Class 12 Business Studies

Nature and Significance of Management


The process of doing things with the aim of achieving goals effectively and efficiently is called management.

There are three keywords in this definition, viz. process, effectively and efficiently. Let us try to understand them one by one.


In this definition, process means primary functions of activities which the management does to get the task done. The process includes planning, organizing, staffing, directing and controlling.


Effective means finishing the task within the stipulated time-frame. For example: if a quarterly target is achieved within the given quarter, it is said to be done effectively.


Efficiency means finishing the task without incurring cost overruns. Cost can be in terms of monetary cost, cost of human resources, raw materials, etc. For example: if a factory produces the targeted number of units in a given month then the factory is showing effectiveness. But if the same factory does so incurring a higher cost than planned, the factory is showing inefficiency. If another factory produces the same number of units in a given month but incurs a cost that is lower than what was specified, the factory is showing both effectiveness and efficiency.

Characteristics of Management

Management is a goal oriented process

An organization has a set of basic goals which is the cause of existence of the organization. The management has to channelize all the efforts towards achieving that goal.

Management is all pervasive

This means that management is present in every organization, right from a small roadside food joint to a big MNC.

Management is multi-dimensional

Management is a complex activity with many dimensions. However, there are three main dimensions of management, and they are: management of work, management of people and management of operations.

Management of Work

Some sort of work is always carried out in each and every organization. The manager needs to manage such a work. For example: cars are serviced at a service station, and the supervisor needs to ensure that cars are serviced properly and on time.

Management of People

People are always involved in functioning of an organization. These are the employees of the organization, and the manager has to manage people as individual, as well as groups.

Management of Operations

Various operations keep on going in organizations. For example: a packet of biscuit becomes a packet of biscuit after raw materials pass through various operations. These operations need to be managed and need to be synchronized so that biscuit production can keep up with market demand.

Management is a continuous process

The work of management never stops rather it is always a work in progress. An organization needs to function every day and hence the process of management is a continuous one.

Management is a group activity

An organization is composed many individuals. There can be many teams in an organization and all the teams need to work in coordination. Even for a single team, all its members need to function as a group. So, we can say that management is a group activity.

Management is a dynamic function

The external environment constantly keeps on changing. So, the management needs to be dynamic in order to be in tune with the business environment. You can take example of Mc Donald’s to understand this. When this company entered the Indian market, it focused on chicken burger and vegetarian burgers which is not the case in other markets.

Management is an intangible force

Management cannot be physically seen or felt but its effect can be seen in every aspect of an organization.

Objectives of Management

Management has to work towards achieving certain objectives which are always related to the business purpose of the organization. These objectives can be classified into three types, viz. ogranisational objectives, social objectives and personal objectives.

Organizational Objectives

Profit maximization is the main objective of any organization. But the company also needs to fulfill the interests of various stakeholders; like shareholders, employees, customers and government. The economic objective of an organization is composed of survival, profit and growth.

Survival is possible when the organization earns enough to cover costs. But only survival is not enough. Profit is necessary to keep the organization functioning in the long run. Growth is also important to increase its potential for survival and profitability.

Social Objectives

An organization has to function in a society. So, it has certain social objectives as well. Creation of economic value is the main social objective of an organization. The organization also needs to be environment-friendly. The company also needs to carry out certain corporate social responsibility (CSR) activities in order to give back to the society. Many companies carry out various charity works. Some companies open schools and hospitals. Companies are also expected to provide suitable opportunities for weaker sections of the society.

Personnel Objectives

An organization is composed of workers. Each individual has various personal needs. A person joins a job with the prime objective of earning a livelihood. But apart from livelihood, an individual has many other needs. For example: a person wants material comforts which can be bought with money. A person also wants recognition in society and in family. An organization has to cater to these needs of its workers.

Importance of Management

Nature of Management

Management is both an art and a science. To understand this let us first understand the basic features of art and science.

Basic Features of Art

Existence of theoretical knowledge

Theoretical knowledge exists in the field of every art. For example: if someone wants to become a good painter, he needs to learn anatomy, colour theory and painting techniques.

