NCERT Notes For Class 12 Business Studies Chapter 2 Principles Of Management

NCERT Notes for Class 12 business studies Chapter 2 Principles of Management

Class 12 business studies Chapter 2 Principles of Management

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NCERT Notes for Class 12 business studies Chapter 2 Principles of Management

Class 12 business studies Chapter 2 Principles of Management

Today business organizations follow certain well defined management principles in their working. Management principles are statements of fundamental truth that help managers in making right decisions. Management principles are developed through scientific study, enquiry and analysis. In this chapter, we will study Henri Fayol 14 Principles of Management and F W Taylor’s Scientific Management Principles and Techniques. This chapter also deals with the meaning, features and importance of management principles.

Principles of management: The concept

Management principles are the general guidelines for managerial decision making and behavior. They have been developed on the basis of observation and experimentation as well as personal experiences of managers. Management principles are not as rigid as principles of pure science. Management principles are formed to guide and influence the behavior of human beings. Human beings never respond in an identical manner. Therefore, when managers apply management principles in an organization, they need to make some modifications depending on the persons or situations prevailing in an organization.

Difference between Management Principles and Principles of Pure Science

Management Principles

Principles of Pure Science

Flexible in Nature

Rigid in Nature

Generally management principles apply according to the changing requirement of

business environment.

Scientific principles do not change with time or situations.

Management Principles are applied in human being; it will not get same result because human beings never respond in an identical manner.

Scientific principles are applied in physical matters, it always show same result.

Difference between Management Principles and Management Techniques

Management Principles

Management Techniques

Management principles are guidelines for managerial decision making and behavior.

Management techniques are methods and procedures to be performed to accomplish goals

Management principles are more flexible.

Management techniques are less flexible

Nature/characteristics of Management Principles

Managerial principles are general guideline for decision making and behavior. Management principles help managers to take correct decisions while performing their functions like planning, organizing, directing etc. The following points summarise the nature of Principles of Management:

Universal applicability

The principles of management are applicable in all types of organizations irrespective of their size and nature. They are applicable in a business as well as non-business organizations, small as well as large organizations, public sector as well as private sector, manufacturing as well as trading concerns etc.

General guidelines

Management principles are not static or absolute statements. This is not a complete solution to the problem. These cannot be applied blindly in all situations. Managers are required to make some modifications according to the persons or situations prevailing in an organization.

Eg-Principle of ‘fair remuneration’ guide the managers to give adequate salary to employees but what amount of salary is ‘fair’ depends upon the nature, size and financial capacity of the organization.

Formed by practice and experimentation

These principles of management have been developed only after deep and thorough research work. They are not developed overnight or they are not the personal feelings of a person.

Flexibility

Management principles are flexible and can be modified by the manager according to the requirements of the situation. They are not a set of rigid statements.

Eg.Principle of ‘centralisation’ insists on concentration of power and authority at top level

but the degree of centralization may vary according to the nature of organization and staff.

Behavioral in nature

The management principles are formed to guide and influence the behavior of human beings/employees. These help to improve the relationship between superior, subordinates and all the members of an organization.

Cause and effect relationship

The principles of management are intended to establish relationship between cause and effect so that they can be used in similar situations in a large number of cases. According to one of his important principle, Henri Fayol says ‘Division of work leads to specialisation’. Division of work is the ‘cause’ and ‘specialisation’ is the ‘effect’. Management principles tell the manager, what would be the result, if a particular principle is applied in a particular situation. It is very helpful for managers to take right decisions without resorting to ‘trial and error method’.

Contingent/Dependent

The application of principles of management is contingent/ dependent upon the prevailing situation at a particular point of time. Their application and effect depend upon the nature of organization. For example, employees deserve fair and just remuneration. But what is just and fair remuneration is determined by multiple factors like contribution of the employee, paying capacity of the employer etc.

