired results. Every manager has to apply certain knowledge and skills while dealing with the
people to achieve the desired results. As an art management calls for a combination of abilities, skills
and judgment and a continuous practice of management concepts and principles.
MANAGEMENT: BOTH SCIENCE AND AN ART: Management is combination of an organized body of
knowledge and skilful application of this knowledge. Effective performance of various management
functions necessarily needs an adequate basis of knowledge and a scientific approach. Thus,
management is both a science and an art;. It is a science because it uses certain principles. It is an art
because it requires continuous practice and personal skills. From the above discussion it is clear that
management is both a science and an art.
MANAGEMENT IS A PROFESSION: A profession means an occupation for which specialized skills are
required. In a profession entry is restricted by examination or education. But these skills are not
meant for self-satisfaction but are used for the large interests of the society. A profession has the
following characteristics:
1. Well defined body of knowledge.
2. Restricted entry.
3. Representative Professional association.
4. Ethical Code of conduct.
5. Service Motive
Management can be referred as a profession if it fulfills the above mentioned features:-
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1. Well defined body of knowledge: Every profession has a specialized body of knowledge relevant
to the area of specialization and it can be imported through formal methods of instructions or
education. Management fulfills these criteria. The principle and theories of management have
been developed for the existing and potential managers.
2. Restricted entry: Entry in a profession is subject to qualifying prescribed exams and acquired
practice through training and apprenticeship. However there are no restrictions on a person to
become a manager anyone can become a manager irrespective of ducation. Therefore this
criterion is not fulfilled by the management.
3. Professional association: For every profession a representative association is there to lay down
the code of conduct and membership rules. Management also has association such as All India
Management Association, National Institution of Personnel Management etc. However the
membership to these associations is not essential for the managers therefore this criterion is
partly fulfilled by the management.
4. Ethical Code of conduct: Members of a profession have to abide by code of conduct which
contains rules and regulations relating to the profession any member violating the code can be
punished and the membership can be cancelled. The All India Management Association has also
framed code of conduct for the managers but there is no legal backing for this code. Therefore
management does not fulfill this criterion.
5. Service motive: The basic motive of a profession is to serve their clients interests by rendering
dedicated and committed service. The basic purpose of management is to help the organisation
achieve its stated goal. This may be profit maximisation for a business enterprise. However, profit
maximisation is not the sole objective of the management.. Therefore, if an organisation has a
good management team that is efficient and effective it automatically serves society by providing
good quality products at reasonable prices.
Conclusion: On the basis of above discussion we find that management fulfills some of the features
of profession. Therefore it can be regarded as profession. But not full-fledged professions like legal or
medical profession. But the recent trends show that it is moving in that direction.
1.5 LEVELS OF MANAGEMENT
Every business organisation, irrespective of its size, has many managerial positions in its structure.
These positions are created through the process of delegation of authority from top to lower levels.
Each position is marked by authority, responsibility, functions, roles and relationships. The contents
and nature vary, depending in the level at which the position lies. As one moves upward in the
organisation, the managerial position plays an important role, larger the contribution, greater the
authority and higher the responsibility. These managerial positions lying in the chain of command
may be classified into various groups or levels of management.
A series of managerial position from top to bottom is called levels of management. Level of
management determines the amount of authority and status enjoyed by any manager. The levels of
management can be classified into three parts.
1) Top level Management
2) Middle level management
3) Supervisory level or operating management

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TOP MANAGEMENT: Top management consists of managers at the highest level in the management
chain of command. This includes Board of Directors, Chief executive and the departmental heads.
Functions of top level Management / Activities Performed by top level Management
(i) To make a corporate plan for the entire organisation covering all areas of operations.
(ii) To decide upon the matters which are vital for the survival, profitability and growth of the
organisation such as introduction of new product, shifting to new technology and opening
new plant etc.
(iii) To decide corporate goals.
(iv) To decide structure of organisation, creating various positions there in
(v) To exercise overall managerial control through the process of reviewing over all financial and
operating results.
(vi) To make decisions regarding disposal and distribution of profits.
(vii) To select key officials and executives for the company.
(viii) To coordinate various sub-systems of the organisation.
(ix) To maintain liaison with outside parties having a stake in business such as government, trade
union and trade associations etc.
(x) To formulate basic policies and providing direction and leadership to the organisation as a
whole.
MIDDLE MANAGEMENT: Middle level management consists of departmental managers, branch
managers like purchase managers, production managers, personnel manager, finance manager
marketing manager etc.
Function of the middle level management / Activities performed by the middle level management.
(i) To prepare departmental plan covering all activities of the department within the basic
framework of the corporate plan.
(ii) To establish departmental goals and to decide upon various ways and means for achieving
these goals to contribute to organisational goals.
(iii) To perform all other managerial functions with regard to departmental activities for securing
smooth functioning of the entire department.
(iv) To issue detailed orders and instructions to lower level managers and coordinate the
activities of various work units at lower level.
(v) Middle level managers explain and interpret policy decisions made at the top level to lower
level managers.
SUPERVISORY OR OPERATIONAL MANAGEMENT: Supervisory / operative / lower management
consist of first line supervisors. They generally have such designations as superintendent, section
officer, foreman etc. Following are the important functions of lower management.
(i) Planning of day to day work
(ii) Assignment of jobs and issuing orders and instructions
(iii) Supervising and guiding workers
(iv) Maintaining close personal contacts with workers to ensure discipline and team-work
(v) Evaluating operating performance
(vi) Sending reports and statements to higher authorities
(vii) Communicating the grievances and suggestions of workers to higher authorities.
Reporting the problems faced and suggestions made by workers to the middle level management.
