Principles of Management

Principles of Management
LECTURE NO. 1- Topics

 Concepts of Management
 Nature and scope of Management
 Managers and Managerial Tasks
 Functions of Management
 Roles of Managers
 Levels of Management
 Managerial Skills
 Challenges for Management in a Global Environment
What is Management?
The term management is used in three alternative ways:
1. Management as a discipline
2. Management as a group of people, and
3. Management as a process
Different context of defining management:
 Production- or Efficiency-oriented Definition: “Management is the art of knowing what you want
to do and then seeing that it is done in the best and cheapest way”
 Decision-oriented Definitions: “Management is simply the process of decision making and
control over the action of people for the expressed purpose of attaining predetermined goals”
 People oriented Definitions: “Management is the accomplishment of results”
 Function oriented Definitions: “Management is to plan, to organize, to coordinate and to control”
through the efforts of other people”
Definitions:
F.W. Taylor -“Art of knowing what you want to do and then seeing that it is done the best and
cheapest way”.
Henry Fayol –“To manage is to forecast, to plan, to organize, to command, to co-ordinate and to
control”
Simple Definition-“Management is the process of achieving organizational goals and objectives
effectively and efficiently through and with the people”
Elements of definition
 Process- represents ongoing functions or primary activities engaged in by managers

 Efficiency- getting the most out put from the least amount of inputs
 Doing things right
 Concerned with means
 Achieved the objectives in time
 Effectiveness-Completing activities so that organizational goals are attained
 Doing things right
 Concerned with ends
 Achieved the objectives in time
 Resources- include people, skills, know-how and experience, machinery, raw materials,
computers and IT, patents, financial capital, and loyal customers and employees
 Organizations – are group of people, with ideas and resources, working toward common goals. Or
A systematic arrangement of people brought together to accomplish some specific purpose is called
organization
Prepared by: KASHIF IQBAL - 0300-6422450Page 1

Organizational Performance
A measure of how efficiently and effectively managers use available resources to satisfy customers and
achieve organizational goals

Nature and Scope of Management
1. The nature of management can be described as follows:
 Multidisciplinary
 Dynamic nature of principles
 Relative, not absolute principles
 Management: Science or Art
 Management as profession
 Universality of management
2. IMPORTANCE OFMANAGEMENT
The importance of management may be traced in the following contexts:
 Effective Utilization of Resources

 Development of Resources
 Incorporate Innovations
 Integrating Various Interest Groups
 Stability in the Society
Managers and Managerial Tasks
• Managers
– The people responsible for supervising the use of an organization’s resources to meet its
goals
• Managers at all levels in all organizations perform each of the four essential managerial tasks of
planning, organizing, leading, and controlling
Four Functions of Management
1. Planning
It is a process of identifying and selecting appropriate organizational goals and courses of action. It is
Complex, difficult activity done under uncertainty
Steps in the Planning Process
 Deciding which goals the organization will pursue
 Deciding what courses of action to adopt to attain those goals
 Deciding how to allocate organizational resources
2. Organizing
Task managers perform to create a structure of working relationships that allow organizational members
to interact and cooperate to achieve organizational goals
 Involves grouping people into departments according to the kinds of tasks they perform
 Managers lay out lines of authority and responsibility
 Decide how to coordinate organizational resources
Organizational Structure

It is a formal system of task and reporting relationships that coordinates and motivates members so that
they work together to achieve organizational goals.
3. Leading
Articulating a clear organizational vision for its members to accomplish, and energize and enable
employees so that everyone understands the part they play in achieving organizational goals.
 Leadership involves using power, personality, influence, persuasion, and communication skills
 Outcome of leadership is highly motivated and committed workforce
4. Controlling
Task of managers is to evaluate how well an organization has achieved its goals and to take any corrective
actions needed to maintain or improve performance
 The outcome of the control process is the ability to measure performance accurately and regulate
organizational efficiency and effectiveness

Roles of Managers
In 1960 Henry Mintzberg identified 10 managerial roles, these are:-
Interpersonal Roles
These are the roles that managers assume to provide direction and supervision to both employees and the
organization as a whole.
 Figurehead—symbolizing the organization’s mission and what it is seeking to achieve.
 Leader—training, counseling, and mentoring high employee performance.
 Liaison—linking and coordinating the activities of people and groups both inside and outside the
organization.
Decisional Roles
Roles associated with methods managers use in planning strategy and utilizing resources.
 Entrepreneur—deciding which new projects or programs to initiate and to invest resources in.
 Disturbance handler—managing an unexpected event or crisis.
 Resource allocator—assigning resources between functions and divisions, setting the budgets of
lower managers.
 Negotiator—reaching agreements between other managers, unions, customers, or shareholders.
Informational Roles
Roles associated with the tasks needed to obtain and transmit information in the process of managing the
organization.
 Monitor—analyzing information from both the internal and external environment.
 Disseminator—transmitting information to influence the attitudes and behavior of employees.
 Spokesperson—using information to positively influence the way people in and out of the
organization respond to it.

Levels of Management
First line managers

These are responsible for daily supervision of the non-managerial employees who perform many of the
specific activities necessary to produce goods and services. For examples:
– Crew leader, supervisor, head nurse, or office manager
Middle managers
Such managers supervise the first-line managers. These are responsible for finding the best way to
organize human and other resources to achieve organizational goals. For examples:
– Sales manager, branch manager, or department head
Top managers
Such managers are responsible for the performance of all departments and have cross-departmental
responsibility. For examples:
– president, or vice president, etc
These managers
 Establish organizational goals and monitor middle managers
 Decide how different departments should interact
 Ultimately responsible for the success or failure of an organization
Chief executive officer (CEO)
He is the company’s most senior and important manager.
Relative Amount of Time That Managers Spend on the Four Managerial Functions

Managerial Skills
Skill: skill is the ability to understand, alter, lead, and control the behavior of other individuals and
groups
 Conceptual skills
It is the ability to analyze and diagnose a situation and distinguish between cause and effect.
 Technical skills
It is the Job-specific skills required to perform a particular type of work or occupation at a high
level.
 Human skills
The ability to understand, alter, lead, and control the behavior of other individuals and groups.
 Design Skill
It is the problem solving skill
 Communication skill
It is the ability of exchanging ideas and information effectively. It means to understand others
and let others to understand comprehensively.
 Leadership skills
It is the ability to influence other people to achieve the common goals.
Skill Types Needed

Challenges for Management in a Global Environment
 Rise of Global Organizations.

 Building a Competitive Advantage
 Maintaining Ethical Standards
 Managing a Diverse Workforce
 Utilizing Information Technology and Technologies
 Global Crisis Management
Building Competitive Advantage-Building Blocks of Competitive Advantage
INNOVATION
EFFICIENCY
COMPETITATIVE
ADVANTAGE
RESPONSIVNESS TO
QUALITY
CUSTOMERS
 Increasing efficiency
– Reduce the quantity of resources used to produce goods or services
 Increasing Quality
– Improve the skills and abilities of the workforce
– Introduce total quality management
 Increasing speed, flexibility, and innovation
– How fast a firm can bring new products to market
– How easily a firm can change or alter the way they perform their activities
 Innovation
– Process of creating new or improved goods and services that customers want
– Developing better ways to produce or provide goods and services
Maintaining Ethical and Socially Responsible Standards
 Managers are under considerable pressure to make the best use of resources
 Too much pressure may induce managers to behave unethically, and even illegally

Managing a Diverse Workforce
 To create a highly trained and motivated workforce managers must establish HRM procedures
that are legal, fair and do not discriminate against organizational members
Global Crisis Management
May be the result of:

 Natural causes
 Manmade causes
 International terrorism
 Geopolitical conflicts
Terminologies used in this chapter:
 Core Competency-Specific set of departmental skills, abilities, knowledge and experience that
allows one organization to outperform its competitors
 Restructuring-Involves simplifying, shrinking, or downsizing an organization’s operations to
lower operating costs
 Outsourcing-Contracting with another company, usually in a low cost country abroad, to
perform a work activity the company previously performed itself. It increases efficiency by
lowering operating costs.
 Empowerment-Involves giving employees more authority and responsibility over the way they
perform their work activities
 Self-managed teams-Groups of employees who assume collective responsibility for organizing,
controlling, and supervising their own work activities

 Evolution of Management theories
 Scientific Management Theory
 Administrative Management Theory
 Behavioral Management Theory
 The Systems Approach
 Contingency Approach
 Management Science Theory
The Evolution of Management Theory
Adam Smith (18th century economist) observed that firms manufactured pins in one of two different
ways:
 Craft-style—each worker did all steps
 Production—each worker specialized in one step
He realized that job specialization resulted in much higher efficiency and productivity.
– Breaking down the total job allowed for the division of labor in which workers became very
skilled at their specific tasks.