Significance/Importance of management principles

Proper understandings of management principles are very helpful for managers as these principles act as guidelines for managerial activities. The following points highlight the importance of management principles:

Providing managers with useful insights into reality

Respect of management Principles increase managerial efficiency by increasing their knowledge, ability and understanding of managerial situations and circumstances. These principles guide managers to take right decision at the right time.

Optimum utilization of resources and effective administration

Principles of management equip managers to foresee the cause and effect relationships of their decisions and actions. Therefore, the wastage associated with trial and error approach can be reduced. That is, an optimum utilization resource takes place.

Scientific decisions

Management principles help managers to take thoughtful decisions in terms of the intended purposes. The management principles enable the managers to approach various problems systematically and scientifically. In the past managers used ‘rule of thumb’ to make decisions. Scientific decisions emphasis logic rather than blind faith or experience.

Meeting changing environment requirement

Every businessman has to make changes in the organization according to changes taking place in the business environment. Management principles help the managers in implementing the changes in the right direction and right level in the organization.

Fulfilling social responsibility

Today consumers and the general public are fully aware of their rights. Business is a social institution. Business should fulfill its social responsibility. Principles of management have been developed in such a way that they help in fulfilling its social responsibilities.

Base for management training, education and research

Management principles are used as a basis for management training; education and research. Principles of management are at the core of management theories.

Different Management Thoughts

Henry Fayol and F W Taylor are two great personalities who have made significant contributions to the field of management.

Henri Fayol (1841-1925)

Henri Fayol was a French mining engineer and management theorist who developed a general theory of business administration that is often called Fayolism. Fayol’s work was one of the first comprehensive statements of a general theory of management. He proposed that there were five primary functions of management and fourteen principles of management. In his original work ‘Administration industrielle’(published in 1916) five primary functions of mangers were identified. They are planning, organizing, commanding, co-coordinating and controlling. He started his career in 1960 as a mining engineer in a Coal Mining Company at the age of 19.In 1988 he became the Managing Director of that company. He continued in that post for 30 long years i.e. till 1918.Based on his long experience in the field of management he developed 14 principles of management. It were discussed in detail in his famous book published in French in the year 1916 ’Administration Industrielle et generle’. It was published in English as ‘General and Industrial Management’ in 1949 and is widely considered as foundation work in classical management theory. These principles act as guidelines for managers to perform managerial activities.Henri Fayol is known as ‘Father of General Management’.

Henry Fayol’s 14 Principles of Management

Fourteen principles of management developed by Fayol are:

  1. Principle of Division of Work
  2. Principle of Authority and Responsibility
  3. Principle of Discipline
  4. Principle of Unity of Command
  5. Principle Unity of Direction
  6. Principle of Subordination of Individual Interest to General Interest
  7. Principle of Remuneration of Employees
  8. Principle of Centralisation and Decentralisation
  9. Principle of Scalar Chain
  10. Principle of Order
  11. Principle of Equity
  12. Principle of Stability of Tenure of Personnel
  13. Principle of initiative
  14. Principle of Esprit De Corps (Union is Strength)

Principle of Division of Work

According to this principle the whole work in an organization must be divided into small tasks and one task or units of work should be assigned to one person according to his ability and qualification. When a person does a job regularly, he/she will become an expert in that job. Thus, division of work leads to “specialization”. According to Fayol , specialization is the most efficient way to use human effort. Through division of work, a manager can assign a single job to a particular person and the manager can easily fix responsibility on him.

Example: The manager of a furniture manufacturing company can divide the total work to be done in that company into smaller works. The manager can then delegate each of the smaller tasks, for example, the task of cutting, assembling, polishing etc. Division of work leads to specialization. It will improve his efficiency.

Principle of Authority and Responsibility

Authority means the power to take decision. Responsibility means the obligation to complete the job assigned on time. According to this principle there must be balance (parity) between the authority and responsibility. Excess of authority without matching responsibility may bring negative results and excess of responsibility without matching authority will not allow the worker to complete his job on time. There should be a balance between authority and responsibility.

Example: If a person is given the responsibility to produce 100 units of bag in a week but he is not given the authority to purchase the raw materials. In this case, he would never be able to achieve the target, if he does not have adequate raw materials.

