CBSE Class 12 Business Studies Revision Notes Chapter 2: Principles of Management

Principles of management are broad and general guidelines that help managers take decisions and guide organisational behaviour. CBSE Class 12 Chapter 2 covers their nature and significance, Taylor’s scientific management and Fayol’s 14 principles.

Principles of Management explains the guidelines managers use while taking decisions and handling workplace situations. These principles are flexible because business conditions, technology and human behaviour keep changing.

These CBSE Class 12 Business Studies Revision Notes Chapter 2 cover the complete chapter for the 2026–27 academic session. Use them to revise management principles, Taylor’s scientific management, work-study techniques and Fayol’s administrative principles.

Key Takeaways

• Seven features: Management principles are universal, general, flexible, behavioural, contingent and based on practice and cause-effect relationships.
• Four Taylor principles: Scientific methods, harmony, cooperation and employee development improve efficiency.
• Seven Taylor techniques: These include functional foremanship, work studies and differential wages.
• Fourteen Fayol principles: These guide administration, authority, discipline, coordination and employee relations.

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Principles of Management Class 12 Notes: Chapter Overview

This chapter begins with the meaning, nature and significance of management principles. It then explains Taylor’s scientific-management approach and Fayol’s administrative principles.

Access Class 12 Business Studies Chapter 2 Notes Principles of Management in 30 Minutes

Begin with the meaning, nature and significance of management principles. These concepts explain why principles guide managerial action but do not provide fixed solutions.

Next, revise Taylor’s four principles and seven techniques. Complete the chapter with Fayol’s 14 principles and the comparison between Fayol and Taylor.

Meaning of Principles of Management in Class 12 Business Studies Notes

A principle is a fundamental truth or proposition that forms the basis of behaviour or reasoning.

Principles of management are broad and general guidelines for managerial decision-making and behaviour.

They guide managers while planning, organising, staffing, directing and controlling. However, they do not prescribe one fixed solution for every situation.

Managers apply these principles according to:

• Organisational needs
• Human behaviour
• Available resources
• Business conditions
• Scale of operations
• Nature of the problem

Principles, Techniques and Values in Principles of Management Notes

Principles, techniques and values are related concepts, but they have different meanings.

Management principles guide the use of techniques. Values ensure that managers apply principles in a socially and ethically responsible manner.

Nature of Principles of Management Class 12 Revision Notes

The nature of principles of management refers to their main qualities and characteristics.

Universal Applicability

Management principles apply to all types of organisations.

They can be used in:

• Business and non-business organisations
• Public and private organisations
• Small and large enterprises
• Manufacturing and service organisations

However, their extent of application depends on the organisation’s nature, size and activity.

General Guidelines

Management principles provide general direction. They do not offer ready-made solutions to every managerial problem.

Business situations are complex and affected by several factors. Managers use judgement while applying a suitable principle.

Formed by Practice and Experimentation

Management principles develop through:

• Managers’ experiences
• Collective workplace knowledge
• Observation
• Repeated experimentation

For example, the need for discipline became clear through managerial experience. Work studies developed through systematic observation and experimentation.

Flexible

Management principles are not rigid rules.

Managers can modify their application according to:

• Business circumstances
• Employee needs
• Organisational size
• Available resources
• Environmental conditions

For example, the degree of centralisation differs across organisations.

Mainly Behavioural

Management principles mainly influence human behaviour.

They help managers understand and guide the relationship between:

• Employees
• Managers
• Departments
• Human and material resources

Their results are not always exact because people react differently in different situations.

Cause-and-Effect Relationships

Management principles help establish a connection between an action and its likely result.

For example:

• Division of work may increase specialisation.
• Unity of command may reduce confusion.
• Fair remuneration may improve employee satisfaction.

The relationship is not perfectly exact because business situations and human behaviour vary.

Contingent

The application of management principles depends on the prevailing situation.

A principle suitable in one situation may need modification in another. Managers consider the circumstances before applying it.

