SRM INSTITUTE OF SCIENCE AND TECHNOLOGY-RAMAPURAM CAMPUS

DEPARTMENT OF MECHANICAL ENGINEERING

15ME401 -ECONOMICS AND PRINCIPLES OF MANAGEMENT

UNIT IV - MANAGEMENT OF HUMAN AT WORK

SYLLABUS:-
 Human Resource Development – Staffing and Selection, development

 Motivation and Training theories Motivating individuals and workgroups

 Leadership for Managerial Effectiveness , type

 Team working , Creativity and decision making

 Managerial Communication – importance, classification

 Time Management

 Performance Appraisal- promotion, methods

 Career Planning

Topic – 1
Human Resource Management

Synopsis

 Meaning and Definition of HRM

 Functions of HRM

MEANING AND DEFINITIONS OF HRM

Human resources management (HRM) is a management function concerned with hiring,

motivating and maintaining people in an organization. It focuses on people in organizations. Human
resource management is designing management systems to ensure that human talent is used effectively
and efficiently to accomplish organizational goals.

HRM is the personnel function which is concerned with procurement, development,

compensation, integration and maintenance of the personnel of an organization for the purpose of
contributing towards the accomplishments of the organization’s objectives. Therefore, personnel
management is the planning, organizing, directing, and controlling of the performance of those operative
functions (Edward B. Philippo).
FUNCTION OF HUMAN RESOURCE MANAGEMENT (HRM)

a) Human Resource Planning: The objective of HR Planning is to ensure that the organization has the
right types of persons at the right time at the right place. It prepares human resources inventory with a
view to assess present and future needs, availability and possible shortages in human resource.

Thereupon, HR Planning forecast demand and supplies and identify sources of selection. HR Planning
develops strategies both long-term and short-term, to meet the man-power requirement.

b) Job Analysis : This is the task of laying down organization structure, authority, relationship and
responsibilities. This will also mean definition of work contents for each position in the organization.
This is done by “job description”. Another important step is “Job specification”. Job specification
identifies the attributes of persons who will be most suitable for each job which is defined by job
description.

c) Selection and Staffing: This is the process of recruitment and selection of staff. This involves
matching people and their expectations with which the job specifications and career path available
within the organization.

d) Training and Development: This involves an organized attempt to find out training needs of the
individuals to meet the knowledge and skill which is needed not only to perform current job but also to
fulfill the future needs of the organization.

e) Organizational Development: This is an important aspect whereby “Synergetic effect” is generated

in an organization i.e. healthy interpersonal and inter-group relationship within the organization.

f) Compensation and Benefits: This is the area of wages and salaries administration where wages and
compensations are fixed scientifically to meet fairness and equity criteria. In addition labour welfare
measures are involved which include benefits and services.

g) Employee Assistance: Each employee is unique in character, personality, expectation and

temperament. By and large each one of them faces problems every day. Some are personal some are
official. In their case he or she remains worried. Such worries must be removed to make him or her
more productive and happy.

h) Union-Labour Relations: Healthy Industrial and Labour relations are very important for enhancing
peace and productivity in an organization. This is one of the areas of HRM.

i) Personnel Research and Information System: Knowledge on behavioral science and industrial
psychology throws better insight into the workers expectations, aspirations and behavior. Advancement
of technology of product and production methods have created working environment which are much
different from the past. Globalization of economy has increased competition any fold. Science of
ergonomics gives better ideas of doing a work more conveniently by an employee. Thus, continuous
 research in HR areas is an unavoidable requirement. It must also take special care for improving
exchange of information through effective communication systems on a continuous basis especially on
moral and motivation.

STAFFING

What is Staffing?
The most basic meaning of ‘staffing’ is to put people to jobs. It mainly starts with human resource planning
and also consists of other functions such as recruitment, selection, training, development, manpower
planning, compensation, promotion and maintenance of managerial position. As Dale Yoder says that,
“Staffing is that phase of the management which deals with the effective control and use of manpower of
human resources”.

What is the need and importance of staffing?

