Sunteți pe pagina 1din 21

FUNDAMENTALS OF MANAGEMENT What is Management? Nature and characteristics of management.

Management is Combination of Art and Science Management knowledge exhibits characteristics of both art and science, the two not mutually exclusive but supplementary. Every discipline of art is always backed by science which is basic knowledge of that art. Similarly, every discipline of science is complete only when it is used in practice for solving various kinds of problems faced by human beings in an organisation or in other fields of social life which is more related to an art. Art basically deals with an application of knowledge personal skill and know-how in a specific situation for efficiently achieving a given objective. It is concerned with the best way of doing things and is consequently, personalised in nature. During the primitive stages of development of management knowledge, it was considered as an art. There was a jungle of managerial knowledge. It was not codified and systemised. People used it to get things done by others, in their own way giving an impression that whosoever uses it, knows the art of using it. This kind of loose and inadequate understanding of management supported the view that it was an art. The definitions by some of the leading management thinkers and practitioners are given below: (i) Management consists in guiding human and physical resources into dynamic, hard-hitting organisation unit that attains its objectives to the satisfaction of those served and with a high degree of morale and sense of attainment on the part of those rendering the service. Lawrence A. Appley Management is the creation and maintenance of an internal environment in an enterprise where individuals, working in groups, can perform efficiently and effectively towards theattainment of group goals. Harold Koontz and Cyrill ODonnell Management is the art of knowing what you want to do and then seeing that it is done in the best and cheapest way. F.W. Taylor To manage is to forecast and to plan, to organise to command, to coordinate and to control. Henry Fayol Management is the function of executive leadership anywhere. Ralph C. Davis Management is a distinct process consisting of planning, organising, actuating and controlling performed to determine and accomplish the objectives by the use of people and resources. George R. Terry Management is guiding human and physical resources into dynamic organisational units which attain their objectives to the satisfaction of those served and with a high degree of morale and sense of attainment on the part of those rendering service. American Management Association Management is a multipurpose organ that manage a business and manages Managers and manages Workers and work. Peter Drucker


(iii) (iv) (v) (vi)



Nature and Characteristics of Management

The salient features which highlight the nature of management are as follows: (i) Management is goal-oriented: Management is not an end in itself. It is a means to achieve certain goals. Management has no justification to exist without goals. Management goals are called group goals or organisational goals. The basic goal of management is to ensure efficiency and economy in the utilisation of human, physical and financial resources. The success of management is measured by the extent to which the established goals one achieved. Thus, management is purposefull. (ii) Management is universal: Management is an essential element of every organised activity irrespective of the size or type of activity. persons are engaged in working for a common goal, management is necessary. All types of organisations, e.g., family, club, university, government, army, cricket team or business, require management. Thus, management is a pervasive activity. The fundamental principles of management are applicable in all areas of organised effort. Managers at all levels perform the same basic functions. (iii) Management is an Integrative Force: The essence of management lies in the coordination of individual efforts in to a team. Management reconciles the individual goals with organizational goals. As unifying force, management creates a whole that is more than the sum of individual parts. It integrates human and other resources. (iv) Management is a Social Process: Management is done by people, through people and for people. It is a social process because it is concerned with interpersonal relations. Human factor is the most important element in management. According to Appley, Management is the development of people not the direction of things. A good manager is a leader not a boss. It is the pervasiveness of human element which gives management its special character as a social process. (v) Management is multidisciplinary: Management has to deal with human behaviour under dynamic conditions. Therefore, it depends upon wide knowledge derived from several disciplines like engineering, sociology, psychology, economics, anthropology, etc. The vast body of knowledge in management draws heavily upon other fields of study. (vi) Management is a continuous Process: Management is a dynamic and an on-going process. The cycle of management continues to operate so long as there is organised action for the achievement of group goals. (vii) Management is Intangible: Management is an unseen or invisible force. It cannot be seen but its presence can be felt everywhere in the form of results. However, the managers who perform the functions of management are very much tangible and visible. (viii) Management is an Art as well as Science: It contains a systematic body of theoretical knowledge and it also involves the practical application of such knowledge.