Nature of Management Principles Quick Notes

Significance of Principles of Management Class 12 Notes

The significance of principles of management comes from their usefulness in managerial decisions and actions.

Providing Managers with Useful Insights into Reality

Management principles help managers understand practical business situations.

They enable managers to:

• Learn from past experience
• Understand recurring problems
• Avoid repeating mistakes
• Handle situations more confidently
• Improve managerial knowledge

Optimum Utilisation of Resources and Effective Administration

Organisations have limited human and material resources.

Management principles help managers:

• Reduce wastage
• Lower unnecessary costs
• Use resources efficiently
• Improve administration
• Avoid biased decisions

Optimum utilisation means achieving maximum benefit with minimum cost.

Scientific Decisions

Scientific decisions are based on:

• Facts
• Logic
• Careful analysis
• Measurement
• Evaluation

Management principles reduce guesswork, prejudice and personal bias. They help managers make timely and justifiable decisions.

Meeting Changing Environmental Requirements

Business environments change because of technology, competition and customer expectations.

Flexible management principles help organisations adapt their:

• Work methods
• Organisational structures
• Authority relationships
• Specialisation
• Business activities

Fulfilling Social Responsibility

Businesses have responsibilities towards customers, employees, communities and the environment.

Management principles guide managers in:

• Treating employees fairly
• Providing customer value
• Protecting the environment
• Dealing ethically with business associates
• Supporting social welfare

Management Training, Education and Research

Management principles form the basis of management education and training.

They support:

• Management courses
• Managerial development
• Business research
• New management techniques
• Professional management practices

Significance of Management Principles Quick Revision Table

Taylor’s Scientific Management Class 12 Business Studies Notes

F.W. Taylor was an American mechanical engineer associated with the classical school of management. He is known as the Father of Scientific Management.

Taylor studied factory work and aimed to find the one best way of performing each job.

Scientific management means knowing exactly what workers must do and ensuring that they do it in the best and cheapest way.

It replaces personal judgement and trial-and-error methods with:

• Scientific study
• Standard methods
• Trained workers
• Cooperation
• Work measurement
• Specialised supervision

Principles of Scientific Management Class 12 Notes

Taylor proposed four main principles of scientific management.

Science, Not Rule of Thumb

Rule of thumb means relying on personal judgement, traditional methods or trial and error.

Taylor suggested that managers should scientifically study every job and identify the best method of performing it.

This requires:

• Work study
• Investigation
• Experimentation
• Standardisation
• Analysis of alternatives

The aim is to replace old methods with scientifically developed procedures.

Harmony, Not Discord

Taylor believed that managers and workers should maintain complete harmony.

Conflict between labour and management reduces productivity. Both groups must recognise that they depend on each other.

This principle requires a mental revolution in the attitudes of workers and management.

Cooperation, Not Individualism

Management and workers should cooperate instead of working only for individual interests.

Managers should:

• Consult workers
• Encourage useful suggestions
• Share responsibilities
• Avoid unreasonable pressure

Workers should cooperate in applying improved work methods and achieving organisational goals.

This principle extends the idea of harmony between labour and management.

Development of Every Person to Greatest Efficiency and Prosperity

Employees should be selected scientifically and assigned work suited to their abilities.

Management should provide:

• Proper training
• Skill development
• Suitable job placement
• Growth opportunities
• Efficient work methods

The development of workers increases their productivity and prosperity.

Taylor’s Principles of Scientific Management Quick Notes

Mental Revolution in Taylor’s Scientific Management

Mental revolution means a complete change in the outlook of both workers and management.

Management should stop viewing workers only as a source of labour. Workers should stop viewing management as an opponent.

Both sides should realise that higher productivity can increase:

• Organisational profits
• Worker wages
• Employment stability
• Business growth
• Mutual prosperity

Mental revolution is necessary for harmony and cooperation.