Need – In any organization, you need people to perform work and thus, this requirement is fulfilled by the
staffing function of management which finds the right people for the right job. The human element becomes
very important while selecting the right person for the job. Staffing provides this human element or instinct
while selecting a person. Some of the qualities that are perceived as important by the organization are
aptitude, attitude, loyalty and commitment.

Importance – Human resources are considered as the foundation of any business. Staffing is seen as the
most fundamental drive of organizational performance as the right people can help you in taking your
business to the top and the wrong people may break your business. The most important asset of any
organization is human resources. Staffing is a very important managerial function as the ability of any
organization to achieve its goals depend upon the quality of its human resources.

Proper staffing helps in ensuring the following benefits to the organization:

1. It will ensure higher performance by putting right people on the right job.

2. It makes sure that there is the continuous growth and survival of the enterprise.

3. It helps in discovering and obtaining competent personnel for various jobs.

4. It also ensures the optimum utilization of the human resources and prevents under-utilization of high
labor costs and personnel.

5. With the help of objective assessment, it improves job satisfaction as well as morale of the employees.
 What is Human Resource Management?

Human Resource management is basically the recruitment, selection, development, utilization,

compensation and motivation of human resources of the organization. The main function of Human
Resource Management is to give skilled human elements to the organization. Thus, a separate
department is created by big organizations known as HRD which works under H.R. managers.

Staffing as a part of Human Resource Management

Staffing is considered a function which all managers need to perform. It is a specialized function and
many aspects of human relations are included in it. It is the responsibility of all managers to directly
deal and select people to work for the organization. In small organizations, when the manager performs
the staffing function his role is limited but as the organization grows, then staffing function is not
enough, hence a separate department is formed known as human resource department.

Human Resource Management has a wider scope than staffing. It consists of staffing, keeping personnel
records and other works. It includes recruitment of right people in right number for the right job. The
nature of staffing as part of HRM is given below:

1. Staffing is relevant in all types of organization and is people centered.

2. It is the duty of every manager to perform the staffing activities.

3. Staffing function involves training, development and performance appraisal of human resources.
What are the activities of Human Resource Management?

Human Resource management includes many duties which the human resource personnel must perform.
These duties are:

1. Recruitment, selection and placement

2. Developing compensation

3. Human Resource planning

4. Training and development of employees for efficient career growth

5. Handling complaints

6. Maintaining labor relations

7. Motivating the employees

8. Providing social security to employees

9. Defending the company in law suits

 IMPORTANCE OF STAFFING
1. Staffing helps in discovering and obtaining competent and personnel for various jobs.
2. It helps to improve the quantity and quality of the output by putting the right person on the right job.
3. It helps to improve job satisfaction of employees.
4. It facilitates higher productive performance by appointing right man for right job.
5. It reduces the cost of personnel by avoiding wastage of human resources.
6. It facilitates growth and diversification of business.
7. It provides continuous survival and growth of the business through development of employees.

Staffing Process
The following steps are involved in the staffing process:

1. ESTIMATING THE MANPOWER REQUIREMENTS –

It involves the appointment of a person with a specific set of educational qualifications, skills, training
and prior experience. It also assesses the future human resource needs of all departments. In order
to understand the manpower requirements, you need workload analysis on one hand and workforce
analysis on the other.

2. RECRUITMENT –

Recruitment is defined as the process of searching for prospective employees and the identification of
the sources of manpower availability in order to secure applicants for various job positions in an
organization.

Sources of Recruitment– The required position may be filled up from within the organization or from
outside. Therefore, there are two sources of recruitment – internal and external.

(a) Internal sources of recruitment:

Internal sources refer to recruiting candidates from within the organization. There are two important
sources of recruitment, namely, transfers and promotions.

 Transfers – It includes shifting of an individual from one job to another, one department to another or
from one shift to another, without any change in the status and responsibility of the employee.

 Promotions – It includes shifting of an employee to a higher position who carries a higher position,
higher responsibilities, facilities, status and pay.
 Advantages of Internal Sources:-

 It motivates the employees to improve their performance.

 It simplifies the process of selection and placement.

 Transfer is a tool of training for the employees to prepare them for higher jobs.

