Paper Code: HU-601

Paper: Engineering Management and Economics

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Unit-I: Introduction to Economics

Nature & significance of Economics, Meaning of Science, Engineering, Technology and their relationship with
economic development.
Unit-II: Basic Concept
Basic concept of demand & supply, Elasticity of demand & supply, Interference curve analysis, Price effect, Income
effect, Substitution effect.
Unit-III: Money and Banking
Function of money, Value of money, Inflation and measures to control it, Brief idea of function of banking system,
Commercial and central banking, Business fluctuations.
Unit-IV: Introduction to Management
Definition, Nature and significance of
Contribution of Max Weber, Taylor and Fayol.

management,

Evaluation

of

management

thought,

Unit-V: Human Behavior

Factor of individual behavior, Perception, Learning & Personality development, Interpersonal relation and group
behavior.

CYBERSONY

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UNIT-1
Economics is the social science that studies economic activity to gain an understanding of the processes that govern the
production, distribution and consumption of goods and services in an economy.
The term economics comes from the Ancient Greek from (oikos, "house") and (nomos, "custom"
or "law"), hence "rules of the house (hold for good management)". 'Political economy' was the earlier name for the
subject, but economists in the late 19th century suggested "economics" as a shorter term for "economic science" to
establish itself as a separate discipline outside of political science and other social sciences.
Economics can be defined as a social science that deals with the production, distribution and consumption of scare
resources in an economy. It examines how resources can be optimally distributed to satisfy the needs of individuals
and the economy as whole.
Economics focuses on the behavior and interactions of economic agents and how economies work. Consistent with this
focus, primary textbooks often distinguish between microeconomics and macroeconomics. Microeconomics examines
the behavior of basic elements in the economy, including individual agents and markets, their interactions, and the
outcomes of interactions.
Example:-

Arrangement of Pizza and cold-drink with limited money for a party.

Buying pen and candies in 20 rupees.

-:Nature and Scope of economics:A.

B.
C.
D.
E.
F.

Economics can be seen as science and art.

Stabilizes Economy.
Economics help us to answer:- What to produce?
Continuous process.
Maximizes resource utilization.
Helps in strategic planning and controlling.

How to produce?

&

For whom to produce?

SIGNIFICANCE OF ECONOMICS
1. First and foremost, the most important advantage of economics is helping the society decide and formulate the
ways for the optimal allocation of its limited and scarce resources.
2. Economics provides us the mechanism and analytical techniques to optimise the utilisation of the available
resources and reduce wastages.
3. Optimum utilisation of the Opportunity cost is another principle in which the scarce resources are utilised
efficiently after calculating and checking the opportunity cost. Minimising the opportunity cost gives maximum
profits. The use of this principle by governments in budget allocations results in better growth rates for a nation.
4. The stability of an economy is a must for any country or society to survive in the long run. The adoption of sound
economic practices in a society can only ensure that the economy is stable and growing at the same time.

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5. Economics is equally important for the economical growth of individuals. A person may not need the knowledge
and understanding of the theoretical side of economics, but he definitely needs to understand the basic
economic practices that he must follow to save himself from going broke or bankrupt and to enjoy a healthy and
wealthy life. Also, understanding of at least the basic economics helps maximising the profit.
6. Economists can advise governments on how to manage the economy and avoid inflation and unemployment
through well devised economic policies.
7. Economists can also be of great help to the society by suggesting certain policies to the governments to
overcome the market failures caused due to various factors such as under or over-production.

Sceince engineering & technology and relationship with economic development

Science (from Latin scientia, meaning "knowledge") is a systematic enterprise that builds and organizes knowledge in the
form of testable explanations and predictions about nature and the universe. In an older and closely related meaning,
"science" also refers to a body of knowledge itself, of the type that can be rationally explained and reliably applied. A
practitioner of science is known as a scientist.
Science helps in economic development through inventions, objectivity, open-mindness, skepticism
Engineering (from Latin ingenium, meaning "cleverness" and ingeniare, meaning "to contrive, devise") is the application
of scientific, economic, social, and practical knowledge in order to invent, design, build, maintain, research, and improve
structures, machines, devices, systems, materials and processes.
The discipline of engineering is extremely broad, and encompasses a range of more specialized fields of engineering, each
with a more specific emphasis on particular areas of applied science, technology and types of application.
Enigneering helps in economic development by facilitating the mechanization of production process and helping the
developemt of infrastructure
Technology (from Greek , techne, "art, skill, cunning of hand"; and -, -logia[1]) is the collection of tools,
including machinery, modifications, arrangements and procedures used by humans.
Engineering is the discipline that seeks to study and design new technologies.The human species' use of technology
began with the conversion of natural resources into simple tools. The prehistoric discovery of how to control fire
increased the available sources of food and the invention of the wheel helped humans in travelling in and controlling
their environment.
Technology means skills, knowledge or procedure for making, using and doing useful things

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Economics is classified into two catagories
MICROECONOMICS
MACROECONOMICS

Microeconomics is the study of particular markets, and segments of the economy. It looks at issues such
as consumer behaviour, individual labour markets, and the theory of firms.
Macro economics is the study of the whole economy. It looks at aggregate variables, such as aggregate
demand, national output and inflation.

Micro economics is concerned with:

Supply and demand in individual markets

Individual consumer behaviour. e.g. Consumer choice theory
Individual labour markets e.g. demand for labour, wage determination
Externalities arising from production and consumption.

Macro economics is concerned with

Monetary / fiscal policy. e.g. what effect does interest rates have on whole economy?
Reasons for inflation, and unemployment
Economic Growth
International trade and globalisation
Reasons for differences in living standards and economic growth between countries.
Government borrowing

Moving from Micro to Macro

If we look at a simple supply and demand diagram for motor cars. Microeconomics is concerned with issues
such as the impact of an increase in demand for cars.
This micro economic analysis shows that the increased demand leads to higher price, and higher quantity.
Macro economic analysis
This looks at all goods and services produced in the economy.
The macro diagram is looking at Real GDP (which is the total amount of output produced in the economy)
instead of quantity.
Instead of the price of a good, we are looking at the overall price level (PL) for the economy. Inflation measures
the annual % change in the aggregate price level.