Techniques of Scientific Management Class 12 Revision Notes

Taylor developed several techniques of scientific management to improve efficiency, reduce wastage and standardise production.

Functional Foremanship in Taylor’s Scientific Management

Functional foremanship separates planning from execution and introduces specialised supervision.

Taylor suggested that a single foreman may not possess every required quality. Therefore, supervision should be divided among eight specialists.

Planning In-Charges

Production In-Charges

Functional foremanship increases specialisation in supervision. However, a worker receives instructions from several specialists.

Standardisation and Simplification of Work Notes

Standardisation and simplification improve production by controlling unnecessary variation.

Standardisation

Standardisation means setting standards for:

• Processes
• Raw materials
• Tools
• Machines
• Methods
• Products
• Working conditions

Its objectives include:

• Maintaining quality
• Ensuring consistency
• Reducing waste
• Improving compatibility
• Establishing performance standards

Simplification

Simplification means eliminating unnecessary varieties, sizes and grades of products.

It helps an organisation:

• Reduce inventories
• Lower production costs
• Use machines fully
• Simplify purchasing
• Increase turnover

Standardisation Versus Simplification of Work

Method Study in Scientific Management Notes

Method study determines the one best way of performing a job.

It studies the complete production process, including:

• Procurement of raw materials
• Transportation
• Inspection
• Storage
• Production
• Delivery to customers

Its objectives are:

• Reducing production cost
• Improving resource use
• Increasing quality
• Simplifying the production process
• Improving customer satisfaction

Motion Study in Scientific Management Notes

Motion study examines the movements involved in performing a job.

Movements may be:

• Productive
• Incidental
• Unproductive

The aim is to eliminate unnecessary movements and combine useful movements efficiently.

Motion study helps:

• Reduce worker fatigue
• Save time
• Improve productivity
• Design better tools
• Improve workplace layout

Time Study in Scientific Management Notes

Time study determines the standard time required to perform a well-defined job.

The standard time depends on:

• The task
• The method used
• Worker ability
• Working conditions
• Rest intervals

Time study helps determine:

• Number of workers required
• Standard labour cost
• Suitable incentive schemes
• Expected production level
• Fair working time

Fatigue Study in Scientific Management Notes

Fatigue study determines the frequency and duration of rest intervals.

Long working hours, unsuitable work and poor working conditions may cause physical and mental fatigue.

Rest intervals help workers:

• Regain energy
• Maintain efficiency
• Reduce accidents
• Prevent errors
• Improve product quality

Differential Piece Wage System Class 12 Notes

The differential piece wage system distinguishes between efficient and inefficient workers.

Under this technique:

• A standard output is fixed.
• Workers meeting or exceeding the standard receive a higher rate per unit.
• Workers producing below the standard receive a lower rate per unit.

For example:

• Standard output: 10 units
• Higher rate: ₹60 per unit
• Lower rate: ₹50 per unit

A worker producing 11 units earns ₹660. A worker producing 9 units earns ₹450.

The difference motivates workers to achieve the standard output.

Techniques of Scientific Management Quick Revision Table

Fayol’s Principles of Management Class 12 Revision Notes

Henri Fayol was a French mining engineer and management theorist. He is known as the Father of General Management.

Fayol developed 14 principles of management based largely on his managerial experience.

These principles focus on overall administration and managerial conduct.

14 Principles of Management by Henri Fayol

Division of Work

Work should be divided into small and specialised tasks.

Specialisation helps employees develop:

• Skill
• Speed
• Accuracy
• Efficiency
• Expertise

This principle applies to both managerial and technical work.

Authority and Responsibility

Authority is the right to give orders and obtain obedience. Responsibility is the obligation to complete assigned work.

Authority and responsibility should remain balanced.

• Responsibility without authority weakens performance.
• Authority without responsibility may lead to misuse of power.

Discipline

Discipline means obedience to organisational rules and employment agreements.

