Importance of Management

Importance and Limitations of Management

Table of Contents:

  • Importance of management
  • Management Importance
  • Reasons why management has become so important
  • Limitations of Management

Importance of management

The importance of management is immense in a developing country like India. The country’s limited resources are unable to meet the extensive and diverse needs of its population. Therefore it becomes important to manage scarce resources effectively.

In such cases, only experienced and skilled managers can make the best and most economical use of limited resources.

According to Trucker, “Management is the dynamic life-giving element in every business. Without it, the resources of production simply remain resources and never become production”. 

Management is the catalyst without which an institution cannot grow and survive.

Management Importance

Understanding the importance of management becomes evident when you examine the following points below.

1) Encourages Initiative

Management encourages initiative. Initiative means doing the right thing at the right time without being informed or influenced by the superior. It motivates the employees to develop and put into action their plans. The initiative taken by the employees gives satisfaction and success to both the employees and the organisation.

2) Encourages Innovation

Management is responsible for encouraging innovation in the organisation. Innovation brings new ideas, new methods, new products,  new technology,  new services, etc. This makes the organisation more efficient and competitive.

3) Facilitates Growth and Expansion

Management if done properly makes optimum utilisation of available resources. It reduces wastage and increases efficiency. Management encourages teamwork and motivates employees. It also reduces absenteeism and labour turnover. All this results in the expansion, growth and diversification of the organisation.

4) Improves the Life of Workers

Every employee wants to get a share in profit, fair remuneration, participation in management activities, promotion, etc. Effective management shares some of its profits with the employees. It provides employee motivation, good leadership and open communication with a good working environment and conditions. It also gives the employees many financial and non-financial benefits. All these things improve the quality of life of the workers.

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5) Improves Corporate Image

If the management done by the organisation is good, then it will produce good quality goods and services. This will also improve the goodwill and corporate image of the organisation. A good corporate image in the market brings many added benefits to the organisation.

6) Motivates Employees

Management motivates employees by providing financial and non-financial benefits such as Salary, Bonus, Appreciation, Promotion, Job security, Performance appraisal etc. These benefits increase the willingness and efficiency of the employees and it results in boosting the organisation’s productivity and profitability.

7) Optimum Use of Resources

Management brings together all the available resources from the environment. It makes the best use of the resources and it brings optimum results to the organisation.

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8) Reduces Wastage

Effective management reduces the wastage of material, human, and financial resources. Wastage is reduced by proper planning,  production and control. If wastage is reduced then it will result in increased productivity.

9) Increases Efficiency

Efficiency is the relationship between the returns and the cost. Management uses many techniques to reduce costs and increase returns. Management improves efficiency by minimizing the wastage of resources that is money, time, and effort. It helps in the optimum utilization of the organisation’s resources by coordinating all the activities performed by individuals in the achievement of the common goal. The organisation gets many benefits from higher efficiency.

10) Improves Relations

Management improves relationships between people, groups, departments and between different levels of management.  Better relations lead to better teamwork and it brings success to the organisation.

11) Reduces Absenteeism and Labour Turnover

Absenteeism is a pattern or habit of an employee missing work, frequently for no good reason. Labour turnover means the movement of workers into and out of ongoing jobs in establishments. Labour absenteeism and turnover increase the cost and create many problems in the organisation’s smooth functioning. 

Turnover is the percentage or number of an employer’s workforce that must be replaced due to the voluntary and involuntary separation of employees from the job. Voluntary turnover includes leaving employment due to illness, retirement, returning to home and better career opportunities, while involuntary turnover includes terminations and layoffs for poor performance or disciplinary problems. 

Management uses different techniques to reduce absenteeism and labour turnover in the organisation by enhancing employee engagement and communication.

12) Encourages Teamwork

Management motivates employees to work as a team. It develops a team spirit among the employees in the organisation. This unity brings success to the organisation.

Management is a versatile function that is an essential part of every organisation. 

Reasons why management has become so important

Given below are some of the reasons why effective management has become so important –

(a) Management helps to achieve collective goals 

Management is needed for achieving the goals of the organisation. The functions of management is to give equal direction to employees’ efforts to achieve the overall purpose of the organisation.

(b) Increases Management Efficiency

The goal of a manager is to improve productivity and reduce costs through better arrangement, planning, organising, directing, and controlling of organizational activities.

(c) Management helps in the achievement of individual objectives

The manager encourages and leads his team in such a way that each member achieves particular objectives while contributing to the total objectives of the organization. Management through motivation and leadership helps people to develop team spirit, collaboration, and commitment to collective success.

