Nature of Management
Business Studies — Grade 12 | Chapter 1 | NEB Nepal
Table Of Contents
Introduction
Management is the process of coordinating human effort, financial resources, and physical assets to achieve organizational goals efficiently and effectively. It operates in every organization — from a small trekking agency in Namche Bazaar to a large commercial bank with branches across Nepal’s seven provinces. Chapter 1 explores what management is, its characteristics, whether it is a science, art, or profession, how it differs from administration, its core functions, and the levels at which it operates — the conceptual foundation for all subsequent chapters in Grade 12 Business Studies.
1. Concept and Meaning of Management
According to Frederick Winslow Taylor, the father of Scientific Management, “Management is the art of knowing what you want to do and then seeing that they do it in the best and cheapest way.”
According to Henri Fayol, the father of Administrative Management Theory, “To manage is to forecast and plan, to organise, to command, to coordinate and to control.”
According to Harold Koontz and Cyril O’Donnell, “Management is the creation and maintenance of an internal environment in an enterprise where individuals, working in groups, can perform efficiently and effectively towards the attainment of group goals.”
According to Peter Drucker, “Management is a multi-purpose organ that manages a business and manages managers and manages workers and work.” He further stated, “The purpose of management is to make people capable of joint performance, to make their weaknesses irrelevant.”
According to George R. Terry, “Management is a distinct process consisting of planning, organizing, actuating, and controlling, performed to determine and accomplish stated objectives by the use of human beings and other resources.”
According to Mary Parker Follett, “Management is the art of getting things done through people.”
From these definitions, the common threads are: management is a continuous process, involves people and resources, aims at predetermined goals, and demands both efficiency (doing things right) and effectiveness (doing the right things).
2. Characteristics of Management
i. Goal-Oriented: Every management activity is directed toward specific, predetermined objectives. Without a clear goal, there is nothing to manage toward.
ii. Continuous Process: Management is an unending cycle — planning → organizing → directing → controlling → back to planning. According to Koontz and O’Donnell, “The management process is a universal phenomenon applicable to all types of organizations at all levels.”
iii. Pervasive: Management is required in every organization — business or non-business, large or small, public or private, at every level from village cooperative to national ministry.
iv. Group Activity: Management coordinates the efforts of groups of people. According to Mary Parker Follett, management is about creating productive relationships among people, not merely directing individual tasks.
v. Multidimensional: Management operates across three dimensions simultaneously — management of work (tasks defined and executed), management of people (motivated and developed), and management of operations (goods and services delivered).
vi. Dynamic: Management must adapt to changing environments — technological change, market shifts, regulatory reforms. Rigid management systems that cannot adapt eventually fail.
vii. Intangible: Management cannot be seen or touched — it is felt through results: productivity, morale, customer satisfaction, and financial performance.
viii. Social Process: Since management involves directing people, it is inherently social. According to Elton Mayo, management must attend to the social and psychological needs of workers, not only their technical tasks.
ix. Efficiency and Effectiveness: Peter Drucker drew the critical distinction: “Efficiency is doing things right; effectiveness is doing the right things.” Good management requires both.
x. Universal: The fundamental principles of management apply across all cultures and organizations. According to Fayol, these principles are applicable equally to a family household and a large industrial corporation.
3. Management as a Science, Art, and Profession
3.1 Management as a Science
Science requires: a systematized body of knowledge, principles from observation and experimentation, universal applicability, and cause-and-effect relationships.
According to Koontz and O’Donnell, “Management is a science in that it involves systematized knowledge and principles developed through observation and experience.”
Management qualifies as a science because:
- It has an organized body of knowledge built over a century (Taylor, Fayol, Drucker, Mayo)
- Its principles — Fayol’s 14 principles, Taylor’s scientific management — are based on systematic observation
- It establishes cause-and-effect relationships (e.g., employee participation improves goal achievement)
- Its principles have universal applicability across organizations
However, management is not a pure science because its subject — human behaviour — is unpredictable, and results cannot always be precisely replicated. According to Peter Drucker, “Management is a social science — its laws are probabilistic, not deterministic.”
3.2 Management as an Art
Art requires: personal skill and creativity, personalized application of knowledge, improvement through practice, and achievement of concrete results.
According to Mary Parker Follett, “Management is an art — the art of getting things done through people.”
Management qualifies as an art because:
- Two managers with identical training manage differently — each applies principles in their own style
- Management skill develops through practice and experience, not textbooks alone
- It requires creativity and judgment, especially in complex or ambiguous situations
- According to Chester Barnard, “The art of management consists not in applying formulas but in exercising judgment in situations of incomplete information and irreducible uncertainty.”
