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Business Ethics

BBA General

Study Notes, eBook

CONTENTS

MODULES CONTENT PAGE No:

1 NATURE AND SCOPE OF MANAGEMENT 5

2 FUNCTIONS OF MANAGEMENT 20

3 MANAGER AND LEADER 43

4 ETHICS, CULTURE AND VALUES 60

5 BUSINESS ETHICS 67

MODULE 1

NATURE AND SCOPE OF MANAGEMENT

Managing is essential in all organized co-operation, as well as at all levels of organization in an enterprise. It is the function performed not only by corporation President and the army general but also of the shop supervisors and the company commander. Managing is equally important in business as well as non business organizations. During the last few decades, Management as a discipline has attracted the attention of academicians and practitioners to a very great extent. The basic reason behind this phenomenon is the growing importance of management in day to day life of the people.

Because of the divergent views, it is very difficult to give a precise definition to the term ―Management‖. It has drawn concepts and Principles from economics, sociology, psychology, anthropology, history, and statistics and so on. The result is that each group of contributors has treated Management differently. Management is invariably defined as the process of ―getting things done through the effort of others‖, getting from where we are to where we want to be with the least expenditure of time, money and efforts, or co-ordinating individual and group efforts, or co-ordinating individual and group efforts towards super-ordinate goals.

Harold Koontz defines management in a very simple form where he states that ―Management is the art of getting things done through and with the people in formally organized groups‖.

Dalton E. McFarland defines Management as ―Management is defined for conceptual, theoretical and analytical purposes as that process by which Managers create direct, maintain and operate purposive organization through systematic co-ordinated co-operative human effort.‖

To sum up, we can say that management is the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims.

NATURE AND SCOPE OF MANAGEMENT The study and application of Management techniques in managing the affairs of the organization have changed it‘s nature over the period of time. The nature of Management can be described as

1. Multi disciplinary Management integrates the ideas and concepts taken from disciplines such as psychology, sociology, anthropology, economics, ecology, statistics, operation research, history etc. and presents newer concepts which can be put in practice for managing the organizations. Contributions to the field of management can be expected from any discipline which deals with some aspects of human beings.

2. Dynamic Nature of Principles Principles are a fundamental truth which establish cause and effect relationship of a function. Based on practical evidences, management has framed certain principles, but these principles are flexible in nature and change with the changes in the environment in which an organization exists. In the field of Management, organization researches are being carried on to establish principles in changing society and no principles can be regarded as a final truth. 3. Relative, Not Absolute Principles Management Principles are relative, not absolute and they should be applied according to the need of the organization. Each organization may be different from others. The difference may exist because of time, place, socio-cultural factors etc. A particular management Principles has different strength in different conditions and therefore Principles of Management should be applied in the light of the prevailing conditions. 4. Management, science or Art Science is based on logical consistency, systematic explanation, critical evaluation and experimental analysis. It is a systematized body of knowledge. Management, being a social science may be called as an inexact or pseudo science. The meaning of art is related with the bringing of desired result through the application of skills. It has to do with applying of knowledge or science or of expertness in performance. Management can be considered as an art and a better manager is one who knows how to apply the knowledge in solving a particular problem. 5. Management as a Profession The word profession may perhaps be defined as an occupation based upon specialized intellectual study and training, the purpose of which is to supply skilled service or advice to others for a definite fee or salary. Profession is an occupation for which specialized knowledge, skills and training are required and the use of these skills is not meant for self satisfaction , but these are used for the larger interests of the society and the success of these skills is measured not in terms of money alone. Management possess certain characteristics of profession, while others are missing. Therefore, it cannot be said to be a profession, though it is emerging as a profession and the move is towards management as a profession. 6. Universality of Management There are arguments in favour and against the concept of universality. The arguments in favour of universality are:- [a]management as a process and the various process of management are universal for all organizations [b]distinction between management fundamentals and techniques [c]distinction between management fundamentals and practices.