Principle of Discipline

Discipline means obedience, respect of authority and observance of established rules. According to Fayol discipline is necessary for the efficient working of an organization. Discipline applies not only to workers but also to managers at all levels. To ensure discipline supervisors should be appointed at all levels, make clear and fair agreements and careful application of penalties.

Principle of Unity of Command

According to Fayol there should be one and only one boss for every individual employee. This principle states that each participant in a formal organization should receive orders from and be responsible to only one superior. If there is more than one superior, there can be contradictory orders. The employee is likely to have confusion as to whose order to obey. Besides, in the absence of unity of command, responsibility cannot be fixed, overlapping orders, duplication of work etc. may happen.

Example: Suppose a sales person is asked to settle a deal with a buyer and is allowed to give 10% discount by the marketing manager. But the finance manager tells the salesman not to offer more than 5%. Now there is no unity of command.

Principle Unity of Direction

According to Fayol there should be one head (manager) and one plan’ for each group of organizational activities that have the same objectives. For example Reliance Industries Ltd works in various fields including petrochemicals, communications, super markets etc. The activities and objectives of each of these areas will be different. Fayol advocate that each group of activities having the objectives must have one head and one plan. This ensure unity of action and coordination.

Example. If a company is manufacturing car as well as medicines, each product has its own market and its own business environment. Each division should have its own in charge(manager), plans and targets. Every employee of that division must put his efforts towards the achievement of plan of their division under the direction of one head only.

Difference between Unity of Command and Unity of Direction

Basis

Unity of Command

Unity of Direction

Meaning

This principle states that one subordinate should receive orders from and should be responsible to

only one boss.

This principle states each group of activities having the same objectives must have one head and

one plan.

Aim

To prevent dual subordination

To prevent overlapping of activities

Implications

It affects an individual employee

It affects the entire organization

Display Relationship

It represents relationship between superior and subordinate.

It represents relationship of activities as per organizational plans

and goals.

Need

It is needed to fix the responsibility of

each person in the organization.

It is needed for sound organization

of activities.

Principle of Subordination of Individual Interest to General Interest

According to Fayol, the interest of the organisation should be the first priority over the interest of any individual in that organization. Workers working in an organization may have personal interest like get high salary, get promotion etc. The organization also has its own objectives (maximum profit with minimum cost).According to Fayol the focus should be on the organizational objectives and not on those of the individual.

Example-1 When making decision, managers should not consider personal gains but the

organisation’s general goals.

Example-2 When an organization needs to buy land for expansion purpose, some directors may have bought a particular place out of his personal interest, regardless the interest of the organization.

Principle of Remuneration of Employees

According to this principle remuneration to the employees should be fair for both employees and the organization. The remuneration should be sufficient to motivate employees. At the same time it should be within the paying capacity of the organisation. It is the duty of the manager to ensure that employees are being paid remuneration according to their work. If employees are not paid wages properly they may work with perfect dedication and capacity. Remuneration should be just and equitable. This will create good relations between workers and management.

Principle of Centralisation and Decentralisation

Centralisation means concentration of authority in few hands at the top level. Decentralization means delegation or distribution of authority throughout all the levels of the organization. Decentralisation is a situation in which an employee is given the authority to make decisions regarding work related matters. According to Fayol an organization should not be completely centralized or decentralized, there must be a proper balance between the two depending upon the, size and nature of the business. Decentralisation helps the top management to reduce their work load and at the same time it will motivate the lower level managers.

Example-The major decisions like setting up of goals,plans,policies and strategies can be centralized, but there can be a policy of decentralization for the activities of routine work such as purchase of raw materials, assignment of targets to workers etc.

Principle of Scalar Chain

An organization consists of superiors and subordinates. Scalar chain is the formal line of authority (Chain of command) which moves from highest to lowest rank in a straight line. The chain specifies the route through which the information is to be communicated to the desired person. Fayol insists that this chain must be strictly followed by all managers and subordinates in an organisation. Scalar chain or chain of command gives a clear idea about authority-responsibility relationship and systematic communication can be ensured in an organization.