3.3 Management as a Profession
A profession requires: specialized knowledge, formal education, a code of ethics, a professional body, and a service orientation.
According to Louis Allen, “A profession is a vocation in which professed knowledge of some branch of science or learning is used in its application to the affairs of others.”
Management is moving toward a profession because:
- It has a defined body of knowledge taught through BBA, MBA, and professional certifications
- Professional associations exist — Nepal Management Association (NMA), Chartered Institute of Management
- Ethical standards are increasingly formalized through corporate governance codes
Management is not yet a fully established profession because there is no mandatory licensing, no single recognized governing body, and managers are primarily accountable to shareholders rather than society.
According to Peter Drucker, “Management is a practice — neither a science nor an art, but a discipline.” This captures the essence: scientific foundations, artistic execution, professional ethics.
3.4 Summary Table
| Dimension | Characteristics Present | Limitations |
|---|---|---|
| Science | Systematized knowledge; principles from observation; cause-and-effect | Human behaviour is unpredictable; not precisely replicable |
| Art | Personal application; creativity; practice improves skill | No purely aesthetic dimension |
| Profession | Specialized knowledge; formal education; ethical standards | No mandatory licensing; no single governing body |
4. Management and Administration
4.1 Concept of Administration
According to E.F.L. Brech, “Administration is that part of the management process concerned with the institution and carrying out of procedures by which the programme is laid down and communicated.”
According to Oliver Sheldon, “Administration is the function of industry concerned with the determination of corporate policy, the coordination of finance, production, and distribution.”
Administration refers to the top-level function of setting objectives and formulating policy. Management refers to the executive function of implementing those policies through people and resources.
4.2 Schools of Thought
American View (Administration above Management) — According to Ordway Tead, “Administration determines the aims; management executes them.” Administration sets goals; management pursues them.
British View (Management above Administration) — According to Brech, management is the broader function; administration is a subset handling clerical and procedural work.
Modern View (Same Function) — According to Fayol, there is no fundamental distinction; both involve the same process of planning, organizing, directing, and controlling at different levels.
4.3 Differences Between Management and Administration
| Basis | Management | Administration |
|---|---|---|
| Level | Middle and lower levels | Top level |
| Function | Executes policies | Formulates policies |
| Decision type | Operational and tactical | Strategic and policy |
| Focus | People and work | Goals and objectives |
| Skills required | Technical and human skills | Conceptual and human skills |
| Nature | Executive | Legislative/determinative |
| Used in | Business organisations | Government, public bodies |
| Accountability | To administration/board | To shareholders/government |
5. Functions of Management
Different scholars classify management functions differently:
- Fayol: Planning, Organizing, Commanding, Coordinating, Controlling — POCCC
- Gulick: Planning, Organizing, Staffing, Directing, Coordinating, Reporting, Budgeting — POSDCORB
- Terry: Planning, Organizing, Actuating, Controlling — POAC
- Koontz & O’Donnell: Planning, Organizing, Staffing, Directing, Controlling — POSDC
The most widely accepted classification for NEB is the five-function model:
5.1 Planning
According to Koontz and O’Donnell, “Planning is deciding in advance what to do, how to do it, when to do it, and who is to do it. It bridges the gap from where we are to where we want to go.”
According to George R. Terry, “Planning is the selecting and relating of facts and making assumptions regarding the future in the formulation of proposed activities to achieve desired results.”
Planning involves setting objectives, assessing the situation, identifying alternatives, selecting the best course, and developing budgets and schedules.
5.2 Organizing
According to Louis Allen, “Organizing is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships to enable people to work most effectively together.”
According to Koontz and O’Donnell, “Organizing involves establishing an intentional structure of roles for people to fill in an organization.”
Organizing involves grouping tasks into departments, assigning authority and responsibility, and creating the organizational hierarchy.
5.3 Staffing
According to Koontz and O’Donnell, “The managerial function of staffing involves manning the organization structure through proper and effective selection, appraisal, and development of personnel to fill the roles designed in the structure.”
According to Edwin B. Flippo, “Staffing is the process of searching for prospective employees and stimulating them to apply for jobs, followed by selecting, training, and compensating the best candidates.”
Staffing covers human resource planning, recruitment, selection, training, appraisal, and compensation.
5.4 Directing
According to George R. Terry, “Actuating is putting all members of the group to want to achieve and to strive to achieve the objective in accordance with managerial planning and organising efforts.”
According to Earnest Dale, “Direction is telling people what to do and seeing that they do it to the best of their ability.”
Directing involves guiding employees, motivating through incentives, communicating expectations, delegating authority, and resolving conflicts.
5.5 Controlling
According to Henri Fayol, “Control consists of verifying whether everything occurs in conformity with the plan adopted, the instructions issued, and the principles established, in order to point out weaknesses and errors and prevent recurrence.”
