Elective Course in Commerce
ECO – 03: Management Theory

Dear Students,
As explained in the Programme Guide, you have to do one Tutor Marked Assignment in this Course.
Assignment is given 30% weightage in the final assessment. To be eligible to appear in the Term-end examination, it is compulsory for you to submit the assignment as per the schedule. Before attempting the assignments, you should carefully read the instructions given in the Programme Guide.
This assignment is valid for two admission cycles (July 2020 and January 2021). The validity is given below:
1)         Those who are enrolled in July 2020, it is valid up to June 2021.
2)         Those who are enrolled in January 2021, it is valid up to December 2021.
You have to submit the assignment of all the courses to The Coordinator of your Study Centre. For appearing in June Term-End Examination, you must submit assignment to the Coordinator of your study centre latest by 15th March. Similarly for appearing in December Term-End Examination, you must submit assignments to the Coordinator of your study centre latest by 15th September.

Course Code : ECO - 03
Course Title : Management Theory
Assignment Code: ECO - 03/TMA/2020-21
Coverage: All Blocks
Maximum Marks: 100

Attempt all the questions:

1. What is meant by scientific management? Discuss its main principles, merits and limitations. (20)

Ans:  Scientific Management may be defined as the scientific study and analysis of work, scientific selection and training of employees, standardization and scientific rate setting. It is an art of knowing exactly what a manager wants his workers to do and seeing it that they do it in the best and cheapest way.

According to F.W.Taylor who is regarded as the father of scientific management, “Scientific Management is the art of knowing exactly what you want your men to do and seeing that they do it in the cheapest way”.

Taylor’s philosophy consists of the following principles of scientific management:

a)      Replacing rule of thumb with science: According to this principle, scientific investigation should be applied in the scientific management, which will replace the rule of thumb. Taylor had made study of every job and fixed the method and timing for performing the job so that the worker should know that what, when, and how is required to perform the job. This principle is the starting point of scientific.

b)      Harmony in group action: This principle states that there should be cooperation between the management and the workers. In order to achieve the best possible results from the business operations, it is essential that there should be harmonious relations between the management and the workers.

c)       Division of responsibility between workers and management: According to this principle there should proportionate division of the responsibility between the managers and the workers, clearly defined, and predetermined.

d)      Maximum Output: Scientific Management aims for the continuous production and productivity. According to this principle management and the workers should try to increase the production at the minimum cost.

e)      Selection, training, and development of the workers in the scientific manner: According to this principle the right men is placed on the right job. The jobs are determined first for which the workers are required and then the qualifications required for the job are determined. On the basis of these standards the employees are selected.

Merits of Scientific Management:

Scientific Management aims to develop each man to his greatest efficiency and prosperity. The main advantages arising out of scientific management are as follows:

1. Increase in production and productivity: The scheme of scientific management involves planning of task and scientific methods of doing work. This results in the increase in production and output per worker and per machine because of increased efficiency.

2. Reduction in cost of production: Scientific management ensures avoiding of all types of wastages and losses. There is planned production due to which production time is minimised. This leads to reduction in cost of production.

3. Better quality products: Standardisation, which is an essential element of scientific management, ensures better quality products.

4. Benefits of division of labour: The principle of specialisation adopted under scientific management enables to attain the benefits of division of labour. The work is simplified and carried in the most economical manner.

5. Proper selection and training of workers: One of the essential elements of scientific management is proper selection, placement and requirement of workers. Misfits are avoided and right man is given a right job.

Demerits of scientific management

In spite of so many benefits, scientific management has evoked certain criticism some of them are listed below:

1. Monotony: Under scientific management the function of planning is separated from that of doing. Every worker is expected to perform his small part of a job due to specialisation. This makes the work monotonous and the worker tends to lose interest in his job.

2. Unemployment: Scientific management reduces the number of processes and motions of workers, increases the hourly or daily output per worker, increase their efficiency by standardisation and division of labour, thereby, it creates unemployment by requiring.

3. Unsuitable for small scale units: Some employers are of the opinion that scientific management is suitable for only large-scale units and small-scale units cannot afford to introduce the scheme of scientific management.

4. Absence of non-wage incentives: Scientific management provides the use of only monetary financial incentives by way of differential wage plan. But the non-wage incentives such as job security, promotion, status etc. is not present in scientific management.

5. Pessimistic assumptions: The scientific management is based too much on pessimistic assumptions about human nature. McGrgor is of the opinion that active and responsible role should be assigned to workers and there should be management by objectives and ‘self-control’.