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Macro diagrams are based on the same principles as micro diagrams, we just look at Real GDP rather than
Quantity and Inflation rather than Price Level (PL)
We can also consider differences between micro and macro economics. I will summarise the main differences
here:
1. Small segment of economy vs whole aggregate economy.
2. Microeconomics works on principle that markets soon create equilibrium. In macro economics, the
economy may be in a state of disequilibrium (boom or recession) for a longer period
3. There is little debate about the basic principles of micro-economics. Macro economics is more
contentious. There are different schools of macro economics offering different explanations (e.g.
Keynesian, Monetarist, Austrian, Real Business cycle e.t.c).
4. Macro economics places greater emphasis on empirical data and trying
to explain it. Micro economics tends to work from theory first.

Differences Between Microeconomics and Macroeconomics

The main difference is that micro looks at small segments, and macro looks at
the whole economy. But, there are other differences.
Equilibrium Disequilibrium
Classical economic analysis assumes that markets return to equilibrium (S=D). If
demand increases faster than supply, this causes price to rise and firms respond
by increasing supply. For a long time, it was assumed that the macro economy
behaved in the same way as micro economic analysis. Before, the 1930s, there
wasnt really a separate branch of economics called macroeconomics.
Great Depression and Birth of Macroeconomics
In the 1930s, economies were clearly not in equilibrium. There was high unemployment, output was below
capacity, and there was a state of disequilbrium. Classical economics didnt really have an explanation for this
dis-equilibrium, which from a micro perspective, shouldnt occur.
In 1936, J.M.Keynes produced his The General Theory of Employment, Interest and Money, this examined why
the depression was lasting so long. It examined why we can be in a state of disequilibrium in the macro
economy. Keynes observed that we can have a negative output gap (disequilibrium in the macroeconomy) for a
prolonged time. In other words, microeconomic principles of markets clearing, didnt necessarily apply to
macro economics. Keynes wasnt the only economist to investigate this new branch of economics. For example,
Iriving Fisher examined the role of debt deflation in explaining the great depression. But, Keynes theory was
the most wide ranging explanation, and played a large role in creating the new branch of macro-economics.
Since 1936, macroeconomics developed as a separate strand within economics. There have been competing
explanations for issues such as inflation, recessions and economic growth.

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Similarities between Microeconomics and Macroeconomics

Although it is convenient to split up economics into two branches microeconomics and macroeconomics, it is
to some extent an artificial divide.
8. Micro principles used in macro economics. If you study impact of devaluation, you are likely to use same
economic principles, such as the elasticity of demand to changes in price.
9. Micro effects macro economics and vice versa. If we see a rise in oil prices, this will have a significant
impact on cost-push inflation. If technology reduces costs, this enables faster economic growth.
10. Blurring of distinction. If house prices rise, this is a micro economic effect for housing market. But,
housing market is so influential that it could also be considered a macro-economic variable, and will
influence monetary policy.
11. There have been efforts to use computer models of household behaviour to predict impact on macro
economy.

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UNIT-2
Basic concept of demand & supply

In economics, demand is the utility for a good or service of an economic agent, relative to his/her income.
Demand is a buyer's willingness and ability to pay a price for a specific quantity of a good or service. Demand
refers to how much (quantity) of a product or service is desired by buyers at various prices. The quantity
demanded is the amount of a product people are willing to buy at a certain price; the relationship between
price and quantity demanded is known as the demand. The term demand signifies the ability or the willingness
to buy a particular commodity at a given point of time.
Definition:- Demand is defined as the quantity of goods or services that consumers are willing and able to buy
at a given price in a given time period
ELEMENTS OF DEMAND
1. Quantity of commodity.
2. Price of commodity.
3. Period of commodity.

DETERMINANTS OF DEMAND:-

1. Price of the product\goods:-

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2. Price of associated goods\product:i. Substitute goods

ii. Complementary goods
3. Income of the consumer:4. Status of the consumer:5. Advertisement effect:6. Seasonal variation of demand:7. Taste of the consumer:8. Number of consumer in market:9. Consumers expectations with regards to future price:10. Government policy:-

SUPPLY
Supply (S) is a schedule, which shows amounts of a product a producer is willing and able to produce and sell at
each specific price in a series of possible prices during a specified time period.
Quantity supplied (Qs) is the amount of a product that producers are willing and able to produce and sell at a
particular price at a particular time.
In another words, supply is the quantity supplied at all prices during a specific time period. A change in price
will change the quantity supplied, not the supply. Any other factors other than price change will change the
supply. Non-price factors include wage, price of related resources, cost of production, tax, expectation, number
of sellers, etc.
Factors affecting Supply:Good's own price: The basic supply relationship is between the price of a good and the quantity supplied.
Although there is no "Law of Supply", generally, the relationship is positive, meaning that an increase in price will
induce an increase in the quantity supplied.
Prices of related goods: For purposes of supply analysis related goods refer to goods from which inputs are
derived to be used in the production of the primary good. For example, Spam is made from pork shoulders and
ham. Both are derived from pigs. Therefore pigs would be considered a related good to Spam. In this case the
relationship would be negative or inverse. If the price of pigs goes up the supply of Spam would decrease (supply
curve shifts left) because the cost of production would have increased. A related good may also be a good that
can be produced with the firm's existing factors of production.
Conditions of production: The most significant factor here is the state of technology. If there is a technological
advancement in one good's production, the supply increases. Other variables may also affect production
conditions. For instance, for agricultural goods, weather is crucial for it may affect the production outputs.

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Expectations: Sellers' are concerning future market conditions can directly affect supply. If the seller believes that
the demand for his product will sharply increase in the foreseeable future the firm owner may immediately
increase production in anticipation of future price increases. The supply curve would shift out.
Price of inputs: Inputs include land, labor, energy and raw materials. If the price of inputs increases the supply
curve will shift left as sellers are less willing or able to sell goods at any given price. For example, if the price of
electricity increased a seller may reduce his supply of his product because of the increased costs of production.
Number of suppliers: The market supply curve is the horizontal summation of the individual supply curves. As
more firms enter the industry the market supply curve will shift out driving down prices.
Government policies and regulations: Government intervention can have a significant effect on supply.
Government intervention can take many forms including environmental and health regulations, hour and wage
laws, taxes, electrical and natural gas rates and zoning and land use regulations

The law of supply

Law of supply states: As price of a good increases, the quantity supplied of the good rises, and as the price of a
good decreases, the quantity supplied of the good falls, ceteris paribus.
Restated: there is a direct relationship between price (P) and quantity supplied (Qs).
Explanation of Law of Supply
If the product cost is given, a higher price means greater profits and thus an incentive to increase the quantity
supplied. Price and quantity supplied are directly related.

