What is Management? Concept, Scope, Characteristics, Importance, Function

What is Management?

Management is a social process entailing responsibility for the effective and economical planning and regulation of the operations of an enterprise, in fulfilment of a given purpose or task, such responsibility involves:

• Judgment and decision in determining plans and in using data to control performance, and progress against plans; and
  
  
• The guidance, integration, motivation and supervision of the personnel composing the enterprise and carrying out its operations

In other words, Management is the process of controlling the whole productive machinery.”

So, management is an important factor in the business. It is considered as important as a brain in human body. Without a brain human body is only a collection of bones and fleshes which is of no use; likewise, if management is not in business it is only collection of money, machines, material and men which is not useful in achieving the objectives.

The management is not a matter of pressing a button, pulling a lever, issuing orders, scanning profit and loss statements, promulgating rules and regulations. Rather it is the process to determine what shall happen to the personalities and happiness of entire people, the power to shape the destiny of a nation and all the nations which make up the world.

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Definitions of Management

Management may be defined in many different ways. Many eminent authors on the subject have defined the term “management”, some of these definitions are reproduced below:

According to Lawrence A. Appley, “Management is the development of people and not the direction of things”.

According to Joseph Massie, “Management is defined as the process by which a co-operative group directs action towards common goals”.

In the words of George R Terry, “Management is a distinct process consisting of planning, organizing, actuating and controlling performed to determine and accomplish the objectives by the use of people and resources”.

According to James L Lundy, “Management is principally the task of planning, coordinating, motivating and controlling the efforts of others towards a specific objective”.

In the words of Henry Fayol, “To manage is to forecast and to plan, to organize, to command, to co-ordinate and to control”.

According to Peter F. Drucker, “Management is a multi-purpose organ that manages a business and manages managers and manages worker and work”.

In the words of J.N. Schulze, “Management is the force which leads guides and directs an organization in the accomplishment of a pre-determined object”.

In the words of Koontz and O’Donnell, “Management is defined as the creation and maintenance of an internal environment in an enterprise where individuals working together in groups can perform efficiently and effectively towards the attainment of group goals”.

According to Ordway Tead, “Management is the process and agency which directs and guides the operations of an organization in realizing of established aims”.

According to Stanley Vance, “Management is simply the process of decision-making and control over the actions of human beings for the express purpose of attaining pre-determined goals”.

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Concept of Management

The concept is the idea or image or understanding about things, activity or a person that emerges in the mind of a person. There are several different concepts about management. Economists have treated management as a factor of production; sociologists have treated it as a class or group of persons; practitioners have treated it as a process comprising different activates.

There are three basic concepts of Management

1. Management as a Discipline
2. Management as a Group of People
3. Management as a process

Management as a Discipline

Discipline refers to a field of study having well-defined concepts and principles. When we refer to management as a discipline, we include in it the various relevant concepts and principles, the knowledge of which aids in managing.

Management as a Group of People

We refer to management as a group of people in which we include all those personnel who perform managerial functions in organizations. We refer to two distinct classes or groups of personnel in the organization.

In the first category, we include all those persons who are responsible for managerial functions and in the second category, we include non-managerial personnel.

Management as a process

In studying management discipline, we generally refer to management as a process. A process can simply be defined s a systematic method of handling activates. However, the management process can be treated as a complex one which can be referred to as an identifiable flow of information through interrelated stages of analysis directed towards the achievement of an objective or set of objectives.

It is a concept of dynamic rather than static existence in which events and relationships must be seen as dynamic, continuous, and flexible, and as such, must be considered as a whole. Thus, management as a process includes various activities and sub-activities.

The new concept of management is to build a long term relationship based on professionalism, communication, integrity and trust.

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Scope of Management

The scope of management is too wide to be covered in a few pages. It is very difficult to precisely state the scope of management. However, management includes the following aspects:-

• Economic Resource
• System of Authority
• Class or Elite
• Subject-matter of Management
• Functional Areas of Management
• Management is an Inter-Disciplinary Approach
• Principles of Management
• Management is an Agent of Change
• The Essentials of Management

Economic Resource

Business Economics classifies the factors of production into four basic inputs, viz. land, labour, capital and entrepreneur. By the use of all these four, basic production can be done. But to turn that into a profitable venture, an effective utilization of man, money, material, machinery and methods of production has to be ensured.

