Notes for IDM 11

Business Enterprise
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Business Enterprise is a work organization especially created to produce goods and services
for the community
o Produces goods for the market and consumers
o Yield profits for owners or dividends for shareholders
o Generates services for employees in terms of jobs, careers, income, perks and welfare

An enterprise also produces by-products

o Revenue for the state, payable in the form of various taxes
o Services for the community such as employment promotion, housing, medical care
o Power for the bosses which they may use to acquire personal status as well as for
influencing public policies

Every enterprise has four key features (CCMS)

o Charter: A statement of aims and objectives, the purpose for which the enterprise has
been created. This may be stated in the form of Memorandum of Association or
Articles of Association
o Culture: May be influenced by the personal philosophy and values of promoters,
social environment expressed through methods and procedures of work and conveyed
through business policy and communication system
o Decision Making and Implementation Machinery: To translate policies into actions
o Mechanism of Socialization of New Members: Structured into recruitment, selection
and training programmes which gives the new comers the required behaviour pattern

Self-interest brings people together to join an enterprise. The enterprise provides a framework
for control and coordination of diverse skills necessary for achievement of the common goal

Profits and Corporate Citizenship

o Goal of an enterprise is to attain the optimum efficiency and effectiveness
o Profits are a function of efficiency of operations of an enterprise
o Valid test to determine the organization health of an enterprise is the efficiency of its
operations rather than profitability
o Holders of the power may not necessarily be the owners of an enterprise. They are
professional managers hired to do a job
o Profit can be used as a measure of success but it need not be the goal of an enterprise,
certainly not for the professional manager

Forms of Business Enterprise

o Proprietary and Partnership firms
Unlimited liability is a great risk
Financial institutions hesitate to entertain request for assistance from such
firms
o Companies
Private limited companies, the total number of shareholders cannot be more
than 50, shares are not quoted on stock exchange and liquidity of shares is
restricted
Public limited companies offer their shares to larger public and the shares are
widely distributed among shareholders. Shares can be quoted on the stock
exchange and are liquid assets
o Multinational Corporations

Have their headquarters in one country but their operations in many countries
Modern MNCs have a geocentric orientation. This means that the total
organization is viewed as an interdependent system operating in many
countries
Advantages
Can take advantage of business opportunities in different countries
Can raise money for its operations throughout the world
Able to establish their production facilities in countries where their
products can be produced most effectively and efficiently
Can recruit from a worldwide labour pool
Challenges
Increasing nationalism
To maintain good relations with the host country

Entrepreneur
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An entrepreneur is one who undertakes an economic venture, owns, organizes, promotes and
manages it and assumes the risk of business

Management refers to the executive action of planning, organizing, directing, controlling and
supervising any business with responsibility for results

Management is a means to accomplish an end; the end is determined by entrepreneurship

Attributes of an Entrepreneur (OPWPE)

o Opportunity Finding
Results in business are obtained by exploiting opportunities, not by solving
problems
It means that effectiveness rather than efficiency is essential for business
The relevant question is not how to do things right, but how to find right
things to do, and to concentrate resources and efforts on them
An entrepreneur is in search of right things to do, a manager is preoccupied
with how to do things right
o Problem Finding
Problem finding is more important than problem solving and much more
complex
Entrepreneurship calls for the ability to foresee and identify problems that
need to be solved before it is too late
He must be able to read meaning into changes in methods of doing business,
and into actions of customers and competitors which may not show up in
written statements or reports
A manager is trained in problem solving and an entrepreneur is a problem
finder
o Will to Manage
There is a way to manage and a will to manage
A person can be trained on the way to manage but will to manage is
something he must have
The will to manage is a crucial factor, therefore, in determining whether a
person can get effective results from others
A good performer or a high achiever may be a do-it-yourself type but may
not be able to make other people excel at their jobs
o Need for Power

Entrepreneurs are power seekers

They strive hard to reach positions where they can exercise authority over
increasingly large number of people
A person who makes millions continues to work even harder and to make
more money for what it can get for him
An entrepreneur without need for power may set up an enterprise and even
make money but will remain an mere trader
Capacity for Empathy
Ability to cope with the emotional reactions that inevitably occur when
people work together in an organization
It is often said that trained managers are emotion blind and may not be able to
cope with human emotions in an organization
Entrepreneurs capacity to handle emotions get them loyal colleagues who
stand with them all the way through, from the backyard days of starting to the
present day empire