Scientific Management Theory
It is the systematic study of the relationships between people and tasks for the purpose of redesigning the
work process for higher efficiency.
Scientific Management is defined as the use of the scientific method to determine the “one best way” for
a job to be done.
Important Contributions
Frederick W. Taylor is known as the “father” of scientific management. Taylor’s work at the Midvale and
Bethlehem Steel companies stimulated his interest in improving efficiency. Taylor sought to create a
mental revolution among both workers and managers by defining clear guidelines for improving
production efficiency.
He defined four principles of management
1. Study the ways jobs are performed now and determine new ways to do them
– Gather detailed time and motion information
– Try different methods to see which is best
2. Codify the new methods into rules.
– Teach to all workers the new method
3. Select workers whose skills match the rules.
4. Establish fair levels of performance and pay a premium for higher performance.
– Workers should benefit from higher output
Frederick W. Taylor achieved consistent improvements in productivity in the range of 200 percent. He
affirmed the role of managers to plan and control and the role of workers to perform as they were
instructed.
How Do Today’s Managers Use Scientific Management?
Guidelines devised by Taylor and others to improve production efficiency are still used in today’s
organizations. However, current management practice is not restricted to scientific management practices
alone. Elements of scientific management still used include:
1. Using time and motion studies

2. Hiring best qualified workers
3. Designing incentive systems based on output

Administrative Management Theory
“The study of how to create an organizational structure that leads to high efficiency and effectiveness.”
Max Weber and Henri Fayol were the two most prominent proponents of the general administrative
approach.
Max Weber developed the concept of bureaucracy as a formal system of organization and administration
designed to ensure efficiency and effectiveness.
Weber’s Principles of Bureaucracy management.
Henri Fayol focused on activities common to all managers and described the practice of management as
distinct from other typical business functions. He stated 14 principles of management (fundamental or
universal truths of management that can be taught in schools). These are:-
1. Division of Labor: allows for job specialization.
2. Authority and Responsibility: both formal and informal authority resulting from special expertise.
3. Unity of Command: Employees should have only one boss.
4. Line of Authority: A clear chain of command from top to bottom of the firm.
5. Centralization: The degree to which authority rests at the top of the organization.
6. Unity of Direction: A single plan of action to guide the organization.
7. Equity - The provision of justice and the fair and impartial treatment of all employees.
8. Order - The arrangement of employees where they will be of the most value to the organization.
9. Initiative - The fostering of creativity and innovation by encouraging employees to act on their own.
10. Discipline: Obedient, applied, respectful employees are necessary for the organization to function.
11. Remuneration of Personnel: An equitable uniform payment system.
12. Stability of Tenure of Personnel: important for skill development.
13. Subordination of Individual Interest to the Common Interest
14. Esprit de corps: shared enthusiasm foster devotion to the common cause (organization).
How Do Today’s Managers Use General Administrative Theories?
Some current management concepts and theories can be traced to the work of the general administrative
theorists.
 The functional view of a manager’s job relates to Henri Fayol’s concept of management.
 Weber’s bureaucratic characteristics are evident in many of today’s large organizations

Behavioral Management Theory
“The study of how managers should behave to motivate employees and encourage them to perform at
high levels and be committed to the achievement of organizational goals.”
Mary Parker Follett Concerned that Taylor ignored the human side of the organization
• Suggested workers help in analyzing their jobs

• If workers have relevant knowledge of the task, then they should control the task
The Hawthorne Studies

• Hawthorne experiments were groundbreaking studies in human relations that were conducted
between 1924 and 1932 at Western Electric Company's Hawthorne Works in Chicago. In this
study workers productivity was measured a various levels of light illumination.
• The basic idea was to vary and record levels of illumination in a test room with the expectation
that as lighting was increased, productivity would too. In another test room, illumination was
decreased, with the correlating expectation that efficiency would decrease. The electric power
industry provided an additional impetus for these tests, hoping to encourage industries to use
artificial lighting in place of natural light.
How Do Today’s Managers Use the Behavioral Approach?
1. The behavioral approach assists managers in designing jobs that motivate workers, in working
with employee teams, and in facilitating the flow of communication within organizations.
2. The behavioral approach provides the foundation for current theories of motivation, leadership,
and group behavior and development.
The Systems Approach
During the 1960s researchers began to analyze organizations from a systems perspective based on the
physical sciences.
A system is a set of interrelated and interdependent parts arranged in a manner that produces a unified
whole. The two basic types of systems are open and closed. A closed system is not influenced by and
does not interact with its environment. An open system interacts with its environment.
The Systems Approach and Managers

1. Using the systems approach, managers envision an organization as a body with many
interdependent parts, each of which is important to the well-being of the organization as a whole.
2. Managers coordinate the work activities of the various parts of the organization, realizing that
decisions and actions taken in one organizational area will affect other areas.
3. The systems approach recognizes that organizations are not self-contained; they rely on and are
affected by factors in their external environment.
Contingency Approach
It is also known as situational approach, is a concept in management stating that there is no one
universally applicable set of management principles (rules) by which to manage organizations.

• There is no one best way to organize”
• The idea that the organizational structures and control systems manager choose depend on—
are contingent on—characteristics of the external environment in which the organization
operates.
Management Science Theory
The management science approach, sometimes known as operations research or quantitative approach
to management uses quantitative techniques to improve decision making. This approach includes
applications of statistics, optimization models, information models, and computer simulations.
– Quantitative management — utilizes linear programming, modeling, simulation systems

and chaos theory.
– Operations management —techniques used to analyze all aspects of the production

system.
– Total Quality Management (TQM) —focuses on analyzing input, conversion, and output
activities to increase product quality.
– Management Information Systems (MIS) — provides information vital for effective

decision making.
How Do Today’s Managers Use the Quantitative Approach?
1. The quantitative approach has contributed most directly to managerial decision making,
particularly in planning and controlling.
2. The availability of sophisticated computer software programs has made the use of quantitative
techniques more feasible for managers.

 Organizational Culture-Views and Dimensions  External Environment
 How employees learn culture  How external environment affects Managers
 Sources of Organizational Culture
 How Culture Affects Managers
Organizational Culture
 Organizational culture refers to a system of shared meaning held by members that distinguishes
the organization from other organizations.
This system of shared meaning is a set of key characteristics that the organization values.
Seven primary characteristics are:
1. Innovation and risk taking. The degree to which employees are encouraged to be innovative
and take risks.
2. Attention to detail. The degree to which employees are expected to exhibit precision,
analysis, and attention to detail.
3. Outcome orientation. The degree to which management focuses on results or outcomes rather
than on the techniques and processes used to achieve those outcomes.
4. People orientation. The degree to which management decisions take into consideration the
effect of outcomes on people within the organization.
5. Team orientation. The degree to which work activities are organized around teams rather than
individuals.
6. Aggressiveness. The degree to which people are aggressive and competitive
7. Stability. The degree to which organizational activities emphasize maintaining the status quo
in contrast to growth.
 Each of these characteristics exists on a continuum from low to high.

 Appraising the organization on these characteristics gives a composite picture of the
organization’s culture.
 Organizational culture is concerned with how employees perceive the seven characteristics, not
whether they like them.
 Organizational culture is descriptive, whereas job satisfaction is evaluative.
Strong versus Weak Cultures

Strong Cultures
o Are cultures in which key values are deeply and widely held.
o A strong culture has a greater impact on employee behavior and is more directly related
to reduce turnover.
o The more members who accept the core values and the greater their commitment to those
values, the stronger the culture is.
o A strong culture will have a greater influence on the behavior.
o One specific result of a strong culture should be low employee turnover.
o A strong culture demonstrates high agreement among members about what the or-
ganization stands for.
Factors Influencing the Strength of Culture

o Size of the organization
o Age of the organization
o Rate of employee turnover

o Strength of the original culture
o Clarity of cultural values and beliefs
HOW EMPLOYEES LEARN CULTURE
A. Stories
 Example—Henry Ford II was chairman of the Ford Motor Co.—remember “It’s my
name that’s on the building.” The message was clear: Henry Ford II ran the company.
 Example—Nordstrom refunding a customer’s money for tires, a product the story didn’t
sell because, “but we do whatever we need to do to make the customer happy. I mean it
when I say we have a no-questions-asked return policy.” Nordstrom then picked up the
telephone and called a friend in the auto parts business to see how much he could get for
the tires.
 Stories such as these contain a narrative of events about the organization’s founders, rule
breaking, rags-to-riches successes, reductions in the workforce, relocation of employees,
reactions to past mistakes, and organizational coping. These stories anchor the present in
the past and provide explanations and legitimacy for current practices.
B. Rituals
 Rituals are repetitive sequences of activities that express and reinforce the key values of
the organization, what goals are most important, which people are important and which
are expendable.
 Example—Wal-Mart’s companies chant
C. Material Symbols
 Physical assets distinguishing the organization
 Examples of material symbols include the size of offices, their furnishings, executive
perks, the use of employee lounges or on-site dining facilities, and so on.
 These material symbols convey to employees who is important, the degree of
egalitarianism desired by top management, and the kinds of behavior (for example, risk
taking, conservative, authoritarian, participative, individualistic, social) that are
appropriate.
D. Language
 Many organizations and units within organizations use language as a way to identify
members of a culture or subculture.
 Example— Acronyms and jargon of terms, phrases, and word meanings specific to an
organization.
 New employees are frequently overwhelmed with acronyms and jargon that, after six
months on the job, have become fully part of their language.