Management is also a discipline involving specialised training and an ethical code arising out of its social obligations. On the basis of these characteristics, management may be defined as a continuous social process involving the coordination of human and material resources in order to accomplish desired objectives. It involves both the determination and the accomplishment of organizational goals. SCOPE OF MANAGEMENT The field of management is very wide. The operational areas of business management may be classified into the following categories: (i) Production Management: Production management implies planning, organising, directing and controlling the production function so as to produce the right goods, in right quantity, at the right time and at the right cost. It includes the following activities: (a) designing the product (b) location and layout of plant and building (c) planning and control of factory operations (d) operation of purchase and storage of materials (e) repairs and maintenance (f) inventory cost and quality control (g) research and development etc. (ii) Marketing Management: Marketing management refers to the identification of consumers needs and supplying them the goods and services which can satisfy these wants. It involves thefollowing activities: (a) marketing research to determine the needs and expectation of consumers (b) planning and developing suitable products (c) setting appropriate prices (d) selecting the right channel of distribution, and (e) promotional activities like advertising and salesmanship to communicate with the customers (iii) Financial Management: Financial management seeks to ensure the right amount and type of funds to business at the right time and at reasonable cost. It comprises the following activities: (a) estimating the volume of funds required for both long-term and short-term needs of business (b) selecting the appropriate source of funds (c) raising the required funds at the right time (d) ensuring proper utilisation and allocation of raised funds so as to maintain safety and liquidity of funds and the creditworthiness and profitability of business, and (e) administration of earnings Thus, financial management involves the planning, organizing and controlling of the financial resources

(iv) Personnel Management: Personnel management involves planning, organising and controlling the procurement, development, compensation, maintenance and integration of human resources of an organisation. It consists of the following activities: (a) manpower planning (b) recruitments, (c) selection, (d) training (e) appraisal, (f) promotions and transfers, (g) compensation, (h) employee welfare services, and (i) personnel records and research, etc.

PURPOSE OF MANAGEMENT The objectives of management are narrated as under. (i) Organisational objectives: Management is expected to work for the achievement of the objectives of the particular organisation in which it exists. Organisational objectives include: (a) Reasonable profits so as to give a fair return on the capital invested in business (b) Survival and solvency of the business, i.e., continuity. (c) Growth and expansion of the enterprise (d) Improving the goodwill or reputation of the enterprise. (ii) Personal objectives: An organisation consists of several persons who have their own objectives. These objectives are as follows:

(a) Fair remuneration for work performed (b) Reasonable working conditions (c) Opportunities for training and development (d) Participation in management and prosperity of the enterprise (e) Reasonable security of service. (iii) Social objectives: Management is not only a representative of the owners and workers, but is also responsible to the various groups outside the organisation. It is expected to fulfil the objectives of the society which are given below: (a) Quality of goods and services at fair price to consumers. (b) Honest and prompt payment of taxes to the Government. (c) Conservation of environment and natural resources. (d) Fair dealings with suppliers, dealers and competitors. (e) Preservation of ethical values of the society

MANAGEMENT VS ADMINISTRATION There has been a controversy on the use of these two terms-management and administration. Many experts make no distinction between administration and management and use them as synonyms. Several American writers consider them as two distinct functions. The management experts like Elbourne, Unwick and Mary Follett regarded administration and management as synonymous and use them interchangeably in their works. But Schuze and Sheldon found distinction between these two concepts. According to them the distinction is important to clearly understand the role of people in administrative positions versus those in managerial positions. Oliver Sheldon in his The Philosophy of Management defines Administration as a function is concerned with the determination of the corporate policy, the coordination of finance, production and distribution, the settlement of the compass (i.e., structure) of the organisation, under the ultimate control of the executive. On the oth er hand, Management is concerned with the execution of the policy, within the limits setup by administration and the employment of the organization for the particular objects before it. Thus Sheldon declares administration as a thinking process and management as doing process. In other words, management is a concomitant of administration. The following figure depicts this line of thinking