production. This new way of thinking led the way for the human resource perspective, which saw workers as a resource to be fully utilized, as opposed to tools from which to extract utility. It suggested that beyond the need for worker inclusion and supportive leadership, organizations should design jobs to meet the higher needs of their employees and utilize their full potential. This perspective paved the way for the role that human relations departments play in organizations today. Many of today‘s management perspectives grew out of adaptations of the humanistic perspective. One such perspective is the systems theory, which views an organization as a series of interconnected systems that affect and are effected by each other The modern management thinkers like Robert Schlaifer and Herbert Simon define organization as a system. They also consider the impact of environment on the effectivenss of the organization. The social system school, the decision theory school, the quantitative management school, the systems management school, etc. are the contributions of modern management era. To sum up (A)Early management approaches which are represented by scientific management, the administrative management theory and the human relations movement (B)Modern management approaches which are represented by scientific management, the administrative/management science approach, the systems approach and the contingency approach

SCHOOLS OF MANAGEMENT THOUGHT The development of thought on Management dates back to the days when people first attempted to accomplish goals by working together in groups.With the work of Frederic Taylor and Henri Fayol, there was serious thinking and theorizing about managing many years before. In the early 19th century , industrialization and the factory system saw the advent of assembly line operation and costing systems. Management Principles in business were adopted in the latter half of nineteenth century. As the concept of management evolved, various schools of management thought emerged. Thus there came a myriad ways of classifying management theories. One such classification was given by Koontz, who classified the theories into the following six groups:

The management process school The empirical school The human behavioral school The social systems school The decision theory school The mathematical school

The purpose of this article is to identify the various schools of management theory, indicate the source of the differences, and to provide some suggestions for disentangling the management theory jungle. Koontz describes six schools of management theory as follows.

1. The Management Process School

The management process school views management as a process of getting things done with people working in organized groups. Fathered by Henri Fayol, this school views management theory as a way of organizing experience for practice, research and teaching. It begins by defining the functions of management.

2. The Empirical School

The empirical school views management theory as a study of experience. Koontz mentions Ernest Dale's comparative approach as an example which involves the study and analysis of cases. The general idea is that generalizations can be drawn from cases that can be applied as guides in similar situations. As such it is also known as case approach or management experience approach. According to this school, management is considered as a study of managers in practice. It is a study of success and failures in the application of management techniques by managers in their practice. Theories of management can be developed by studying large number of experiences because some sort of generalizations can be possible.

3. The Human Behavior School

The central thesis of the human behaviour school is that since management involves getting thing done with people, management theory must be centered on interpersonal relations. Their theory focuses on the motivation of the individual viewed as a socio-psychological being. This approach can be divided into two groups ; interpersonal behaviors approach and group behaviors approach. Emphasis is put on increasing productivity through motivation and good human relations.

4. The Social System School

The members of the social system school of management theory view management as a social system. March and Simon's 1958 book Organizations published by Wiley is used as an example, but Koontz indicates that Chester Barnard is the spiritual father of this school of management. The social system school identifies the nature of the cultural relationships of various social groups and how they are related and integrated. Barnard's work includes a theory of cooperation which underlies the contributions of many others in this school. Herbert Simon,

Taylor‘s famous work entitled the ―The Principles of Scientific Management‖ was published in 1911.Scientific Management is not any efficiency device, in its essence, scientific management involves a complete mental revolution on the part of the working man in any particular establishment or industry – and is equally complete mental revolution on the part of those on the management side. The great mental revolution that takes place in the attitude of two parties is that together they turn their attention towards increasing the surplus than dividing the surplus.

The fundamental Principles that Taylor was underlying the Scientific approach of Management may be summarized as follows:-

1. Replacing rules of thumb with science.

2.Obtaining harmony in group action, rather than discord

3.Acheiving co-operation of human beings, rather than chaotic individualism.

4.Working for maximum output rather than restricted output.

5.Developing all workers to the fullest extent possible for their own and their company‘s highest prosperity.