SOURCES OF ORGANIZATIONAL CULTURE
1. The ultimate source of an organization’s culture is its founders.

 The founders of an organization.
o They have a vision of what the organization should be.
o They are unconstrained by previous customs for doing things or ideologies.
o The small size of any new organization further facilitates the founders’ imposition of their
vision on all organizational members.
o The organization’s culture results from the interaction between the founders’ biases and
assumptions and what the original members learn subsequently from their own
experiences.
2. Past practices of the organization

 An organization’s human resource practices reinforce its culture
o Three forces play a particularly important part in sustaining a culture—selection practices,
the actions of top management, and socialization methods.
 Selection
– The explicit goal of the selection process is to identify and hire individuals who
have the knowledge, skills, and abilities to perform the jobs within the organization
successfully.
– With multiple candidates, the final decision about who is hired will be significantly
influenced by the decision maker’s judgment of how well the candidates will fit
into the organization.
– This results in the hiring of people who have common values.
– The selection process also gives applicants information about the organization.
– Candidates who perceive a conflict between their values and those of the
organization can self-select themselves out of the applicant pool.
 Top Management
– The actions of top management have a major impact on an organization’s culture.
– What they say and how they behave establish norms that filter down through the
organization.
 Socialization
– The organization will, therefore, want to help new employees adapt to its culture.
This adaptation process is called socialization.
– The most critical socialization stage is at the time of entry into the organization.
– Socialization’s three stages—pre-arrival, encounter, and metamorphosis
July

The Nature of the Organizational Environment
The external environment is everything outside an organization that might affect it.
The internal environment consists of conditions and forces within the organization.
External Environment:
It consists of two environments.
1. General Environment
The general environment consists of factors that may have an immediate direct effect on operations but
nevertheless influences the activities of the firm.
Let’s see the elements or dimensions of the general environment.

 Economic Dimension: The economic dimension of an organization is the overall status if the
economic system in which the organization operates. The important economic factors for business
are inflation, interest rates and unemployment. These factors of economy always affect the
demand for products. During inflation, company pays more for its resources and to cover the
higher costs for it, they raise commodity prices. When interest rates are high, customers are less
willing to borrow money and the company itself must pay more when it borrows. When
unemployment is high, the company is able to be very selective about whom it hires, but
customers’ buying power is low as fewer people are working.
 Technological Dimension: It denotes to the methods available for converting resources into
products or services. Managers must be careful about the technological dimension. Investment
decision must be accurate in new technologies and they must be adaptable with them.
 Socio-cultural dimension: Customs, mores, values, and demographic characteristics of the
society in which the organization operates are what made up the socio-cultural dimension of the
general environment. Socio-cultural dimension must be well studied by a manager. It indicates the
product, services, and standards of conduct that the society is likely to value and appreciate.
Standard of business conduct vary from culture to culture and so does the taste and necessity of
products and services.

 Political-Legal Dimension: The politico-legal dimension of the general environment refers to the
government law of business, business-government relationship and the overall political and legal
situation of a country. Business laws of a country set the dos and don’ts of an organization. A
good business-government relationship is essential of the economy and most importantly for the
business. And overall situation of law implementation and justices in a country indicates that there
is a favorable situation in of business in a country.
 International Dimension: Virtually every organization is affected by the international dimension.
It refers to the degree to which an organization is involved in or affected by businesses in other
countries. Global society concept has brought all the nation together and modern network of
communication and transportation technology, almost every part of the world is connected.
2. Task Environment of Organization
The task environment consists of factors that directly affect and are affected by the organization’s
operations. These factors include suppliers, customers, competitors, regulators and so on.
A manager can identify environmental factors of specific interest rather than having to deal with more
abstract dimension of the general environment. The different elements of task environment may be
discussed as under:
 Competitors: policies of the organization are often influenced by the competitors. A competitive
market place companies are always trying to stay and go further ahead of the competitors. In the
current world economy, the competition and competitors in all respects has increased
tremendously. The positive effect of this is that the customers always have options and the overall
quality of products goes high.
 Customers: “Satisfaction of customer”- primary goal of every organization. Customer is who
pays money for organization’s product or services. They are the peoples who hands them the
profit that the companies are targeting. Managers should pay close attention to the customers’
dimension of the task environment because its customers purchase that keeps a company alive and
sound.
 Suppliers: suppliers are the providers of production or service materials. Dealing with suppliers is
an important task of management. A good relationship between the organization and the suppliers
is important for organization to keep a steady follow of quality input materials.
 Regulators: regulators are units in the task environment that have the authority to control,
regulate or influence an organization’s policies and practices. Government agencies are the main
player of the environment and interest groups is created by its members to attempt to influence
organizations as well as government. Trade unions and chamber of commerce are the common
example of interest group.
 Strategic Partners: they are the organization and individuals with whom the organization is in an
agreement or understanding for the benefit of the organization. These strategic partners in some
way influence the organizations activities of in various ways.
Internal Environment:
Forces or conditions or surroundings with in the boundary of the organization are the elements of internal
environment of organization.
The internal environment consists mainly of the organization’s owners, board of directors, employees and
culture.

1. Owners: Owners are people who invested in company and have property rights and claims on the
organization. Owners can be an individual or group of person who started the company; or who bought a
share of the company in the share market. They have the right to change the company’s policy at any
time.
2. Board of Directors: The board of directors is the governing body of the company who are elected
by stockholders, and they are given the responsibility of overseeing a firm’s top managers such as general
manager.
3. Employees: Employees or the workforce, the most important element of organizations internal
environment, who performs the tasks of the administration. Individual employees and also the labor
unions they join are important parts of the internal environment. If managed properly they can positively
change the organizations policy. But ill-management of the workforce could lead to a catastrophic
situation for the company.
4. Culture: Organizational culture is the collective behavior of members of an organization and the
values, visions, beliefs, habits that they attach to their actions. An organization’s culture plays a major
role in shaping its success, because culture is an important determinant of how well their organization will
perform. As the foundation of the organization’s internal environment, it plays a major role in shaping
managerial behavior.
External Environment
and Managers
It is important for managers to understand the external environment for
five main reasons, as discussed below:

1. To understand how competition affects their business
Managers must be aware of, and understand, the competition in their business sector. This is vital because
their competitors are seeking to gain market share at their expense. Likewise, managers must look for
ways to increase their respective businesses' market share. Knowledge of what the competition is doing in
terms of sales promotions, product mix, general pricing, customer service initiatives, and more, will help
a business ensure that they have programs and policies in place to compete with their competition.
Consequently, they are protecting their market share as best they can and even working to increase their
market share by trying to stay one step ahead of their competition.
2. To understand how government regulations affect their business
Laws of the land affect businesses and managers must be aware of how these laws affect their operations.
An example of this is the increasing environmental legislation that affects companies. To adhere to these
laws and regulations, businesses must budget properly and ensure that they have knowledgeable and
trained employees who can oversee the administration of these laws and regulations in the workplace.
Furthermore, businesses must understand how government regulations affect their bottom line (profits) as
there is always a cost to putting into place policies and procedures required to adhere to government laws
and regulations.
3. To understand how technological advances affect their operations
Managers must be aware of technological innovation that can help them run their businesses more
efficiently. Conversely, they must have the knowledge and courage to make a decision against
succumbing to all the technological innovations out there. In essence, any technology that can reduce
costs and increase production and efficiency should be seriously considered. However, changing to a new
technology just because it is the "new flavor of the month", when changing will not advance their
competitiveness or efficiency, or grow revenues and profits, may have to be avoided. Everything new
when it comes to technology is not for every business and managers must do a "cost-benefit' analysis
before putting out money for any new technology.
4. To understand how geopolitical and economic concerns can affect their business
Managers must follow the news more so than ever as worldwide turmoil, with tensions and sanctions
abounding are able to directly and indirectly affect their operations. A perfect example is the Ukraine
crisis and the sanctions imposed on trade with Russia. Another is the Cuba issue and some of its trade
sanctions still in place. Furthermore, businesses that require capital and that are on the major markets
must understand how geopolitical concerns affect investors, who may shy away from investing in a
business that is at the whim of geopolitical turmoil. A current perfect example of this is the drop in oil
prices and how it is affecting companies in the oil patch. Many are suspending new exploration and lying
off staff until oil prices rebound and stabilize. Some investors are shying away from investing in the oil
patch presently.
5. To understand the labor force
Managers must understand what skilled labor is available to help them run their businesses properly. They
must know what their competition is willing to pay qualified personnel, and they must be ready to do the