E.F.L. Breach distinguishes administration and management. Breach considers management as a social process entailing the responsibility for effective planning, regulation, coordination and control of operations including the responsibility for personnel supervision. According to him, administration is that part of management which is concerned with the installation and carrying out the procedures bywhich the progress of activities is regulated and checked against plans. Few authors treat administration as part of management. These three points of view are explained below. (i) Administration isdifferent from management: According to this view point, administration is a higher level activity while management is a lower level function. Administration is a determinative function concerned with the determination of objectives and policies while management is an executive function involving the implementation of policies and direction of efforts for the achievement of objectives. This view is held largely by American experts on management. American experts such as Florence, Lansburg, Haimann, Milward, McFarland, Spriegel, Schulze and Tead also hold this view that administration involves decision-making and policyformulation while management is concerned with the execution of policies and supervision of work. According to them, administration is superior to management as the latter has only a peripheral role in determination of objectives and policies. Administration is a part of management: According to the European School of thought, management is a wider term including administration and organisation. This viewpoint has been propounded by Breach. According to him, Management is the generic term for the total process of executive control involving responsibility for effective planning and guidance of operations of an enterprise. Administration is that part of management which is concerned with the installation and carrying out of the procedures by which the programme is laid down and communicated and the progress of activities is regulated and checked against plans. Kimball and Kimball, Richman and Copen also hold similar views. According to them, administration is only an implementing agency while management is determinative. Thus, the European viewpoint is exactly opposite to the American opinion. Administration and management are one: Many writers like Henri Fayol, William Newman, Chester Barnard, George Terry, Louis. A. Allen, Koontz and O Donnell make no distinction between management and administration. According to Newman, Management or administration is the guidance,



leadership and control of the efforts of a group of individuals towards some common goals. According to Fayol, all undertakings require the same functions and all must observe the same principles. Administrative management involve determination of objectives and policies whereas operative management is primarily concerned with the execution of plans for the achievement of objectives. At every level of management, an individual manager performs both types of functions. Every manager spends a part of his time on administrative management and the remaining time on operative management

SKILLS OF MANAGEMENT Several skills are required to manage successfully a large organization in a dynamic environment. These skills of managers have been classified into four categories, namely technical, human, diagnostic and conceptual skills. (i) Technical Skills Technical skills refer to the ability and knowledge in using the equipment, technique and procedures involved in performing specific tasks. These skills require specialised knowledge and proficiency in the mechanics of particular job. Ability in programming and operating computers is, for instance, a technical skill. There are two things a manager should understand about technical skills. In the first place, he must know which skills should be employed in his particular enterprise and be familiar enough with their potentiality to ask discerning questions of his technical advisors. Secondly a manager must understand both the role of each skill employed and interrelations between the skills. (ii) Human Skills Human skills consists of the ability to work effectively with other people both as individual and as members of a group. These are required to win cooperation of others and to build effective work teams. Such skills require a sense of feeling for others and capacity to look at things from others point of view. Human skills are reflected in the way a manager perceives his superiors, subordinates and peers. An awareness of the importance of human skills should be part of a managers orientation and such skills should be developed throughout the career. While technical skills involve mastery of things human skills are concerned with understanding of People. (iii) Conceptual Skills Conceptual skills comprise the ability to see the whole organization and the interrelationships between its parts. These skills refer to the ability to visualise the entire picture or to consider a situation in its totality. Such skills help the manager to conceptualise the environment, to analyse the forces working in a situation and take a broad and farsighted view of the organisation. Conceptual skills also include the competence to understand a problem in all its aspects and to use original thinking in solving the problem. Such competence is necessary for rational decision-making. Thus technical skills deal with jobs, human skills with persons and conceptual skills with ideas. These types of skills are interrelated. But the proportion or relative significance of these skills varies with the level of management as shown in the figure 1.4. Fig. 1.4