For example, in an organization there is one head A who has two lines of authority under him. One line consists of B-C-D-E-F.Another line of authority under A is L-M-N-O-P.According to Scalar Chain if E wants to communicate with O he has to move through E-D-C-B-A-L-M-N and then O.But in case of emergency a Gang Plank between E and O may be created as shown by the dotted line in order to avoid delay.

Drawbacks of Scalar chain

  • Time consuming-Huge time is required for the communication to reach the destination.
  • There is possibility of distortion of message in the course of its transmission.

Gang Plank (Direct Contact)

According to this concept, in case of emergency, two executives of the organization of different departments at the same level can communicate directly, so that speedy decisions and actions could be taken. Gang plank allows direct communication between the officials working at same level of authority without following every link of chain. In the above example, if employee ‘E’ has to contact employee ‘O’, he can easily and directly communicate the information to ‘O’ using this Gang plank. Some business opportunities may be lost due to lack of timely decisions; gang plank is a solution for this.

Principle of Order

According to Fayol, there must be a fixed place for everything (men and materials) and everything must be in its place. If this order is strictly followed in an organization, there will be no hindrance in the activities of the business/ factory. This increases the efficiency of company’s operations.

Example: All employees should have a fixed place in an office

Example: Efficiency can be increased by keeping the required tools in a fixed place in an automobile workshop.

Principle of Equity

Equity refers to kindness and justice in the behavior of managers towards workers. According to Fayol the principle of equity should be followed by managers at all levels. There should be no discrimination against anyone on account of sex, religion, language,caste, belief or nationality. Employees will bring their maximum efforts only when they are treated with kindness and justice. If a manager is biased in dealing with employees then employees will get dissatisfied and will not contribute to their maximum capacity.

Example-1 There should be no discrimination in granting medical leave to workers irrespective of their caste and religion.

Example-2 Google, an American multinational Company, has appointed Sundar Picchai, an Indian, as its CEO. It is clear here that nationality should not be considered when giving a promotion to someone.

Principle of Stability of Tenure of Personnel

According to this principle, employees once selected, should be kept at their post for a minimum fixed term (tenure).Employees turnover should be minimized to maintain organizational efficiency. They should be given reasonable time to show results. Employees are more likely to leave the organization if there is job insecurity. Recruitment, selection and training costs of new employees will be high.

Principle of initiative

Fayol suggested that employees in the organization must be given an opportunity to take some initiative in making and executing a plan. Initiative gives more freedom to its employees to suggest their new ideas and more convenient methods of work. Initiative will increase the satisfaction level of employees. Initiative does not mean disobedience; it will develop a feeling of oneness in employees.

Example- A manager should welcome the ideas and suggestions of his subordinates before fixing final plan.

Principle of Esprit De Corps (Union is Strength)

According to Fayol management should promote a team spirit of unity or harmony among employees. Employees should have a feeling that they are a member of that organization. A manager should replace ’I’ with ‘We’ in all his conversations with workers. Fayol put emphasis on team work because team contribution is always better than individual contribution. It will also minimize the need for using penalties.

From the above discussion it is clear that Fayol’s 14 principles of management are widely applicable to managerial problems and it will really working as a guideline for managerial decision making and behavior. According to Fayol, the list of 14 principles discussed above is not final. With the development of management science, the list can be modified on the basis of experience and needs.