This is guaranteed by the application of management fundamentals and practices. The better is the management of an enterprise; the higher is its growth rate in terms of profit, sales, production and distribution. Thus management itself serves as an economic resource.

System of Authority

As already discussed, management is a system of authority. It formalizes a standard set of rules and procedure to be followed by the subordinates and ensures their compliance with the rules and regulations. Since management is a process of directing men to perform a task, authority to extract the work from others is implied in the very concept of management.

Class or Elite

Management is considered to be a distinct class that has its own value system. Managerial class, often referred to as a collective group of those individuals that perform managerial activities is essential component of each organization. The importance the class has become so huge that the entire group of mangers is known as “management” in every organization.

Subject-matter of Management

Management is considered as a continuing activity made up of basic management functions like planning, organizing, staffing, directing and controlling. These components form the subject matter of management.

Functional Areas of Management

Management covers the following functional areas:-

• Financial Management: Financial management includes forecasting, cost control, management accounting, budgetary control, statistical control, financial planning etc.
  
  
• Human Resource Management: Human Resource Management covers the various aspects relating to the employees of the organization such as recruitment, training, transfers, promotions, retirement, terminations, remuneration, labour welfare and social security, industrial relations etc.
  
  
• Marketing Management: Marketing management deals with marketing of goods, sales promotion, advertisement and publicity, channels of distribution, market research etc.
  
  
• Production Management: Production Management includes production planning, quality control and inspection, production techniques etc.
  
  
• Material Management: Material management includes purchase of materials, issue of materials, storage of materials, maintenance of records, materials control etc.
  
  
• Purchasing Management: Purchasing management includes inviting tenders for raw materials, placing orders, entering into contracts etc.
  
  
• Maintenance Management: Maintenance Management relates to the proper care and maintenance of the buildings, plant and machinery etc.
  
  
• Office Management: Office management is concerned with office layout, office staffing and equipment of the office.

Management is an Inter-Disciplinary Approach

Though management is regarded as a separate discipline, for the correct application of the management principles, the study of commerce, economics, sociology, psychology, and mathematics is very essential. The science of management draws ideas and concepts from a number of disciplines making it a multi-disciplinary subject.

Principles of Management

The principles of management are of universal application. These principles are applicable to any group activity undertaken for the achievement of some common goals.

Management is an Agent of Change

The techniques of management can be improved by proper research and development.

The Essentials of Management

The essentials of management include scientific method, human relations and quantitative techniques.

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Characteristics of Management

An analysis of the various definitions of management indicates that management has certain characteristics. The following are the salient characteristics of management.

• Management is universal
• Management is a social process
• Management is an integrating/unifying force
• Management is objective/ target oriented
• Management is dynamic, and not static
• Management is a system of authority
• Decision-making
• Continuous process
• Management is born as well as acquired ability
• Proper utilization of resources
• Intangible
• Management is a science as well as an art
• Modern management can be regarded as a profession
• Distinct Process
• Management is a group activity
• Management implies good leadership
• Management draws ideas and concepts from various disciplines
• Different Levels of Management
• Need of organization
• Management need not be owners

Management is universal

Management is applicable to all forms of human organizations whether it is profit- making or non- profit making. Management is not applicable to business undertakings only. It is applicable to political, social, religious and educational institutions also. Management is necessary when group effort is required

Management is a social process

To get things done from the people manager has to establish inter-personal relations with them. He has to understand the behavior of all as individual members as well as members of a group. Management is a process, function or activity. This process continues till the objectives set by administration are actually achieved.

“Management is a social process involving co-ordination of human and material resources through the functions of planning, organizing, staffing, leading and controlling in order to accomplish stated objectives”.

Management is an integrating/unifying force

Management is integrating people into a single working force with available physical resources. The essence of management is the integration of human and other resources to achieve the desired objectives. Managers seek to harmonize the individuals’ goals with the organizational goals for the smooth working of the organization.