ELASTICITY OF DEMAND

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UNIT-4

#_management_#
Management is the process of dealing with or controlling things or people
According to Henri Fayol, "management is to manage is to forecast and to plan, to organise, to command, to coordinate and to control."
Fredmund Malik defines it as "the transformation of resources into utility."
Management included as one of the factors of production - along with machines, materials and money
As a discipline, management comprises the interlocking functions of formulating corporate policy and organizing,
planning, controlling, and directing a firm's resources to achieve a policy's objectives
Mary Parker Follett (18681933), defined management as "the art of getting things done through people"

Manager: the person(s) responsible for directing the efforts aimed at helping organizations to achieve their goals.

} LEVELS OF MANAGEMENT {

Top Level of Management

It consists of board of directors, chief executive or managing director. The top management is the ultimate source of authority and it
manages goals and policies for an enterprise. It devotes more time on planning and coordinating functions.

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The role of the top management can be summarized as follows a. Top management lays down the objectives and broad policies of the enterprise.
b. It issues necessary instructions for preparation of department budgets, procedures, schedules etc.
c. It prepares strategic plans & policies for the enterprise.
d. It appoints the executive for middle level i.e. departmental managers.
e. It controls & coordinates the activities of all the departments.
f. It is also responsible for maintaining a contact with the outside world.
g. It provides guidance and direction.
h. The top management is also responsible towards the shareholders for the performance of the enterprise.
; Middle Level of Management
The branch managers and departmental managers constitute middle level. They are responsible to the top management for the
functioning of their department. They devote more time to organizational and directional functions. In small organization, there is
only one layer of middle level of management but in big enterprises, there may be senior and junior middle level management. Their
role can be emphasized as a. They execute the plans of the organization in accordance with the policies and directives of the top management.
b. They make plans for the sub-units of the organization.
c. They participate in employment & training of lower level management.
d. They interpret and explain policies from top level management to lower level.
e. They are responsible for coordinating the activities within the division or department.
f. It also sends important reports and other important data to top level management.
g. They evaluate performance of junior managers.
h. They are also responsible for inspiring lower level managers towards better performance.
; Lower Level of Management
Lower level is also known as supervisory / operative level of management. It consists of supervisors, foreman, section officers,
superintendent etc. According to R.C. Davis, Supervisory management refers to those executives whose work has to be largely with
personal oversight and direction of operative employees. In other words, they are concerned with direction and controlling function
of management. Their activities include a. Assigning of jobs and tasks to various workers.
b. They guide and instruct workers for day to day activities.
c. They are responsible for the quality as well as quantity of production.
d. They are also entrusted with the responsibility of maintaining good relation in the organization.
e. They communicate workers problems, suggestions, and recommendatory appeals etc to the higher level and higher level
goals and objectives to the workers.
f. They help to solve the grievances of the workers.
g. They supervise & guide the sub-ordinates.
h. They are responsible for providing training to the workers.
i. They arrange necessary materials, machines, tools etc for getting the things done.
j. They prepare periodical reports about the performance of the workers.
k. They ensure discipline in the enterprise.
l. They motivate workers.
m. They are the image builders of the enterprise because they are in direct contact with the workers

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Process of Management
PLANNING
ORGANISING
STAFFING
DIRECTING
CONTROLLING

Planning
Deciding in advance what to do, how to do, why to do, where to do and who will be responsible for doing is
planning. Determination of the objectives of business, splitting of objectives into goals for each department of
the organization and formulating policies, programs, procedures rules and regulations and budget are the
important steps involved in planning.

Organizing
Division of work into functions and sub-functions, grouping of activities that are closely related in their nature,
assigning of duties and responsibilities to the employees and finally delegation of authority and power to each
employee or the group to discharge their duties accordingly are the processes come under the function of
management organizing.

Identification of activities.
Classification of grouping of activities.
Assignment of duties.
Delegation of authority and creation of responsibility.
Coordinating authority and responsibility relationships.

Staffing
The process of making out, assessing, appointing, evaluating and developing the employees at work in an
organization is staffing. In here the characteristics of a job are determined primarily. It is followed by ensuring
of the right number of and kind of employees are placed at the right places and at the right time when
organization is in need of them. Staffing function of management begins with notifying the vacancies in the
organisation and selecting the best individuals as employees. Performance appraisal and man power
development are the other processes involved under staffing function of management.

Manpower Planning (estimating man power in terms of searching, choose the person and giving the right place).
Recruitment, Selection & Placement.
Training & Development.
Remuneration.
Performance Appraisal.
Promotions & Transfer.

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Directing
Communication, leadership and supervision and last but not the least motivation are the elements come under
the function of management, directing. Directing is nothing but guiding and leading the people in an
organization. It is not just giving instructions by a superior to the sub-ordinates but also is a process of
supervising, guiding and motivating the latter to achieve the organizational goals. It is a complex function of
management that ensures the employees work effectively and efficiently.

Supervision
Motivation
Leadership
Communication

Controlling
It is the process that ensures whether the resources are obtained and used efficiently in achieving the
organizational objectives. Controlling function of management is closely linked with the planning function
because, it includes checking the performance of employees to see whether the planned performance is being
achieved by them or not. Budgetary control, Inventory control, quality control, profit and loss control,
Management audit, cost accounting and cost control, production control, financial control, break-even analysis
and internal audit control are the important control devices of controlling techniques.
a.
b.
c.
d.

Establishment of standard performance.

Measurement of actual performance.
Comparison of actual performance with the standards and finding out deviation if any.
Corrective action.

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PLANNING
Planning is the process of thinking about and organizing the activities required to achieve a desired goal.
Planning involves the creation and maintenance of a plan. As such, planning is a fundamental property of
intelligent behavior. This thought process is essential to the creation and refinement of a plan, or integration of
it with other plans; that is, it combines forecasting of developments with the preparation of scenarios of how to
react to them.
An important, albeit often ignored aspect of planning, is the relationship it holds with forecasting. Forecasting
can be described as predicting what the future will look like, whereas planning predicts what the future should
look like.