same so they can attract first-rate candidates to their enterprises. Managers must be aware of college and
university programs that are training suitable candidates to populate their businesses. They must
aggressively recruit from these colleges and universities or else their competitors will beat them to the
punch and have an edge when it comes to knowledgeable and business savvy employees.
Internal Environment and Managers (How Culture Affects Managers)

Constrains decision making in all management functions
• Planning - degree of risk that plans should contain
• how much environmental scanning is necessary
• Organizing - degree of autonomy given to employees
• degree of interdepartmental interaction
• Leading - degree of concern for job satisfaction
• what leadership styles are appropriate
• Controlling - reliance on external or internal controls
• what performance criteria to use
Motivation
When a company culture demonstrates its values by singularly tying achievement to managers’ ability to
move ahead with the company, For example, a culture stated as, “Our company rewards leadership that
focuses on producing new ideas and inventive thinking,” could positively influence a manager's can-do,
problem-solving attitude, resulting in rapid advancement.
Leadership
A company culture can alter a manager’s attitude toward leadership. For example, an employee-centric
culture might be expressed with a statement such as, “Our company’s culture asserts our fundamental
belief that leaders are cultivated from within our ranks; we consistently work from this precept.” When
this type of cultural environment consistently supports and grooms managers through training and similar
investments, subsequent leadership possesses attitudes that, in turn, foster internal employee growth.
Ambiguous Cultures
Business cultures that are not clearly established can change managers’ attitudes from positive to
negative. A new manager may be excited and energized to prove his worth to a company. However, if the
culture does not specifically support and empower managers' decision-making efforts, a reversal may
occur, changing the upbeat attitude to a fearful one.
Ethics
Managers with strong values match up with company cultures purporting high ethical standards in all
business dealings. Business owners can fall back on the company’s culture to hold offending managers
accountable, thereby retaining the culture's validity.
LECTURE NO. 4- DECISION MAKING

Decision-Making Defined

• Decision
– A choice made between available alternatives.
• Decision Making
– The process of developing and analyzing alternatives and choosing from among them.
Types of Decisions
1. Programmed Decision
Programmed decisions are made for very routine problems.
Let’s assume you supervise an assembly line at GM and an employee calls in sick. You have likely made
the decision of how to replace his/her position many times before and therefore do not have to give it a lot
of thought.
2. Nonprogrammer Decision
These are the type of decisions that you have not typically made in the past. You need to demonstrate
some creativity in your data gathering in order to make the most logical, effective decision you can.
DECISION MAKING PROCESS
It is 8-step model or process.
Step 1 - Identifying a Problem

 Discrepancy between an existing and a desired state of affairs
Step-2 – Identifying Decision Criteria
 What’s relevant in making a decision? What factors are relevant in making a
decision
Step-3- Allocating Weights to the Criteria
 Must weigh the criteria to give them appropriate priority in the decision.
 Not all criteria are equally important.
Step-4- Developing Alternatives
 List the viable alternatives that could resolve the problem without evaluating
them
Step-5- Analyzing Alternatives
 Each alternative is evaluated against the criteria. Each alternative is evaluated
by appraising it against the criteria established in step 2.
Step-6- Selecting an Alternative
 Choosing the best alternative from among those considered
Step-7- Implementing the Alternative
Step-8- Evaluating Decision Effectiveness
 determine whether the problem is resolved
EXAMPLE:

Assessed Values of Notebook Computer
Evaluation of laptop Computer alternatives against Criteria and Weigh:
Group Decision-Making Techniques

A number of decision-making techniques can be employed by groups:
1. Brainstorming
This technique is employed by groups with a view to overcoming the pressure to conform. When groups
are brainstorming, a number of group members typically sit around a table, and many ideas are generated
by the members. There are four primary rules to brainstorming:
 No criticism
 Freewheeling is welcomed
 Quantity is good; and
 People should build on each other’s ideas (piggy-backing)
2. Nominal Group Technique

This technique is one that is often used when there is conflict in the group, or when it has become almost
impossible to make a decision because of diverse opinions. It restricts discussion during the decision-
making process.
The nominal group technique is often used in large groups that are broken down into smaller sizes of 5-7
people. Each person responds in writing to a question, and then the answers are recorded. After the
answers are recorded, again participants are asked to rank the ideas, so that the most preferred action can
be narrowed down.
3. Delphi Technique
Sometimes group members cannot meet face to face (for geographic or confidentiality reasons). The
Delphi technique uses questionnaires that are answered by members of the group. A coordinator then
summarizes the solutions and sends the summary back to the group members, together with another
questionnaire. This process is continued until a clear course of action is determined.
Rational Decision Making: (How you make the right decisions?)

Managers assumes to make rational decisions
Assumptions of Rationality - decision maker would:
1. Follow the DM process
2. be objective and logical
3. carefully define a problem
4. have a clear and specific goal
5. select the alternative that maximizes the likelihood of achieving the goal
6. make decision in the firm’s best economic interests
Bounded Rationality
Herbert Simon won a Nobel Prize for his theory of bounded rationality, which argues that people do make
decisions with restricted information, and therefore the decisions tend to be less than ideal. Bounded
rationality is based on four primary assumptions:
 Decision makers tend to ‘satisfies’: select the first alternative that is satisfactory.
 Often decision makers establish a problem statement or understanding of a problem without full
or even adequate information.
 Decisions are often made without a comprehensive evaluation of alternatives.
 Decision makers rely on heuristics, or judgment shortcuts, to simplify the decision making
process.
Intuitive decision making

It is a Subconscious process of making decisions on the basis of experience and accumulated judgment.

 Does not rely on a systematic or thorough analysis of the problem
 Generally complements a rational analysis
Decision-Making Conditions

 Certainty
 When a manager can make an accurate decision because the outcome of every alternative is
known.
 Risk
 When a manager can only estimate the different outcomes resulting from each alternative.
 Uncertainty
 Limited or no information prevents estimation of outcomes resulting from alternatives and may
force managers to use intuition, hunches, and “gut feelings”.
o Maxi-max: the optimistic manager’s choice to maximize the maximum payoff

o Maxi-min: the pessimistic manager’s choice to maximize the minimum payoff
o Mini-max: the manager’s choice to minimize his maximum regret.
Decision-Making Styles
 Directive: Use minimal information and consider few alternatives.

 Analytic: Make careful decisions in unique situations.
 Conceptual: Maintain a broad outlook (wide perception) and consider many alternatives in
making long-term decisions.
 Behavioral: Avoid conflict by working well with others and being receptive (accept) to
suggestions.
Decision-Making Biases (wrong attitudes) and Errors
 Using “rules of thumb” (fixed, easy guidelines) to simplify decision making.
 Holding unrealistically (too high) positive views of one’s self and one’s performance.
 Choosing alternatives that offer immediate rewards to avoid immediate costs.

