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Revision Notes for Class 12 Business Studies Chapter 2 Principles of Management

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Revision Notes for Class 12 Business Studies Chapter 2 Principles of Management

Here we are providing Revision Notes for Class 12 Business Studies Chapter 2 Principles of Management. These are the important points related to the chapter. Students should remember these points.


The principles of management are defined as a broad and general guideline that serves as the basis for the managerial decision making and action.

Differences between Principles of Pure Science and Principles of Management

A principle of pure science is based on scientific approach and provides a general explanation for important natural phenomena whereas a managerial principle serves as a broad and general guideline in support of decision making and behaviour. The principles of pure science are rigid in nature whereas the principles of management are flexible in nature as they deal with human behaviour.

Differences between Values and Principles of Management

Values are socially determined norms which are formed through common practice for behaviour of people in society. Whereas the principles of management are formed on the basis of research conducted in work situations on the basis of observation and experimentation.

Differences between Techniques of Management and Principles of Management

The techniques of management refer to the procedures as well as the methods which require a series of steps to be performed so as to achieve the desired goal. The techniques of management support the application of principles of management in the real work situations.


The following features highlight the nature of principles of management:

(a) Universal applicability: The principles of management are deemed to apply to all types and all sizes of organisations. However, these principles need to be applied with modification in the light of the given situation so as to achieve the desired results.

(b) General guidelines: The principles of management do not provide any readymade or straitjacket solutions to all managerial problems. This is because the real business situations are complex and dynamic in nature as they are dependent on a large number of factors

(c) Formed by practice and experimentation: The principles of management are formulated by the management experts through observations, personal experiences and repeated experimentations.

(d) Flexible: The principles of management are not rigid prescriptions, which have to be followed absolutely. They are flexible in nature and can be modified by the manager in the light of given situation so as to achieve the desired goals.

(e) Mainly behavioural: The principles of management aim at influencing behaviour of human beings in a desired manner. The principles of management in practice may seek to mould the attitude, outlook or motivation level of the employees.

(f) Cause and effect relationships: The principles of management highlight the cause and effect relationship between various factors. It guides the managers about the strategies that should be adopted to ensure effective and efficient management of an organisation.

(g) Contingent: The applicability of the principles of management is contingent or dependent upon the prevailing situation at a particular point of time. Therefore, in order to achieve the desired results, the application of principles has to be changed as per the need of the situation.


The significance of principles of management can be described through the following points:

(a)         Providing managers with useful insights into reality: The principles of management provide the managers with useful insights into real work situations and promote managerial efficiency.

(b)         Optimum utilisation of resources and effective administration: The understanding of principles of management enables the managers to be equipped with the necessary competence so as to make all their decisions and actions cost effective.

(c)          Scientific decisions: The knowledge of principles of management enables an objective assessment of the managerial situation or problem in hand. As a result it enables the managers to undertake scientific decisions based on logic rather than wishful thinking or guess work.

(d)         Meeting changing environment requirements: The business environment is dynamic in nature and the utility of the principles of management is derived from the fact that they exist in the form of general guidelines. At the same time they are also flexible in nature.

(e)         Fulfilling social responsibility: The knowledge of principles of management seeks to develop a sense of responsiveness among them towards various kinds of social responsibilities and interest groups be it customers, employees, etc.

(/) Management training, education and research: The principles of management are the fundamental to management theory and practice. Also, the various research initiatives undertaken in the field of management are also based on these principles.


In order to provide a systematic approach to the workers in the factory. Taylor formulated the theory of scientific management. Fredrick Winslow Taylor was also known as the ‘Father of Scientific Management’ because of his valuable contribution in the field of 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.”


The various principles of scientific management formulated by Taylor are described below:

(a) Science not Rule of Thumb: Taylor evolved of the method of scientific inquiry into the sphere of management in practice in order to substitute ‘Rule of Thumb’ or hit and trial method throughout the organisation. Taylor believed that there was only ‘one best method’ to maximise efficiency which can be developed through study and analysis.

(b) Harmony, Not Discord: Taylor called for complete mental revolution on the part of both management and workers. He believed that the best results could be created only from the partnership between a trained and qualified management and a cooperative and innovative workforce. To achieve this state, he advocated the use of paternalistic style of management.

(c) Cooperation, Not Individualism: This principle is an extension of principle of ‘Harmony not discord’. Through this principle, Taylor stresses that should be complete cooperation between the workers and the management instead of individualism. The management should seek participation of workers in taking important decisions which relates to them and also should reward the workers for their suggestions which benefits the organisation.

(d) Development of Each and Every Person to His or Her Greatest Efficiency and Prosperity: Taylor was of the view, that the concern for scientific approach and efficiency should be incorporated right from the process of employee selection. Each person should be scientifically selected and the work assigned should suit her/his physical, mental and intellectual capabilities. He felt that it was essential to train the workers so as to make them learn the ‘one best method’.