Management is objective/ target oriented

Management is purposeful or goal-oriented activity. The success of management is measured by the extent to which organization goals are achieved.

Management is dynamic, and not static

Management is not a stereotype activity but is ever changing. It is a complex and dynamic activity. Management adapts itself to changes in environment, and also initiates and introduces changes i.e. Innovations, change in methodology etc.

Management is a purposeful activity. It coordinates the efforts of workers to achieve the goals of the organization. The success of management is measured by the extent to which the organizational goals are achieved. Management is concerned with directing and controlling of the various activities of the organization to attain the pre-determined objectives.

Every managerial activity has certain objectives. In fact, management deals particularly with the actual directing of human efforts.

Management is a system of authority

In management scalar- chain indicates system of authority. Everybody in the organization knows under whom he is working, whose orders he has to follow and to whom he is answerable. Authority means power to make others act in a predetermined manner.

Management formalizes a standard set of rules and procedure to be followed by the subordinates and ensures their compliance with the rules and regulations. Since management is a process of directing men to perform a task, authority to extract the work from others is implied in the very concept of management.

Decision-making

Decisions are taken in all the activities of management. The success is judged by the quality of decisions taken by the managers. Management implies making decisions regarding the organization and operation of business in its different dimensions.

The success or failure of an organization can be judged by the quality of decisions taken by the managers. Therefore, decisions are the key to the performance of a manager.

Continuous process

Management is not one time activity, but it is continuous activity. The cycle of management continues to operate so long as the organizations continue to exist.

Management is born as well as acquired ability

Management is considered not only as an inborn ability but also an acquired ability by proper training.

Proper utilization of resources

Management is concerned with the best and proper utilization of the resources.

Intangible

Management is intangible, it cannot be seen with eyes, it is evidenced or measured only by the quality results of organization, such as increased productivity, the increased morale of the employees etc. Management has been called an unseen force.

Its presence is evidenced by the result of its efforts – orderliness, informed employees, buoyant spirit and adequate work output. Thus, feeling of management is result-oriented.

Management is a science as well as an art

Management has an organized body of knowledge consisting of well-defined concepts, principles and techniques which have wide applications. So it is treated as a science. The application of these concepts, principles and techniques requires specialized knowledge and skills on the part of the manager. Since the skills acquired by a manager are his personal possession, management is viewed as an art.

Modern management can be regarded as a profession

Management is gradually becoming a profession because there are established principles of management which are being applied in practice, and it involves specialized training and is governed by ethical code arising out of its social obligations.

Distinct Process

Management is a distinct process consisting of such functions as planning, organizing, staffing, directing, and controlling. These functions are so interwoven that it is not possible to lay down exactly the sequence of various functions or their relative significance. Management enjoys the separate status in the organization, so, management is a distinct activity.

Management is a group activity

Management comes into existence only when there is a group activity towards a common objective. Management is always concerned with group efforts and not individual efforts. To achieve the goals of an organization management plans organizes, coordinates, directs and controls the group effort.

Management implies good leadership

A manager must have the ability to lead and get the desired course of action from the subordinates. According to R. C. Davis – “management is the function of executive leadership everywhere”. Management of the high order implies the capacity of managers to influence the behavior of their subordinates.

Management draws ideas and concepts from various disciplines

Management is an interdisciplinary study. It draws ideas and concepts from various disciplines like economics, statistics, mathematics, psychology, sociology, anthropology etc.

Different Levels of Management

Management is needed at different levels of an organization namely top level, middle level and lower level.

Need of organization

There is the need of an organization for the success of management. Management uses the organization for achieving pre-determined objectives.

Management need not be owners

It is not necessary that managers are owners of the enterprise. In joint stock companies, management and owners (capital) are different entities.

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Importance of Management

Management acts as a creative and life-giving force in the organization. Management by right men through right methods may give better results. It is properly said that business is built not by the technical ability of specialists but largely by good managers who can effectively utilize human skill, energy and efficiency for transforming resources with higher productivity.

Management is considered to be the brain of business, which plans, coordinates resources of production, gets the things done through other people and accomplishers objectives.