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1.6 MANAGEMENT FUNCTIONS OR ELEMENTS P.O.S.D.C.
PLANNING, ORGANISING, STAFFING, DIRECTING AND CONTROLLING MEANING
1. Planning: Planning is the primary function of management. It involves determination of a course
of action to achieve desired results/objectives. Planning is the starting point of management
process and all other functions of management are related to and dependent on planning
function. Planning is the key to success, stability and prosperity in business. It acts as a tool for
solving the problems of a business unit. Planning plays a pivotal role in business management It
helps to visualize the future problems and keeps management ready with possible solutions.
2. Organising: Organising is next to planning. It means to bring the resources (men, materials,
machines, etc.) together and use them properly for achieving the objectives. Organisation is a
process as well as it is a structure. Organising means arranging ways and means for the execution
of a business plan. It provides suitable administrative structure and facilitates execution of
proposed plan. Organising involves different aspects such as departmentation, span of control
delegation of authority, establishment of superior-subordinate relationship and provision of
mechanism for co-ordination of various business activities.
3. Staffing: Staffing refers to manpower required for the execution of a business plan. Staffing, as
managerial function, involves recruitment, selection, appraisal, remuneration and development
of managerial personnel. The need of staffing arises in the initial period and also from time to
time for replacement and also along with the expansion and diversification of business activities.
Every business unit needs efficient, stable and cooperative staff for the management of business
activities. Manpower is the most important asset of a business unit. In many organisations,
manpower planning and development activities are entrusted to personnel manager or HRD
manager. 'Right man for the right job' is the basic principle in staffing.
4. Directing (Leading): Directing as a managerial function, deals with guiding and instructing people
to do the work in the right manner. Directing/leading is the responsibility of managers at all
levels. They have to work as leaders of their subordinates. Clear plans and sound organisation set
the stage but it requires a manager to direct and lead his men for achieving the objectives.
Directing function is quite comprehensive. It involves Directing as well as raising the morale of
subordinates. It also involves communicating, leading and motivating. Leadership is essential on
the part of managers for achieving organisational objectives.
5. Controlling: Controlling is an important function of management. It is necessary in the case of
individuals and departments so as to avoid wrong actions and activities. Controlling involves
three broad aspects: (a) establishing standards of performance, (b) measuring work in progress
and interpreting results achieved, and (c) taking corrective actions, if required. Business plans do
not give positive results automatically. Managers have to exercise effective control in order to
bring success to a business plan. Control is closely linked with other managerial functions. It is
rightly treated as the soul of management process. It is true that without planning there will be
nothing to control It is equally true that without control planning will be only an academic
exercise Controlling is a continuous activity of a supervisory nature.
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6. Coordinating: Effective coordination and also integration of activities of different departments
are essential for orderly working of an Organisation. This suggests the importance of coordinating
as management function. A manager must coordinate the work for which he is accountable. Co-
ordination is rightly treated as the essence of management. It may be treated as an independent
function or as a part of organisms function. Coordination is essential at all levels of management.
It gives one clear-cut direction to the activities of individuals and departments. It also avoids
misdirection and wastages and brings unity of action in the Organisation. Co-ordination will not
come automatically or on its own Special efforts are necessary on the part of managers for
achieving such coordination.
7. Motivating: Motivating is one managerial function in which a manager motivates his men to give
their best to the Organisation. It means to encourage people to take more interest and initiative
in the work assigned. Organisations prosper when the employees are motivated through special
efforts including provision of facilities and incentives. Motivation is actually inspiring and
encouraging people to work more and contribute more to achieve organisational objectives. It is
a psychological process of great significance.
8. Communicating: Communication (written or oral) is necessary for the exchange of facts,
opinions, ideas and information between individuals and departments. In an organisation,
communication is useful for giving information, guidance and instructions. Managers should be
good communicators. They have to use major portion of their time on communication in order to
direct, motivate and co-ordinate activities of their subordinates. People think and act collectively
through communication. According to Louis Allen, "Communication involves a systematic and
continuing process of telling, listening and understanding".
1.7 CO-ORDINATION MEANING AND FEATURES
Co-ordination as a function of management refers to the task of integrating the activities of separate
units of on organization to accomplish the goals efficiently. The purpose of coordination is to ensure
that the goals of units and subunits are pursued in harmony with each other keeping in view the
goals of the organization as a whole. The definitions given above highlight the following features of
coordination:
(i) Coordination integrates group efforts: Coordination unifies unrelated or diverse interests into
purposeful work activity. It gives a common focus to group effort to ensure that performance is
as it was planned and scheduled.
(ii) Coordination ensures unity of action: The purpose of coordination is to secure unity of action in
the realisation of a common purpose. It acts as the binding force between departments and
ensures that all action is aimed at achieving the goals of the organisation.
(iii) Coordination is a continuous process: It is not a one time process but a continuous process. It
starts with the establishment of business and runs up to its closure. Maintaining coordination
among various activities of business is the essential task of managers. This should happen
continuously
(iv) Coordination is an all pervasive function: Coordination is required at all levels of management
due to the interdependent nature of activities of various departments. It integrates the efforts of
different departments and different levels.
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(v) Coordination is the responsibility of all managers: Coordination is the function of every manager
in the organisation. Top level managers need to coordinate with their subordinates to ensure
that the overall policies for the organisation are duly carried out. Middle level management
coordinates with both the top level and first line managers. Operational level management
(vi) Coordination is a deliberate function: A manager has to coordinate the efforts of different
people in a deliberate manner. Even where members of a department willingly cooperate and
work, coordination gives a direction to that willing spirit. Cooperation in the absence of
coordination may lead to wasted effort and coordination without cooperation may lead to
dissatisfaction among employees.