Personalized application

All the students of fine arts learn the basics of how to make drawing and painting. But different artists apply these theories with their own personal style and preferences. Personalized application creates someone an ace artist in the mold of Vinci or Satish Gujral.

Based on practice and creativity

An artist needs to put many years of practice in order to master the techniques. Moreover, an artist also needs to apply his creativity in order to create a masterpiece.

Management is an Art

Many theories exist in the field of management. A manager can read them by enrolling for some management course or by going through various books and journals. But a manager needs to apply his own personal style and creativity to be an effective manager. So, we can say that management is an art.

Basic Features of Science

Systematized body of knowledge

A science has a systematized body of knowledge. For example: physics or chemistry has a systematized body of knowledge.

Principles based on experimentation

All the scientific principles are formulated only after being proved through scientific experiments.

Universal Validity

Every rule of science is valid throughout the universe.

Management is a Science

There is a systematized body of knowledge in the field of management. Many principles of management are formulated after proving them through experiments. But a rule of management may not have universal validity. A business functions under the influence of various external factors. Many of these factors cannot be forecast in advance. A manager needs to quickly adapt to such a change in the market. However, management holds some semblance of a science.

Management as a Profession

Characteristics of a profession

Let us see management fits how many of these criteria.

There is a well defined body of knowledge in the field of management. There are business schools which impart education in management. There are journals and books which a manager can use to get knowledge about management.

While a person needs a degree in medical science to become a doctor, there is no such need in the field of management. Many people become managers in spite of having no degree in management.

A doctor in India needs to be the member of the Indian Medical Association. A lawyer needs to be a member of the Bar Council. But being a member of the All India Management Association is not mandatory for a person to be a manager.

Managers have to follow certain ethics while practicing their profession.

A manager’s job is to serve the organization he is working for. His job is to achieve the goal of the organization.

Levels of Management

There are three main levels of management in an organization: top management, middle management and lower management. Lower management is also called supervisory or operational management.

Top Management

The top management of a company is composed of senior level executives. The job of top management is to coordinate among various departments. The top management has to analyse the business environment. Then it needs to formulate strategies to achieve organisation’s goals. The top management gives broad guidelines to the middle management people.

Middle Management

Middle management has to translate and implement the guidelines given by the top management. Middle management needs to ensure proper implementation of company’s strategies to meet organisation’s goals. Middle management needs to plan for raw materials and personnel. It needs to ensure coordination among various departments.

Supervisory or Operational Management

This is the lower level of management. It has to ensure accomplishment of tasks. Managers at this level are called line managers or first line managers. A first line manager supervises the work of the workers. For example: factory workers are supervised by the supervisor. A team of sales representatives is led by an Area Manager. The line manager needs to pass instructions to workers and to ensure that the work is being done as per the instruction.

Functions of Management

Planning, Organising, Staffing, Directing, Controlling


Planning is all about determining in advance what needs to be done. It involves setting a goal and chalking out actions to achieve that goal.


Organizing involves allocation of resources, allocation of manpower, assigning tasks and establishing authority and line of command.


Staffing is a part of organizing. The manager needs to ensure adequate manpower allocation in terms of numbers and skill level.


The management needs to provide direction to the workers so that they can work to achieve the desired goal. The management also needs to motivate and influence people to work with all the zeal.


It is about suitable use of resources. It is also about periodical analysis to see if everything is going in the right direction. If some deviation occurs then the manager has to take corrective actions. For example: let us assume that a production unit was given the task of producing ten thousand widgets in a month, which translates to 30,000 widgets in a quarter. If the unit produces only 9,000 widgets in the first month then the manager needs to ensure that the number is compensated before the quarter ends.

Coordination: The Essence of Management

An organization is composed of diverse people and many departments. All the departments must work in coordination to ensure smooth functioning of the organization.

Different departments can have different needs, features and biases. In many complex organizations, different departments can be like silos, often insulated from the outer world. Coordination is necessary to ensure that different departments and diverse people work towards organisation’s goal.