Types of Entrepreneurs
o Small Scale Sector
o Sons of Industrialists
o Professional Managers
o Public Sector Executives

Structure of an Enterprise
-

Informal Groups
Management
o Supervisors
o Middle management
o Top management
Board of Directors
Employees

Management
-

Without some form of organization and order therein, the group will not be able to achieve
anything, it will be just a crowd with everyone pulling in different directions

Management is what a manager does. Management is getting things done through others

Management is the process of designing and maintaining an environment in which,

individuals working together in groups, efficiently accomplish selected goals

Decision making is the most critical attribute of being a manager. Manager must also take
action

Management Art or Science

o Some people argue that management is an art as managers are born not made
o However, management has become a profession with following attributes
Management has a body of knowledge of its own theories, concepts, etc
and it is growing continuously
It has skills of the practice of profession that are codified, communicable and
can be used for imparting training
Offer career to its members paid jobs to practice the profession
Presence of professional organizations that regulate entry into the profession
o Management has become a professional discipline and a science
o Given the basic aptitude and opportunities, all men and women can train themselves
as managers and engage in professional practice

Functional Areas of Management

o Production, Finance, Marketing, Personnel, Procurement, Public Relations and
Operations Research

Management Processes
o Processes refer to a set of activities sequentially arranged and designed to produce a
specific output
o Individual tasks/ functions within a process are important but none of them matter if
the process does not deliver the goods
o Every function must pass through various management processes. And every process
applies to all functions

Management Techniques: Techniques are essentially ways of doing things

o Value Engineering
A proven management technique using a systematized approach to seek out
the best functional balance between the Cost, Performance and Reliability of
a product or a project
It seeks to improve the management capability of people and to promote
progressive change by identifying and removing unnecessary costs
The systematic approach of value engineering is Job Plan. The Job Plan is the
road map; for defining the required task and determining the most
economical combination of functions to achieve the task
Job Plan consists of five steps (ICJDR)
Information Phase
Creative Phase
Judgement Phase
Development Phase

Recommendation Phase
Value Engineering is
System Oriented: formal job plan to identify and remove unnecessary
costs
Multidiscipline Team Approach: terms of experienced designers and
consultants
Life Cycle Oriented: examines the total cost of owning and operating
a facility
Proven Management Technique
Function Oriented: related function required to the value received
Value Engineering is not
Design Review
Cheapening Process
Requirement Done on All Designs
Quality Control
Benchmarking
It is a process of systematic and continuous approach to identify the
benchmark, compare yourself to the benchmark and identify practices that
enable you to become the new Best-in-class
It should be seen as a means of enhancing competitive behaviour and of
searching for ways of doing business more effectively
Benchmarking helps drive rapid business improvement in three ways
Quantification of the gap between internal and external practices
creates the need for change
Understanding industry best practices identifies what is to be
changed
Examination of externally benchmarked practices gives a picture of
what the future holds after change
Preparing for Benchmarking: starts with self-study
Define your objectives
Know your processes
Types of Benchmarking
Strategic
Performance
Process
Who to Benchmark Against?
Internal
Competitors
Functional
Generic
Business Process Reengineering (BPR)
Reorganizing the processes rather than functions and exploiting the potential
of information technology
Reengineering implies the fundamental rethinking and radical redesign of the
business process to achieve dramatic improvements in critical, contemporary
measure to cost, quality, service and speed
The first principle is that reengineering begins with no assumptions.
Reengineering means starting over from the scratch
The term radical design is getting to the root of the problem. The second
principle is that reengineering is about business reinvention