Ex:- Before making purchases we future forecast and decide whether the product should actually be in cart or not.
Planning is a basic management function involving formulation of one or more detailed plans to achieve
optimum balance of needs or demands with the available resources.
The planning process (1) identifies the goals or objectives to be achieved,
(2) formulates strategies to achieve them,
(3) arranges or creates the means required, and
(4) implements, and monitors all steps in their proper sequence.

What needs to be accomplished?

When is the deadline?
Where will this be done?
Who will be responsible for it?
How will it get done?
How much time, energy, and
resources are required to
accomplish this goal?

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CONTROLLING
Controlling is one of the managerial functions like planning, organizing, staffing and directing. It is an
important function because it helps to check the errors and to take the corrective action so that deviation from
standards are minimized and stated goals of the organization are achieved in a desired manner.
According to modern concepts, control is a foreseeing action whereas earlier concept of control was used only
when errors were detected. Control in management means setting standards, measuring actual performance
and taking corrective action.
Controlling means to compare and find out the gaps between Expected and Actual performances, and then
taking suitable remedial actions to bridge those possible gaps
________________________ C.S.
In 1916, Henri Fayol formulated one of the first definitions of control as it pertains to management:
Control of an undertaking consists of seeing that everything is being carried out in accordance with the plan
which has been adopted, the orders which have been given, and the principles which have been laid down. Its
object is to point out mistakes in order that they may be rectified and prevented from recurring.[1]
According to EFL Breach:
Control is checking current performance against pre-determined standards
contained in the plans, with a view to ensure adequate progress and satisfactory performance.
According to Harold Koontz :
Controlling is the measurement and correction of performance in order to
make sure that enterprise objectives and the plans devised to attain them are accomplished.

Characteristics

Control is a continuous process

Control is a management process
Control is embedded in each level of organizational hierarchy
Control is forward looking
Control is closely linked with planning
Control is a tool for achieving organizational activities
Controlling is an end process
Control compares actual performance with planned performance*
control point out the error in the execution process
Controlling helps in minimizing cost
control helps in achieving standard
Controlling saves the time

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Roles and Responsibilities of a Professional Manager

As a manager, you probably fulfill many different roles every day.
For instance, as well as leading your team, you might find yourself resolving a conflict, negotiating new contracts, representing your
department at a board meeting, or approving a request for a new computer system.
Put simply, you're constantly switching roles as tasks, situations, and expectations change. Management expert and professor Henry
Mintzberg recognized this, and he argued that there are ten primary roles or behaviors that can be used to categorize a manager's
different functions.
The ten roles are:
FIGUREHEAD
SPOKESPERSON

LEADER
ENTREPRENEUR

LIAISON
RESOURCE ALLOCATOR

The 10 roles are then divided up into three categories, as follows:

Category
Interpersonal
Figurehead
Leader
Liaison
Informational
Monitor
Disseminator
Spokesperson
Decisional
Entrepreneur
Disturbance Handler
Resource Allocator
Negotiator

MONITOR
DISTURBANCE HANDLER

DISSEMINATOR
NEGOTIATOR

Roles

Let's look at each of the ten roles in greater detail.

Interpersonal Category
The roles in this category involve providing information and ideas.
1. Figurehead As a manager, you have social, ceremonial and legal responsibilities. You're expected to be a source of
inspiration. People look up to you as a person with authority, and as a figurehead.
2. Leader This is where you provide leadership for your team, your department or perhaps your entire organization; and it's
where you manage the performance and responsibilities of everyone in the group.
3. Liaison Managers must communicate with internal and external contacts. You need to be able to network effectively on
behalf of your organization.
Informational Category
The roles in this category involve processing information.
4. Monitor In this role, you regularly seek out information related to your organization and industry, looking for relevant
changes in the environment. You also monitor your team, in terms of both their productivity, and their well-being.
5. Disseminator This is where you communicate potentially useful information to your colleagues and your team.
6. Spokesperson Managers represent and speak for their organization. In this role you're responsible for transmitting
information about your organization and its goals to the people outside it.
Decisional Category
The roles in this category involve using information.
7. Entrepreneur As a manager, you create and control change within the organization. This means solving problems,
generating new ideas, and implementing them.
8. Disturbance Handler When an organization or team hits an unexpected roadblock, it's the manager who must take charge.
You also need to help mediate disputes within it.

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9.

Resource Allocator You'll also need to determine where organizational resources are best applied. This involves allocating
funding, as well as assigning staff and other organizational resources.
10. Negotiator You may be needed to take part in, and direct, important negotiations within your team, department, or
organization.

Applying the Model

Figurehead
Figureheads represent their teams. If you need to improve or build confidence in this area, start with your image, behavior, and
reputation . Cultivate humility and empathy , learn how to set a good example at work , and think about how to be a good role
model .
Leader
This is the role you probably spend most of your time fulfilling. To improve here, start by taking our quiz, How Good Are Your
Leadership Skills? This will give you a thorough understanding of your current abilities.
Next, learn how to be an authentic leader , so your team will respect you. Also, focus on improving your emotional intelligence
this is an important skill for being an effective leader.
Liaison
To improve your liaison skills, work on your professional networking techniques. You may also like to take our Bite-Sized Training
course on Networking Skills.
Monitor
To improve here, learn how to gather information effectively and overcome information overload . Also, use effective reading
strategies , so that you can process material quickly and thoroughly, and learn how to keep up-to-date with industry news .
Disseminator
To be a good disseminator you need to know how to share information and outside views effectively, which means that good
communication skills are vital.
Learn how to share organizational information with Team Briefings . Next, focus on improving your writing skills . You might also
want to take our communication skills quiz , to find out where else you can improve.
Spokesperson
To be effective in this role, make sure that you know how to represent your organization at a conference . You may also want to read
our articles on delivering great presentations and working with the media (if applicable to your role).
Entrepreneur
To improve here, build on your change management skills, and learn what not to do when implementing change in your
organization. You'll also need to work on your problem solving and creativity skills , so that you can come up with new ideas, and
implement them successfully.
Disturbance Handler
In this role, you need to excel at conflict resolution and know how to handle team conflict . It's also helpful to be able to manage
emotion in your team .
Resource Allocator
To improve as a resource allocator, learn how to manage a budget , cut costs , and prioritize , so that you can make the best use of
your resources. You can also use VRIO Analysis to learn how to get the best results from the resources available to you.
Negotiator
Improve your negotiation skills by learning about Win-Win Negotiation and Distributive Bargaining .
You might also want to read our article on role-playing this technique can help you prepare for difficult negotiations.