According to Koontz and O’Donnell, “Controlling is the measuring and correcting of activities of subordinates to ensure that events conform to plans.”
Controlling involves establishing standards, measuring actual performance, comparing with standards, identifying deviations, and taking corrective action. The output of controlling feeds directly back into planning — making management a continuous cycle.
6. Levels of Management
6.1 Top-Level Management
Consists of the Board of Directors, CEO, Managing Director, and equivalent senior executives.
According to Koontz and O’Donnell, “Top management is responsible for the overall direction of the enterprise, determining broad objectives and major policies, and is ultimately accountable for the organization’s performance.”
Functions: Setting vision and strategic objectives; formulating major policies; making capital allocation decisions; representing the organization externally; appointing senior managers.
Skills required: Primarily conceptual skills — seeing the organization as a whole, understanding the environment, and thinking strategically.
Nepal example: At Nepal Electricity Authority, top-level management includes the Board of Directors and the Managing Director responsible for national energy strategy.
6.2 Middle-Level Management
Consists of departmental managers, branch managers, regional managers, and divisional heads.
Functions: Translating top management’s strategy into departmental operational plans; coordinating between departments; training and supervising first-line managers; reporting performance upward and communicating policy downward.
Skills required: Balance of human skills and technical skills, with moderate conceptual skill for departmental planning.
Nepal example: At NIC Asia Bank, middle-level managers include regional managers, department heads (credit, HR, IT), and large-branch managers.
6.3 Lower-Level (First-Line) Management
Consists of supervisors, foremen, team leaders, and section heads who directly oversee non-managerial workers.
According to George R. Terry, “Lower-level management is responsible for directly supervising workers and ensuring that day-to-day work is carried out efficiently according to established procedures.”
Functions: Directly supervising workers; assigning daily tasks; enforcing quality and safety standards; reporting operational problems to middle management; training new employees.
Skills required: Primarily technical skills combined with strong human skills for direct interaction with workers.
Nepal example: In a manufacturing company, first-line managers include production supervisors, quality control inspectors, and warehouse supervisors.
6.4 Managerial Skills at Each Level — Robert Katz’s Model
According to Robert L. Katz, effective management requires three categories of skills whose relative importance varies by level:
- Technical Skills: Knowledge of specific methods and processes — most important at lower levels
- Human Skills: Ability to work with, motivate, and communicate with people — important at all levels
- Conceptual Skills: Ability to see the organization as a whole and think strategically — most important at top levels
| Level | Technical Skills | Human Skills | Conceptual Skills |
|---|---|---|---|
| Top management | Low | Medium | High |
| Middle management | Medium | High | Medium |
| Lower management | High | High | Low |
7. Importance of Management
i. Achieves Group Goals: Management coordinates diverse individual efforts toward objectives that no person could achieve alone — from building hydropower plants to managing national banking systems.
ii. Optimizes Resources: Good management ensures scarce resources — capital, skilled labour, technology — are deployed as productively as possible. In Nepal’s constrained economy, this difference often determines project success or failure.
iii. Reduces Costs: Through planning and process improvement, management lowers the cost of achieving objectives. According to Taylor, scientific management eliminates unnecessary effort and matches tasks to the right workers.
iv. Creates Dynamic Organizations: Well-managed organizations adapt to new technologies, market changes, and competitive pressures. According to Tom Peters, “The only sustainable competitive advantage is an organization’s ability to learn faster than its competitors.”
v. Develops the Nation: According to Peter Drucker, “Management is the engine of economic development.” Nepal’s aspirations — infrastructure, poverty reduction, middle-income status — depend on the quality of management across its institutions.
vi. Ensures Employee Well-Being: Effective management creates workplaces where employees perform at their best, develop their capabilities, and find meaning in their work. According to Abraham Maslow, management addressing both lower-order needs (wages, safety) and higher-order needs (belonging, growth) produces peak performance.
Conclusion
Management is both the oldest human activity — coordinating collective effort toward shared goals — and one of the most systematically studied modern disciplines. It is simultaneously a science (systematized knowledge), an art (personalized application), and an emerging profession (ethical practice with formal education).
As Peter Drucker observed, “Every organization of today has to build into its very structure the management of change.” For Nepal’s future leaders — in business, government, and civil society — understanding the nature, functions, and levels of management is not merely examination preparation. It is preparation for the responsibility of building organizations capable of delivering Nepal’s development aspirations.
Prepared for NEB Grade 12 Business Studies — Chapter 1: Nature of Management Aligned with the National Curriculum Framework 2076, Curriculum Development Centre, Sanothimi, Bhaktapur