2. What do you understand by leadership? Define 'leadership style'. What are the main differences between autocratic, democratic and free rein leadership styles? (20)

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Ans: Meaning of Leadership: Leadership is the ability to build up confidence and deal among people and to create an urge in them to be led. To be a successful leader, a manager must possess the qualities of foresight, drive, initiative, self-confidence and personal integrity. Different situations may demand different types of leadership.

Leadership means influencing the behaviour of the people at work towards realizing the specified goals. It is the ability to use non-coercive (no force) influence on the motivation, activities and goals (MAG) of others in order to achieve the objectives of the organisation.

Koontz and 0' Donnel “Leadership is the ability of a manager to induce subordinates to work with confidence and zeal”.

George R Terry “Leadership is the activity of influencing people to strive willingly for group objectives”.

Meaning of Leadership Styles: Leadership style is a method in which leaders provides direction, implement plans and motivates his subordinates. Great leader can inspire and motivate his subordinates to innovate and do creative things. Leadership style is simply behaviour of leaders while leading a group of people. Leadership styles are of various types such as autocratic, democratic, free-rein style and paternalistic leaders.

Meaning and Difference of Autocratic, Democratic and Free-rein style leaders:

1.       Autocratic or Authoritarian Style leader: An autocratic also known as authoritarian style of leadership implies wielding absolute power. Under this style, the leader expects complete obedience from his subordinates and all decision-making power is centralized in the leader. No suggestions or initiative from subordinates is entertained. The leader forces the subordinates to obey him without questioning. An autocratic leader is, in fact, no leader. He is merely the formal head of the organisation and is generally disliked by the subordinates who feel comfortable to depend completely on the leader.

2.       Democratic or Participative Style leader: The democratic or participative style of leadership implies compromise between the two extremes of autocratic and laissez-fair style of leadership. Under this style, the supervisor acts according to the mutual consent and the decisions reached after consulting the subordinates. Subordinates are encouraged to make suggestions and take initiative. It provides necessary motivation to the workers by ensuring their participation and acceptance of work methods. Mutual trust and confidence is also created resulting in job satisfaction and improved morale of workers. It reduces the number of complaints, employee's grievances, industrial unrest and strikes. But this style of leadership may sometimes cause delay in decisions and lead to indiscipline in workers.

3.       Laissez-faire or Free-rein Style Leader: Under this type of leadership, maximum freedom is allowed to subordinates. They are given free hand in deciding their own policies and methods and to make independent decisions. The leader provides help only when required by his subordinates otherwise he does not interfere in their work. The style of leadership creates self-confidence in the workers and provides them an opportunity to develop their talents. But it may not work under all situations with all the workers, may bring problems of indiscipline. Such leadership can be employed with success where workers are competent, sincere and self-disciplined.

Difference between Autocratic, Democratic and free-rein style:





1. Meaning

An autocratic also known as authoritarian style of leadership implies wielding absolute power. Under this style, the leader expects complete obedience from his subordinates and all decision-making power is centralized in the leader.

The democratic or participative style of leadership implies compromise between the two extremes of autocratic and laissez-fair style of leadership. Under this style, the supervisor acts according to the mutual consent and the decisions reached after consulting the subordinates.

Under this type of leadership, maximum freedom is allowed to subordinates. They are given free hand in deciding their own policies and methods and to make independent decisions.

2. Authority

Authority is centralised.

Authority is decentralized.

Authority is distributed amongst each level of management.

3. Control

Complete control by top level of management.

Low level of control from management.

Lower level management has also controlling power.

4. Autonomy

Autonomy is very less in case of autocratic leadership style.

Autonomy is moderate as compared to autocratic leadership style.

Autonomy is very high.

5. Subordinates

Subordinates only follow leader’s instruction.

Subordinates can give suggestions to the superior.

Subordinates also have decision making powers.

6. Applicability

This leadership is suitable where employees are less educated and have minimum or no skill.

This leadership is suitable where employees are well educated and experienced.

This leadership is suitable where workers are competent, sincere and self-disciplined.

3. Write short notes on the following:   (4X5)

(a) Principles of delegation of authority

Ans: The following are the principles of delegation:

1.       Principle of Functional Definition. The related or similar activities should be grouped together according to enterprise function. When the definition of a position is clear then delegation of authority becomes simple. In the words of Koontz and O’Donnell “the more a position or a department has clear definitions of results expected, activities to be undertaken, organization authority delegated and authority and informational relationships with other positions understood, the more adequately the individuals responsible can contribute toward accomplishing enterprise objectives.”