 Transfer has the benefit of shifting workforce from overstaffed departments to those where there is
shortage of staff.

 Filling of jobs from inside the organization is cheaper as compared to external sources.

Limitations of Internal Sources :-

 There is reduction in the induction of fresh talent.

 The spirit of competition among the employees may be affected.

 There will be reduction in the productivity of the organization.

 The internal sources of recruitment cannot be used by new organization.

 This type of recruitment may lead to employees becoming lethargic.

(b) External sources of Recruitment –

External sources refers to the selection of employees from outside the organization. The
common methods of external sources of recruitment are Direct Recruitment, Casual Callers,
Advertisements, Employment Exchange, Placement Agencies, Campus Recruitment, Labor Contractors,
Advertising on Television.

Advantages of External Sources –

 It can attract qualified and trained personnel to fill up the vacant job.

 The management has wider while choosing the people for jobs.

 It brings new talent in the organization.

 The existing staff will have to compete with the outsiders for promotions.
Limitations of External Sources –

 It may lead to dissatisfaction among existing employees.

 It is a very costly as well as a lengthy procedure.


 3. SELECTION –

As Dale Yoder says,”Selection is the process of choosing from among the candidates from within the
organisation or from the outside, the most suitable person for the current position or for the
future”. The important steps in the process of selection are as follows:

 Preliminary Screening

 Selection Tests – Intelligence tests, Aptitude Tests, Personality Tests, Trade Tests, Interest Tests

 Employment Interview

 Reference and Background Checks

 Selection Decision

 Medical Examination

 Job Offer

 Contract of Employment
4. PLACEMENT AND ORIENTATION – Orientation means introducing the selected employee to
other employees. Placement refers to the employee occupying the post for which he/she has been
selected.

5. TRAINING AND DEVELOPMENT – Training is the process by which the skills and abilities of
employees to perform a specific job are increased. Development refers to the learning
opportunities that are designed to help employees grow.

Benefits of training to the organization –

 It increases employees’s morale.

 It increases employee productivity.

 It helps in adjusting to the changing environment.

Benefits of training to the Employee –

 Due to increase in performance there are chances to earn more.

 It allows employees to handle machines more efficiently.

 It enhances the satisfaction of employees.

Training methods – There are two types of training methods:
 On the Job Methods –
(a) Apprenticeship Programs
(b) Coaching

(c) Internship Training

(d) Job Rotation

 Off the Job Methods –

(a) Class Room Lectures
(b) Films
(c) Case Study
(d) Computer Modelling
(e) Vestibule Training
(f) Programmed Instruction

Topic – 2
Motivation

Synopsis

 Meaning and Definition of Motivation

 Importance of Motivation
 Theories of Motivation

MEANING AND DEFINITION OF MOTIVATION

Motivation" is a Latin word, meaning "to move". Human motives are internalized goals within
individuals. Motivation may be defined as those forces that cause people to behave in certain ways.
Motivation has been defined by Michael J Juicus as "the act of stimulating someone or oneself to
get a desired course of action".
In the words of Lewis Allen, "Motivation is the work a manager performs to inspire, encourage
and impel people to take required action".
According to Dubin, Motivation is, "The complex of forces starting and keeping a person
at work in an organization. To put it generally, motivation starts and maintains an activity along a
prescribed line. Motivation is something that moves the person to action, and continuous him in the
course of action already initiated".
IMPORTANCE AND BENEFITS OF MOTIVATION
A manager's primary task is to motivate others to perform the tasks of the organization.
Therefore, the manager must find the keys to get subordinates to come to work regularly and on time, to
work hard, and to make positive contributions towards the effective and efficient achievement of
organizational objectives. Motivation is an effective instrument in the hands of a manager for inspiring
the work force and creating confidence in it. By motivating the work force, management creates "will to
work" which is necessary for the achievement of organizational goals.