The term dramatic is not about making marginal improvements but about
achieving quantum of leaps in performance. The third principle of
reengineering is that dramatic improvement demands blowing up the old and
replacing it with something new
The fourth and final principle of reengineering is that the shift to process
based thinking is need of the day. Reengineering requires looking at the
business as a whole and introduce change in a manner that triggers off
changes in the entire way of doing business in the desired direction and to the
desired level
Business Process
A process may be defined as transformation of inputs into outputs
There are three types of business processes within an organization
o End to end business processes
Take inputs from outside the boundaries of an
organization, and produce goods and services for
delivery to the customers outside the boundaries of
the organization
o Funnel business processes
Move from broad, long term inputs to defined
outputs
o Composite business processes
Act as a holding category for business processes,
which cannot be fitted into the other two until
rationalization can be made
The business processes in a reengineering organization are few in
number perhaps only four to six should be networked together.
Other processes should be ordered hierarchically under business
processes
Partnering
Partnering assumes that the parties share sufficient common goals to warrant
a more collaborative relationship
This means that both the contractors and the owners would want projects
completed safely and on time. Neither party wants rework and would prefer
to avoid costly litigation. Each party would like to reduce costs while at the
same time improve quality
Conditions for Success
Acceptance by the partners that it is worth making the investment in
building a partnering arrangement
Potential for improvement in the product or service that is subject of
partnering arrangement
To achieve full benefits of partnering, it has to be a medium to long
term strategy
Long term commitment to strategic partnering arrangements by
senior management is an essential pre-requisite
Organizations should have similar work, culture, compatibility and
be financially stable
Arrangement should be based on equality rather than being a one
sided paternalistic relationship
Partners should have an interest in each others profitability and seek
to take an equal share of risks
Free and open exchange of information is an important characteristic
of good partnering

There should be annual review of performance

Real efficiency requires the whole team to work reliably and
efficiently

Scientific Management Theory (Fredrick Taylor)

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Taylor propounded that there was no inherent conflict between labour and employers
Labour wanted more income, employers wanted more profits and the consumer wanted a
better price. All of them could be benefited only if the plant itself produced more
Therefore, it was in the interest of everyone to produce more and thereby take more
The real problem was in determining a fair days pay for a fair days work. For this, if a
quantitative method could be evolved wherein a worker could know the basis of his wages,
and in which his income moved up along with the increase in efforts put in, the he would be
more rational and more production oriented
It is for employers to establish a scientific approach to management which he said was based
on five basic rules
o Replacing thumb rule with organized knowledge
o Obtaining harmony in group action
o Achieving cooperation for all rather than individuals
o Working for maximum output rather than restricted output
o Developing of workers ability to their fullest extent possible for their own and their
companys prosperity
Taylor advised the employers to establish the following four management practices
o Scientific management of work
o Clear procedures of work
o Rational wage structure
o Right man for the right job

Human Relations Theory (Elton Mayo)

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The Generic Electric Plant was undergoing high labour turnover, absenteeism and production
fall for no explicable reason
The company felt this was due to fatigue as well as lack of proper lighting and other physical
amenities at the work place. The needful was done
The production went up but the problem was that while these conditions were not present in
the control group, its production also went up
It was not of the fact of giving better conditions but the feeling that this action created
amongst the employees that did the trick
Later when the workers were asked to elect representatives that would sit with the
management to discuss working conditions, the production soared up without any regard to
whether changes made or not
Another department of the same company never showed any improvement in production
irrespective of whatever management did
Production fluctuated up and down for no particular reasons due to which management did
not feel in control of the situation
Mayo identified the role of informal groups in shop floor management. He found that people
organize themselves into small groups on the basis of interests and someone emerged as
leader of the group
Mayo said that a management should accept the role of informal groups and involve informal
groups leaders into management processes
The formal management should be trained in human relations in order to achieve better
production

Theory X & Y (McGregor)

-

Theory X was a label for the traditional management approach of pushing people and
extracting work out of them
Theory X was based on the premise that

People did not like to work basically

Some kind of authority, threat of punishment, needed to be held on their heads to
make sure that they worked
o People did not like to think for themselves. Therefore they should be told what to do
Theory Y was based on the following premises
o People do not like or dislike work as such. Rather they develop an attitude towards
work based on their experience in the past
o While authoritarian methods can get work done in the short run, it will not work in
the long run
o People select the goals for themselves, if they see some kind of reward in it
o Once a person sets a goal for himself he will pursue it vigorously
o Most people, under right circumstances, seek responsibility for self-fulfilment
Most powerful motivating force to an individual was the possibility of financial gains coupled
with the possibility of personal growth
o
o

Management System Theory (Henri Fayol)