Technical skills are most important at the supervisory or operating level where a close understanding of job techniques is necessary to guide workers. As one moves up the management hierarchy, technical skills become less important. Higher level managers deal with subordinate managers and specialised technical knowledge is comparatively less important for them. Conceptual skills are very important for top management in formulating long-range plans, making broad policy decisions, and relating the business enterprise to its industry and the importance of conceptual skills increases as we move to higher levels of management. This would be self evident as management is the process of getting things done through people. Human skills are equally important at all levels of management because every manager has to deal with people. (iv) Diagnostic Skills Diagnostic skills include the ability to determine by analysis and examination the nature and circumstances of particular conditions. It is not only the ability to specify why something happened but also the ability to develop certain possible outcomes. It is the ability to cut through unimportant aspects and quickly get to the heart of the problem. Diagnostic skills are probably the most difficult ones to develop because they require the proper blend of analytic ability with common sense and intelligence to be effective.

.MANAGEMENT FUNCTIONS The objective of this topic is to make students understand the functions of management and the role of managers in an organization. The five basic management functions are listed below: PLANNING ORGANISING STAFFING LEADING CONTROLLING

PLANNING: The managerial activities aid in selecting the objectives, examine and forecast changes, develop policies, procedures and choose future course of action from among alternatives. Planning proceeds from Where we are to Where we want to go. Planning activities are 1. Analysing the current situation (also called the SWOT Analysis) 2. Anticipating or predicting the future based on the analysis 3. Determination of organizational objectives to be achieved 4. Deciding on the action plan 5. Evolving proper strategies 6. Pooling the resources (physical, financial and monetary) to accomplish enterprise objective


It is a process which integrates people and tasks; In order to achieve their tasks people are given sufficient authority, tools and information. Organising activities include 1. Specification of job responsibilities 2. Grouping of jobs into respective work units 3. Allocation of resources STAFFING: Human resource management is one of the key areas that decides the success of a firms activity. Staffing involves the selection of Right person for the right job. The activities are 1. Recruitment 2. Selection 3. Training and Development 4. Compensation 5. Promotion 6. Evaluation and 7. Rewarding people to achieve enterprise goals. LEADING: Leadership is the set of interpersonal behaviors that influence people to contribute to the organization and group goals. The activities under this category are 1. Providing proper direction 2. Guidance and Motivation 3. Clarity in communication to the work force CONTROLLING: This is a process that is necessary to keep track of the performace of individuals by setting some standards for direction. The activities include 1. Establishing performance standards enabling the work force to achieve the goals (both short term and long term) 2. Enhancing the employee performance through performance appraisal or rating of work 3. Comparison of performance against the standards to identify deviation or work problems and take corrective measures 4. Bench marking is one of the management techniques that facilitates an organization to uplift its performance levels to the best of industry standards and also catch hold of the strengths of the competitors and rectify the weaknesses prevailing in ones own firm. CO-ORDINATION: It is regarded as a key function of a manager to bring in harmony among individuals and an effort towards accomplishment of goals. 1. Marginal decision making and 2. Sub Optimisation are some of the new approaches developed in the field of decision making. MANAGERIAL SKILLS:

Skill is the resultant effect of knowledge, experience and expertise. It is the ability of an individual to perform a task which is obvious from the results he/ she shows. There are 3 kinds of skills that a manager should possess in order to excel. 1. The Conceptual Skill: Assessing a situation and acting accordingly depicts the managers perceiving ability of the abstract elements in force. A manager has to improve this kind of skill as he moves up the ladder in the management level or let us say that he can move up the ladder only if he possesses this kind of skill. Management Consultants Managing Director of a firm President of a company Economists Startegists are conceptual analytic experts 2. The Technical Skill: This skill is purely based on ones knowledge and on the job experience. This is needed at a lower level of management Computer Operators Engineers Accountants Machine Operators possess this kind of skill 3. The Human Relations Skill: This is needed at all levels of management as it is all pervasive and represents the ability of a manager to interact efficiently with individuals. Counselling Performance Appraisal Feedback Human Resource management Conflict management 1. Negotiations need this skill set.