It is very difficult to define a job and the authority required to accomplish it. If the superior is not clear about the results expected then it becomes all the more difficult. It should be clear ‘who should do what’ so that right amount of authority is delegated. Dual subordination results in conflicts, division of loyalty and lack of personal responsibility for results.

2.       Principle of Unity of Command. The basic management principle is that of unity of command. This principle states that a subordinate should report only to a single superior. This will give a sense of personal responsibility. Although it is possible for a subordinate to receive orders from more superiors and report to them but it creates more problems and difficulties. An obligation is essentially personal and authority delegation by more than one person to an individual is likely to result in conflicts in both authority and responsibility. This principle is also useful in the classification of authority-responsibility relationships.

3.       Principle of Delegation by Results Expected. The delegation of authority should be based on the basis of results expected. The authority should be sufficient to achieve the desired results. If the authority is insufficient then only actions will not be achieved. So, there should be a balance between the results expected and the authority required.

4.       Principle of Absoluteness of Responsibility. The responsibility of a subordinate, once he has accepted the work, is absolute to his superior. The responsibility of the superior does not decrease once he has delegated authority. A person can delegate authority and not responsibility. He will remain accountable for the work even if it is delegated to the subordinate. So, the responsibility of superior and subordinate remains absolute.

5.       Principle of Parity of Authority and Responsibility. Since authority is the right to carry out assignments and responsibility is the obligation to accomplish it, there should be a balance between the both. The responsibility should bear logical relationship with authority delegated. The subordinate should not be burdened with high performance responsibility with delegating enough authority. Sometimes the authority is delegated but the concerned person is not made accountable for its proper use. This will take a case of poor management. The parity between authority and responsibility will be essential for achieving efficiency.

(b) Span of control

Ans: SPAN OF CONTROL: Span of control or span of management refers 10 'numbers of subordinates a superior can direct, guide and control effectively. The span of control should be minimum, because there is a limit to the number of subordinates that can be effectively supervise by a superior.

In the words of Spriegal, "Span of control means the number of people reporting directly to an authority. The principle of span of control implies that no single executive should have more people looking to him for guidance and leadership than he can reasonably be expected to serve. The span of supervision is also known as span of control, span of management, span of responsibility, span of authority and span of direction.

Factors influencing the span of Management: There are number of factors that influence or determine the span of Management in a particular organisation, the most important of these are as follows:

1.       The capacity and ability of the executive: The characteristics and abilities such as leadership, administrative capabilities; ability to communicate, to judge, to listen, to guide and inspire, physical vigour, etc. differ from person to person. A person having better abilities can manage effectively a large number of subordinates as compared to the one who has lesser capabilities.

2.       Competence and training of subordinates: Subordinates who are skilled, efficient, knowledgeable, trained and competent require less supervision, and therefore, the supervisor may have a wider span in such cases as compared to inexperienced and untrained subordinates who requires greater supervision.

3.       Nature of Work: Nature and importance of work to be supervised is another factor that influences the span of supervision. The work involving routine, repetitive, unskilled and standardized operations will not call much attention and time on the part of the supervisor.

4.       Time available for supervision: The capacity of a person to supervise and control a large number of persons is also limited on account of time available at his disposal to supervise them. The span of control would be generally narrow at the higher level of management because top manager have to spend their major time on planning, organising, directing and controlling and the time available at their disposal for supervision will be less.

(c) Organization structure

Ans: Organizational Structure: Organising function is basically concerned with the allocation of tasks and delegation of authority.  On account of different practices of distributing authority and responsibility among the members of the enterprise several types of structures have been evolved which are known as organisational structure. There are mainly two types of organisational structure: formal and informal.

The formal organization refers to the structure of jobs and positions with clearly defined functions and relationships as prescribed by the top management. This type of organization is built by the management to realize objectives of an enterprise and is bound by rules, systems and procedures. Formal organisations are further classified into the following categories:

a)      Line Organisation

b)      Functional Organisation

c)       Line and staff organisation

d)      Committee Organisation

Informal organisation is natural or spontaneous network of personal and social relationships between individuals formed on the basis of personal attitudes values emotions, friendships prejudices, interest’s likes and dislikes, regional affinity, common work place etc.  Informal organisation is all pervasive and is found at all levels of management.  It consists of small informal groups with their own behavioral patterns, status systems, beliefs and goals.

(d) Herzberg's Motivation Hygiene Theory

Ans: Difference between Maslow’s Need Hierarchy theory and Herzberg’s motivation Hygiene Theory

1. Meaning:  Maslow's theory is based on the concept of human needs and their satisfaction.

Hertzberg's theory is based on the use of motivators which include achievement, recognition and opportunity for growth.