More significance or importance of management can be explained with the help of the following points:

• Management meets the challenge of change
• Accomplishment of various interests of different groups
• Effective utilization of resources
• Stability to society
• Innovation
• Co-ordination and team spirit
• Social responsibilities
• Development of country
• Effective functioning of business
• Resource development
• Sound organizational structure
• Management directs the organization
• It integrates various interests
• It stabilizes the fluctuations
• Tackling and solving problems
• Management is a tool for personality development

Management meets the challenge of change

In the modern business world, there are frequent changes; business operates in an environment created by demographic, political, legal, technological, social, natural, economic and cultural factors.

The business environment is highly dynamic and it has far-reaching impact on business. The management can gear-up the business in such a way that the opportunities are grabbed and threats are fought against successfully.

Accomplishment of various interests of different groups

There are various groups such as shareholders, society, which have various interests in the business. The survival of the business depends on the satisfaction of these stakeholders. Management can skillfully integrates the interests of these different groups and obtain their support.

Effective utilization of resources

The efficient management can make optimum use of resources, (i.e. – Men, Money, Materials, Machines, Methods, Motivation, Markets and Management.) Underutilization or over utilization of resources should be avoided and this can be done by management only because Management has control over other remaining ‘M’s.

Stability to society

If there is no smooth supply of goods and services to society, the society becomes vibrant. There fluctuations in supply can be stabilized by the management.

Innovation

New ideas are developed by the management and implemented in the business for better performance.

Co-ordination and team spirit

Management coordinates the activities of different department and establishes team- spirit to achieve the objectives.

Social responsibilities

No organization can run its function in isolation from society. A number of responsibilities have to be discharged for the upliftment of society. The management plays an important role in discharging the responsibilities towards society.

Development of country

The management helps in infrastructural development of the nation, in increasing GDP, capital formation, national income etc.

Effective functioning of business

Ability, experience, mutual understanding, coordination, motivation and supervision are the factors responsible for effective functioning of the business.

Resource development

The resources viz. men, machines, materials and money have to be developed by the management.

Sound organizational structure

It clearly defines the authority and responsibility relationship of employees. Care must be taken to appoint right persons to the right job.

Management directs the organization

Similar to human mind directing and controlling human body, management directs and controls the organization.

It integrates various interests

Management takes steps to integrate various interests of employees working in the organization.

It stabilizes the fluctuations

The business always has ups and downs. These fluctuations are stabilized by the management.

Tackling and solving problems

Good management acts as a friend and guide to the employees to solve the day-to-day problems for effective performance.

Management is a tool for personality development

New methods and techniques are taught to workers. Training facilities are arranged by the management. Thus, there is personality development in the employees.

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Functions of Management

There are five major functions of management which are given below:

1. Planning
   
2. Organising
   
3. Staffing
   
4. Directing
   
5. Controlling
   
6. Other Functions of Management

Planning

It involves anticipating all possible future conditions and deciding the future course of action. In other words, planning involves setting future goals and objectives and devising the methods and means for achieving those objectives. The function is carried out at all levels of an organisation i.e., top, middle and lower management levels, and in all divisions, departments, business units and sub-units.

Organising

It involves two major activities: one is to establish an organisational structure and the other is to arrange all necessary resources (such as men, machines, materials, methods, money and market) so that work can be performed effectively.

An organisational structure is a diagrammatic representation of how different roles, powers, authorities and responsibilities are assigned in an organisation. You will study the organisational structure and its functions in detail later in the book.

Staffing

This function is all about recruiting people with the required skill sets. It involves evaluating the existing skills and knowledge of candidates before offering them specific job roles. Staffing is an ongoing function as employees keep on leaving and joining an organisation.

Directing

After the managers have established goals, created the organisational structure, recruited people and trained them, it is time for directing the employees and facilitating coordination among them so that work can be performed on time in order to meet the set goals.

Controlling

This function involves ensuring that work is performed as per the plans developed and instructions issued. The controlling function includes three main activities, which are:

• Establishing the required performance standards
  
• Assessing the current performance level and comparing it with the established standards
  
• Take corrective actions in case the actual performance deviates from the established standards.