F.W.Taylor’s Scientific Management

F.W.TAYLOR (1856-1915)

Fredrick Winslow Taylor was an American mechanical engineer.F W Taylor is known as ‘Father of Scientific Management’. He was born in 1856 in Philadelphia, USA in the year 1956.In 1878 he joined Midvale Steel Works as a mechanical engineer and rose to the position of Chief Manager of that company in 1884 at the age of 28.He was primarily concerned about the efficiency of workers and optimum utilization of resources. He conducted a series of experiments in management science for two decades. From 1890 until 1893 Taylor worked as a general manager and a consulting engineer to management for the Manufacturing Investment Company of Philadelphia.1893, Taylor opened an independent consulting practice in Philadelphia. Through these consulting experiences, Taylor perfected his management system. In 1898 he joined Bethlehem Steel to solve an expensive machine- shop capacity problem. While at Bethlehem, he discovered many management techniques.Taylor was forced to leave Bethlehem Steel in 1901 after discord with other managers. Since then, Taylor was promoting his management methods through his writings, lecturing and consultation. In 1911, Taylor introduced his The Principles of Scientific Management paper to the American Society of Mechanical Engineers (ASME) In early spring of 1915 Taylor caught pneumonia and died, one day after his fifty-ninth birthday, on March 21, 1915.One hundred years after his death, Taylor’s findings are still relevant today.

Scientific Management

Scientific Management refers the application of science for each and every element of management. In scientific management conducting business activities according to standard tools, methods and trained personnel in order to increase the output , improve its quality and reduce costs and wastes. In scientific management, F W Taylor replaced ‘Old Rule of Thumb’ in management. He broke up human activity into small parts and found out how it could be done effectively, in less time and with increased productivity.

According to F.W Taylor “Scientific Management means knowing exactly what you want men to do and seeing that they do it in the best and cheapest way”.

Scientific management insists on replacement of rule of thumb by science that means decision in the organization should not be taken on the basis of wills and wishes of the managers but decisions must be based on scientific studies conducted by using scientific tools. When Taylor was introduced his scientific management principles in Bethlehem Steel company, its production tripled.

Scientific management includes:

  1. Scientific study and analysis of work
  2. Scientific selection and training of employees.
  3. Standardization of raw materials, tools and working conditions.
  4. Reasonable remuneration to employees.
  5. Integration and co-ordination of available resources.

Taylor’s Scientific Management is based on certain Principles. These principles are applied in practice with the help of certain Techniques.

Principles of Scientific Management

Taylor’s Scientific Management is based on certain principles, which are discussed below.

  1. Science, not rule of thumb
  2. Harmony, Not Discord (Conflict)
  3. Co-operation, not individualism
  4. Scientific selection, training and development of workers
  5. Maximum, not restricted output

1- Science, not rule of thumb

According to this principle, Taylor insists that each job performed in the organization should be based on scientific enquiry and not on the basis of rule of thumb. In rule of thumb decisions are taken on the basis of practical knowledge and not on the basis of scientific calculations. Taylor advocated the following studies to be made regarding jobs:-

  1. Method study-To identifies the best possible method of doing a particular job.
  2. Time study-observing and recording time required for every piece of work and operation.
  3. Motion Study-It helps to eliminate the unproductive and unnecessary motions/movements and it help to reduce the time to complete a particular job efficiently.
  4. Fatigue study-Fatigue study helps to determine the amount and frequency of rest intervals required for a worker during a particular job.

2- Harmony, Not Discord (Conflict)

According to Taylor in an organization there should be complete harmony between the management and workers. Both should realize that each one is important. To achieve this, Taylor advocated a complete ‘Mental Revolution ‘on the part of both management and workers. Management should share the gains of the company with workers and at the same time workers must contribute their level best for the organization. Taylor feels that prosperity of the organization depends upon prosperity of employers as well as employees.

Eg.The main objective of workers is to earn more and the objective of management is to maximize production; instead of discord of for each other’s objective workers can earn more by producing more which will help in maximizing the production also.

3- Co-operation, not individualism

According to this principle, there should be complete cooperation between employees and the management instead of individualism. Competition should be replaced by cooperation. Management needs to trust workers and involve them when making important decisions. At the same time, workers, should not go for strike and should not make unreasonable demands on the management. It is a situation where employer take care the needs of the employees.

Eg.While assigning job to workers, if management asks them about their interest and then work is assigned according to their interest, definitely the worker will perform it more efficiently.