2. Basis of Theory: Maslow's theory is based on the hierarchy of human needs. He identified five sets of human needs (on priority basis) and their satisfaction in motivating employees.

Hertzberg refers to hygiene factors and motivating factors in his theory. Hygiene factors are dissatisfies while motivating factors motivate subordinates. Hierarchical arrangement of needs is not given.

3. Nature of Theory: Maslow's theory is rather simple and descriptive. The theory is based long experience about human needs.

Hertzberg's theory is more prescriptive. It suggests the motivating factors which can be used effectively. This theory is based on actual information collected by Hertzberg by interviewing 200 engineers and accountants.

4. Applicability of Theory: Maslow's theory is most popular and widely cited theory of motivation and has wide applicability. It is mostly applicable to poor and developing countries where money is still a big motivating factor.

Herzberg's theory is an extension of Maslow's theory of motivation. Its applicability is narrow. It is applicable to rich and developed countries where money is less important motivating factor.

5. Descriptive or Prescriptive: Maslow's theory or model is descriptive in nature.

Herzberg's theory or model is prescriptive in nature.

6. Motivators: According to Maslow's model, any need can act as motivator provided it is not satisfied or relatively less satisfied.

In the dual factor model of Hertzberg, hygiene factors (lower level needs) do not act as motivators. Only the higher order needs (achievement, recognition, challenging work) act as motivators.

 4. Differentiate between the following:    (4X5)

(a) Management and administration

Ans: Difference between management and administration




1. Nature

It is a doing function i.e. implementation of plans.

It is thinking functions i.e., determination of objectives and policies.

2. Scope

Management works within framework of administration.

Administration is a wider term than management.

3. Status

Managers may be employees.

It consists of owners of an enterprise.

4. Level of authority

It is a lower level management function.

It is a top management functions.

5. Skills

Technical and human skills are required.

Conceptual and human skills required.

(b) Policies and objectives

Ans: Policies: Policy can be defined as organisation’s general response to a particular problem. In simple words, it is the organisation’s own way of handling the problems. Example: Different business firms may follow different sales policies as stated below: “We don’t sell on credit”; “It is our policy to deal with wholesalers only.

Objectives: Objectives are the ends towards which the activities are directed. They are end result of every activity.

Distinction of Policies and Objectives




1)       Aim

Policies are framed to achieve objectives efficiently.

Objectives determine the final goal of the enterprise.

2)       Level of Management

Policies are determined by top, middle and Lower level of management.

Objectives are determined by the owners or the top level management.

3)       What

Policies decide how the work is to be done.

Objectives determine what is to be done.

4)       How

Policies decide the procedures to be adopted for completion of the job.

Objectives decide the way in which a specific job to be done.

(c) Line and Functional Organization

Ans: Comparison of Line and Functional Organisation:

a)      Line organisation is a simple form of organisation. But functional organisations are complicated.

b)      In the case of the line organisation, there is clear-cut line of authority. But in the case of functional organisation, there is no clear-cut line of authority.

c)       In the case of line organisation, there is clear-cut responsibility. In the case of functional organisation, there is clear-cut responsibility for the line officers, but staff officers do not have any responsibility.

d)      Because of clear-cut line authority, there is unity of command in the case of line organisation. There is no unity of command in the case of functional organisation, as a worker has to take instructions from several authorities.

e)      In the case of line organisation, there is flexibility in the sense that quick decisions and prompt actions can be taken to adjust to changing situations because of the existence of full authority. Functional organisation is rigid and inflexible.

f)       Strict discipline is enforced in the case of line organisation. In the case of functional organisation, enforcement of discipline is difficult because of lack of unity of command.

 (d) PERT and CPM

Ans: Difference between PERT and CPM




1. Activities

PERT is a technique used in planning, scheduling, coordination and control of uncertain events.

CPM is a technique used in planning, scheduling, coordination and control of well defined activities.

2. Nature

PERT is used for projects which are of non-repetitive nature.

CPM is used for projects which are of repetitive nature.

3. Focus on

PERT main focus on controlling of time.

CPM helps in controlling cost and time involved in the project

4. Model used

Probabilistic model used in PERT.

Deterministic model used in CPM.

5. Projects

PERT is used for research based projects.

CPM is used for mainly construction projects.

6. Orientation

PERT is event oriented.

CPM is activity oriented.

5. Comment briefly on the following statement:       (4X5)

(a) Planning and decision making are two sides of the same coin.

Ans: Planning is the primary function of management.  Planning concentrates on setting and achieving objectives through optimum use of available resources.  Planning is necessary for any organisation for its survival growth and prosperity under competitive and dynamic environment.  Planning is a continuous process to keep organisation as a successful going concern.