Other Functions of Management

1. Coordinating
   
2. Reporting
   
3. Budgeting

Coordinating

This key function of management implies interrelating the various work components and processes to ensure smooth functioning in an organisation. Coordination is used to synchronise and integrate the activities, responsibilities, command control, structures and resources of an organisation to achieve organisational objectives.

Reporting

This function of management is significant for controlling and planning functions. The reporting function involves giving a regular update to the superiors about the progress of the work assigned to subordinates. The information is disseminated through records or inspection.

Budgeting

The budgeting function of management comprises all the activities that fall under auditing, accounting, fiscal planning and control. Budgeting is used to do all forms of planning related to the sources of income, accounting and control of expenditures.

It is the process of creating a plan to spend the available money. It is used to determine in advance whether an organisation has enough money to execute activities smoothly or not.

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Functional Areas of Management

As mentioned above, management has a wide scope in different areas due to its social and universal nature. Therefore, the functional areas of management have widened due to its inter-disciplinary approach.

There are four major functional areas of management as shown in Figure below:

• Production and operations
• Marketing
• Finance
• Human Resource (HR)
• Information Technology (IT)/Information and Communication Technology (ICT)
• Logistics and Distribution

Production and operations

The production and operations function converts inputs, such as land, labour and raw materials into goods and services in the right quantity at the right cost and at the right time.

The production function includes various subordinate functions which are as follows:

• Developing product designs
• Selecting the plant location and layout
• Purchasing and storing materials
• Planning and controlling the production operations
• Carrying out repair and maintenance works
• Ensuring inventory control
• Ensuring quality control

Marketing

Under the marketing function, managers need to identify consumers’ needs and provide them the goods and services to satisfy their needs. The scope of the marketing function is quite wide and it includes various subordinate functions which are as follows:

• Carrying out marketing research to determine the exact needs and expectations of consumers
• Developing suitable products
• Setting prices
• Selecting marketing strategies
• Selecting appropriate marketing channels

Finance

Finance is an extremely important functional area of management and the main activity of finance is to ensure that there are sufficient funds in the organisation for carrying out different activities, such as procurement, working capital management, debt repayment, etc. In addition, the finance function involves determining financial strategies, such as expansion, diversification, joint ventures, mergers and acquisitions.

The three major subordinate functions of finance are as follows:

• Financial planning: This sub-function relates to decisions, such as raising funds, deciding about the amount to be raised and estimating the costs (interests) and risks associated with raising funds.
• Financial control: This sub-function involves monitoring the finance-related operations of an organisation.
• Financial decision-making: This sub-function relates to the use of funds that have been raised by the organisation.

Human Resource (HR)

The human resource function relates to the management of various aspects related to human resources such as:

• Taking care of employee compensation and benefits
• Maintaining employee database
• Planning the staff and workforce requirements
• Appraising employee performance and promotions
• Devising HR policies
• Taking care of recruitment, selection and training and development processes

Information Technology (IT)/Information and Communication Technology (ICT)

It involves managing information and communication technology tools and techniques that collect, organise, and distribute data for use in the organisation’s decision-making purposes.

The significant aspects related to IT/ICT are as follows:

• It is committed to develop the organisation’s hardware, software, and other computing and communicating technologies.
• It develops the organisation’s management information system (MIS) tailored to the needs of the firm’s units.
• It also encourages e-commerce through the use of the Internet.

Logistics and Distribution

In simple terms, logistics refers to the planning and controlling the movement of goods. Logistics and distribution functional area ensure that goods are delivered to the right place on time and in the right condition.

Some major aspects of logistics and distribution are as follows:

• Ensuring that the process of the finished goods leaving a factory and arriving at a store is predefined and hurdle free
• Ensuring the proper storage of goods before dispatch
• Ensuring that dispatched goods are firmly packed and appropriately labelled
• Ensuring the dispatch of goods at the right time
• Ensuring the completion of the delivery documents

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Levels of Management

Management involves a set of functions performed by people in an organisation who are bound together in a hierarchy of relationships. Every person in the organisational hierarchy is responsible for the successful completion of particular tasks. To perform these tasks successfully and make decisions, individuals are given a certain degree of authority, which lead to the creation of different levels in the organisational hierarchy.