Taylor devised many techniques of scientific management which are based on the various experiments he conducted during his career which are detailed below:

(a) Time study: Time Study is the technique to determine the standard time taken by a worker of average skill and knowledge to complete a standard task.

(b) Fatigue study: Fatigue study seeks to determine the amount and frequency of rest intervals required in completing a task.

(c) Method study: Method study seeks to find out one best way of doing the job.

(d) Motion study: Motion study refers to the study of movements of limbs which are undertaken while doing a typical job so as to complete the job efficiently in less time by eliminating unnecessary movements of the limbs of a worker.

(e) Standardisation and Simplification: The term ‘Standardisation’ literally means conforming to predetermined requirements in terms of size, design, weight, quality, etc. Simplification aims at eliminating superfluous varieties, sizes and dimensions of products.

(f) Functional foremanship: Under this technique, each worker is closely observed by eight bosses, each of whom is an expert in a specific task. This technique is based on the concept of multiple accountability of workers which is in direct contraction to the principle of unity of command as suggested by Fayol. The technique of Functional foremanship is an extension of the principle of division of work and specialisation to the shop floor. The work is divided into two basic departments namely;

(i) Planning department consists of Instruction Card Clerk, Route Clerk, Time and Cost Clerk and Disciplinarian.

(ii) Production department consists of Speed boss, Gang Boss, Repair Boss and Inspector.

(g) Differential piece wage system: It is an incentive bonus plan suggested by Taylor. Under this plan, the piece wage rate paid to efficient workers is higher than the normal piece wage rate.

The techniques of time study, method study, motion study and fatigue study collectively are known as work study techniques.


The 14 principles of management given by Henri Fayol are described below:

(a) Division of work: Fayol suggests that the whole organisation work both managerial and technical should be divided into specialised jobs. The division of work will lead to specialisation. Specialisation promotes speed, efficiency and accuracy to work and facilitates growth of an organisation.

(b) Discipline: The term ‘discipline’ in context of management refers to the regulated behaviour of employees, feeling of respect for one another regardless of their positions and strict adherence to the organisational rules and regulations of the organisation.

(c) Authority and Responsibility: Authority refers to the right of person to give orders and extract obedience by the virtue of one’s position in the organisation. Responsibility refers to the obligation of a subordinate to perform the assigned task to the best of his ability and skill. There should always be a balance between the authority given and responsibility entrusted to an employee.

(d) Unity of command: According to Fayol, there should be one and only one boss for every individual employee. Dual subordination should be avoided.

(e) Unity of Direction: Each group of activities having the same objective must have one head and one plan.

(f) Subordination of Individual Interest to General Interest: According to Fayol, for all times the interests of an organisation should take priority over the interests of any one individual employee. This is so because larger interests of the workers and stakeholders are more significant than the interest of any one individual.

(g) Remuneration of employees: According to Fayol, the overall pay and compensation should be fair to both employees and the organisation.

(h) Centralisation and Decentralisation: Centralisation is said to exist in an organisation where the decision-making authority is concenterated in the hands of top level management. Decentralisation involves a systematic dispersal of authority at all levels of management in order to enable the managers at all levels to take the decisions appropriate at their level. Fayol emphasis that both centralisation and decentralisation should exist together to ensure smooth running of an organisation.

(i) Scalar Chain: According to Fayol, the formal lines of authority from highest to lowest ranks are known as scalar chain. However, in order to ensure speedy communication during emergencies, Gang Plank is a shorter route that has been provided for emergencies.

(j) Order: According to Fayol, the practice of ‘a place for everything (everyone) and everything in its place’ should be followed within every organisation. This principle refers to two aspects, i.e. material order and social order.

(k) Equity: Fayol urges the managers to practice kindliness and justice in their behaviour towards the workers. He emphasises that under no circumstances a manager should distinguish between employees on the basis of caste, creed, gender, language, caste, belief or nationality, etc.

(l) Stability of Personnel: Fayol suggested that employee turnover should be minimised to maintain operational efficiency in the organisation. After placement they should be kept at their post for a minimum fixed tenure so that they get time to prove their potential

(m) Initiative: According to Fayol, the workers should be encouraged to develop and carry out their plans for improvement. The management should encourage initiatives among their employees.

(n) Espirit De Corps: According to Fayol, “Management should promote a team spirit of unity and harmony among employees.” And should replace T with ‘We’ in all his conversations with workers so as to promote a feeling of togetherness/teamwork.


Like, both Fayol and Taylor through their respective principles emphasised upon the importance enhancing employee participation. Fayol suggested the principle of initiative in this regard. Whereas Taylor also laid due emphasis on the adoption of a suggestion system in an organisation, through the principle of cooperation and not individualism. It is also important to bring out the aspects where they contradicted each other. Like, the principle of unity of command as suggested by Fayol, advocates that dual subordination should be avoided. Whereas, through the technique of functional foremanship Taylor emphasises on multiple accountability of a worker towards eight specialists. Moreover, it is also important to appreciate the fact that the technique of functional foremanship as suggested by Taylor is an extension of the first principle of division of work.


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