 Planning , Types of Planning, Purposes of Planning
 Planning and Performance
 Elements of Planning
 Goals and Types of Goals
 Steps in Goal Settings
What Is Planning?
Planning
A primary managerial activity that involves:
 Defining the organization’s goals
 Establishing an overall strategy for achieving those goals
 Developing plans for organizational work activities.
Types of planning
1. Informal: not written down, short-term focus; specific to an organizational unit.
2. Formal: written, specific, and long-term focus, involves shared goals for the organization.
Purposes of Planning: (Why Do Managers Plan?)
 Provides direction
 Reduces uncertainty
 Minimizes waste and redundancy
 Sets the standards for controlling
Planning and Performance (The Relationship between Planning and Performance)

 Formal planning is associated with:
 Higher profits and returns on assets.
 Positive financial results.
 The quality of planning and implementation affects performance more than the extent of
planning.
 The external environment can reduce the impact of planning on performance,
 Formal planning must be used for several years before planning begins to affect performance.
Elements of Planning
 Goals (also Objectives)
o Desired outcomes for individuals, groups, or entire organizations
o Provide direction and evaluation performance criteria
 Plans
o Documents that outline how goals are to be accomplished
o Describe how resources are to be allocated and establish activity schedules
Types of Goals

 Financial Goals
These are related to the expected internal financial performance of the organization.
 Strategic Goals
These are related to the performance of the firm relative to factors in its external environment (e.g.,
competitors).
 Stated Goals
Official statements of what an organization says, what it wants its shareholders to believe. For Examples:
Steps in Goal Setting

1. Review the organization’s mission statement.
Do goals reflect the mission?
2. Evaluate available resources.
Are resources sufficient to accomplish the mission?
3. Determine goals individually or with others.
Are goals specific, measurable, and timely?
4. Write down the goals and communicate them.
Is everybody on the same page?
5. Review results and whether goals are being met.
What changes are needed in mission, resources, or goals?
:)
Types of Plan

1. Strategic Plans
 Apply to the entire organization.
 Establish the organization’s overall goals.
 Seek to position the organization in terms of its environment.
 Cover extended periods of time.
2. Operational Plans
 Specify the details of how the overall goals are to be achieved
 Cover short time period
3. Long-Term Plans
 Plans with time frames extending beyond three years
4. Short-Term Plans
 Plans with time frames on one year or less
5. Specific Plans
 Plans that are clearly defined and leave no room for interpretation
6. Directional Plans
 Flexible plans that set out general guidelines provide focus, yet allow discretion in
implementation
7. Single-Use Plan
 A one-time plan specifically designed to meet the need of a unique situation
8. Standing Plans
 Ongoing plans that provide guidance for activities performed repeatedly
Specific versus Directional Plans

Planning in the Hierarchy of Organizations
You should know:

 Vision – what to ultimately accomplish?
 Mission – what is the firm about?
 Values – how to accomplish goals?

 Strategic Management and its purpose
 Importance of Strategic management
 Strategic Management Process
 Strategic Management
Strategic management is a process through which managers formulate and implement strategies geared to
optimizing goal achievement, given available environmental and internal conditions.
Strategic management is that set of managerial decisions and actions that determines the long-run
performance of an organization. It entails all of the basic management functions—planning, organizing,
leading, and controlling.
 Purposes of strategic management
1. One reason strategic management is important is because it’s involved in many of the decisions that
managers make.
2. Another reason is that studies of the effectiveness of strategic planning and management have found
that, in general, companies with formal strategic management systems had higher financial returns than
those companies with no such systems.
3. Strategic management has moved beyond for-profit organizations to include all types of organizations,
including not-for-profit.
 Strategic management is important to organizations because it
1. Helps organizations identify and develop a competitive advantage, a significant edge over the
competition in dealing with competitive forces.
2. provides a sense of direction so that organization members know where to expend their efforts. Helps
highlight the need for innovation and provides an organized approach for encouraging new ideas related
to strategies.
 Strategic Planning Process:

Strategic Management process is composed of:
1. Environmental Scanning
2. Strategic Formulation
3. Strategic Implementation
4. Evaluation and Control

1. Environmental Scanning
It is the monitoring, evaluating, and disseminating of information from the external and internal
environments to key people within the firm.
Here it is important to identify strategic factors
o SWOT Analysis
Strengths, Weaknesses
Opportunities, Threats
o Internal Environment
Strengths & Weaknesses
o External Environment
Opportunities & Threats
2. Strategy Formulation
It is the development of long-range plans for the effective management of environmental
opportunities and threats in light of corporate strengths and weaknesses.
It is composed of:
 Mission-Purpose or reason for the organization’s existence
 Objectives-The end results of planned activity
 Strategies-A strategy of a corporation forms a comprehensive master plan stating
HOW the corporation will achieve its mission and objectives.
 Policies-Broad guidelines for decision making that link the formulation of strategy
with its implementation
 Deciding what new businesses to enter,

 What businesses to abandon,
 How to allocate resources,
 Whether to expand operations or diversify,
 Whether to enter international markets,
 Whether to merge or form a joint venture,
 How to avoid a hostile takeover.
3. Strategic Implementation
It consists of:
 Programs- A program is a statement of activities or tasks needed to accomplish a single-
use plan
 Budget- A budget is a statement of a corporation’s program in dollar terms
 Procedures- Procedures refer to a system of sequential steps or techniques that describe in
detail how to perform a particular activity or task
4. Strategy evaluation
 Reviewing external and internal factors that are the bases for current strategies,
measuring performance, and taking corrective actions.

 Organizing and Organizing Structure
 Various types of Organization Structure (Organization Design)
 Departmentalization
 Patterns of Departmentalization
 Chain of Command, Span of Control

Organizing
Organizations are experimenting with different approaches to organizational structure and design.
Organizational structure can play an important role in an organization’s success. The process
of ORGANIZING—the second management functions—is how an organization’s structure is
created. So it is the process of creating an organization’s structure.
Organization structure
It is the formal pattern of interactions and coordination designed by management to link the tasks of
individuals and groups in achieving organizational goals. An organizational structure is the formal
framework by which job tasks are divided, grouped, and coordinated. Organization structure consists
primarily of four elements:
a. Job design
b. Departmentalization
c. Vertical coordination
d. Horizontal coordination
Types of Organization Structure:

There are three main structures of organization

Departmentalization:
Departmentalization is the clustering of individuals into units and units into departments and larger units
in order to facilitate achieving organizational goals.
Major Patterns of Departmentalization

There are four major patterns of departmentalization.
1. The functional structure
2. The divisional structure
3. The hybrid structure
4. The matrix structure
1. Functional Structure:
As shown in the following Figure, it groups jobs by functions performed. It can be used in all
kinds of organizations; it depends on the goals each of them wants to achieve.
2. Divisional Structure:
Divisional structure is a type of departmentalization in which positions are grouped according to
similarity of products, services, or markets. Divisional structures are also called “self-contained
structures” because each division contains the major functional resources it needs to pursue its own goals
with little or no reliance on other divisions.
The three major forms of divisional structure differ according to the rationale for forming the divisions.
a. Product divisions are divisions created to concentrate on a single product or service or at least a
relatively homogeneous set of products or services.
b. Geographic divisions are divisions designed to serve different geographic areas.
c. Customer divisions are divisions set up to service particular types of clients or customers.

3. Hybrid structure
It is a form of departmentalization that adopts parts of both functional and divisional structures at the
same level of management. Hybrid structures are adopted by large organizations to gain the advantages of
functional and divisional structures.
The hybrid structure has several advantages.
a. Corporate and divisional goals can be aligned.
b. Specialized expertise and economies of scale can be achieved in major functional areas.
c. Adaptability and flexibility may be achieved in handling diverse product or service lines, geographic
areas, or customers.
The hybrid structure has several disadvantages.
a. Conflict may arise between departments and divisions.
b. Hybrid organizations tend to develop excessively large staffs in the corporate-level functional
departments.
c. There may be a slow response to exceptional situations requiring coordination between a division and a
corporate functional department.
4. Matrix Structure
A matrix structure is a type of departmentalization that superimposes a horizontal set of divisional
reporting relationships onto a hierarchical functional structure.
An organization with a matrix structure has a functional and a divisional structure at the same time.
Employees who work in a matrix organization report to two “bosses,” thus, the unity-of-command
principle is violated.
The matrix form of organization has several advantages.
a. Decision making can be decentralized.
b. Horizontal coordination is strengthened.
c. Environmental monitoring is improved.
d. Responses to environmental changes are quickly made.
Matrix designs have several disadvantages.
a. Administrative costs are increased.
b. Lines of authority and responsibility may not be clear to individual employees.
c. Possibilities of conflict are increased.
Chain of Command
it is defined as a continuous line of authority that extends from upper organizational levels to the lowest
levels and clarifies who reports to whom. There are three important concepts attached to this theory:
 Authority: Refers to the rights inherent in a managerial position to tell people what to do and to
expect them to do it.
 Responsibility: The obligation to perform any assigned duties.
 Unity of command: The management principle that each person should report to only one
manager.
Span of Control
It is important to a large degree because it determines the number of levels and managers an organization
has. Also, determines the number of employees a manager can efficiently and effectively manage.