Generally, there are three levels of management as shown in Figure:

Let us now study about these three levels of management:

• Top-level management
• Middle-level management
• Lower-level management

Top-level management

This level is comprised of corporate heads, such as chief executive officer (CEO), chief financial officer (CFO), chief operating officer (COO), and chief information officer (CIO), president, vice president, chairman, managing directors and executive directors.

These corporate heads are responsible for performing the following functions:

• Determining organisational goals and objectives and formulating plans, strategies and policies accordingly
• Organising and arranging resources
• Communicating with the public, government and other external agencies
• Controlling and overseeing organisational activities
• Preparing long-term plans (usually for 5 years or more) and making strategic (strategy-level) decisions

Middle-level management

This level comprises business heads, such as departmental heads, general managers and regional managers. These business heads are responsible for performing the following functions:

• Subordinating the top-level management
• Supervising the lower-level management
• Organising departmental activities
• Recruiting and selecting the workforce
• Controlling resources and executing organisational plans
• Ensuring adherence to the organisation’s policies
• Acting as a connecting link between the top-level and lower-level management
• Co-ordinating and communicating
• Preparing short-term plans (usually for 1-5 years or more)
• Compiling the relevant data and generating reports for top-level management
• Motivating lower-level managers

Lower-level management

This level includes functional heads, such as supervisors and team leaders, who are primarily responsible for the following functions:

• Supervising baseline workers and putting plans into action
• Helping middle-level managers in the recruitment and selection process
• Making operational or functional-level decisions
• Controlling and directing the work of baseline workers
• Communicating with baseline workers about the decisions of middle and top levels of management.
• Preparing daily, weekly or monthly plans

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Forces Behind Management Thoughts

The concept of management is not new and has emerged as a result of a complex evolutionary process. Management has been practiced for many years right from the time of The Sumerians, Babylonians, and Romans. However, it gained importance during the industrial revolution era and was backed by many forces. The three main forces of management:

Let us study these forces in detail.

• Political forces
• Social forces
• Economic forces

Political forces

Political forces, such as government regulations, political institutions, and trade policies affect environmental analysis, organizational design and structure, and employee rights. Political pressure significantly impacts organizations’ management as the rights of customers, suppliers, labor, creditors, owners, and other segments keep changing with respect to changes in the political environment of a country.

Social forces

These forces can be social norms arising from the values and beliefs of people in a society. These forces help form social contracts, wherein no particular sets are mutually understood. People interact with each other on the basis of these norms. Similarly, social contracts are also formed between organizations and their labor, creditors, investors, and customers.

Economic forces

These forces are responsible for forming a base market economy and other concepts, such as private ownership of property, financial freedom, and competitive markets. These forces also play an essential role in determining the distribution of goods and services in a society.

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Purpose of Management

Let us discuss the purpose of management. The purpose of management has been discussed in the following points:

• Achievement of goals and objectives
• Optimum utilization of resources
• Cost minimization
• Survival and growth
• Development of a nation

Achievement of goals and objectives

An organization can be successful if it continuously strives to achieve its goals and objectives. Management aims to achieve individual and organizational goals by utilizing human and non-human resources judiciously. This also creates a spirit of teamwork and coordination among employees.

Optimum utilization of resources

Effective management ensures the availability of adequate resources, such as material, money, manpower, and machines so that production cannot be hampered. Moreover, management ensures that employees get the required training and instructions to make the best utilization of available resources.

Cost minimization

Management ensures that day-to-day operations in the organization take place in such a manner that the wastage of resources is prevented. This ultimately results in reduced production costs.

Survival and growth

It is important for every organization to adapt itself to the changing needs of the market and society. Management assesses the existing business environment and forecasts risks and opportunities in the future. This helps in minimizing risks and maximizing opportunities for the organization.

Development of a nation

Management is also important at the national level which is why it is called the key to the economic growth of a country. Nations can grow well if wealth-related resources are managed well. This further leads to an increase in national income and a rise in the living standards of people.

Management Topics