MGT503 GDB Solution Fall 2012

MGT503 GDB Solution Fall 2012

Do the principles of management applicable in ‘for-profit organization’ differ from those applicable in’ not-for-profit organization’? Why or why not?


Yes the principles of management are applicable in for profit and not-for-profit organizations and these principles are same for profit as well as not-for-profit organizations. Because every business need proper management by applying management functions, policies rules and regulations to run in proper way and for long term existence either business is for profit and not-for-profit organization.

 Principals of Management are almost same everywhere either it is for profit or not for profit organization. As we know, Management process is the set of ongoing decisions and work activities in which managers engage as they plan, organize, lead and control. So, these four things are known as main pillars of management, and we see these four pillars in every organization, for example, if you are going to start a not for profit organization, the employees will of course needed there and you will plan to determining organizational goals and the means for achieving these goals, organize, lead and control; upir employees as a leader, so, if we go through basics of principals of management, i think they are almost same in both type of organizations.

Not For Profit Businesses

  • Many charity-based business organisations are run as ‘not for profit’ operations
  • They typically receive donations or funds from groups or government
  • Any financial surplus is ploughed back into the business
  • The organisation does not aim to generate profits

Not-for-Profit Organization Characteristics

  • Revenues received from providers who do not expect economic benefits in return
  • Operating purposes of the organization are other than to make a profit
  • Defined ownership interests are absent
Following are the Principle of Management:

DIVISION OF WORK: Work should be divided among individuals and groups to ensure that effort and attention are focused on special portions of the task. Fayol presented work specialization as the best way to use the human resources of the organization.

AUTHORITY: The concepts of Authority and responsibility are closely related. Authority was defined by Fayol as the right to give orders and the power to exact obedience. Responsibility involves being accountable, and is therefore naturally associated with authority. Whoever assumes authority also assumes responsibility.

DISCIPLINE: A successful organization requires the common effort of workers. Penalties should be applied judiciously to encourage this common effort.

UNITY OF COMMAND: Workers should receive orders from only one manager.

UNITY OF DIRECTION: The entire organization should be moving towards a common objective in a common direction.

SUBORDINATION OF INDIVIDUAL INTERESTS TO THE GENERAL INTERESTS: The interests of one person should not take priority over the interests of the organization as a whole.

REMUNERATION: Many variables, such as cost of living, supply of qualified personnel, general business conditions, and success of the business, should be considered in determining a worker’s rate of pay.

CENTRALIZATION: Fayol defined centralization as lowering the importance of the subordinate role. Decentralization is increasing the importance. The degree to which centralization or decentralization should be adopted depends on the specific organization in which the manager is working.

SCALAR CHAIN: Managers in hierarchies are part of a chain like authority scale. Each manager, from the first line supervisor to the president, possess certain amounts of authority. The President possesses the most authority; the first line supervisor the least. Lower level managers should always keep upper level managers informed of their work activities. The existence of a scalar chain and adherence to it are necessary if the organization is to be successful.

ORDER: For the sake of efficiency and coordination, all materials and people related to a specific kind of work should be treated as equally as possible.

EQUITY: All employees should be treated as equally as possible.

STABILITY OF TENURE OF PERSONNEL: Retaining productive employees should always be a high priority of management. Recruitment and Selection Costs, as well as increased product-reject rates are usually associated with hiring new workers.

INITIATIVE: Management should take steps to encourage worker initiative, which is defined as new or additional work activity undertaken through self direction.

ESPIRIT DE CORPS: Management should encourage harmony and general good feelings among employees.