-

He said all activities of an enterprise could be divided into 6 groups (TCFSAM)

o Technical production
o Commercial buying, selling and exchanging
o Financial creating resources and making optimal use of capital
o Security protection of property, persons and health
o Accounting book keeping and statistics
o Managerial planning, organization, coordination and control
Fayol pointed out that the first 5 activities are well known and they existed in businesses of
any kind and size. Therefore, he devoted attention to the 6 th activity i.e. Managerial
Persons responsible for management must have required managerial qualities which are listed
as below (PMMEET)
o Physical i.e. good health and vigour
o Mental i.e. ability to understand, learn, judge and predict
o Moral i.e. energy, willingness to accept responsibility, initiative and loyalty
o Educational i.e. expert knowledge of ones own field and ability to work with other
disciplines
o Experience i.e. performance in the past which a person is able to analyze, cosdify and
use for work in future
o Technical i.e. expertise in ones own profession
Fayols fourteen general principles of management
o Division of work
o Authority and responsibility
o Discipline
o Unity of command
o Unity of direction
o Subordination of self-interest to the corporate interest
o Human relations
o Centralization
o Chain of authority
o Orderliness i.e. place for everything and everything in place
o Quality
o Stability of tenure i.e. offering a career
o Initiative
o Team spirit

Motivation Theory (Herzberg)

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Herzberg was concerned about the fall in production which varied from time to time for no
particular identifiable reason
He had interviews with engineers and asked them recall specific incidents which made them
feel particularly good or bad about their jobs
This led to identification of a series of factors in the work situation of individuals that
influenced their attitudes and performance and whose intensity and duration affected their
work behaviour
o Hygiene Factors
Job, job security, work rules, promotions, incentives, leaves, employment
practices
o Motivating Factors
Attitudes, feeling about job, desire to excel, care and concern about quality
Based on the study and classification of factors he concluded as below
o Hygiene factors when inadequate had negative effect on employees attitudes.
However when present, they had no positive effect
o Hygiene factors are something that have to be provided and without which no person
worth his while will join the organization
o Hygiene factors are necessary to create motivation but are powerless by themselves
o The lesson for management is that if you do not provide hygiene factors you risk not
having productivity and you do not expect motivated workforce
o If you are looking for quality, desire to excel, concern for economy, care of the
materials and equipments, then you need to create a motivating environment and this
is what Herzberg called Management
o He said four things were important
Treating people as individuals, not as foreman, mechanic, peon, etc
Giving true respect to them as dignified human beings
Involving them in taking decisions that affect their careers and lives
Giving them a feeling through involvement and training that staying with the
company is contributing to their career development

Needs Hierarchy Theory (Maslow)

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Maslows studies led him to conclude that man was never contended. You can never really
buy content for people by giving them what they want
Needs were of three orders
o Physical needs i.e. needs to satisfy hunger, protection against nature and well being of
self and family
o Social Relationship needs i.e. belonging to a group, recognitions and promotions
o Power, Social and Societal Esteem needs
One need replaces another and the process continues
Money is worth what it can buy and some people have all that is worth having. Therefore, the
needs that motivate them to keep striving to work hard, to expand, must be of a different order
altogether
Todays motivators are likely to become tomorrows hygiene factors

McKinseys 7S Approach
-

The basic premise of the model is that there are seven internal aspects of an organization that
need to be aligned if it is to be successful
The 7S model can be used in a wide variety of situations where an alignment perspective is
useful, such as to

o Improve the performance of a company

o Examine the likely effects of future changes within a company
o Align departments and processes during a merger or acquisition
o Determine how best to implement a proposed strategy
The McKinsey 7S model involves seven interdependent factors which are categorized as
either hard or soft elements
o Hard elements
Strategy
The plan devised to maintain and build competitive advantage over
the competition
Structure
The way the organization is structured and who reports to whom
Systems
The daily activities and procedures that staff members engage in to
get the job done
o Soft elements
Shared Values
Core values of the company that are evidenced in the corporate
culture and the general work ethic
Skills
Skills and competencies of the employees working for the company
Style
Style of leadership adopted
Staff
Employees and their general capabilities
Hard elements are easier to define and management can directly influence them
Soft elements are more difficult to describe and less tangible and more influenced by culture
Placing Shared Values in the middle emphasizes that these values are central to the
development of all other critical elements
The original vision of the company was formed from the values of the creators. As the values
change, so do all the other elements