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Evolution of Management thought

From where does it begin.

Name and Year of major work

Major Contribution to management

Frederick W.Taylor
Shop Management(1903)
Principles of Scientific
Management(1911)
Testimony before the Special
House Committee(1912)
Heneri Fayol
Administration Industrielle et
Generale(1916)

Acknowledged as the father of scientific management. His primary concern

was to increase productivity through greater efficiency in production and
increased pay for workers, through the application of the scientific method. His
principle emphasized using science, creating group harmony and cooperation,
achieving maximum output, developing workers.
He is referred as the father of the modern management theory. He divided
industrial activities into six groups namely: TECHNICAL, COMMERCIAL,
FINANCIAL, SECURITY, ACCOUNTNG & MANAGERIAL. He recognized the need
for teaching management. He formulated epic fourteen principals of
management:Principles of management
1. Division of labor - Fayol presented work specialization as the best way to use
the human resources of the organization.
2. Authority - Managers must be able to give orders. Authority gives them this
right. Note that responsibility arises wherever authority is exercised.
3. Discipline - Employees must obey and respect the rules that govern the
organization. Good discipline is the result of effective leadership.
4. Unity of command - Every employee should receive orders from only one
superior.
5. Unity of direction - Each group of organizational activities that have the
same objective should be directed by one manager using one plan for
achievement of one common goal.
6. Subordination - The interests of any one employee or group of employees
should not take precedence over the interests of the organization as a whole.
7. Remuneration - Workers must be paid a fair wage for their services.
8. Centralization - Centralization refers to the degree to which subordinates are
involved in decision making.
9. Scalar chain - The line of authority from top management to the lowest ranks
represents the scalar chain. Communications should follow this chain.
10. Order - this principle is concerned with systematic arrangement of men,
machine, material etc. there should be specific place for every employee in
organization
11. Equity - Managers should be kind and fair to their subordinates.
12. Stability of tenure of personnel - High employee turnover is inefficient.
Management should provide orderly personnel planning and ensure that
replacements are available to fill vacancies.
13. Initiative - Employees who are allowed to originate and carry out plans will
exert high levels of effort.
14. Esprit de corps - Promoting team spirit will build harmony and unity within
the organization.

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Hugo Munstsberg (1912)

Application of psychology to industry and management.

Walter Dill Scott(1901-1911)

Max weber (1946-1947)

Application of psychology to advertisement, marketing and personnel.

Theory of bureaucracy.
Weber listed several preconditions for the emergence of bureaucracy:
the growth in size of the population being administered, the growth in
complexity of the administrative tasks being carried out, and the
existence of a monetary economy requiring a more efficient
administrative system.
Weber identified in bureaucracies a rational-legal authority in which
legitimacy is seen as coming from a legal order and the laws enacted
within it. This is contrasted with traditional forms of authority, which
arose from phenomena like kinship.
Rationalization describes a transition in society, wherein traditional
motivators of behavior, like values, beliefs, and emotions, are replaced
with rational calculations.
Weber termed the increasing rationalization in Western societies an
"iron cage" that traps individuals in systems based solely on efficiency,
rational calculation and control.
Weber termed the increasing rationalization in Western societies as
an "iron cage" that traps individuals in systems based purely on
efficiency, rational calculation and control.

Elton Mayo & F.J. Roethlisberger

(1933)
Peter F. Drucker(1974)

Famous studies at the Hawthorne plant of the western electric company.

Influence of social attitudes and relationships of work-groups on performance
Decentralization and simplification.[30] Drucker discounted the command and
control model and asserted that companies work best when they are
decentralized. According to Drucker, corporations tend to produce too many
products, hire employees they don't need (when a better solution would be
outsourcing), and expand into economic sectors that they should avoid.
The concept of "knowledge worker" in his 1959 book "The Landmarks of
Tomorrow".[31] Since then, knowledge-based work has become increasingly
important in businesses worldwide.
Respect for the worker. Drucker believed that employees are assets not
liabilities. He taught that knowledgeable workers are the essential ingredients
of the modern economy, and that a hybrid management model is the sole
method of demonstrating an employee's value to the organization. Central to
this philosophy is the view that people are an organization's most valuable
resource, and that a manager's job is both to prepare people to perform and
give them freedom to do so.

W.Edward deming (after world

Introduced quality control in japan.

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war II)
Thomas peters and Robert
waterman(1982)

Identified characteristics of companies they considers excellent.

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UNIT 5

PERCEPTION
Define:The act or faculty of perceiving, or apprehending by means of the senses or of the mind; understanding.
Perception is the organization, identification, and interpretation of sensory information in
order to represent and understand the environment. All perception involves signals in the
nervous system, which in turn result from physical or chemical stimulation of the sense
organs.

Psychology defines:- a single unified awareness derived from sensory processes

while a stimulus is present.
In simple words we can say that perception is the process by which our
brain makes calculations and makes us understand things easily on
behalf of our attitude, experiences and knowledge
The process of perception works on the model of
Input

Process &

Output.

Lets understand the Process of perception

easily:-

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BARRIERS TO PERCEPTION
1. Selective Perception:- Numerous inaccurate impressions and interpretations arise because of wrong
perceptions. Selectiveness in perception can be one such wrong perception of reality. You have a natural
tendency to accept information that is beneficial or is understandable and to reject information that you might
not wish to assimilate. Information that is unpleasant or difficult to believe is automatically filtered and rejected.
This tendency to filter out information that does not support your beliefs or views may result in the assimilation
of inaccurate conclusions.