4- Scientific selection, Training and Development of workers

Industrial efficiency depends upon the efficiency of workers. Workers efficiency depends upon proper selection, training and assigning duties according to their qualification. To increase efficiency, they should be given the required training. This will ensure the greatest efficiency and prosperity for both company and workers.

5- Maximum, not restricted output

Both the management and workers should try to achieve maximum output in place of restricted output. This will be benefited to both the parties. Maximum output will result in higher wages for the workers and greater profit for the management. Increased production leads to decrease in cost of production per unit and consumers will get quality products at reasonable prices.

Techniques of Scientific Management

Principles of Scientific Management are applied in practice with the help of certain techniques. Management techniques are methods and procedures to be performed to accomplish goals. Various techniques of Scientific Management are discussed below:-

Functional Foremanship

  1. Standadisation and simplification of work
  2. Work Study
  3. Differential Piece Wage System
  4. Functional Foremanship

In this technique Taylor suggested the division of factory into two departments-Planning Department and Production Department. Through this planning is separated from execution. So that ‘Planning in charge’ can concentrate only on planning the job of worker’s and ‘production in charge’ can concentration only on execution of the job. Taylor said foreman must be intelligent, educated, energetic, honest and profession expert. All these qualities can’t be found in one person so Taylor proposed there must be at least eight specialist or foreman to supervise and give orders to workers .Out of the eight foreman , 4 of them in the planning department and 4 of them in the production department to guide workers.

Functional Foremanship

The eight functional experts suggested by Taylor are:

Under planning department:

  1. Route Clerk-This foreman is responsible for determining the sequence of steps for completing a particular job or task.
  2. Instruction Card Clerk-He issues instruction to the workers to be followed by them.
  3. Time and Cost clerk-He records the time taken for completion of a job and also prepares cost sheet for every job.
  4. Disciplinarian-He ensures that each job is being performed in a disciplined manner.

Under Production Department:

  1. Gang Boss-He arranges all the machines, tools and other resources required for performance of the job so that there is no delay.
  2. Speed Boss-This foreman assures timely completion of work.
  3. Repair Boss-This foreman taken care of the maintenance of machines.
  4. Inspector-This foreman keeps a check on quality control of the output.

Standardization and Simplification of Work

Standardisation refers to the process of setting standards for every business activity, i.e standardization of process, standardization of raw materials, standardization of time, standardization of product etc. Standardisation does not mean quality standards only but it refers to setting up standards for size, type, weights and quality of product. Simplification aims at eliminating unnecessary diversity of products.

The objectives of standardization are:

  1. To establish standards of performance of men and machines.
  2. To establish interchangeability of manufactured parts and equipments.
  3. To specify a given line of products to fixed type, size, colour etc.
  4. To maintain quality standards.

Work Study:

Work study is a systematic, objective oriented, analytical and critical assessment of the performance of workers in various operations in a workshop. Its various aspects are:

(a) Method study (b) Motion Study (c) Time Study (d) Fatigue Study

3(a) Method Study

Method study is a technique to know the one best way of doing a particular job. Taylor suggested that method of production should not be decided by the rule of thumb method but all the methods must be tried in the organization and the one which brings maximum benefits with minimum cost must be selected.

Example: In a car manufacturing, the sequence of operations, place for men, machines, and raw materials etc. will be systematically decided in advance.

3 (b) Motion Study

Motion study refers to the study of various movements, like sitting, standing, holding, turning, changing position etc., of workers, while performing a particular job. The main objective of this study is to identify the motions which are productive, incidental and unproductive. This study helps in eliminating the unnecessary movements as to complete a given task in less time and thereby increasing the efficiency.

Example: While observing an average worker, if it is observed that he has to bend frequently to pick up tools from the tool box placed under his table, then a stool can be placed near his seat to keep the tool box so that the worker does not waste his energy in bending again and again. Saved energy can be used for improving his production capacity.