But before planning, decision making is very important. Decision-making is an integral part of the planning process and considered as the base of planning. The effectiveness of planning depends on the quality of decision-making. In this sense, management is rightly described as decision-making process. According to R. C. Davis, "management is a decision-making process." Decision-making is an intellectual process which involves selection of one course of action out of many alternatives. Decision-making will be followed by second function of management called planning. The other elements which follow planning are many such as organising, directing, coordinating, controlling and motivating.

Decision-making has priority over planning function. According to Peter Drucker, it is the top management which is responsible for all strategic decisions such as the objectives of the business, capital expenditure decisions as well as such operating decisions as training of manpower and so on. Without such decisions, no action can take place and naturally the resources would remain idle and unproductive. The managerial decisions should be correct to the maximum extent possible. For this, scientific decision-making is essential. From the above discussion, we can say that planning and decision making are two sides of the same coin.

(b) Job description and job specification are useful in recruitment and selection of employees so as to find the right persons for the jobs

Ans: Job description and job specification helps any organisation to recruit and select suitable person for the jobs.

Job description: Job description is an organized, factual statement of the duties and responsibilities of a specific job. It should tell what is to be done, how it is done, and why. It is a standard of function. It defines the authorized content of the job. It contains : job title, location, job summary, duties, machine, tools and equipments, materials used, supervision given or received, working conditions, hazards etc.

Job specification: A statement of the minimum acceptable human qualities necessary to perform a job properly. It is a standard of personnel and designates the qualities required for acceptable performance. A statement of human qualifications necessary to do the job. Usually contains such items: education, experience, training, judgement, initiative, physical effort, physical skills, communication skills, emotional characteristics, sensory demands such as sight, smell, hearing and many others depends upon the nature of job.

(c) The process of communication implies the existence of a sender, a receiver, a message and a motivating climate for it.

Ans: The process of communication is the inter relationship between several independent components. It consists of a chain of related actions and reaction which together result in exchange of information. In order to understand the process of communication, it is necessary to describe each of these components. A model of communication process is as follows:

1.       Sender: The sender is the first component of the process of communication. The sender may be a speaker, a writer or any other person. He is the one who has a message and wants it to share it for some purpose.

2.       Receiver: Receiver is the person or group for whom the message is meant. He may be a listener, a reader or a viewer. Any neglect on the part of the receiver may make the communication ineffective. Receiver is thus the ultimate destination of the message. It the message does not reach the receiver the communication is said to be incomplete.

3.       Message: Message is the heart of communication. It is what the sender wants to convey to the receiver. It may be verbal i.e. written or spoken or non verbal i.e. body language, space language, etc.

4.       Encoding and decoding: To encode is to put an idea into words. In this step the communicator organizes his ideas into a series of symbols or words which will be communicated to the intended receiver. Decoding means translation of symbols encoded by the sender into ideas for understanding. Understanding the message by receiver is the key to the decoding process. The message should be accurately reproduced in the receiver’s mind. If the receiver is unable to understand the message correctly the communication is ineffective.

5.       Behaviour of the receiver: It refers to the response by the receiver of the communication received from the sender. He may like to ignore the message or to store the information received or to perform the task assigned by the sender. Thus communication is complete as soon as the receiver responses.

(d) Coordination is the essence of management.

Ans: Co- ordination is considered to be Essence of Management due to the following reasons:

a)      Coordination through Planning: Planning facilitates co-ordination by integrating the various plans through mutual discussion, exchange of ideas. e.g. - co-ordination between finance budget and purchases budget.

b)      Co-ordination through Organizing - Mooney considers co-ordination as the very essence of organizing. In fact when a manager groups and assigns various activities to subordinates, and when he creates department’s co-ordination uppermost in his mind.

c)       Co-ordination through Staffing - A manager should bear in mind that the right no. of personnel in various positions with right type of education and skills are taken which will ensure right men on the right job.

d)      Co-ordination through Directing - The purpose of giving orders, instructions & guidance to the subordinates is served only when there is a harmony between superiors & subordinates.

e)      Co-ordination through Controlling - Manager ensures that there should be co-ordination between actual performance & standard performance to achieve organizational goals.

Now we can conclude that all the functions of management are affected by coordination. Hence coordination is essential for achieving the objectives of the organisation. It is also required for the survival, growth and profitability of the organisation. Coordination encourages team spirit, gives right direction, motivates employees, and makes proper utilisation of resources. Therefore, Coordination is rightly called the "Essence of Management".

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