INDUSTRIAL MANAGEMENT AND ENGINEERING ECONOMY (MENG5182)

1. BASIC MANAGEMENT CONCEPTS

1.1 INTRODUCTION
The theory of management goes back to the dawn of human civilization, when human being
started group activities for the attainment of some common objectives. Whenever a group is
formed and a group activity is organized to achieve certain common objectives, management is
needed to direct, coordinate and integrate the individual activities of a group and secure team
work to accomplish organizational objectives. The need for efficient management is highly felt in
business activities. The objectives of all business are attained by utilizing the scarce resources
like men, materials, machines, money etc. The basic economic objectives of business activity are
profit maximization or continuous growth and survival. It is only efficient management which
helps in achieving these objectives economically by effective utilization of the scarce resources.
Management is a universal process in all organized economic activities. It is found in every walk
of life where the economical and intelligent application of scarce resources is involved. It is not
merely restricted to shop, factory or office. It is necessary for a business firm, government
enterprises, education and health services, military organizations, trade associations and so on. In
fact management is an operativec force in all complex organizations trying to achieve some
stated objectives.
It can be generalized that no enterprise can enjoy a successful existence and survival without the
competent management. The slow rate of economic growth of under developed countries is due
the poor management. Peter Drucker has rightly remarked that there are no under developed
countries, there are under managed countries. According to Kolin Clark, an eminent economist,
the low rate of economic growth of under developed countries is not due to the dearth of capital,
but it is due to the dearth of the management.
1.2 DEFINITIONS OF MANAGEMENT
Management has been defined by different thinkers in a number of ways. For our understanding
management may be viewed as what a manager does in a formal organization to achieve the
objectives. Some of the important definitions of management are:
1. The art of getting things done through other people.
2. The art of applying the economic principles that underline the control of men and materials
in the enterprise under consideration.
3. The force that integrates men and physical plant in to an effective operating unit.
4. A task of planning, coordinating, motivating and controlling the efforts of others towards
specific objectives.
5. A multipurpose organ that manages a business manages a manager and manages workers
and work.
6. Knowing exactly what you want men to do, and then seeing that they do it the best and
cheapest ways.
7. 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.

1. By Yegetaneh T

INDUSTRIAL MANAGEMENT AND ENGINEERING ECONOMY (MENG5182)

8. Guiding human and physical resources in to dynamic organization units which attain their
objectives to the satisfaction of those served and with high degree of morale and sense of
attainment on the part of those rendering service.
9. To forecast and to plan, to organize, to command, to coordinate and to control.
10. The process of planning, organizing, leading and controlling the efforts of organization
members and of using all other organizational resources to achieve stated organizational
goals. The definition suggests that:
a. Management is a continuous process.
b. Several inter-related activities have to be performed by managers irrespective of
their levels to achieve the desired goals.
c. Managers use the resources of the organization, both physical as well as human,
to achieving the goals.
d. Management aims at achieving the organizations goals by ensuring effective use
of resources.
11. A social process involving coordination of human and material resources through the
functions of planning, organizing, staffing, leading and controlling in order to accomplish
stated objectives. There are five parts to a definition of management as a social process:
a. The coordination of resources.
b. The performance of managerial functions as a means of achieving coordination.
c. Establishing the objective or purpose of management process.
d. Management is art of getting things done through other people.
e. It is cyclic nature, i.e. an ongoing (continuous) process that represents planningaction-control-re-planning cycle.
Men
Men
Materials
Materials
Machines
Machines
Money
Money
Markets
Markets
Resources
Resources

Planning
Planning

Directing
Directing
Goals
Goals
Outputs
Outputs

Transformation
Transformation processes
processes

Organizing
Organizing

Controlling
Controlling

Fig. 1.1 Process of Management

1.3 CHARACTERISTICS OF MANAGEMENT

The important characteristics of management are:
1. Management is purposeful activity: deals with the clear attainment of clearly defined
objectives.
2. It is an efficient handling of economic resources.
3. Management is a distinct process: consisting of planning, organizing, staffing,
directing and controlling.
4. Management is universal: is found in every walk of life.
5. Management is a system of authority: managers at different levels posses varying
degrees of authority that enables them to perform their functions effectively.
6. Coordination is the soul of management: necessary in group activities.
7. Management is dynamic: it works in ever changing social environment.
8. Management is decision making: managers decide about what to do, when to do,
where to do etc.
1. By Yegetaneh T

INDUSTRIAL MANAGEMENT AND ENGINEERING ECONOMY (MENG5182)