Contributions of Henry Fayol

Henri Fayol (Istanbul, 29 July 1841–Paris, 19 November 1925) was a French mining engineer, director of mines, who developed independent of the theory of Scientific Management, a general theory of business administration also known as Fayolism. His contributions are generally termed as operational management or administrative management.

He was one of the most influential contributors to modern concepts of management. Fayolism is one of the first comprehensive statements of a general theory of management developed by Fayol. He has proposed that there are six primary functions of management and 14 principles of management. The Primary function of management are forecasting planning organizing commanding coordinating and controlling.Fayol‘s contributions were first published in the book form titled as ―Administration Industrielle at Generale‘ in French language , in 1916.Fayol looked at the problems of managing an organisation from top management point of view. He has used the term ‗administration‘ instead of ‗management‘ emphasising that there is unity of science of administrator. For him, administration was common activity and administrative doctrine was universally applicable. Fayol found that the activities of an industrial organisation could be divided into six groups.

1. Technical [relating to production]
2. Commercial [buying, selling and exchange]
3. Financial [search for capital and its optimum use]
4. Security [protection of property and person]
5. Accounting [including statistics] and
6. Managerial [planning, organisation, command, coordination, and control]

Pointing out that these activities exist in business of every size, Fayol observed that the first five were well known, and consequently he devoted most of his book to analyse the sixth one, that is, managerial activity. Fayol has divided his approach of studying management into three parts;[1] managerial qualities and training [2]general principles of management and [3] elements of management

[1]Managerial qualities and training

Fayol was the first person to identify the qualities required in a manager. According to him, there are six types of qualities that a manager requires.these are as follows:

1. Physical[health, vigour and address]
2. Mental[ability to understand and learn, judgement, mental vigour, and adaptability
3. Moral [energy, firmness, initiative, loyalty, tact, and dignity]
4. Educational [general acquaintance with matters not belonging exclusively to the function performed]
5. Technical [peculiar to the function being performed] and
6. Experience [arising from the work]

General Principles of Management Fayol has given fourteen principles of management. He has made distinction between management principles and management elements. While management principle is a fundamental truth and establishes cause-effect relationship, management element denotes the function performed by a manager. Henry Fayol strongly felt that managers should be guided by certain principles while giving the management principles, Fayol has emphasised two things.

1. The list of management principles is not exhaustive but suggestive and has discussed only those principles which he followed on most occasions.
2. Principles of management are not rigid but flexible. Fayol evolved 14 general principles of management which are still considered important in management. These are:

7. Remuneration: Management should try to give fair wages to the employees and employees should have the satisfaction of being rightly paid. Remuneration must give satisfaction to both the employers and employees.
8. Centralization: Everything which goes to increase the importance of subordinate‘s role is decentralization and everything which goes to reduce it is centralization. When a single person controls the affairs of an organization, it is said to be complete centralisation.In small concerns, a single manager can supervise the work of the subordinates easily, while in a big organization, control is divided among a number of persons. Thus centralization is more in small concerns and it is less in big concerns. Fayol‘s opinion was that the degree of centralization should be fixed on the basis of capabilities of the persons.
9. Scalar Chain: This is the chain of superiors from the highest to the lowest ranks. The order of this chain should be maintained when some instructions are to be passed on or enquiries are to be made It suggests that each communication going up or coming down must flow through each position in the line of authority. It can be short circuited only in special circumstances when its rigid following would be detrimental to the organization. For this purpose, Fayol has suggested gang Plank which is used to prevent the scalar chain from bogging down action.
10. Order: This is a principle relating to the arrangement of things and people. In material order, there should be a place for everything and everything should be in its place. In social order, there should be right man in the right place. Placement of men and materials should be properly made. Proper space should be made available where materials can be kept safely. Each man should be provided the work for which he is best suited.
11. Equity: This principle requires the managers to be kind and just so that loyalty can be won from the subordinates. Equity is a combination of justice and kindness. The application of equity requires good sense, experience, and good nature for soliciting loyalty and devotion from subordinates.
12. Stability of Tenure: Employees should be selected on the principles of stability of employment. They should be given necessary training so that they become perfect. There should not be frequent termination of employees. Stability of tenure is essential to get an employee accustomed to new work and succeeding in doing it well.