Fredrick Winslow Taylor: Founder of scientific management and is called the Father of scientific management.He emphasized on the need for management planning and standardization of tools and materials, the former to gauge the capability of men and machine and the latter to save time and increase productivity.He was one of the founders of Time and Motion study. His theory was based on the following assumptions: Production planning and control is the main function of an organization Insisted on functional foremanship Time study as the basis for arriving standard time Standardisation of all tools and parts The use of slide-rules and similar time saving implements Inroduced time-cards for workmen The differential rate system of wages Henry Gantt: He proposed the Gantt Chart, a visual method to compare production output with time it took to complete a task. This is considered to be a forerunner of todays PERT PROGRAMME EVALUATION and REVIEW TECHNIQUE). He also developed Work quota systems Bonus systems for workers or managers

Objectives of Scientific Management To ensure continuous employment opportunities for the work force To gauge market tendencies To render workers a high standard of living; this motivates them to contribute more To increase the income of the workers

To assure a socially agreeable condition of working environment Proper selection, training, assignment, transfer and promotion of workers To develop self-confidence and self-respect among workers through opportunity and participation To promote justice through elimination of discrimination in wage-rates To eliminate causes of friction and to promote understanding, tolerance and the spirit of team-work-Espirit de corps. MANAGEMENT PROCESS SCHOOL Henri Fayol (1841-1925) Henri Fayol has propagated 14 principles on management which are very popular.

1. Division of labor: He insists on a high degree of specialization in order to improve efficiency. Both managerial and technical works are amenable to specialization which leads to better work with the same efforts. 2. Authority and Responsibility: Authority can be classified into Official and Personal authority, the former needed by a manager to extract work from the subordinates and the latter emanating from the managers own intelligence, integrity, experience, personality, knowledge and skills. Responsibility comes along with authority; one who has the authority should also be able to take up responsibility. 3. Discipline: Obedience, diligence, correct attitude and outward mark of respect is the essence of discipline which exists as an unwritten agreement between the management and its employees 4. Unity of Command: A subordinate must receive orders and instructions from one superior only 5. Unity of Direction: Activities of similar nature should be grouped under one superior so that the efforts could be streamlined towards the common goal. 6. Sub-ordination of individuals interest to the Common Goal: The personal interests of an individual (like money, recognition etc.) should not be placed before the goal of the organization, which is maximizing production. 7. Remuneration: Fair and equitable remuneration should be provided to employees to ensure better production and satisfaction. 8. Centralization: The concentration and dispersal of authority must be balanced in an organization 9. Scalar Chain: The authority chain from top to bottom should be followed at all times for the purpose of effective communication 10.Order: Human and material resources should be co-ordinated so as to be in the required place at the required time 11.Equity: Fairplay,justice and friendliness is what the employees expect of the organization

12.Stability of Tenure of Personnel: Too much of Job turn over and rotation affect the work in progress and destruct the stability of the work units 13.Initiative: Subordinates must be encouraged to participate in the decision making process to show their initiative 14.Espirit De Corps: In union there is strength and so is team work.Team spirit and a sense of unity and togetherness should be fostered and administered in an organization. James D.Mooney and Allen C.Reilay The Line and the Staff Principle:

According to this principle, the line authorities get things done while it recognizes the role of staff authority who are experts in providing guidance and advice. The emphasis is on, Hierarchial structure Clear decision Delegation of Authority and Responsibility Specialization of Tasks Co-ordination of activities and Utilization of staff experts THE HUMAN RELATIONS SCHOOL