9. Management is a profession: management is not only a science but also an art.
1.4 ADMINISTRATION, MANAGEMENT AND ORGANIZATION
In the study of management there is a controversy in using the terms administration and
management. But it should be clear that administration, management and organization are neither
synonymous nor interchangeable. They have their own field of operation. Administration
determines the objectives and policies of an enterprise. Management caries out these policies to
achieve the objectives of the enterprise. For administration and management to function
effectively, there must be proper structuring of the enterprise (organization).
Administration gives proper direction. Management properly executes, it is an execution
function. Organization is an effective machinery to achieve enterprise objectives in a team spirit.
Management caries out the policies of administration through the framework of an organization.
The following table illustrates the distinctions between administration, management and
organization.
Administration
Management
Organization
Process of determining the Process of planning the work as Process of dividing work in
object to be achieved
per the objective laid by the to different duties and tasks
administration
as planned
Lays down policies and Executes policies and programs It organizes the work
principles
Prepares framework under Supervises and controls the Draws the line of authority
which one is asked to work and execution of assigned work
and determines the line of
execute
action
Provides:
Coordinates activities
It delegates the authority and
fixes responsibility
Direction
Guidance and
Leadership
1.1
LEVELS OF MANAGEMENT
In any organization all those are responsible for the works of others are called managers. Though
their primary task remains the same getting the things done by other people, there is a wide
variation in their authorities and responsibilities. These differences are mainly due to the levels
of management.
Levels of management refers to a line of separation between different positions drawn with a
view to distinguish each other in respect of their duties, responsibilities, rights and authorities.
The three levels of management that are commonly found in organizations are:
a. Top management
b. Middle management
c. Lower level management
Top management: top management constitutes the highest level in the management hierarchy.
This is the policy making level in any organization. This level consists of small group of
executives, board of directors, chairman, managing director, personnel manager, chief executive
etc. they define the aim of the company, establish the primary objectives, policies and strategies
to be pursued to achieve these objectives. They also formulate the plans of organization and
procedure, inaugurate the board program, and approve specific major objects in the program.
1. By Yegetaneh T

INDUSTRIAL MANAGEMENT AND ENGINEERING ECONOMY (MENG5182)

Middle order management: middle level occupies a central place in the hierarchy. It is
concerned with execution of the detailed policies and plans determined by top management
(Administration) through the framework of the organization. Middle level management is
answerable to top management. Its main functions are to plan, to guide, to supervise, to
coordinate, to exercise control over the lower level management.
Lower level management: this is the lowest level in the hierarchy of management. Managers at
this level function under the control and direction of middle level management. Their functions
are also to plan, to guide, to supervise, to coordinate, to exercise control, but all these functions
are performed to get work done from the operating staff. This levels management takes orders
from middle management and explains to the workers at operating level. This level includes
foreman, supervisor, superintendent, inspector etc. The following graph makes the above
hierarchy more clear:
Administration
Administration

Top
Top Management
Management

Management
Management
Low
Low Level
Level Management
Management
Fig. 1.2 Levels of Management

1.5 MANAGERIAL SKILLS

Managerial skill is the ability of a manager to make a smooth functioning team of people
working under him. Management job is different from other jobs. It involves obligation to make
effective utilization of human and material resources. It requires sound judgment to handle
complex situations. Further, the nature of the job becomes increasingly complex at each higher
level because of the increase in the scope of authority and responsibility. Thus the skills required
in management are different in nature at different management levels. Each higher level requires
increased knowledge, broader perspective and greater skills. Manager has to reconcile,
coordinate and upraise the various view points and talents of people working under him towards
the organization goals.
The skills required of a successful manager whether he is working in business organization, an
educational institute or a hospital can be classified as
i. Technical skills
ii. Conceptual skills
a. Decision making skills
b. Organizational skills
iii. Human relation skills
a. Communication skills
b. Motivating skills
c. Leadership skills
Technical skills refer to the ability to use methods, processes, tools, equipment, techniques and
knowledge of a specialized field. It is primarily concerned with the ways of doing things. It
refers to the proficiency in handling methods, techniques and related to a specific field of
activity. Technical skills are most important for low level managers, because by nature their job
1. By Yegetaneh T

INDUSTRIAL MANAGEMENT AND ENGINEERING ECONOMY (MENG5182)

Top management
Top management
Middle management
Middle management
Low level management
Low level management

Human
Human

involves supervision of the workers on the shop floor. Effective supervision, guidance, direction
and coordination of the work performed by the subordinates, therefore depends on the technical
skill possessed by the lower level managers.
Conceptual skill is the ability to see the organization as a whole, to recognize inter-relationships
among different functions of the business and external forces and to guide effectively the
organizational efforts. Conceptual skill extend to visualizing the relation of the organization to
industry, to the community and to the political, economic and social forces of the nation as a
whole and even to forces which operate beyond the national boundaries. It is a creative force
within the organization which is concerned with design and problem solving. A high degree of
conceptual skill helps in analyzing the environment and in identifying the opportunities and
threats.
Human relation skills are primarily concerned with persons as contrasted with things. Human
skill refers to the ability to work effectively with others and build cooperative group relations to
achieve organizational objectives. It is the ability to work with, understand and motivate people.
He understands why people behave as they do and is able to make his own behavior
understandable to them. He can foresee their reactions to possible courses of action and is able to
take their attitudes in to account.

Conceptual
Conceptual

Technical
Technical
Fig. 1.3 Managerial Skills

I had to let her know what I was thinking

1. By Yegetaneh T