The various benefits of motivation are:-

1. Motivation is one of the important elements in the directing process. By motivating the workers,
a manager directs or guides the workers' actions in the desired direction for accomplishing the
goals of the organization
2. Workers will tend to be as efficient as possible by improving upon their skills and knowledge so
that they are able to contribute to the progress of the organization thereby increasing
productivity.
3. For performing any tasks, two things are necessary. They are: (a) able to work and (b)
willingness to work. Without willingness to work, ability to work is of nouse. The willingness to
work can be created only by motivation.
4. Organizational effectiveness becomes, to some degree, a question of management's ability to
motivate its employees, to direct at least a reasonable effort towards the goals of the
organization.
5. Motivation contributes to good industrial relations in the organization. When the workers are
motivated, contented and disciplined, the frictions between the workers and the management will
be reduced.
6. Motivation is the best remedy for resistance to changes. When changes are introduced in an
organization, generally, there will be resistance from the workers. But if the workers of an
organization are motivated, they will accept, introduce and implement the changes whole
heartily and help to keep the organization on the right track of progress.
7. Motivation facilitates the maximum utilization of all factors of production, human, physical and
financial resources and thereby contributes to higher production.
8. Motivation promotes a sense of belonging among the workers. The workers feel that the
enterprise belongs to them and the interest of the enterprise is their interests.
9. Many organizations are now beginning to pay increasing attention to developing their
employees as future resources upon which they can draw as they grow and develop.
THEORIES OF MOTIVATION

1. Maslow's Need-Hierarchy Theory of Motivation

According to Abraham Maslow, a U.S psychologist, man is a wanting animal. He has a variety of wants
or needs. All motivated behavior of man is directed towards the satisfaction of his needs. The theory
postulated that people are motivated by multiple needs, which could be arranged in a hierarchy.
Maslow offers a general theory of motivation called the 'need hierarchy theory'. The needs have
been classified into the following in order:

a) Physiological Needs
Physiological needs are those required to sustain life, such as:
 air
 water
 nourishment
 sleep
According to Maslow's theory, if such needs are not satisfied then one's motivation willfrom the quest to
satisfy them. Higher needs such as social needs and esteem are notfelt until one has met the needs basic
to one's bodily functioning.

b) Safety
Once physiological needs are met, one's attention turns to safety and security in order tobe free from the
threat of physical and emotional harm. Such needs might be fulfilled by:
 Living in a safe area
  Medical insurance
 Job security
 Financial reserves
According to Maslow's hierarchy, if a person feels that he or she is in harm's way, higherneeds will not
receive much attention.
c) Social Needs
Once a person has met the lower level physiological and safety needs, higher level needsbecome
important, the first of which are social needs. Social needs are those related tointeraction with other
people and may include:
 Need for friends
 Need for belonging
 Need to give and receive love
d) Esteem
Once a person feels a sense of "belonging", the need to feel important arises. Esteemneeds may be
classified as internal or external. Internal esteem needs are those related toself-esteem such as self
respect and achievement. External esteem needs are those such associal status and recognition. Some
esteem needs are:
 Self-respect
 Achievement
 Attention
 Recognition
 Reputation
Maslow later refined his model to include a level between esteem needs and selfactualization:the need
for knowledge and aesthetics.
e) Self-Actualization
Self-actualization is the summit of Maslow's hierarchy of needs. It is the quest ofreaching one's full
potential as a person. Unlike lower level needs, this need is never fullysatisfied; as one grows
psychologically there are always new opportunities to continue togrow.
Self-actualized people tend to have needs such as:
 Truth
 Justice
 Wisdom
 Meaning
Self-actualized persons have frequent occurrences of peak experiences, which areenergized moments of
profound happiness and harmony. According to Maslow, only asmall percentage of the population
reaches the level of self-actualization.
2. Hertzberg's Theory of Motivation
Hertzberg developed a theory of motivation on the premise that human nature has two separate elements
- The motivators and maintenance factors. According to this theory of motivation the items that
determine job content are considered motivational factors e.g.:- Achievement, recognition,
responsibility, advancement and the work itself. The elements that influence the job context are the
hygiene or maintenance factors e.g.:-company policy, salary, inter-personal relations, working
conditions etc. They must bead equate and if they are absent or inadequate, they will create
dissatisfaction.