Planning
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Plan
o
o
o
o

Plan is a projected course of action

Project plan will spell out the details in which the activities will be carried out,
resources will be deployed and time frames when certain outputs should be expected
Planning is the process of determining objectives, setting time frames, creating
options and choosing the most efficient one; estimating types and quantum of
requirement of resources and allocating them
Planning always deals with future and it always precedes action

Basic Terms
o Objectives: Ends towards which an activity is aimed
o Strategy: Course of action decided to achieve the goal
o Policy: Statement which guides the actions and decisions of managers
o Procedure: Method of handling work in an enterprise
o Rule: Like procedure except that it has no chronology or sequence
o Programme: Complex of objectives, strategies, procedures and rules
o Budget: Statement of expected performance results in numerical terms

Levels of Planning
o Corporate Planning
Process of planning for the enterprise as a whole
o Project Planning
Series of activities that may be undertaken to complete a project within the
time, cost and quality parameters
o Site Planning

Types of Planning
o Strategic Planning
Long term planning process
o Tactical Planning
Short term planning which offers a great scope of flexibility, correction and
reallocation of resources
o Rolling Planning
Link between long term and short term planning
Plan for short time intervals that fit sequentially in the long term plan
o Contingency Planning
Emergency or standby plans
Resorted to if the plan under implementation fails

Steps in Planning (OPOCDR)

o Setting Objectives
Objectives state the end results desired. Lesser the number, better the focus
Objectives are supported by sub-objectives. Organization will have
objectives, departments will have sub-objectives
Objectives form a hierarchy from broad to specific. Board of Directors may
set objectives in broad terms, management will convert them to more specific
Objectives form a network of desired results. If they are not inter-connected
or if they do not support one another, managers may pursue paths that may
seem good for their own departments but may be detrimental to the company
as a whole

Objectives should be quantifiable and verifiable. Instead of saying to make

reasonable profits, be specific like to achieve 12% p.a. rate of return on
investment
Premising: Making Assumptions
To establish, circulate and obtain agreement to utilize critical planning
premises such as forecasts, applicable basic policies and existing company
plans
They are assumptions about the environment in which the plan is to be
carried out
The more thoroughly individuals who are charged with planning understand
and agree to utilize consistent planning premises, the more coordinated
enterprise planning will be
Forecasting is important to premising
It would not be profitable or realistic to make assumptions about every detail
of the future environment and hence is limited to assumptions that are critical
or strategic to a plan
Creating Options
To search for and evaluate alternative courses of action
The more common problem is not finding alternatives but reducing the
number of alternatives so that the most promising may be analyzed
Evaluating Alternative Courses
To evaluate the alternatives by weighing them in the light of premises and
goals
One course may appear to be the most profitable, but it may require a large
cash outlay and have a slow payback; another may look less profitable but
may involve less risk; still another may suit the companys long term
objectives
There are so many alternative courses in most situations and so many
variables and limitations to be considered that evaluation can be exceedingly
difficult
Selecting a Course
An analysis and evaluation of the alternative courses will disclose that two or
more are advisable, and the manager may decide to follow several courses
rather than the one best course
Formulating Derivative Plans
Derivate plans are almost invariably required to support the basic plan
Estimating Resource Requirement
To numberize them by converting plans into budgets

o
o
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Most Essential Guiding Principles of Planning are listed below:

o The Purpose and Nature of Planning
Principle of Contribution to Objectives
The purpose of every plan and all supporting plans is to promote the
accomplishment of enterprise objectives
Principle of Objectives
If the objectives are to be meaningful to people, they must be clear,
attainable and verifiable
Principle of Primacy of Planning
Planning logically precedes all other managerial functions
Principle of Efficiency of Plans

The efficiency of a plan is measured by the amount it contributes to

purpose and objectives as offset by the costs required to formulate
and operate it
The Structure of Plans
Principle of Planning Premises
The more thoroughly individuals who are charged with planning
understand and agree to utilize consistent planning premises, the
more coordinated enterprise planning will be
Principle of Strategy and Policy Framework
The more strategies and policies are clearly understood and
implemented in practice, the more consistent and effective will be the
framework of enterprise plans
The Process of Planning
Principle of the Critical Factor
The more accurately individuals can recognize and solve for those
factors which are critical to the attainment of the desired goal, the
more easily and accurately they can select the most favourable
alternative
The Commitment Principle
Long range planning is not really planning for decisions but, rather
planning for the future impact of todays decisions
Principle of Flexibility
Building flexibility into plans will lessen the danger of losses
incurred through unexpected events
Principle of Navigational Change
Redraw plans periodically as necessary to maintain a course towards
a desired goal
Unless plans have flexibility built-in, navigational change may be
difficult or costly