(d) The organization is multi-purpose

The Organisation helps in coinciding with the objectives of its various constituents. In the process of fulfilling all these, management helps in the development of the organization and through it helps in the development of society. It helps in providing the best quality goods and services, creating employment opportunities, adopting new technologies for the betterment of the people, and walking on the path of intelligence and development.

(e) Management creates a dynamic organization

Every organization has to be managed in a constantly changing environment. It is commonly seen that people working in any organization resist change because it means shifting from a familiar, safe environment to a new and more challenging one. Management helps employees to adapt to these changes so that the organization becomes successful in maintaining its competitive excellence.

Importance of Management

In all types of organizations, whether it is small or big, commercial or non-business, the common objective is fulfilled through collective efforts and management has great importance in these efforts. Without management, the means of production remain the only means.

According to the late President John F. Kennedy, “The role of management in our society is critical to human progress. It works to improve the standards of living of all people through the effective use of human and material resources.”

According to George Terry, “The settling of principles of management is as important to management as a strength table for a civil engineer.” 

According to Theo Haimann, “The work of a manager becomes easier and his efficiency and effectiveness increase, if he understands the various management principles obtained and makes proper use of them.” The knowledge of principles and concepts saves substantially the power and labour of the managers and guides the managers to come out of complex situations.

Related Article: Workers Participation in Management

Therefore, they are essential in management because of the following reasons:

(i) The use of principles of management increases the efficiency and effectiveness of the managers.

(ii) The manager’s job becomes easy.

(iii) Management processes become systematic and clear based on management principles. In the absence of systematic and empirical principles, the knowledge of management science will remain hollow and incomplete.

(iv) The principles of management make substantial savings in the power and labour of the managers and guide them in getting them out of complex situations.

(v) Efficient use of human and material resources of the society can be done by using management principles.

In general, the importance of management is as follows:

1. Management makes it possible to achieve maximum results with minimum efforts by establishing effective coordination among various means of production to achieve the set goals. 

2. Good and efficient management has vision, different types of plans, the ability to determine actions, the ability to study the interests of customers, the ability to accurately assess the economic condition of the country,  etc. 

3. In the beginning, the basic policies are formulated by the management, and later various policies are determined according to the need.

4. The manager is the stabilizer of society and the custodian of traditions.

5. Management is the most important in the development of individuals. All the activities of management are related to human development. It enhances the efficiency of individuals and their all-around development.

6. Manager is the dynamic and life-sustaining element of every business, in the absence of his leadership, the means of production remain the only means, and never become a product.

7. Management is needed not only in business areas but also in non-business areas like schools, colleges, religious and political institutions, social work, and even in every sphere of life like home, playground, etc.

8. Management also plays an important role in the prosperity of the country. Efficient managers when making maximum production possible at minimum cost. Solve labour problems. They fulfil their responsibility towards different parts of the society well, due to which the nation progresses towards prosperity.

9. Success in group efforts depends upon cooperation among the members of the group. Management creates teamwork and coordination among the specific efforts.

10. Management is essential in all organizations whether a business is a firm, a government, a hospital, a college, a club, etc. Management is a creative force that helps in the optimum utilization of resources.

Some more importance of management are as follows;

11. Competent managerial leadership alone can convert unorganized resources of men, money, materials, and machinery into productive enterprises. If the management is absent, an organization is only a collection of money, men, materials, and machinery.

12. Management is needed to plan, organize, direct and control group efforts. Management provides leadership and motivation to individuals. There is a constant need for management in an organization.

13. As an innovation force, management plays the same role in an organization that the brain does in the human body. It is the fundamental coordination mechanism that follows organized efforts.

14. The importance of management has increased significantly in recent years due to the increase in the size and complexity of organizations, turbulent environments, and increasing responsibilities of business.

15. Sound management helps in maximizing production and minimizing cost. It maintains a dynamic balance between an organization and its ever-changing environment. Management is responsible for the creation, survival, and development of organizations.

16. Management development develops the skills of people by establishing proper coordination among the available resources of the organization.

The importance of management in the modern business world has increased significantly due to the following challenges.

(i) Increasing size and complexities of international business.

(ii) Increase in the specialization of work.

(iii) Tough competition in the market.

(iv) Increasing unionization of labour.

(v) Sophisticated and capital-intensive technology.

(vi) Increase in the complexity of business decisions.

(vii) Increase in the regulations of business by the government.

(viii) Need for research and development.

(ix) Turbulent business environment.

(x) The need to address the interests of different groups, such as owners, workers, customers, and the public.