Effective discipline requires:

• Good supervisors
• Clear agreements
• Fair rules
• Judicious penalties

Discipline helps maintain orderly organisational functioning.

Unity of Command

An employee should receive orders from only one superior.

If an employee receives instructions from more than one superior, it may cause:

• Confusion
• Conflict
• Divided loyalty
• Duplication
• Difficulty fixing responsibility

Unity of Direction

Activities having the same objective should have one head and one plan.

Unity of direction ensures:

• Coordination
• Focused effort
• Common planning
• Unity of action
• Reduced duplication

Subordination of Individual Interest to General Interest

The organisation’s interest should take priority over the interest of an individual employee.

Managers should reconcile personal and organisational interests through:

• Fair agreements
• Proper supervision
• Good example
• Consistent application of rules

Remuneration of Employees

Employees should receive fair and reasonable remuneration.

Wages should consider:

• Employee contribution
• Business capacity
• Cost of living
• Prevailing wage rates
• Organisational conditions

Fair remuneration improves employee satisfaction and organisational stability.

Centralisation and Decentralisation

Centralisation means retaining decision-making authority at higher levels.

Decentralisation means systematically distributing authority among lower levels.

No organisation can remain completely centralised or decentralised. Managers should maintain a suitable balance.

Scalar Chain

Scalar chain is the formal line of authority from the highest to the lowest organisational rank.

Communication should normally follow this chain.

However, in an emergency, employees at the same level may communicate directly through a gang plank after informing their superiors.

Order

Order means that the right person and the right material should be in the right place at the right time.

It includes:

• Material order: A fixed place for every material.
• Social order: A suitable place for every employee.

Order reduces delay, confusion and wastage.

Equity

Equity means fairness and kindness in managerial behaviour.

Managers should avoid:

• Discrimination
• Unfair punishment
• Favouritism
• Biased treatment

Equity develops loyalty and devotion among employees.

Stability of Personnel

Employee turnover should be minimised.

Employees need sufficient time to:

• Learn their roles
• Develop skills
• Adjust to the organisation
• Produce results

Frequent employee changes increase recruitment and training costs.

Initiative

Initiative means thinking out and executing a plan.

Employees should receive opportunities to:

• Suggest improvements
• Develop ideas
• Make plans
• Take responsible action

Initiative increases motivation and commitment.

Esprit de Corps

Esprit de corps means unity and team spirit.

Managers should promote:

• Harmony
• Cooperation
• Mutual trust
• Belongingness
• Teamwork

Fayol recommended using verbal communication where suitable because written communication may sometimes create misunderstanding.

Fayol’s 14 Principles of Management Quick Notes

Unity of Command and Unity of Direction Comparison Notes

Both principles improve organisational efficiency but apply to different areas.

Centralisation and Decentralisation Class 12 Notes

Centralisation and decentralisation are complementary concepts.

The correct balance depends on the size, nature and circumstances of the organisation.

Scalar Chain and Gang Plank in Fayol’s Principles

A scalar chain shows the formal authority relationship in an organisation.

Suppose the chain is:

A → B → C → D
A → E → F → G

Under the normal scalar chain, D communicates with G through:

D → C → B → A → E → F → G

During an emergency, D and G may communicate directly through a gang plank.

The immediate superiors must remain informed.

The gang plank:

• Saves time
• Supports urgent communication
• Does not permanently break the scalar chain
• Requires managerial knowledge and approval

Fayol Versus Taylor Class 12 Business Studies Notes

Fayol and Taylor both contributed to classical management theory. Their approaches differed, but their contributions were complementary.

Similarities Between Fayol and Taylor

Both thinkers:

• Sought to improve organisational efficiency.
• Developed systematic management knowledge.
• Emphasised specialisation.
• Supported cooperation between management and workers.
• Replaced unplanned methods with organised management.
• Influenced modern management theory.

Complete Principles of Management Chapter 2 Revision Summary

Important Terms from Principles of Management Class 12 Notes

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