 Motivation
 Theories of Motivation
Motivation - the process of arousing and sustaining goal-directed behavior
It is the term used to describe the forces within the individual that account for the level, direction, and
persistence of effort expended at work.

Why know about motivation?
 Help you understand your behavior and the behavior of others

 Can help a manager build and manage a “system of motivation.”
 Offers conceptual tools for analyzing motivation problems in organizations
Motivational Theories
Need theories (Content Theories)
1. Maslow’s Hierarchy of Needs Theory
2. E.R.G. Theory
3. McClelland’s Achievement Motivation Theory
4. Herzberg’s Motivator-Hygiene Theory
Cognitive and behavioral theories (Process Theories)

1. Equity Theory
2. Expectancy Theory
3. Goal Setting Theory
Need theories (Content Theories)
Maslow’s Hierarchy of Needs Theory

– Five groups of basic needs.
Lower Order Needs

1. Physiological

2. Safety
3. Social
Higher Order Needs
4. Esteem
5. Self-actualization
• Physiological needs: basic requirements of the human body; food, water, sleep, sex
• Safety needs: desires of a person to be protected from physical and economic harm
• Belongingness and love needs (social): desire to give and receive affection; be in the company
of others
• Esteem needs: self-confidence and sense of self-worth
• Esteem from others: valuation of self from other people
• Self-esteem: feeling of self-confidence and self-respect
• Self-actualization needs: desire for self-fulfillment, realizing personal potential, self-fulfillment,
seeking personal growth and peak experiences.
Need hierarchy
– Unsatisfied need is a potential motivator of behavior
– Satisfied need is no longer a motivator
– Focus on more than one need: promotion leads to more money (esteem and physiological)
– Need satisfaction follows the order shown but is flexible
Alderfer’s ERG Theory

It is an extension of Maslow's theory that proposes the existence of three needs as opposed to five.
Three groups of needs are:
1. Existence Needs:
– Desires for physiological and material well-being.
2. Relationship Needs:
– Desires for satisfying interpersonal relationships.
3. Growth Needs:
– Desires for continued psychological growth and development.

ERG Theory
– Does not assume that lower-level needs must be satisfied before higher-level needs
become activated and,
– This theory includes a unique "frustration-regression" principle whereby an already
satisfied lower-level need becomes reactivated when a higher-level need is frustrated.
Herzberg's Two-Factor Theory
Herzberg gave two factors in his theory conducting interviews with engineers and accountants
and having them describe when they are motivated and satisfied and when they felt
unmotivated and dissatisfied.
These are
1. Hygiene Factors

– Working Conditions
– Interpersonal Relations
– Organizational Policies
– Quality of Supervision
– Base Wage or Salary
Improvements in Hygiene Factors can prevent and/or eliminate job dissatisfaction; they
will not improve job satisfaction.
1. Satisfier (Motivation)Factors
– Sense of Achievement
– Feeling of Recognition
– Sense of Responsibility
– Opportunity for Advancement
– Feelings of Personal Growth
Improvements in Satisfier Factors can increase job satisfaction; they will not prevent job
dissatisfaction.
Motivation-Hygiene Combinations
McClelland’s Acquired-Needs Theory

• David McClelland proposes that people acquire needs through their life experiences.
• He uses a Thematic Apperception Test (TAT) to measure the strengths of three acquired
needs:
1. Achievement
2. Power
3. Affiliation

1. Need for Achievement (nAch)
• The desire to do something better or more efficiently, to solve problems,
or to master complex tasks.
2. Need for Power (nPower)
• The desire to control other persons, to influence their behavior, or to be
responsible for other people. A finer distinction can be made between:
– The need for Personal Power and,
– The need for Social Power
3. Need for Affiliation (nAff)
• The desire to establish and maintain friendly and warm relations with
other persons.
The Need Profile of Successful Executives

• The most important need for executive success is the need for social power.
• Persons with a high need for affiliation may not make the best managers.
• While nPower is often accompanied by a high need for achievement the later need in
itself is not consistently associated with executive success.
Process Theories of Motivation

Equity Theory
It suggests that if people perceive a level of inequality or unfairness when they compare their
work situation to that of others, they will be motivated to do something about it, in order to
create (at least in their minds) a better or more accurate sense of fairness.
This theory distinguishes felt negative inequity and felt positive inequity.

– Felt Negative inequity – when an individual feels that he or she is receiving less than
others.
– Felt positive inequity – when an individual feels that, compared with others, he or she is
actually getting more.
Perceived Equity - occurs whenever a person perceives that their personal

rewards/inputs ratio is equivalent to the rewards/inputs ratio of a comparison
other.
Perceived Inequity - occurs whenever one's rewards/input ratio is perceived to
be unequal.
When feeling either negative or positive inequity, there are number of actions we might take to
remedy this sense of inequity:
o Change work inputs (work less hard)

o Change the outcome (reward)-ask for a wage increase
o Quit the job
o Change comparison points (compare you with another worker)
o Psychologically distort the comparison (perhaps rationalize that the situation is
temporary)
o Do something to change the inputs or outputs of the comparison person (try to give
them more work)
Expectancy Theory
“People will do what they can do when they want to do it.” The question is ‘what makes them want to
do it?’
Vroom suggests that the motivation to work depends on the relationships between the following three
expectancy factors:

• Expectancy: A person's belief that working hard will result in a desired level of task
performance.
• Instrumentality: A person's belief that successful task performance will be followed by

rewards and other potential outcomes.
• Valence: The value a person assigns to possible rewards and other work-related outcomes.
Expectancy Model of Motivation
Expectancy Theory Multiplier Effect
• Implies that for motivation to be high, Expectancy, Instrumentality and Valence must be high.
Motivation = Expectancy x Instrumentality x Valence

A zero at any location on the right side of the equation will result in zero motivation.
• To Maximize Expectancy
– Select workers with ability

– Train workers to use ability
– Support work effort
– Clarify performance goals
• To Maximize Instrumentality
– Clarify psychological contracts

– Communicate performance-outcome possibilities
– Demonstrate what rewards are contingent on performance
• To Maximize Valence
– ID needs and adjust rewards to match

 Group in Organization
Groups Defined
A group is defined as two or more people working together to achieve common goals.
OR
 “Two or more people who identify & interact with one & other”.
 It is made up of people with shared experiences & interests.

 Not every collection of individuals can called a group, (like women, shopkeepers, etc)
this is just a category not a group.
Benefits of Group (Why do groups form?)
1. Security: people who are part of a group generally feel more secure about their
behavior. They have fewer doubts, and are more resistant to threats when they are part
of a group.
2. Status: Membership in a particular service clubs or a political body may be seen to
confer status on members. So as to gain that status people join in such groups.
3. Self-Esteem: people often feel more confident and have increased self-worth as a
result of participation in a group.
4. Affiliation: Humans are by nature gregarious. Groups provide a natural way for people
to gather in order to satisfy their social needs.
5. Power: Individuals gain power in their relationship with their employers by forming
unions.
6. Goal Achievement: Problems and tasks that require the utilization of knowledge tend to
give groups an advantage over individuals. There is more information in a group than in
any one of its members, and groups tend to provide a greater number of approaches to
solving any particular problem
Types of Groups
There are various types of formal groups that are found in an organization. These are:
 Command group which is determined by the organizational chart depicting the approved
formal connections between individuals in an organization. Examples of command group are
Director and the faculty members in a business school, school principal and teachers,
production manager and supervisors, etc.
 Task groups, comprising some individuals with special interest or expertise, are created by the
organizational authorities to work together in order to complete a specific task. Task groups are
often not restricted to the organizational hierarchy and can be cross functional in nature.
Examples of task group might be people working on a particular project.
 Standing committee is a permanent committee in an organization to deal with some specific
types of problems that may arise more or less on a regular basis. Examples of standing
committees include the standing committee in a university to discuss various academic and
administrative issues.
 Task force / ad hoc committee, in contrast, is a temporary committee formed by
organizational members from across various functional areas for a special purpose. Meetings
can also come under this category.