Organizing
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Organizing Process
o Organizing process brings together the basic resources of an enterprise in an orderly
manner, and arranges people and resources in an acceptable pattern so that they could
perform the required activities efficiently and achieve the objectives
o Organizing process deals with creating a structure, assigning duties of individuals and
groups, setting up an hierarchy for smooth and efficient working and sorting out
issues of authority, leadership and delegation

Creating a Structure
o Three basic steps involved in creating a structure are:
Work is distributed among departments
Persons are assigned to perform this divisional work
Methods and procedures of handling work as well as role relationship are laid
down
o The structure or form of organization must remain flexible and should change as new
problems are encountered
o Recently, the matrix form of organization has emerged
o Flat vs Tall Structures
Under flat organization structure
There is extensive delegation or decentralization of authority
By pushing down authority in the hierarchy, span of control can be
widened
Improved vertical communication
Rapid decision making
Better development of subordinates
Centralized financial control

Assigning Duties
o Comprises of following steps:
Determining the duties
Grouping duties
Assigning authority
Span of control

Departmentalization
o By Simple Numbers
On decline because of skill differentiation of workers
o By Time
Based on shifts
o By Functions
Departments according to nature of work in the organization such as finance,
marketing, production, personnel
Advantages
Efficiency and Economy
Simplifies Training
Permits Occupational Specialization
Tighter Controls Possible
Responsibilities can be Fixed
Disadvantages

Loyalty develops to function and not to company as whole

Profitability becomes the concern of top management where all
functions merge
Inter-departmental coordination is difficult

By Territory
Zone wise or Region wise
Advantage is that local action is taken on time and the span of control is
reduced
By Products
Products of similar nature are grouped together and created as a department
The Product Manager then looks after all aspects production, marketing,
finance, personnel, etc
This method permits better planning, better controls and profitability of the
product can be seen more clearly
Its advantages are that the problems of coordination and integration are
detected early and dealt with promptly
Also helps to keep problems of one product isolated from others
Its drawbacks include the reduced opportunity to use professional expertise
for the other products of the organization
Communication among specialists, since they are now in different units, is
hampered

Organization Structure

Span of Control, Authority and Delegation

o You can delegate only that much which you can manage and control
o Authority and Delegation are essentially the pattern of relationships
Manager A delegates to B & C. The resultant relationships that come into
existence are 6
A --------- B
A --------- C
A --------- B + C (Group relationship)
C --------- B (Cross Sectional relationship)
B --------- C
B + C ---- A (Collective relationship)

Tips on How to Do Organizing Successfully

o Dont Do it Yourself
o Communicate Constantly
o Go from the People to the People
o Organizing lines on its Campaigns
o Managers are also Managed
o Do things with the Workers and not merely for them

Most Essential Guiding Principles of Organizing are listed below:

o The Purpose of Organizing
Principle of Unity of Objectives
An organization structure is effective if it enables individuals to
contribute to enterprise objectives
Principle of Organizational Efficiency

