Six significance of principles of management for organizational decision making are: 1. Providing Managers with Useful Insights into Reality 2. Optimum Utilisation of Resources and Effective Administration 3. Scientific Decisions 4. Meeting Changing Environment Requirements 5. Fulfilling Social Responsibility 6. Management Training, Education and Research.

1. Providing Managers with Useful Insights into Reality:

Principles of management help in increasing managerial efficiency by adding to their knowledge and ability to understand the various situations. The principles help the managers to use their and others’ past experiences in delegating routine problems and focus on major issues instead.


For example, by following the principle of delegation, a manger can leave routine decision making activities to his subordinates and deal with only those situations which require his unique expertise. Hence, the principles help managers to learn from past experiences and take right decisions at right time.

2. Optimum Utilisation of Resources and Effective Administration:

Resources, both human and physical, available in an organization are very limited. Thus, these resources should be used fully in such a manner as its gives maximum benefit with minimum cost. Managerial principles help the management to come out with the methods that help in reducing wastages.

Along with this, the principles of management also help in establishing effective administration by limiting the boundary of managerial discretion so that their decisions may be free from personal biases.

For example, while deciding the annual budget for different departments, a manager is required to follow the principle of contribution to organisational objectives and not personal preferences. Similarly, where ‘Unity of Command’ helps to avoid confusion and conflicts, ‘Unity of Direction’ ensures unity of actions to facilitate coordination.

3. Scientific Decisions:


An effective decision must be based on facts, thoughtful and justifiable in terms of the required purpose. Decisions must be timely and realistic. Principles of management help the managers in taking decisions based on the objective assessment of the situation, free of any bias and prejudice. Thus, they approach various problems scientifically, leading to timely implementation of right decisions.

4. Meeting Changing Environment Requirements:

As the principles can be modified, thus, they help the managers to meet the changing environment requirements. For example, at present the principle of division of work has been extended to the whole business.

Of late however, companies are specializing in their core competency and are outsourcing their non core business. For example, most of the big giants are now outsourcing some of their operations through ‘Business Process Outsourcing’ (BPO) and ‘Knowledge Process Outsourcing’ (KPO).

5. Fulfilling Social Responsibility:

Every business has to fulfill many social responsibilities. Thus, principles of management and management theory have been devised in such a way that they help in fulfilling these responsibilities. However, over a period of time, these principles have assumed new and contemporary meaning.


For example, the principle of equity at present is applicable not only to wages alone but it also includes the care of environment; values of the customer etc. Shri Mahila Greha Udyog Lijjat Papad, besides working on the ‘concepts of business’ and concepts of devotion’, has given due emphasis on the ‘concept of family’ too. All the functions of the organisation are dealt with in a manner similar to that of a family providing full support for the development of its member sisters, employees and well wishers.

6. Management Training, Education and Research:

Principles of management are the central point of management theory. So they are used as a basis for management training, education and research. These principles are an integral and important part of the curriculum of various management courses at Bachelor level such as B.B.A (Bachelor of Business Administration) and Master level such as M.B.A (Master of Business Administration).

Moreover, management principles lay due emphasis on sound judgment achieved through proper research. Research helps to find out innovative methods in the fields of marketing, production, finance etc. which eventually lead to effective performance. Thus, management principles serve as a guide to research for effective and efficient performance.