The human behaviorists believed in COLLABORATIVE management which is possible when managers are capable of harmonizing the efforts of individuals at all levels of the organization. This concept draws heavily from psychology and social psychology. Motivation Leadership Communication Training Participative management Group dynamics are assigned importance The important contributors are Elton Mayo, Roethlisberger, Mary Parker Follet, Chester I Bernard, Abraham Maslow and Douglas McGregar. THE EMPIRICAL SCHOOL Case study analogy is the best way to understand management is the idea behind this school of thought. The mistakes of managers are converted into rich experiences over a period of time and the findings are transferred to the practitioners in the management profession. The contributors are, American Management Association Harvard Business School Ernest Dale. However, critics feel that this may not be suitable when it comes to training imparted for making decisions. DECISION THEORY SCHOOL All the managerial functions rest on only one thing, that is Decision -making, is the crux of the contribution of this school and the pioneers are Herbert A. Simon James G.March W.Forrester Richard M.Cyert This school relies on decision models created using various mathematical tools and techniques. For example, the concept of sub-optimization and marginal decisionmaking. THE SYSTEMS SCHOOL The organization is an open system that operates within and also interacts with the environment. This includes Inputs from external environment The transformation process The system of communication

CONTINGENCY APPROACH OF MANAGEMENT The contingency approach to management holds that management techniques should be dependent upon the circumstances. In this lesson, you will learn what the contingency approach to management is and the key elements of contingency management. Definition A contingency approach to management is based on the theory that management effectiveness is contingent - or dependent - upon the interplay between the application of management behaviors and specific situations. In other words, the way you manage should change depending upon the circumstances. One size does not fit all. Theory The contingency approach to management finds its foundation in the contingency theory of leadership effectiveness developed by management psychologist Fred Fielder. The theory states that leadership effectiveness as it relates to group effectiveness is a component of two factors: task motivation or relation motivation and circumstances. You measure task motivation or relation motivation by the least preferred co-worker (LPC) scale. The LPC scale asks the manager to think of the person they least liking working with and then rate that person on a set of questions, each involving an eight-point scale. For example, 1 would be uncooperative and 8 would be cooperative. Fielder believed that people with a higher LPC score try to maintain harmony in their work relationships, while those with a lower LPC score are motivated to focus on task accomplishment. The theory states that task or relations motivations is contingent upon whether the manager is able to both control and effect the group's situational favorability, or outcome. According to the theory, you can assess situational favorability by three factors: 1. Leader-member relations. This factor addresses the manager's perception of his cooperative relations with his subordinates. In other words, is the cooperation between you and your employees good or bad? 2. Task structure. This factor relates to whether the structure of the work task is highly structured, subject to standard procedures and subject to adequate measures of assessment. Certain tasks are easy to structure, standardize and assess, such as the operation of an assembly line. 3. Position power. This factor asks if the manager's level of authority is based on punishing or rewarding behavior. For example, does the manger derive his authority from providing bonuses for meeting sales goals or terminating employees for failure to meet the goals? The combination of leader-member relations, task structure and position power create different situations that have been coined octants 1-8. You can divide these eight situations into three broad categories: favorable situations, intermediate situations and

unfavorable situations. According to the theory, each situation is handled the best by either high or low LPC managers. The theory argues that high LPC managers are most effective at influencing employee group behavior in intermediate situations, while low LPC managers are most effective in favorable or unfavorable situations.