Various types of informal groups are:
 Interest groups are formed when a group of employees band together to seek some common
objectives, like protesting some organizational policy or joining the union to achieve a higher
amount of bonus.
 Friendship groups develop among the organizational members when they share some
common interest like participating in some sports activities or staging the office drama, etc.
 Reference groups are the groups, with which individuals identify and compare themselves.
These could be within the organization when a middle level executive compares himself with
the higher level executive and longs for the perks and benefits enjoyed by the latter. The
reference group might exist outside the organization as well when an individual compares
himself with his batch mates working in other organizations or an ideal group of people he likes
to become.
Stages of Group Development (How Groups Are Formed?)
1. Forming:
It is the initial stage of group development when the group members first come in contact with
others and get acquainted with each other. This stage is characterized predominantly by a
feeling of uncertainty among the group members as they now try to establish ground rules and
pattern of relationship among themselves.
2. Storming:
It is the next stage that is characterized by a high degree of conflict among the members.
Members often show hostility towards each other and resist the leader’s control. If these
conflicts are not adequately resolved, the group may even be disbanded.
But, usually the group eventually comes in terms with each other and accepts the leadership
role at the end of this stage.
3. Norming:
It is the third stage of the group development process during which the group members become
closer to each other and the group starts functioning as a cohesive unit. The group members
now identify themselves with the group and share responsibility for achieving the desired level
of performance of the group. Norming stage is complete when the group members can set a
common target and agree on the way of achieving this.
4. Performing:

It is the fourth stage when the group is finally ready to start working. As the group is now fully
formed after resolving their internal conflicts of acceptance and sharing responsibility, they can
now devote energy to achieve its objectives.
5. Adjourning:
It is the final stage when the group, after achieving the objectives for which it was created, starts
to gradually dissolve itself.
Group Roles
Individual group members tend to play distinct roles in an effort to facilitate group progress.
Typically a member says or does something with a view to accomplishing one of three
things:
1. Completion of a task (task role),

2. Managing relationships within the group (maintenance role) or
3. Satisfying some personal need (individual or self-oriented role)
1. Task Roles
A group member in this role tends to focus on human and economic resources and various
sources of information that are required to accomplish or complete the work itself. Members of
the group may play different task roles:
 Coordinating workloads,
 Problem solver,
 Creating strategies to complete the work.
2. Maintenance Roles
This is one of the most critical roles in a group, and is often the role of one or two people. This
person tries to ensure that harmony is created and maintained in the group, and that every
member of the group has a fair chance to participate. This role is often called a gate keeping
role—someone who maintains a ‘check’ on the temperature of the group. Without this role,
groups often become so task oriented
3. Individual Roles
People in individual roles do not consider the needs of the group beyond their own. They
typically interrupt others, are ‘know-it-alls’, or do not listen effectively to understand the
contribution that others are making.
LECTURE NO. 10, 11- Topics
 Leader and Leadership

 Qualities of a good leader
 Leadership styles
 Transformational leader

 Transactional Leader
 Leadership Theories
Leadership:
According to Peter DeLisle, Leadership is the ability to influence others, with or without authority. The
ability to influence others is a derivation of
 Interpersonal Communications
 Conflict Management
 Problem solving
Leadership is a direct function of three elements of interpersonal effectiveness.
1. Awareness
2. Ability
3. Commitment
Leader:
The person who leads or commands a group, organization, or country.
Qualities of a good leader

• Guiding vision: Effective leaders know what they want to do, and have the strength of character
to pursue their objectives in the face of opposition and in spite of failures.
• Passion: Effective leaders believe passionately in their goals. Their passion for life is a guiding
star for others to follow, because they radiate promise!
• Integrity: Because they know who they are, effective leaders are also aware of their weaknesses.
They only make promises they can follow through on.
• Honesty: Leaders convey an aura of honesty in both their professional and their personal lives.
• Trust: Effective leaders earn the trust of their followers and act on behalf of their followers.
• Curiosity: Leaders are learners. They find out what they need to know in order to pursue their
goals.
• Risk: Effective leaders take calculated risks when necessary to achieve their objectives.
• Dedication: The effective leader is dedicated to his or her charge.
• Listening: Leaders Listen! This is the most important attribute of all, listen to your followers.
Leadership vs Management
• Management seeks stability & predictability (order)
• Leadership seeks improvement through change(disorder)
Leader vs Manager
Leaders :>>>> Do the right thing
Managers :>>> Do things right
Leadership styles
(Basic Leadership styles are :)

1. Autocratic Leadership
• The classical approach
• Manager retains as much power and decision making authority as possible
• Does not consult staff, nor allowed to give any input
• Staff expected to obey orders without receiving any explanations
• Structured set of rewards and punishments
Autocratic leaders:
o Rely on threats and punishment to influence staff
o Do not trust staff
o Do not allow for employee input
2. Bureaucratic
• Manages “by the book¨
• Everything done according to procedure or policy
• It is based upon fixed official duties under a hierarchy of authority
• It can be advantageous in highly regulated lines of business
• It can be an efficient in companies that don't require much creativity or innovation from
employees.
3. Democratic Leadership Style

• Also known as participative style
• Encourages staff to be a part of the decision making
• Keeps staff informed about everything that affects their work and shares decision making and
problem solving responsibilities
Democratic leaders:
o Allows staff to establish goals
o Encourages staff to grow on the job and be promoted
o Recognizes and encourages achievement
4. Laissez-Faire Leadership Style

• Also known as the “hands-off¨ style
• The manager provides little or no direction and gives staff as much freedom as possible
• All authority or power given to the staff and they determine goals, make decisions, and resolve
problems on their own
(In a laissez-faire leadership style, a person may be given a leadership position without providing
leadership. This leads to subordinates having a free hand in deciding policies and methods.)
(Other Leadership styles are :)
1. Transformational Leadership
 It is a style of leadership where the leader is charged with identifying the needed change, creating
a vision to guide the change through inspiration, and executing the change in tandem with
committed members of the group.

 It also serves to enhance the motivation, morale, and job performance of followers through a
variety of mechanisms
 Charisma: It is special leadership style commonly associated with transformational leadership. It
is the leader’s ability to inspire pride, faith, and respect; to recognize what is really important, and
to articulate effectively a sense of mission, or vision, that inspires followers.
2. Transactional Leadership
 It is also known as managerial leadership, focuses on the role of supervision, organization, and
group performance;
 It is a style of leadership in which the leader promotes compliance of his/her followers through
both rewards and punishments.
Leaders using the transactional approach

o Are not looking to change the future, they are looking to merely keep things the same
o Pay attention to followers' work in order to find faults and deviations.
o This type of leadership is effective in crisis and emergency situations, as well as for projects that
need to be carried out in a specific way.
3. Creative Leadership
 Ability to uniquely inspire people,
 To generate shared innovative responses and solutions
LEADERSHIP THEORIES
1. Traits Theories of Leadership
Concept that certain traits help make people effective leaders. Early research suggested that the
traits fell into three categories:

 Physical Characteristics
 Personality Characteristics
 Abilities
Traits Associated with Leadership:
o Energy o Verbal fluency o Interpersonal skills
o Appearance o Sense of humor o Enthusiasm
o Integrity o Achievement drive o Extroversion
o Intelligence o Tolerance for stress o Tact
o Persistence o Adaptability o Initiative
o Self-confidence o Judgment
o
Six Core Traits of Leadership
1. Drive – Ambition, persistence, tenacity, initiative
2. Leadership motivation - Desire to lead, influence others, assume responsibility, and gain power;
two types - socialized power motive, personalized power motive
3. Integrity – Truthfulness, honesty, maintain consistency between what they say and what they do
4. Self-confidence - Confident in their actions and show that confidence to others, learn from their
mistakes, react positively to stress, even-tempered, display appropriate emotions
5. Cognitive ability - High degree of intelligence, process complex information, deal with changing
environments
6. Knowledge of the domain - Knowledge of business in which they are engaged, make better
decisions, anticipate future problems, understand implications of their actions
2. Behavioral Theories of Leadership

These theories say that specific behaviors differentiate leaders from non-leaders. Under these theories two
studies are considered important:
1. The Michigan Leadership Study
 Conducted shortly after WWII
 One dimensional
 Identified two basic leadership styles:
o Job-centered leadership style – a behavioral leadership style that emphasizes
employee tasks and the methods used to accomplish them
o Employee-centered leadership style - a behavioral leadership style that emphasizes
employees’ personal needs and development of interpersonal relationships
2. Ohio State University Studies

 After WWII
 Measured specific leader behaviors
 Identified two dimensions
o Consideration - a behavioral leadership style demonstrated by leaders who express
friendship, develop mutual trust and respect, and have strong interpersonal
relationships with those being led
o Initiating structure - a behavioral leadership style demonstrated by leaders who
establish well-defined patterns of organization and communication, define
procedures, and delineate their relationships with those being led

3. Situational Theories of Leadership
Hersey–Blanchard Situational Leadership Model
– A model aims to provide a practical way for a leader to decide how to adapt his or her
style to the task.
– Model focuses on four leadership styles:
• The delegating style lets the members of the group decide what to do.
• The participating style asks the members of the group what to do, but makes the
final decisions.
• The selling style makes the decision but explains the reasons.
• The telling style makes the decision and tells the group what to do.