(a) Hygiene Factors:

Hygiene factors represent the need to avoid pain in the environment. They are not an intrinsic part of a
job, but they are related to the conditions under which a job is performed. They are associated with
negative feelings. They must be viewed as preventive measures that remove sources of dissatisfaction
from environment. Hertzberg believed that hygiene factors created zero level of motivation and if
maintained at proper level prevents negative type of motivation from occurring. Thus, hygiene factors,
when absent, increase dissatisfaction with the job. When present, help in preventing dissatisfaction but
do not increase satisfaction or motivation.

(b) Motivators:
Motivators are associated with positive feelings of employees about the job. They make people satisfied
with their job. Motivators are necessary to keep job satisfaction and job performance high. On the other
hand, if they are not present, they do not prove highly satisfying. Motivational factors or satisfier’s are
directly related to job content itself, the individual's performance of it, its responsibilities and the growth
and recognition obtained from it. Motivators are intrinsic to the job. Thus, when motivators are absent,
prevent both satisfaction and motivation. When, motivators are present, they lead to satisfaction and
motivation. To apply the two-factor theory to the workplace, Hertzberg suggests a two-step process:
 The supervisor should attempt to eliminate the hygiene factors that are found to be more basic
than factors that lead to satisfaction.
  Once the dissatisfies have been somewhat neutralized, the supervisor may be able to motivate
workers through the introduction of motivational factors
3. Victor Vroom's Expectancy Theory
Expectancy Theory was developed by Victor H Vroom. It is based on the notion that human
behavior depends on people's expectations concerning their ability to perform tasks and to receive
desired rewards. The expectancy theory argues that the strength of a tendency to act in a certain way
depends in the strength of an expectation that the act will be followed by a given outcome and on the
attractiveness of the outcome to the individual. It includes three variables which Vroom refers to as –

(i) Valance: Valence means the strength of an individual's preference for a particularoutcome. A
valence of zero occurs when the individual is indifferent towards the outcome. The valance is negative
when the individual prefers not attaining the outcome to attaining it.

(ii)Instrumentality: Instrumentality refers to the relationship between performance and reward. It refers
to a degree to which a first level outcome (e.g.:-superior performance) will lead to a desired second level
outcome (e.g.:- promotion). If people perceive that their performance is adequately rewarded the
perceived instrumentality will be positive. On the other hand, if they perceive that performance does not
make any difference to their rewards, the instrumentality will be low.

(iii) Expectancy: People have expectancies about the likelihood that an action or effort on their part will
lead to the intended performance. Workers will be motivated by the belief that their performance will
ultimately lead to payoffs for them. Expectancy is the probability that a particular action will lead to a
particular first level outcome.
4. McGregor's Theory X and Theory Y
Different styles of management have a different bearing on the motivation of workers in the
organization. The style adopted by a manager in managing his subordinates is basically dependent upon
his assumption about human behaviour. Theory X is negative, traditional and autocratic style while
Theory Y is positive, participatory and democratic. Thus, these labels describe contrasting set of
assumptions about human nature.
Douglas McGregor has classified the basic assumption regarding human nature into two parts
and has designated them as 'theory X’ and 'theory Y'.
a) Theory X:
This is the traditional theory of human behaviour, which makes the following assumptions about human
nature:
1. Management is responsible for organizing the elements of productive enterprises -money, material,
equipment, and people - in the interest of economic ends.
2. With reference to people it is a process of directing their efforts, motivating them, controlling their
actions, modifying their behaviour in order to be in conformity with the needs of the organization.
3. Without this active intervention by management, people would be passive – even resistant to
organizational needs. Hence they must be persuaded, rewarded, punished and properly directed.
4. The average human being has an inherent dislike of work and will avoid it if he can.
b) Theory Y:
The assumption of theory Y, according to McGregor are as follows:-
1. Work is as natural as play or rest, provided the conditions are favorable; the average human being
does not inherently dislike work.
2. External control and the thrust of punishment are not the only means for bringing about efforts
towards organizational objectives. Man can exercise self-control and self-direction in the service of
objectives to which he is committed. Commitment to objectives is a result of the rewards associated
with their achievement. People select goals for themselves if they see the possibilities of some kind of
reward that may be material or even psychological.
4. The average human being, under proper conditions does not shirk responsibility, but learn not only to
accept responsibility but also to seek it.
5. He has capacity to exercise a relatively high degree of imagination, ingenuity and creativity in the
solution of organizational problems in widely, not narrowly distributed in the population.
6. Under conditions of modern industrial life the intellectual potentialities of people are only partially
utilized. As a matter of fact, men, have unlimited potential.
 Topic – 3
Leadership