An organization is efficient if it is structured for accomplishment of

enterprise objectives
The Cause of Organizing
Span-of-management principle
In each managerial position, there is a limit to the number of persons
an individual can effectively manage, but the exact number will
depend on the impact of underlying variables
The Structure of Organization: Authority
Scalar Principle
The clearer the line of authority from the ultimate management
position in an enterprise to every subordinate position, the clearer
will be the responsibility for decision making and the more effective
will be organizational communication
Principle of Delegation by Results Expected
Authority delegated to all individual managers should be adequate to
ensure their ability to accomplish results expected
Principle of Absoluteness of Responsibility
Superiors cannot escape responsibility for the organization activities
of their subordinates
Principle of Parity of Authority and Responsibility
The responsibility for actions cannot be greater than that implied by
the authority delegated
Principle of Unity of Command
The more complete an individuals reporting relationships to a single
superior, the smaller the problem of conflicting instructions
Authority Level Principle
Decisions within the authority of individual managers should be
made by them and not be referred upward in the organization
structure
The Structure of Organization: Departmentalized Activities
Principle of Functional Definition
The more a department has a clear definition of the results expected
and activities to be undertaken, the more adequately the responsible
individual can contribute towards accomplishing enterprise
objectives
The Process of Organizing
Principle of Balance
Application of principles must be balanced to ensure the overall
effectiveness of the structure in meeting enterprise objectives
Inefficiencies of broad span of management must be balanced against
the inefficiencies of long lines of communication and so on
Principle of Flexibility
More that provisions are made for building flexibility into an
organization structure, the more adequately an organization structure
can fulfil its purpose
Enterprise that develops inflexibilities, whether they are resistant to
change, too complicated procedures or too firm departmental lines, is
risking the inability to meet the challenges of economic, technical,
biological, political and social changes
Principle of Leadership Facilitation
It is important for an organization structure to do its part in creating a
situation in which a manager can most effectively lead

Staffing
-

Staffing is a function of filling the organization with right type of people in the right number
at the right time

Sub-Functions of Staffing
o Manpower Planning
It would avoid shortages and at the same time avoid surplus people
Forecasting is the first step in manpower planning
Manpower planning has to be related to some period in the future
It can be made as reliable as possible by following systematic procedures
such as studying the past data, trying to assess the future trend in the related
fields, etc
o Recruitment
This helps in identifying sources for the required manpower
Through recruitment organization attracts potential people and induces them
to apply for the positions
Sources of recruitment could be internal or external
o Selection
This comprises
Comparing the qualifications and experience of the prospective
candidates with job requirement
Eliminating those whose qualifications and experience does not
match the requirement
Selecting those who satisfy the needs
Selection procedure is assisted by Job Analysis and Job Specifications
o Placement
Determination of the precise job to which a selected candidate is assigned or
assigning an appropriate job to the selected candidate
A person who is not properly placed will be frustrated person and also
hamper the work of others in the organization
Placement and Training are complementary
o Training
A person may not fit in place unless some training is given to him
Learning on-the-job on their own is a slow process and candidates may learn
wrong practices
Training is work oriented and is aimed at imparting specific skills for doing a
particular job
Types of Training
Induction training
Job training
Refresher training

Most Essential Guiding Principles of Staffing are listed below:

o The Purpose of Staffing
Principle of the Objective of Staffing
The objective of staffing is to ensure that organization roles are filled
by qualified personnel who are able and willing to occupy them
Principle of Staffing
Clearer the definition of organizational roles and their human
requirements, and better the techniques of appraisal and training, the
higher the managerial quality

Rests on an important body of knowledge concerning management

practices
The Process of Staffing
Principle of Job Definition
More precisely the results expected of managers are identified, the
more the dimensions of their positions can be defined
Principle of Managerial Appraisal
More clearly verifiable objectives and required managerial activities
are identified, the more precise can be the appraisal of managers
against these criteria
Principle of Open Competition
Although social pressures strongly favour promotion from within the
firm, these forces should be resisted whenever better candidates can
be brought in from outside
Principle of Management Training and Development
More the management training and development are integrated with
the management process and objectives, the more effective the
development programs and activities will be
Principle of Training Objectives
More precisely, the training objectives are stated, the more likely are
chances of achieving them
Brings into focus the contribution that training makes to the purpose
of the enterprise and development of individuals
Principle of Continuing Development
In a fast changing and competitive environment, managers cannot
stop learning. Instead, they have to update their managerial
knowledge continuously and improve their skills to achieve
enterprise results

Monitoring and Controlling

-

Control is the measurement and correction of the performance of activities of subordinates to

make sure that all levels of objectives and plans devised to attain them are being
accomplished

Control Process
o Establishing Standards
Standards are yardsticks or measures of expected performance
Standards may be set up as signals for critical activities as all the activities
cannot be monitored
They are best expressed in quantifiable terms i.e. turnover, expenditure, etc
however, some standards may not be quantifiable accurately e.g. morale,
loyalty, etc
o Measuring Actual Performance against the Standards
This should be done on a forward looking basis so that deviations may be
detected in advance of their actual occurrence and avoided by appropriate
actions
In less technical kinds of work not only are standards difficult to develop but
appraisal is also difficult
o Taking Corrective Actions
Process in not complete until deviations from standards are corrected
Deviations may also be positive as the result of superior performance or
inadequate standards
Managers may correct deviations by redrawing plans, modifying goals,
reassigning duties, etc