I. The Basics:

Formal and Informal Forms of Organization

An organization is constituted of humans, therefore it is both an economic and social entity. Modern organizations are too large in terms of number of people in employment. Direct contact between employer and employees is not possible in modern organizations. Modern organization involves huge investment and uses complicated technology. Their management and operation is a complex affair. It needs assistance from specialists at all levels. Formal organizations refers to the official hierarchy and lines of authority, with their spans of control, and Informal organizations refers to the ways in which official rules are negotiated or subverted through the infromal practices of subordiates. Formal and Informal structure in an organization refers to the distinction between procedures and communications in an organization which are prescribed by writeen rules, and those which depend more upon ad hoc, personal interaction within work groups. The contrast between formal and informal structure in an organization emerged from the debate about MAX WEBERs (1864-1920) ideal type bureaucracy within organization theory. Critiques of WEBERs ideal type focused upon the neglect of informal organization and the ways in which adherence to formal rules can lead to inefficiency and detract from the official goals of an organization. The HAWTHORNE EXPERIMENTS were a famous example of the study of informal norms and expectations in work groups. Studies in organizational sociology have demonstrated the ways in which informal practices bend or circuvent formal rules. From a Functionalist perspective, such practices may be seen as conducive to organizational commitment, while other studies emphasise the role of informal work groups as forms of resistance and opposition to the aims of management II. Formal Organization: The formal Organization has a structure that is consciously designed to enable the people of the organization to work together for accomplishing common objectives. Thus, formal Organization os more or less arbitrary structure to which the individual must adjust. It tells idividual members to do certain things in specific manner to obey orders from designated individuals and to cooperate with others. Coodination also proceeds according to a prescribed partner in the formal Organization structure. The formal Organization is built on certain principles, i.e. around four key pillars, namely, (a) division of labour, i.e. the whole work is divided into a number of small operations and each operation is performed by a different person so that there is maximum specialization; (b) scalar and functional processes, which implies that the Organization grows both vertically and horizontally, (c) structure, which refers to the overall arrangement ensuring proper balance between different parts of the organization and secures the execution of all operations and the achievement of organizational objectives; and (d) span of control, refers to the number of subordinates directly reporting and accountable to one supirior. Characteristics of Formal Organization: (a) It is deliberately impersonal; (b) it is based on ideal relationship; (c) It is deliberately constructed to achieve some goals; and (d) It is based on rabble hypothesis of nature of human beings. Criticisms of Formal Organization: (a) individuals are ignored in determining the interactions, communication and accountability; (b) the ideal relationship assumes that rational human beings will

stick to rules and regulations but such assumption is hard to find in reality; ( c) Assumption that punishment or reward always brings a reaction among humans (rabble hypothesis) also fails to succeed as humans are not always motivated by rewards and punishment.; (d) Rules and regulations of a formal Organization is too rigid and not sensitive to changing times and circumstances, thus becomes difficult over time to achieve the goals of the organization. III. Informal Organization: Informal organizations refers to the relationship between people in the organization based on personal attitudes, emotions, prejudices, likes, dislikes, etc. These relations are not developed according to procedures and regulations laid down in the formal organization structure; generally large formal groups give rise to small informal groups. These groups are not prepalnned, rather develop automatically/spontaneously acording to the organizational environment. No organization operates completely by the book. In real settings, the relationship that actually exist among employees in an organization does not follow formal lines. Employees in one department know those in other departments. They may need information about the acts of indiscipline in a particular department or some advice on delicate matters regarding the handling of jobs, etc. The associations of persons, in such cases, come under informal organization. These associations may be among employees on the same level of the hierarchy or on different levels. The communication in informal organization is very fast and efficient. If handled properly, it helps in forming the activities of the organization very efficiently and effectively. Informal organization may act to fill gaps in managements abilities. It also helps in mediating breaches in understanding between the management and the employees. Informal organizations influence productivity and jobsatisfaction. It delineats avenues of promotion and points out dead-end jobs. It makes for closer cooperation and higher morale. It brings to the members of a formal organization a feeling of belongingness, of status, of self respect/esteem, and of gregarious satisfaction. They are rather important means of maintaining the personality of the individual against certain disintegrative effects of formal organization.

2. 3.

To establish parameters, identify options and influence


To report, seek approval, clarify and influence

External Peers

Internal Peers


To give instruction, organize, clarify, direct and influence

To Persuade, Integrate Subordinates and Influence

4. 6.

5. Organizational Communications 7.