Synopsis

 Meaning and Definition of Leader and Leadership

 Difference between Manager and Leader
 Characteristics of Leadership
 Types of Leader

DEFINITION OF LEADERSHIP AND LEADER

"Leadership" according to Alford and Beatty "is the ability to secure desirable actions from a group of
followers voluntarily, without the use of coercion".

According to Chester I Barnard, "It (leadership) refers to the quality of the behaviour of the individual
whereby they guide people on their activities in organized efforts".

According to Koontz and O'Donnell - Managerial leadership is "the ability to exert inter personal
influence by means of communication, towards the achievement of a goal. Since managers get things
done through people, their success depends, to a considerable extent upon their ability to provide
leadership"

DIFFERENCE BETWEEN LEADER AND MANAGER

1. A manager is required to plan, organize, direct and control. But a leader is one who gets others to
follow him.
2. A manager depends on his authority. But a leader depends on his confidence and goodwill. He
inspires enthusiasm.
3. Management is concerned with the formulation of broad policies to guide the operations of an
enterprise. But leadership is concerned with the initiation of action for the accomplishment of the goals.
4. An individual is a leader in the true sense if he is accepted as a leader by the group. A manager is
appointed and he derives his authority by virtue of his office.
5. Management is associated with the organized structure. But leadership may be associated with
unorganized groups.

CHARACTERISCTICS AND FEATURES OF LEADERS

1. Leadership implies the existence of followers: We appraise the qualities of leadership by studying
his followers. In an organization leaders are also followers for e.g.:- Supervisor works under a branch
head. Thus, in a formal organization a leader has to be able to be both a leader as well as a follower, and
be able to relate himself both upward and downward.

2. Leadership involves a community of interest between the leader and his followers: In other
words, the objectives of both the leader and his men are one and the same. If the leader strives for one
purpose and his team of workers works for some other purpose, it is no leadership.
3. Leadership involves an unequal distribution of authority among leaders and group members:
Leaders can direct some of the activities of group members, i.e., the group members are compelled or
are willing to obey most of the leader's directions. The group members cannot similarly direct the
leader's activities, though they will obviously affect those activities in a number of ways.
4. Leadership is a process of Influence: Leadership implies that leaders can influence their followers
or subordinates in addition to being able to give their followers or subordinates legitimate directions.
5. Leadership is the function of stimulation: Leadership is the function of motivating people to strive
willingly to attain organizational objectives. A successful leader allows his subordinates (followers) to
have their individual goals set up by themselves in such a way that they do not conflict with the
organizational objectives.
6. A Leader ensures absolute justice: A leader must be objective and impartial. He should not follow
unfair practices like favoritisms and nepotism. He must show fair play and absolute justice in all his
decisions and actions.

FUNCTIONS OF A LEADER:-
1. To take the initiative: A leader initiates all the measures that are necessary for the purpose of
ensuring the health and progress of the undertaking in a competitive economy. He should not expect
others to guide or direct him. He should lay down the aims and objectives, commence their
implementation and see that the goals are achieved according the predetermined targets.
2. He identifies group goals: A leader must always help the group identify and attain their goals. Thus,
a leader is a goal setter.
3. He represents the organization: A leader represents the organization and its purpose, ideals,
philosophy and problems to those working for it and to the outside world .In other words, leaders is true
representative of the entire organization.
4. He acts as a arbitrator: When groups experience internal difference, whether based on emotional or
intellectual clashes, a leader can often resolve the differences. He acts as an arbitrator to prevent serious
group difference.
5. To assign reasons for his action: It is a delicate task of leaders to assigns reason to his every
command. He has to instruct things in such a way that they are intelligible to all concerned and their co-
operation is readily forthcoming
6. To interpret: He interprets the objectives of the organization and the means to be followed to achieve
them; he appraises hi followers, convinces them, and creates confidence among them.
7. To guide and direct: It is the primary function of the leader to guide and direct the organization. He
should issue the necessary instructions and see that they are properly communicated.
8. To encourage team work: A leader must try to win the confidence of his subordinates. He must act
like the capital of a team.
9. He manages the organization: Last, but not the least, he administers the undertaking by arranging
for the forecast, planning, organization, direction, coordination and control of its activities