 STUDENT ASSIGNMENT:
o Find out and explain the other theories of leadership (at least two).
o Give references of the websites you searched.
LECTURE NO. 12, 13- Topics
 Controlling
 Types of Control and their advantages
 Basic Control Process
 Performance Control Tools
 Measures to control Organizational Performance

 Common performance measuring and Reporting Problem
Controlling:
It is the process of regulating organizational activities so that actual performance conforms to expected
organizational standards and goals.
 Controlling is largely geared to ensuring that the behavior of individuals in the organization
contributes to reaching organizational goals.
 Controls encourage wanted behaviors and discourage unwanted behaviors.
Control system:
A control system is a set of mechanisms that are designed to increase the probability of meeting
organizational standards and goals.
Controls systems can play five important roles in organizations.
1. Control systems enable managers to cope with uncertainty by monitoring the specific activities
2. Control systems help managers detect undesirable irregularities
3. Controls alert managers to possible opportunities
4. Controls enable managers to handle complex situations
5. Controls can decentralize authority
Types of Control
1. Strategic control: It involves monitoring critical environmental factors that could affect the
viability of strategic plans, assessing the effects of organizational strategic actions, and ensuring
that strategic plans are implemented as intended.
o Strategic control is typically the domain of top-level managers who must insure core
competencies are developed and maintained.
2. Tactical control: It focuses on assessing the implementation of tactical plans at departmental

levels, monitoring associated periodic results, and taking corrective action as necessary.
o Tactical control is primarily under the direction of middle managers, but top-level
managers may at times get involved.
3. Operational control: It involves overseeing the implementation of operating plans, monitoring

day-to-day results, and taking corrective action when required.
o Operational control is the responsibility of lower-level managers.
o The concern is with schedules, budgets, rules, and specific outputs of individuals.
Other Types of Control:

Feed forward Controls
o Used to anticipate problems before they arise so that problems do not occur later during the
conversion process
o Giving strict product specifications to suppliers in advance
o It can be used to keep in contact with suppliers and to monitor their progress
Concurrent Controls
o Give managers immediate feedback on how efficiently inputs are being transformed into outputs
o It allows managers to correct problems as they arise
Feedback Controls
Used to provide information at the output stage about customers’ reactions to goods and services so that
corrective action can be taken if necessary
The Control Process
1. Establish standards of performance, goals, or targets against which performance is to be

evaluated
o Managers at each organizational level need to set their own standards.
2. Measure actual performance

o Managers can measure outputs resulting from worker behavior or they can measure the
behavior themselves.
3. Compare actual performance against chosen standards of performance

o Managers evaluate whether – and to what extent – performance deviates from the
standards of performance chosen in step 1
4. Evaluate result and initiate corrective action if the standard is not being achieved
o If managers decide that the level of performance is unacceptable, they must try to change
the way work activities are performed to solve the problem
 performance - the end result of an activity

 organizational performance - accumulated end results of all the organization’s work processes and
activities
Performance Control Tools

 Financial Controls
 Traditional Financial Control Measures
o Taken from organization’s main financial statements
o A number of financial ratios used in organizations
 liquidity ratios - organization’s ability to meet its current debt obligations
 leverage ratios - use of debt to finance assets and ability to meet interest payments
 activity ratios - efficiency of use of firm’s assets
 profitability ratios - effectiveness with which assets used to generate profits
o Budgets provide quantitative standards against which to measure and compare resource
consumption
o Economic Value Added (EVA) - economic value created with the firm’s assets less any capital
investments made by the firm in its assets
o Market Value Added (MVA) - stock market’s estimate of the value of the firm’s past and
expected capital investment projects
 Information Controls
o Management Information Systems - used to provide management with needed information on a
regular basis
o Managers need information about:
 what is happening
 what are performance standards
 acceptable ranges of variation
 appropriate courses of action
 Balanced Scorecard Approach

 performance measurement tool that examines four areas
 financial
 customer
 internal processes
 people/innovation/growth assets
 determine whether goals in each area are being met
 focus is still on areas that drive the organization’s success
 scorecards reflect organizational strategies

 Benchmarking of Best Practices
o Benchmarking - search for the best practices among other organizations that lead to their
superior performance. It means learning from others.
It is used to
• identify performance gaps and potential areas of improvement
• look for internal best practices that can be shared
Common Performance Measuring and Reporting Problems
LECTURE NO. 14
 What is PESTLE analysis?

 Why use PESTLE analysis
 What does PESTLE analysis include?
PESTLE analysis:

PESTLE analysis is a useful method to use in order to identify the external factors that influence an
organization.
Why use PESTLE analysis:

 Is a useful tool for understanding the “big picture” of the environment in which you are operating
 By understanding your environment, you can take advantage of the opportunities and minimize
the threats
 This provides the context within which more detailed planning can take place to take full
advantage of the opportunities that present themselves.
What does PESTLE analysis include?

• P – Political
– The current and potential influences from political pressures
• E - Economic
– The local, national and world economic impact
• S - Sociological
– The ways in which changes in society affect the project
• T - Technological
– How new and emerging technology affects our project / organization
• L - Legal
– How local, national and global legislation affects the project
• E - Environmental
– Local, national and global environmental issues
(In contrast to a SWOT, PESTLE encourages you to think about the wider environment and what might
be happening now and in the future which will either benefit or be of disadvantage to the organization,
individual etc )
• Political:
– Government type and stability
– Freedom of the press, rule of law and levels of bureaucracy and corruption
– Regulation and de-regulation trends
– Social and employment legislation
– Tax policy, and trade and tariff controls
– Environmental and consumer-protection legislation

– Likely changes in the political environment
• Economic:
– Stage of a business cycle
– Current and projected economic growth, inflation and interest rates
– Unemployment and supply of labor
– Labor costs
– Levels of disposable income and income distribution
– Impact of globalization
– Likely impact of technological or other changes on the economy
• Sociological:
– Cultural aspects, health consciousness, population growth rate, age distribution,
– Organizational culture, attitudes to work, management style, staff attitudes
– Education, occupations, earning capacity, living standards
– Ethical issues, diversity, immigration/emigration, ethnic/religious factors
– Media views, law changes affecting social factors, trends, advertisements, publicity
– Demographics: age, gender, race, family size
• Technological:
– Maturity of technology, competing technological developments,
– Information technology, internet, global and local communications
– Technology access, licensing, patents, potential innovation, replacement
– Transportation, energy uses/sources/fuels, associated/dependent technologies
• Legal:
– current home market legislation, future legislation
– European/international legislation
– regulatory bodies and processes
– environmental regulations, employment law, consumer protection
– industry-specific regulations, competitive regulations
• Environmental:
– Ecological
– environmental issues, environmental regulations
– customer values, market values, stakeholder/ investor values
– management style, staff attitudes, organizational culture, staff engagement

Principles of Management

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Principles of Management

LECTURE NO. 1- Topics

 Process- represents ongoing functions or primary activities engaged in by managers

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1. The nature of management can be described as follows:

The importance of management may be traced in the following contexts:

 Effective Utilization of Resources

Managers and Managerial Tasks

Four Functions of Management

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First line managers

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Skill Types Needed

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 Rise of Global Organizations.

Building Competitive Advantage-Building Blocks of Competitive Advantage

Maintaining Ethical and Socially Responsible Standards

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May be the result of:

Terminologies used in this chapter:

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The Evolution of Management Theory

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He defined four principles of management

How Do Today’s Managers Use Scientific Management?

1. Using time and motion studies

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• Suggested workers help in analyzing their jobs

The Hawthorne Studies

How Do Today’s Managers Use the Behavioral Approach?

The Systems Approach

The Systems Approach and Managers

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Management Science Theory

– Quantitative management — utilizes linear programming, modeling, simulation systems

– Operations management —techniques used to analyze all aspects of the production

– Management Information Systems (MIS) — provides information vital for effective

How Do Today’s Managers Use the Quantitative Approach?

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 Each of these characteristics exists on a continuum from low to high.

Strong versus Weak Cultures

Factors Influencing the Strength of Culture

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1. The ultimate source of an organization’s culture is its founders.

2. Past practices of the organization

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Let’s see the elements or dimensions of the general environment.

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2. To understand how government regulations affect their business

3. To understand how technological advances affect their operations

5. To understand the labor force

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Internal Environment and Managers (How Culture Affects Managers)

LECTURE NO. 4- DECISION MAKING

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DECISION MAKING PROCESS