Example:- Here we see what we want to see, and hence can draw unwarranted conclusions from an
ambiguous situations.
2. Attribution:- Explaining the cause of others as own
3. Stereotyping:- Perception can also be influenced by your background, upbringing, interests and attitudes rather
than the actual reality stimulus. Such influence may cause you to stereotype or make generalizations about
people and situations. Stereotyping is a shortcut used to judge individuals from a certain group or locality. Such
generalizations and stereotyping may often result in wrong judgments and often lead to inaccurate conclusions.
When you stereotype someone, you judge that person based on your preconceived notions rather than the
individual's actions.

4. Halo Effect:- The tendency of judging people on the basis of a single trait which may be good or bad,
favorable or unfavorable. Ex:- a person acts bad with you at first meeting, you will consider him bad
throughout your journey till he did something very promising to gain your belief.
5. Projection:- We judge others by assuming that they are similar to ourselves/himself/person specified.
i.e. all fat persons cannot dance. I like pink color, and she is also having pink colored accessories, we will
be good friends. I love challenging work, all loves challenging work.
6. Expectancy:- what do we expect from a person at first sight. I expect my class will work as per my
guidance. PM expects clean nation through his new cleanliness movement.
7. First Impression:- Another barrier to accurate perception is that of the first impression. The cliche "the first
impression is the last impression" is a demonstration of a tendency to cling to the first impression you gained
from meeting someone for the first time. No matter what the individual does in the future, the initial impression
is impossible to erase. The prima-facie impression may not be an accurate one, but you may form the acceptance
or rejection of someone based on your initial impression with no consideration of evidence or facts.

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Managerial Applications of Perception (why perception is needed to be studied):The managers job is to get work done by other people. In respect of this he also needs to understand what
is going on inside the minds of his sub-ordinates, how they are reacting, what do they think about their job,
work place, boss etc. etc.
Hence, perception understanding is also an integral part of the whole process and it can be done by
undertaking following simple factors into mind:A. INTERPERSONAL WORKING RELATIONSHIP
B. SELECTION OF EMPLOYEES
C. PERFORMANCE APPRAISAL

a. INTERPERSONAL WORKING RELATIONSHIP:- As per the name suggests, interpersonal means the
understanding among two or more than two people. In an organization we have people of different
cast, creed, language, tastes, interests, hobbies, attitudes and perception. But organizations expect
people to be having integrated behavior so that there will be lesser conflicts and greater well-being.
b. SELECTION OF EMPLOYEES:- The attitude and Perception of people bring them good job means; while
hiring, many companies try to browse the background of the candidates which outlines their perception
and hence on behalf of these test results it is decided whether he is fit for the goal or he needs
perceptual training or is a negative candidate.
c. PERFORMANCE APPRAISAL:- This term means performance development decision and the
perception of managers affect the career evaluation of any candidate due to:- His tendency to evaluate
candidate better than others due to personal biasness.

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LEARNING
o

o
o
o
o

Learning is the act of acquiring new, or modifying and reinforcing, existing knowledge, behaviors, skills, values, or
preferences and may involve synthesizing different types of information. Human learning may occur as part of
education, personal development, schooling, or training. It may be goal-oriented and may be aided by
motivation.
Learning is an ongoing process including new & modified experiences, situations, observations and practices.
Learning is a relatively permanent change in the behavior or attitude of a person over time. For example when a
child learns to read they are able to retain this knowledge and behavior for the rest of their lives.
Measurable and relatively permanent change in behavior through experience, instruction, or study.
Whereas individual learning is selective, group learning is essentially political its outcomes depend largely on
power playing in the group. Learning itself cannot be measured, but its results can be. In the words of Harvard
Business School psychologist Chris Argyris, learning is "detection and correction of error" where an error means
"any mismatch between our intentions and what actually happens."

Nature of Learning:1. Change in behavior: - If you learn something, it will slightly\heavily change your behavior. Example: - If a person
lives in Haryana for some years there will be a slight change in his language accent. The change may be good or
bad. Like learning smoking or learning swimming. It is not necessary that change in behavior always comes with
improvement over previous behavior. But most of the times it does change previous ones.
2. Reinforcement: - The practice of learning is usually reinforced by other factors in order to make it happen. You
will never opt for fashion-designing until and unless you are motivated by something, like the rewards associated
with it or the curiosity and interests towards it.
3. Change in behavior must be based on some Experience, Practice or Training
4. Change in behavior must be relatively permanent:- Temporary changes may be reflective and fails to signify any
learning. All changes do not mean learning. To constitute learning, changes should be relatively permanent.

THEORIES OF LEARNING
1. Classical Conditioning Theory:- First described by Ivan Pavlov (1849-1936). The typical paradigm for classical
conditioning involves repeatedly pairing an unconditioned stimulus (which unfailingly evokes a reflexive
response) with another previously neutral stimulus (which does not normally evoke the response). Following
conditioning, the response occurs both to the unconditioned stimulus and to the other, unrelated stimulus (now
referred to as the "conditioned stimulus"). The response to the conditioned stimulus is termed a conditioned
response. The classic example is Pavlov and his dogs. Meat powder naturally will make a dog salivate when it is

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put into a dog's mouth; salivating is a reflexive response to the meat powder. Meat powder is the unconditioned
stimulus (US) and the salivation is the unconditioned response (UR). Then Pavlov rang a bell before presenting
the meat powder. The first time Pavlov rang the bell, the neutral stimulus, the dogs did not salivate, but once he
put the meat powder in their mouths they began to salivate. After numerous pairings of the bell and the food the
dogs learned that the bell was a signal that the food was about to come and began to salivate when the bell was
rung. Once this occurred, the bell became the conditioned stimulus (CS) and the salivation to the bell became the
conditioned response (CR).

2. Operant conditioning is distinguished from classical conditioning (or respondent conditioning) in that operant
conditioning deals with the reinforcement and
punishment to change behavior. Operant behavior
operates on the environment and is maintained by its
antecedents and consequences, while classical
conditioning is maintained by conditioning of reflexive
(reflex) behaviors, which are elicited by antecedent
conditions. B.F. Skinner (19041990)

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3. CONGNITIVE LEARNING: - Gestalt views of learning have been incorporated into what have come to be labeled
cognitive theories. Two key assumptions underlie this cognitive approach: that the memory system is an active
organized processor of information and that prior knowledge plays an important role in learning. Cognitive
theories look beyond behavior to consider how human memory works to promote learning, and an
understanding of short term memory and long term memory is important to educators influenced by cognitive
theory. They view learning as an internal mental process (including insight, information processing, memory and
perception) where the educator focuses on building intelligence and cognitive development. The individual
learner is more important than the environment.