TYPE OF LEADERS
The different types of leadership styles are:-
1. Autocratic or task Management Leadership,
2. Participative or democratic leadership,
3. Laissez faire or Free-rein Leadership, and
4. Paternalistic Leadership
.
1. Autocratic or Task Management Leadership
The autocratic Leader gives order which he insists shall be obeyed. He determines polices for the group
without consulting them, and does not give detailed information about future plans, but simply tells the
group what steps they must take.
In other words, an autocratic leader is one who centralizes the authority in himself and does not
delegate authority to his subordinates. He is dictatorial by nature, and has no regard for the subordinates.
He drives himself and his subordinates with one thought uppermost in his mind- action must produce
results. An autocratic close the entire planning and cells upon his subordinates to execute what he has
planned.
Types of autocratic leadership
a) Strict autocratic leaders: A strict autocratic relies on negative influence and givesorders which the
subordinates must accept. He may also use his power to disperserewards to his group.
b) Benevolent Autocrat: The benevolent is effected in getting high productivity in manysituations and
he can develop effective human relationship. His motivational style isusually positive.
c) Manipulative Autocrat: A manipulative autocratic leader is one who makes the subordinates feel
that they are participating in decision making process even though he has already taken the decision.

2. Participative or Democratic Leadership

A democratic leader is one who consults and invites his subordinates to participate in the
decision making process. He gives orders only after consulting the group; sees to it that polices are
worked out in group decisions and with the acceptance of group. The manager largely avoids the use of
power to get a job done.
He behaves that a desired organizational behaviour can be obtained if employees' needs and
wants are satisfied. Therefore, he not only issues orders but interprets them and sees to it that the
employees have the necessary skill and tool to carry out their assignments. He assigns a fair work lead
to his personal and recognizes the job that is well done; there is a team approach to the attainment of
organizational goals. He recognizes human value for greater concern for his subordinates.
3. Laissez Faire or Free-rein Leadership
A free-rein leader does not lead, but leaves the group entirely to itself. The leader avoids using
power and interest the decision making authority to his subordinates. He does not direct his subordinates
and there is complete freedom for the subordinates. Group of members work themselves and provide
their own motivation. The manager exits as a contact man with outsiders to bring for his group the
information and resources it needs to accomplish its job.

4. Paternalistic Leadership
Under this type of leadership, the leader assumes that his function is fatherly. His attitudes that
of treating the relationship between the leader and his groups that of family with the leader as the head
of the family. The leader works to help to work to help, guide, protect and keep his followers happily
working together as members of a family.
He provides them with good working condition, fringe benefits and employee services. It is said
that employees under such leadership well work harder out of gratitude.

MANAGERIAL COMMUNICATION

SCOPE OF COMMUNICATION

Communication has unlimited scope. The scope of Communication can be understood under two
headings:
1. External Dimension
2. Internal Dimension
External Dimension: External dimension regarding communication have a bigger arena .It includes
building relations with external agencies and stakeholders. Effective communication can establish a
healthy external organizational climate in which there is trust, cooperation, collaboration, innovation
and commitment. Self involvement of people in various activities is inculcated to create vibrant and
congenial atmosphere. Likewise, depending upon how an organization looks after its advertisements,
publicity and public relations function, public image and goodwill of the organization is created through
effective communication
Internal Dimension: A lot of communication takes place within the organization. In an organization,
starting from formulating corporate vision, mission policy objectives, taking goals to their
implementation, communication plays a significant role. For formulating policies, top management
needs to obtain information and views of the middle and lower level management through various
forms. Especially for the appropriate implementation of the top management policies and plans, it is
only communication which facilitates proper understanding of the policies in the right spirit. Public
relations, as a management function, solely depend on right communication.