Types of Controls
o Production and Operations Control
o Inventory Control
o Quality Control
o Financial Control

Complexity of Control
o The feedback provided by the system discloses the errors and results in a corrective
action
o There is an erroneous belief that control is a feedback system because the corrective
action is applied on receipt of the feedback
o In fact it is this kind of feedback based control system that results in project overruns

Feed Forward Control

o It is now possible to obtain real time data on many operations when they are taking
place. In such a situation, the Feedback Loop for management control may exist
o The real time information for feedback loop system works efficiently for simple
operations like airlines, payroll, etc. However, in project management where inputs
come from a large number of diverse sources, this system has not been found to work
efficiently always
o Say, in construction projects, one could devise a system of control that will tell
project managers, well in advance, that problems will occur if they do not take some
actions at such and such times
o The forecasting system can be applied successfully in matters of manpower, materials
and cash
o Basic requirements of a Feed Forward Control System are mentioned below

Developing a model of planning and control system

Identify the most important input variables
Model should be kept dynamic
Input data on important variables should be reliable
Variations between the actual input data and planned input data must be
regularly assessed
Action should be taken to solve problems that occur

Budget as a Control Technique

o Formulation of plans for a given future period in financial non-financial terms
o Five basic types of budget are
Revenue and Expense
Time, Space and Materials
Capital Outlay
Cash
Balance Sheet
o Zero-Base Budget
Enterprise plan is divided into packages comprising goals, activities and
needed resources
Then the cost of each package is calculated from ground up i.e. afresh
This avoids the tendency to look at the changes from previous budget
Each package is costed and reviewed in terms of benefits to the organization,
then ranked accordingly to the importance of benefits and finally selected
against cost benefit criteria
This technique is more relevant to support functions of the organization and
not its core function. In a project, construction is a core function

Most Essential Guiding Principles of Controlling are listed below:

o The Purpose and Nature of Control
Principle of the Purpose of Control
The task of control is to ensure that plans succeed by detecting
deviations from plans and furnishing a basis for taking action to
correct actual undesired deviations
Principle of Future-Directed Controls
Because of the time lags in the total system of control, the more a
control system is based on feed forward rather than simple feedback
of information, the more managers have the opportunity to perceive
undesirable deviations from plans before they occur and to take
action in time to prevent them
Principle of Control Responsibility
The principal responsibility for the exercise of control rests in the
manager charged with the performance of particular plans involved
Principle of Efficiency of Control
Control techniques and approaches are efficient if they detect and
illuminate the nature and causes of deviations from plans with a
minimum of costs
Principle of Preventive Control
The higher the quality of managers in a managerial system, the lesser
will be the need for direct controls
o The Structure of Control
Principle of Reflection of Plans

The more the plans are clear, complete and integrated, and the more
that controls are designed to reflect such plans, the more effectively
controls will serve the need of managers
Principle of Organizational Suitability
The more the organizational structure is clear, complete and
integrated, and the more that controls are designed to reflect the place
in organization structure where responsibility for action lies, the more
the controls will facilitate corrections of deviations from plans
Principle of Individuality of Controls
The more that control techniques and information are understandable
to individual managers, the more they will actually be used and the
more they will result in effective control
The Process of Control
Principle of Standards
Effective control requires objective, accurate and suitable standards
There should be a simple, specific and verifiable way to measure
whether a planning programme is being accomplished
Good standards of performance are more likely to be accepted by
subordinates as fair and reasonable
Principle of Critical-Point Control
Effective control requires special attention to those factors critical to
evaluating performance against plans
Critical-Point Control is to do with recognizing the points to be
watched
The Exception Principle
The more that managers concentrate control efforts on significant
exceptions, the more efficient will be the result of their control
Exception principle is to do with watching the size of deviations
Principle of Flexibility of Controls
If controls are to remain effective despite failure or unforeseen
changes of plans, flexibility is required in their design
Principle of Action
Control is justified only if deviations from plans are corrected
through appropriate planning, organizing, staffing and leading
Control is wasteful use of managerial and staff time unless it is
followed by action