(xi) There is a need for optimum utilization of scarce resources.

Management at the national level is equally important. It is an agent of economic change and growth. The power, prosperity, and prestige of a nation depend upon the efficiency and dedication of its managers and administrators.

In a developing country like India, the importance of management can hardly be over-emphasized. High efficiency and high productivity are the only hope of the people, of whom more than 60% are living below the poverty line.

A welfare state cannot realize its twin objectives of economic development and social justice without a well-organized management system. The basic cause of India’s backwardness lies in the disclosure and encroachment of the country’s resources.

Inadequate and inefficient administrative machinery is the most important reason for the poor performance of our development plans. In the public sector, we have lost Rs. In the absence of competent and dedicated management, investments are not being utilized properly.

Poor management in the private sector is the main cause of the disorder. We are underdeveloped because we are doing unnecessary and mismanaging. Professional and dedicated managers can convert the immense inactive energy of people into wealth.

 Management is the key to unlocking the forces of economic growth. It is an important factor in economic and social development.

Limitations of Management

Management is not a pure science like the natural sciences. It is a social science. Therefore its principles cannot be considered completely universal. The predominance of the human element in management makes it an incomplete science.

The following are the limitations of management:

(1) Managers are Actuated by Self-Interest:

Managers keep their interests first. After that, they look for the interests of the institution and society. They ignore social responsibilities in the desire for high pay and ranks, while they are expected to balance the interests of all the parties to the company.

An important limitation of management is that it is concerned with human beings. Therefore, it is related to different classes of people such as employees, customers, business owners, government officials, etc., whose behaviour and tendencies are different, because human behaviour is changeable, so management behaviour is also variable.

(3) External Environment Affects the Management:

The social, economic, and political environment also effectively influences managerial decisions. Sometimes managers make the environment according to them and sometimes they have to adapt to the environment.

(4) Incentive to Bureaucracy:

The fourth limitation of management is that under this the managers get the work done by other individuals. For this, they have to build a bureaucratic setup. As the size of the organization increases, the flaws of this bureaucracy get exposed.

(5) Lack of Proper Technique for Measuring Managerial Efficiency and Effectiveness:

Although Peter F. Drucker said that to test the efficiency and effectiveness of management, it should be seen to what extent the managers achieve the objectives of their organization. However, there is no definite quantitative technique available for this.

(6) Diversity in Organizational Objectives and Philosophies:

Although the principles of management are to a large extent universal, the objectives and philosophies of each organization may differ. Each company can be seen to perform managerial actions according to its beliefs and thoughts.

(7) Flexibility in the Principles of Management:

The main limitation of management is that its principles are not fixed. They are dynamic and flexible. These can be changed according to the circumstances and may have to be changed according to the nature of the organization.

Importance of Management in India

According to PL Tandon – “Labour, capital, and raw materials do not lead to development by themselves. For this, managerial knowledge is required from which maximum results can be achieved. Where there is good management of resources, promising results can also be obtained there”. 

According to Late Rajiv Gandhi – “India seeks to acquire the most modern technical knowledge in the shortest possible time. Management is of utmost importance in this direction today”.

Economic development is being done in our country through five-year plans, and a large number of skilled managers are needed to achieve the goals of these plans. Therefore, in India, “the lack of skilled managers in large quantity has been the reason for inefficiency and delay in the implementation of plans.”

Our government has invested billions of rupees in the public sector but due to mismanagement, the desired results could not be achieved. Most of these are being disinvested today. Thus the IAS Officers have proved to be incompetent and unsuccessful in efficiently managing public undertakings, so in their place, only efficient and qualified managers can run successful management of these public undertakings.

Importance of management

Management plays a vital role in an organization. Its importance may be studied as follows:

i. Achieving Group Goals: Management helps collaborate and coordinate individual efforts to accomplish individual targets and group goals.

ii. Increases Efficiency: Management improves productivity by managing resources in a reliable, conceivable way to decrease cost upscale potency.

iii. The smooth operation of the business: Management ensures smooth operation through sound planning, organization, direction, and effective control.

iv. Adjustment with change: Management ensures adaptation of the organization and its working in all changing situations.

v. Achieving personal objectives: Management promotes leadership and motivates employees to operate effectively to accomplish their personal aims while working together towards the organizational goals.

vi. Development of Society: Management helps enhance the community by manufacturing reliable and quality goods, establishing employment opportunities, and developing innovative technologies.


In conclusion, we can say that if India has to make rapid economic development, then a managerial revolution has to be brought about and the importance of management in economic growth will have to be accepted.

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