Class 12 Business Studies

Principles of Management


Principles of management are general guidelines for decision making and behaviour.

Nature of Principles of Management

Universal Applicability

Principles of management can be universally applied, irrespective of the nature, size and type of business. However, the degree of applicability of these principles varies from one business to another.

General Guidelines

Principles of management are general guidelines. But they do not provide readymade solutions to all the managerial problems.

Formed by Practice and Experimentation

Principles of management are formed by experience and collective wisdom of managers and by experimentation.


Principles of management are flexible in the sense that they can be tweaked according to the situation at the workplace.

Mainly Behavioural

Principles of management are mainly aimed at behaviour pattern of workers and managers. They are all about interaction of human and resources in order to achieve the goal of the business.

Cause and Effect Relationship

Principles of management are based on cause and effect relationship. For example, the concept of variable pay is based on the fact that incentive always has motivational effect on the worker.


Principles of management can be used as per the demand of the situation.

Significance of Principles of Management

Scientific Management

According to Taylor Scientific management means knowing exactly what you want men to do and seeing that they do it in the best and cheapest way.

Taylor’s principles of scientific management are as follows:

Science, not the rule of thumb

Scientific management is based on the study of traditional method of doing a work and finding out the best way of doing the work. On the other hand, rule of thumb may not always lead to efficiency because different managers can have their own rules of thumb. Scientific method of doing a work helps in tremendous saving of energy and time and ensures maximum possible output.

Harmony not discord

A manager has the mandate to get the work done from workers. This often results in class conflict. But the conflict does not lead to anywhere. According to Taylor, both managers and workers should change their paradigm and start cooperating with each other. A profitable organization will always be better for both the manager and the worker.

Cooperation not individualism

This principle is more or less similar to the previous one. All the workers should work as a team rather than working as different individuals. There is a saying that Together Everyone Achieves More (TEAM).

Development of each person to her/his greatest efficiency and prosperity

Each person should be trainer in order to improve his/her efficiency. This will help in maximizing the output. Once the gains made by organization are shared among all the workers, every worker will become more prosperous.

The techniques of scientific management

Functional foremanship

Foreman is the lowest level of manager in a factory and he is in direct contact with the shop-floor workers. Taylor was of the opinion that a person needs to have many qualities in order to be a good foreman. But all the qualities cannot be found in a single individual. So, Taylor advocated the separation of planning and execution functions.

Standardization and Simplification of Work

All the prevalent methods of doing a task should be studied and then the best method should be sorted out and further refined in order to finish the task in as efficient manner as possible. Then work-study techniques should be employed to reduce time, fatigue and energy consumption to do the task. The standard procedure should then be made the benchmark and should be stuck at every workplace of the factory.

Simplification involves ruling out superfluous variations and sticking to the most suitable methods and products.

Method Study

The objective of method study is to find out the best way of doing a job. This concept resulted in assembly line production during the industrial revolution. Ford Motors was among the pioneers to practice assembly line production when it started making model T cars.

Motion Study

Motion study involves study of movements of various components and motion of workers while handling these components. This study helps in minimizing the time taken to finish making a product. This also helps in minimizing worker fatigue.

Time Study

This involves finding the minimum possible time to finish a task. For example, at outlets of Burger King, the time between final order from a customer to delivering the order to the customer should be 2 minutes. If someone delivers the required order within this timeframe, he/she is considered to be doing the task efficiently.

Fatigue Study

This study involves finding out how quickly and how often can the worker get tired after performing a task. This helps in deciding about providing suitable break to a worker. A fatigued worker will not do the task to his optimum efficiency. Moreover, a tired worker also runs the risk of getting seriously injured.

Differential Piece Wage System

Different workers have different levels of efficiency and hence different levels of productivity. Taylor advocated that a worker should be paid according to his contribution. So, apart from the standard wages, Taylor advocated variable wages on the basis of output by a particular worker. This not only rewards the concerned worker for his extra output but also motivated other workers to go for additional output.

Fayol’s Principles of Management

While Taylor’s principles were mainly aimed at factory workers, Fayol’s principles were about general management. Fayol is also called the Father of General Management.

The 14 Principles of Management given by Fayol

Division of work

A work is divided into many tasks. This helps in division of labour so that a person doing a particular task can develop specialization for doing that task. Specialization helps in improving efficiency.

Authority and responsibility

Responsibility comes bundled with authority. There are two types of authority, viz. functional authority and personal authority. Functional authority from the position a manager is given but personal authority comes because of many other factors like seniority, knowledge, interpersonal skills, etc. A manager should be given full authority to get the task done. But every care should be taken to prevent misuse of authority.


Obedience to organizational rules and employment agreement is called discipline. As per Fayol, discipline needs good superiors at all levels, clear and fair agreements and judicious applications of penalties. Discipline also means that superiors do not take undue advantage of their position.

Unity of command

Fayol was of the view that there should be one and only one boss for an individual. An employee should be answerable to a single boss. Dual command should be avoided at all costs. Let us assume that a sales person needs to give 10% discount to close a deal. His sales manager gives the permission to do so. But the finance manager tells him not to go beyond 5% discount. This will result in confusion, low morale and loss of sale for the concerned sales person.

Unity of direction

All the members of a team should move in a single direction, i.e. towards the business goal. Let us take example of a big FMCG (fast moving consumer goods) company. A sales team responsible for selling soaps and detergents should never be given the assignment of looking after beverages. There should be an entirely separate team for beverages.

Subordination of individual interest to general interest

An employee’s personal interest is always secondary to the organisation’s interests. An organisation’s interest is the sum of the interests of various stakeholders, like shareholders, supply chain partners, suppliers, etc.

Remuneration of Personnel

Compensation should be fair for both the employer and employee. The employee should get enough to live a reasonable standard of life commensurate with his/her level of skills. On the other hand, the organization should have the capacity to pay proper remuneration.

Centralisation and decentralization

There should be a proper balance between centralization and decentralization. All the managers should be given enough delegation in order to get the task done and to retain the employee. Broad policy making can be more of centralized nature.

Scalar Chain

The formal line of command from top to bottom is called scalar chain. Let us assume there is one head called A. There are two separate lines of command under him. The first command goes like B-C-D-E-F and the second command line goes like L-M-N-O-P. In this situation, if F has to communicate with P then he will have to go through E-D-C-B-A-L-M-N-O-P. This happens due to the principle of scalar command. But in case of emergency, there should be a provision for F directly communicating with P and such a line of communication is called Gang Plank.


Every material and personnel must be at suitable place at the appropriate time. This helps in achieving maximum efficiency. Even in our households there are fixed places for keeping various items. The place for keeping soaps and detergents is entirely different from one for keeping vegetables. This helps in finding the required item at the right time.


Every person should be treated with respect and dignity. There should be no discrimination on the basis of gender, religion or race. This helps in developing a sense of self respect and belonging among the employees.

Stability in the tenure of Personnel

Employee turnover should be minimized to ensure stability in the company. People should be selected only through rigorous methods. If an employee leaves an organization within short time frame it results in wastage of resources which were invested no his/her training.


Workers should be encouraged to take initiative while doing a task. Suggestions on improvisation should always be welcome from the workers.

Espirit De corps

Team spirit is highly important for every organization.