4. Social Learning theory:- Social learning theory integrated behavioral and cognitive theories of learning
in order to provide a comprehensive model that could account for the wide range of learning
experiences that occur in the real world. As initially outlined by Bandura and Walters in 1963 and
further detailed in 1977, key tenets of social learning theory are as follows:
Learning is not purely behavioral; rather, it is a cognitive process that takes place in a social context.
Learning can occur by observing a behavior and by observing the consequences of the behavior (vicarious
reinforcement).
Learning involves observation, extraction of information from those observations, and making decisions
about the performance of the behavior (observational learning or modeling). Thus, learning can occur
without an observable change in behavior.
Reinforcement plays a role in learning but is not entirely responsible for learning.
The learner is not a passive recipient of information. Cognition, environment, and behavior all mutually
influence each other

Managerial applications:Planning and implementing learning strategies for training and development.
Understanding human behavior.
Controlling the gap between expected and actual performance.
Framing strategies for future.

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--Pers nality --#

"Personality" is a dynamic and organized set of characteristics possessed by a person that uniquely influences their
environment, cognitions, emotions, motivations, and behavioral science in various situations. The word "personality"
originates from the Latin persona, which means mask(Speak\present). In the theatre of the ancient Latin-speaking
world, the mask was not used as a plot device to disguise the identity of a character, but instead was a convention
employed to represent or typify that character.
Personality can be defined as consistency in a persons way of being that is, long-term consistency in
their particular ways of perceiving, thinking, acting and reacting as a person. Organised patterns of
thought and feeling and behaviour.
the set of emotional qualities, ways of behaving, etc., that makes a person different from other people
Attractive qualities (such as energy, friendliness, and humor) that make a person interesting or pleasant
to be with.
Personality is made up the characteristic patterns of thoughts, feelings, and behaviors that make a
person unique. It arises from within the individual and remains fairly consistent throughout life.
Personality is a wholesome package, which constitutes a blend of attitude, heredity, looks, behavior,
culture, experiences, knowledge, etc etc -----------------------------------------------C.Sy.

Determinants of Personality:Heredity:- The ultimate explanation of an individuals personality is the molecular structure of the genes located in the
chromosomes. It includes physical structure, facial attractiveness, gender, temperament, muscle composition, energy
level, biological rhythms etc.
Environment:- A per the name suggest environment means the surroundings around us. Hence the personality of any
person is also affected by the social life, situations handled, family and their culture.

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Can personality be measured?
Yes, now science offers a number of tools
and techniques by which we can estimate
personality in quantitative and qualitative
standards. Ex:- TAT, Inkblot test,
interviews, MMPI, etc.

Theories of Personality
1. Big five theory.
2. Psychoanalytical theory.

Lewis Goldberg proposed a five-dimension personality model, nicknamed the "Big Five":
1. Openness to Experience: the tendency to be imaginative, independent, and interested in variety vs.
practical, conforming, and interested in routine.
2. Conscientiousness: the tendency to be organized, careful, and disciplined vs. disorganized, careless, and
impulsive.
3. Extraversion: the tendency to be sociable, fun-loving, and affectionate vs. retiring, somber, and reserved.
4. Agreeableness: the tendency to be softhearted, trusting, and helpful vs. ruthless, suspicious, and
uncooperative.
5. Neuroticism: the tendency to be calm, secure, and self-satisfied vs. anxious, insecure, and self-pitying
The Big Five contain important dimensions of personality. However, some personality researchers argue that this
list of major traits is not exhaustive. Some support has been found for two additional factors: excellent/ordinary
and evil/decent. However, no definitive conclusions have been established
Psychoanalytic theories explain human behavior in terms of the interaction of various components of personality.
Sigmund Freud was the founder of this school of thought. Freud drew on the physics of his day (thermodynamics)
to coin the term psychodynamics. Based on the idea of converting heat into mechanical energy, he proposed
psychic energy could be converted into behavior. Freud's theory places central importance on dynamic,
unconscious psychological conflicts.
Freud divides human personality into three significant components: the id, ego, and super-ego. The id acts
according to the pleasure principle, demanding immediate gratification of its needs regardless of external
environment; the ego then must emerge in order to realistically meet the wishes and demands of the id in
accordance with the outside world, adhering to the reality principle. Finally, the superego (conscience) inculcates
moral judgment and societal rules upon the ego, thus forcing the demands of the id to be met not only
realistically but morally. The superego is the last function of the personality to develop, and is the embodiment of
parental/social ideals established during childhood. According to Freud, personality is based on the dynamic
interactions of these three components.

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Why managers need to understand personality:1.

Helps them classifying task in accordance of personality.

2.

Choosing the best fit talent for the job.

3.

Helps in setting goals of teams or groups in respect of different personality types.

4.

It makes the workplace worthy as different personalities add different qualities to the task assigned.

5.

It tells the level of endurance\physical and mental strength of people working under him.

6.

It also plots the different other talents available at workplace.

7.

Understanding personality is a crucial aspect to handle organizational conflicts and workforce stress.

8.

The results of personality tests determine a line of control, so that the organizational plans should not go
beyond that line otherwise the once controllable factors may become uncontrollable.

9.

Managers must be well aware of values of different personalities, because we cannot just ignore the set of
attitudes, behaviors and perception of any employee that might bring the whole pie into dump.

10. Understanding personalities regulates a flow of proper communication at workplace.

11. Develop trait profiles to use in the selection process that help maximize department and company performance
by improving the accuracy of candidate selection.
12. Link identifying job competencies with targeted job profiles.
13. Identify traits and behaviors of team members and discuss optimal interactions (relationships) to improve
individual and team performance.
14. Help managers identify different motivations and belief systems of their staff members so they can manage to
the individual, not the group.