13. Initiative: Within the limits of authority and discipline, managers would encourage their employees for taking initiative. Initiative is concerned with thinking out and execution of a plan. Initiative increases zeal and energy on the part of human beings.
14. Esprit de Corps: This is the principle of ‗Union is strength‘ and extension of unity of command for establishing team work. Managers should infuse the spirit of team work in their subordinates.

Fayol made it clear that these principles can be applied to most organizations, but these are not absolute principles. Organizations are at liberty to adopt those which suit them or to delete a few according to their needs.

MANAGEMENT AS A SCIENCE AND AN ART The controversy with regard to management, as to whether it is a science or art is very old. Specification of exact nature of management as science or art or both is necessary to specify the process of learning of management. Management is not easy. It is not an exact science. In fact, it is seen as an art that people master with experience.. When viewed as an art, management is remarkable, but natural expression of human behavior. It is intuitive, creative and flexible. Managers are leaders and artists who are able to develop unique alternatives and novel ideas about their organizations needs. They are attuned to people and events around them and learn to anticipate the turbulent twists and turns around them. However, artistry in management is neither exact nor precise. Artists interpret experience and express it in forms that can be felt, understood and appreciated by others. Art allows for emotion, subtlety and ambiguity. An artist frames the world so that others can see new possibilities. Science is extraordinary. It is a method of doing things. It is the organized systematic expertise that gathers knowledge about the world and condenses the knowledge into testable laws and principles. When science is done correctly, it can advice us in all of our day to day decisions and actions. The Process of scientific theory construction and confirmation can be viewed as involving the following steps:-

1. The formulation of a problem or complex of problems based on observation.
2. The construction of theory to provide answers to the problem or problems based on inductions from observations
3. The deduction of specific hypothesis from the theory.
4. The recasting of the hypothesis in terms of specific measures and the operations required to test the hypothesis.
5. The devising of the actual situation to test the theorem; and
6. The actual testing in which confirmation does or does not occur

Before ·trying to examine whether the management. is a science or not we have to understand the nature of science. Science may be a described as a systematized body of knowledge pertaining to an act of study and contains some general truths explaining past events or phenomena. It is Systematized in the sense that relationships between variables and limit have been ascertained and underlying principal discovered. Three important characteristics of science are.

1. It is a systematized body of knowledge and uses scientific methods for Observation;
2. Its principles are evolved on the basis of continued observation and experiment; and
3. Its principles are exact and have universal applicability without any limitations Judging from these criteria, it may be observed that management too is a systematized body of knowledge and its principles have evolved on the basis of observation not necessarily through the use of scientific methods. However, if we consider science a discipline in the sense of our natural science one is able to experiment by keeping all factors and varying one at a time. In the natural science it is not only possible to repeat the same conditions over and over again, which enables the scientist to experiment and to obtain a proof. This kind of experimentation-cannot be accompanied in the art of management since we are dealing with the human element. This puts a limitation on management as a science. It may be designated as 'inexact' or 'soft science‘

MANAGEMENT PROCESS or SCOPE OF MANAGEMENT Briefly, there are 5 core functions that constitute Scope of Management functions or the process of management. They are Planning, Organizing, Staffing, Directing and Controlling.

Scope /Process of Management

1. Planning

The first management function in scope of management functions that managers must perform is PLANNING. Within this function plan is created to accomplish the mission and vision of the business entity. Under the mission is considered the reason for the establishment, while under the vision is considered where business entity is aiming. The plan must define the time component and to plan necessary resources to fulfill the plan. Accordingly plan of organization is developed together with required personnel; method of leading people is defined and controlling instruments for monitoring the realization of plans. The guiding idea in the making of mentioned items is the realization of the objectives and fulfilling the mission and vision of the business entity. Planning may be broadly defined as a concept of executive action that embodies the skills of anticipating, influencing and controlling the nature and direction of change. Each organization should make a good first step, a good plan, because without it the organization takes a great risk of mistakes and thus compromising their business.