3 (c) Time Study

Time study determines the standard time taken by a workman to perform a given task. The standard time is fixed by taking several readings of a specific task. Its purpose is to decide how much time is normally required by the workers to perform a certain job and thus to determine the number of workers to be employed for a fair day’s work. It also helps in calculating labour costs and framing suitable incentive schemes. The time taken in doing a task is assigned to a worker by using time measuring devices such as stop watch etc.

Example: The standard time taken by the worker to make a lunch box is 30 minutes. So in one hour he will make 2 boxes. Assuming the worker works for 8 hours per day, he should make 16 lunch boxes per day. Now this is the standard task a worker has to perform. Wages can be calculated accordingly.

Time study helps the manager:-

  1. To decide how much time is normally required to perform a certain job.
  2. To determine a fair day’s work for the workmen.
  3. To determine the number of workers to be employed.
  4. To frame suitable incentive schemes.

3 (d) Fatigue Study

It is human tendency that a person feels tired physically and mentally if she/ he does not rest while working. The rest period enables one to regain the stamina and to work again with same capacity. This will result in increased productivity. Fatigue study intends to find out the number and frequency of rest intervals that must be provided to a worker in completing a job efficiently.

Example: If workers are involved in heavy manual labour such as brick layering or poor working conditions then small pauses must be given to regain stamina and after each interval they resume their work with greater enthusiasm.

4- Differential Piece Wage System

Differential piece rate system is a system of wages’ payment in which efficient and inefficient workers are paid at different rates. Taylor has suggested two types of wages for similar work. Differential piece rate system suggests two piece rate-higher rate for efficient workers who produce the standard output or more and lower rate for inefficient workers who produce less than the standard output.

For example, Narmada Ltd. gives Rs. 2 per piece if daily production is 25 or more units and Rs.1.50 per unit ,if production is less than 25 units. Suppose worker ‘A’ who produced 24 units and he will get only Rs.36 (24×1.50) whereas worker ‘B’ who produced 25 units (just one unit more than worker ‘A’, but he achieved target) and he will get Rs. 50 (25×2). In this case worker ‘A’ could not achieve the target. Although, he lost the target for just one unit, he suffered a huge loss of Rs.14.So under this system; workers will be motivated to attain atleast minimum standard performance.

Worker

Standard Output

Actual output

Wage Rate (Rs)

Wage (Rs)

A

25

24

1.5

36

B

25

25

2

50

Advantages of Differential Piece Wage System

  1. It discriminates between efficient and inefficient workers
  2. It ensures reward for efficient workers.
  3. It automatically penalise inefficient worker
  4. This system motivate the workers towards higher productivity.

Mental revolution.Mental Revolution is a change in thinking both on the part of management and workers. Success of implementation of scientific management depends

on the mental revolution of management and workers. Mental revolution involves a change in the attitude of workers and management towards one another from competition to cooperation. Both should realise that each one is important. Both the management and workers should try to achieve maximum output in place of restricted output. This will be benefited to both the parties. Management should share a part of surplus with workers. Workers should also contribute their maximum effort so that the company makes profits. This attitude will be good for both of them and also for the company. If mental revolution not take place, all the measures suggested in scientific management system would be useless.

Comparison between Fayol and Taylor

Difference

Fayol

Taylor

Meaning

Henry Fayol, is a father of modern management who laid down fourteen principles of management, for improving overall administration.

F.W. Taylor is a father of scientific management who introduced four principles of management, for increasing overall productivity.

Concept

General theory of administration

Scientific Management

Emphasis

Top level management

Lower level management

Applicability

Universally applicable

Applies to specialized organizations only.

Basis of formation

Personal Experience

Observation and Experimentation

Focus

Improving overall Administration

Increasing Productivity

Approach

Manager’s approach

Engineer’s approach

Knowledge Box-For Future Comparison

Rate on

Gold (8 gm)

Sensex

Nifty- 50

Rubber –

(4)

Reliance-share Price-Face value- Rs.10

South Indian Bank-share Price. Face Value Rs.1

6-7-19

25680

39513

11811

150/kg

1262

13

10-8-20

41600

38182

11274

134/kg

2119

7

       

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