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GROUP
A collection of individuals who have regular contact and frequent interaction, mutual influence, common feeling of
camaraderie, and who work together to achieve a common set of goals.
Interpersonal relationship\
An interpersonal relationship is a strong, deep, or close association or acquaintance between two or more people that
may range in duration from brief to enduring. This association may be based on inference, love, solidarity, regular
business interactions, or some other type of social commitment. Interpersonal relationships are formed in the context of
social, cultural and other influences.
The context can vary from family or kinship relations, friendship, marriage, relations with associates, work, clubs,
neighborhoods, and places of worship. They may be regulated by law, custom, or mutual agreement, and are the basis of
social groups and society as a whole.
Interpersonal behaviour is how people interact with one another. Specifically it is studied as the way people behave when
this behaviour would affect a relationship. Making jokes, body language, giving presents and going to parties are all
aspects 0of interpersonal behaviour.
GROUP DYNAMICS
The social process by which people interact face to face in small groups is called group dynamics.
Agents can also be given group tasks, which in turn may be influenced by their own group dynamics.
Pigeons flocks use hierarchical group dynamics to decide where to fly orbiter.
Those synchronized dips and waves seem to hold secrets about perception and group dynamics.

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HOW TO MAKE EFFECTIVE GROUPS
1. Forming. This stage is usually characterized by some confusion and uncertainty. The major goals of the group
have not been established. The nature of the task or leadership of the group has not been determined (Luthans,
2005). Thus, forming is an orientation period when members get to know one another and share expectations
about the group. Members learn the purpose of the group as well as the rules to be followed. The forming stage
should not be rushed because trust and openness must be developed. These feelings strengthen in later stages of
development. Individuals are often confused during this stage because roles are not clear and there may not be a
strong leader.
2. Storming. In this stage, the group is likely to see the highest level of disagreement and conflict. Members often
challenge group goals and struggle for power. Individuals often vie for the leadership position during this stage of
development. This can be a positive experience for all groups if members can achieve cohesiveness through
resolution. Members often voice concern and criticism in this phase. If members are not able to resolve the
conflict, then the group will often disband or continue in existence but will remain ineffective and never advance
to the other stages.
3. Norming. This stage is characterized by the recognition of individual differences and shared expectations.
Hopefully, at this stage the group members will begin to develop a feeling of group cohesion and identity.
Cooperative effort should begin to yield results. Responsibilities are divided among members and the group
decides how it will evaluate progress.
4. Performing. Performing, occurs when the group has matured and attains a feeling of cohesiveness. During this
stage of development, individuals accept one another and conflict is resolved through group discussion.
Members of the group make decisions through a rational process that is focused on relevant goals rather than
emotional issues.
5. Adjourning. Not all groups experience this stage of development because it is characterized by the disbandment
of the group. Some groups are relatively permanent (Luthans, 2005). Reasons that groups disband vary, with
common reasons being the accomplishment of the task or individuals deciding to go their own ways.

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TYPES OF GROUPS
Formal groups:- a formal group is one that has structure,
officers, regular meetings, etc. there are usually by-laws
and a charter. Formal groups are further divided into
three main categories:-

A. Command groups: As per the name

suggests, command groups are specified by the
organizational chart and often consist of a supervisor and
the subordinates that report to that supervisor. An
example of a command group is an academic department
chairman and the faculty members in that department.
B. Task force Groups: Task groups consist of people who work together to achieve a common task. Members are
brought together to accomplish a narrow range of goals within a specified time period. Task groups are also
commonly referred to as task forces. The organization appoints members and assigns the goals and tasks to be
accomplished. Examples of assigned tasks are the development of a new product, the improvement of a
production process, or the proposal of a motivational contest.
C. Committees: a person or group of persons elected or appointed to perform some service or function, as to
investigate, report on, or act upon a particular matter.
Informal groups:- are those which are formed by individuals along the lines of friendships, common interests or hobbies,
and do not have the formal structural elements.
*cliques = colleagues.
*sub-cliques = some members of clique and other specialized peoples.

Group Decision Making Process

Identify and analyse the problem

Collecting information and analysing the
problem.
Drawing Alternatives.

Choosing a best fit Alternative.

Implement the decision.

Evaluation and Control

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Understanding Work Teams

A team comprises a group of people or other animals linked in a common purpose. Human teams are especially
appropriate for conducting tasks that are high in complexity and have many interdependent subtasks.
A team becomes more than just a collection of people when a strong sense of mutual commitment creates
synergy, thus generating performance greater than the sum of the performance of its individual members.
Thus teams of game players can form (and re-form) to practice their craft/sport. Transport logistics executives
can select teams of horses, dogs or oxen for the purpose of conveying passengers or goods.
All teams are groups, but all teams cannot be Groups.

All groups can be team, but all teams cannot be groups.

Group
Team

Long span\Continuous.
frequently short span \ depends on task.

Difference between Groups and Teams:Work Groups

Teams

Individual accountability

Individual and mutual accountability

Come together to share

information and
perspectives

Frequently come together for discussion,

decision making, and problem solving, and
planning.

Focus on individual goals

Focus on team goals

Produce individual work

products

Produce collective work products

Define individual roles,

responsibilities, and tasks

Define individual roles, responsibilities, and

tasks to help team do its work; often share
and rotate them

Concern with one's own

outcome and challenges

Concern with outcomes of everyone and

challenges the team faces

Purpose, goals, approach to

work shaped by manager

Purpose, goals, approach to work shaped by

team leader with team members

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Types of Teams
A) Problem-Solving Teams
They are typically composed of 5 to 12 employees from the same department who meet
for a few hours each week to discuss ways of improving quality, efficiency, and the work environment.
Organizations are relaying more and more on problem-solving teams to help solve
organizational problems.
In problem-solving teams, members share ideas or offer suggestions on how work
process and methods can be improved. Rarely, however, are these teams given the
authority to unilaterally implement any of their suggested actions,

B) B) Self-Managed Teams:- They are generally composed of 10 to 15 people who take on the responsibilities of their
former supervisors. Typically, these responsibilities include:
a) Collective control over the pace of work, b) Determination of work assignments,
c) Organization of breaks, and
d) Collective choice of inspection procedures used.
Fully self-managed teams select their own members, and the members evaluate each others performance. As a
result, supervisory positions take on decreased importance and may even be eliminated.

C) Cross - Functional Teams: - Cross-functional teams are made of employees at about the same hierarchical level, but
from different work areas, who come together to accomplish a task.

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