2. Organizing Organizing is the second function manager, where he had previously prepared plan, establish an appropriate organizational structure in business organization. In part, it determines the ranges of management, type of organizational structure, authority in the organization, types and ways of delegating and developing lines of communication. The organization and its subsystems are placed under the plan, which was created as part of functions, ie planning. Organizing basically involves analysis of activities to be performed for achieving organizational objectives, grouping them into various departments and sections so that these can be assigned to various individuals and delegating them appropriate authority so that they can carry their work properly. In performing construction and organization in particular must pay attention to formal and informal lines of communication, because if these lines are not adequately monitored the possibility of collision between them, resulting in delays and / or even failure to achieve the goal. 3. Staffing

Staffing, as the next function of management, consists of a selection of appropriate staff for the organization to reach a goal / goals easier and more efficient. According to today‘s experience is well known that it is difficult to financially evaluate, quality and efficient staff. Staff is one of the more valuable, if not the most valuable resource in any successful organization. For this reason,

MODULE 2

FUNCTIONS OF MANAGEMENT

The management process involves performance of certain fundamental functions. One useful classification of managerial function has been given by Luther Gulick, who abbreviating them using the word POSDCORB – Planning, Organizing, Staffing, Directing, Co- Ordinating, Reporting and Budgeting. George R Terry has mentioned four fundamental functions of management, Planning, Organizing, Actuating and Controlling. In short, different scholars in the field of management have their own classification of functions of management. Some scholars add few functions and delete some other functions. The Important functions of management are discussed below: -

PLANNING

Meaning Planning is the most crucial and foremost function of management. It is defined as the process of setting goals and choosing the means to achieve those goals. A sound planning is inperative for the successful achievement of the goals in the desired direction. It is rightly said ―well plan is half done‖. It involves setting of objectives and goals, designing appropriate strategy and cource of action, and framing plans and procedure etc for execution of the proposed activities under the project. Definitions According to George R Terry, ―Planning is the selecting and relating of facts and making and using of assumptions regarding the future in the visualization and formulation of proposed activities believed necessary to achieve desired results.‖ According to Henry Fayol, ―Planning is deciding the best alternatives among others to perform different managerial operations in order to achieve the predetermined goals.‖ Generally speaking, planning is deciding in advance what is to be done, that is, a plan is a projected course of action.

Features of Planning

1. Planning is looking in to the future
2. It involves predetermined lines of action
3. Planning is a continuous process
4. Planning integrates various activities of an organization
5. Planning is done for a specific period
6. It discovers the best alternatives out of available alternatives

7. Planning is a mental activity
8. Planning is required at all levels of Management
9. It is the primary functions of Management]
10. Growth and prosperity of any organization is depends upon planning Objectives of Planning Planning in organization serve to realize the following objectives:
11. To reduces uncertainty
12. To bring co-operation and co-ordination in the organisation
13. To bring economy in operations
14. Helps to anticipate unpredictable contingencies
15. To achieve the pre determined goals
16. To reduce competition. Advantages of Planning Planning helps the organization to achieve its objectives easily. Some of the advantages of planning are given below:
17. It helps the better utilization of resources
18. It helps in achieving the objectives
19. It helps in achieving economy in operations
20. It minimizes future uncertainties
21. It improves competitive strength
22. It helps effective control
23. It helps to give motivation to the employees
24. It develop rationality among management executives
25. It reduces red tapism
26. It encourages innovative thought
27. It improves the ability to cope with changes.
28. It create forward looking attitude in Management
29. It helps in delegation of authority
30. It provide basis for control Planning Process It is not necessary that a particular planning process is applicable for all organization and for all types of plans because the various factors that go into planning process may differ from plan to plan or from one organization to another. This can be presented by using the