IMPORTANCE AND FUNCTIONS OF COMMUNICATION

The importance of communication can be judged from the functions performed by it.
Following are the important functions of communication:
1. Information Sharing: The main purpose of communication is to transmit information for a source to
target individuals or groups. Various type of information is transmitted in the organization: policies and
rules, and changes and development in the organization etc. There may be need for fast diffusion of
some information in the organization, e.g., special rewards and awards given, settlements with the
union,
and major changes in the organization.
2. Feedback: There is a need to give feedback to the employees on their achievements, to the
department on their performance, and to the higher management on the fulfillment of goals; and,
difficulties encountered in the communication of feedback helps in taking corrective measures and
making necessary adjustments, and it motivates people in developing challenging and realistic plans.
3. Influence: information is power. One purpose of communication is to influence people. The manager
communicates to create a good environment, right attitudes, and congenial working relationship. All
these are examples of influencing.
4. Problem-solving: In many cases communications aim to solving problems. Communication between
the management and the unions on some issues (negotiation) is aimed at finding solutions for a problem
and to evolve a consensus.
5. Assists in decision-making: The most important function of every manager is decision-making. In
order to mark accurate and appropriate decision, a manager needs to obtain information available in
various channels of communication.
6. Facilitating change: The effectiveness of a change introduced in an organization depends to a large
extent on the clarity and spontaneity of the communication. Communication between the managers and
employees helps in recognizing the difficulties in the planned change, and in taking corrective action.
7. Group building: Communication helps in building relationships. If communication breaks down the
group may disintegrate. Communication provides the necessary lubrication for the proper functioning of
a group.
8. Gate keeping: Communication helps to build linkages of the organization with the outside world.
The organization can use its environment to increase its effectiveness.
9. Conveying the right message: The main object of communication is to convey the right message to
the right person, i.e., to the person for whom it is meant. The message conveyed should be well
understood and accepted by the receiver in the right perspective. In other words, it should carry the same
meaning which has been conveyed so that it may be translated in to action effectively.
10. Helps in Co-ordination of Effort: Communication is an effective tool for co-coordinating the
activities of different persons engaged in running a business. Co-ordination without communication is a
remote possibility.

Classify communication:-

1. Intrapersonal Communication: It is talking to oneself in one’s own mind. Examples are soliloquies
or asides in dramatic works.
2. Interpersonal Communication: It is the exchange of messages between two persons. For example, a
conversation, dialogue, or an interview in which two persons interact (others may also be present as
audience). An author communicates interpersonally with his reader, who is always present as a silent
audience in the author’s mind while he writes. A letter too is an example of interpersonal
communication between the writer and the person to whom it is written.
3. Group Communication: It can be among small or large groups, like an organization, club or
classroom, in which all individuals retain their individual identity.
4. Mass Communication: It occurs when the message is sent to large groups of people, for example, by
newspaper, radio, or television. In this process, each person becomes a faceless individual with almost
no opportunity for personal response or feedback.

Communication can also be classified on the basis of the medium employed:

1. Verbal Communication: It means communicating with words, written or spoken. Verbal

communication consists of speaking, listening, writing, reading, and thinking. It may further be
classified as Oral or Written Communication.
2. Non-verbal communication: It includes using of pictures, signs, gestures, and facial expressions for
exchanging information between persons. It is done through sign language, action language, or object
language. Non-verbal communication flows through all acts of speaking or writing. It is a wordless
message conveyed through gestures (sign), movements (action language), and object language
(pictures/clothes)and so on. Further non-verbal communication can be identified by personal space
3. Meta Communication: Here the speaker’s choice of words unintentionally communicates something
more than what the actual words state. For example, a flattering remark like “I’ve never seen you so
smartly dressed” could also mean that the regular attire of the listener needed improvement.
4. Formal Communication: A formal channel of communication can be defined asa means of
communication that is formally controlled by managers or people occupying positions in an
organization. The communication flows through formal channels, that is, officially recognized positions
along the line in the organization. This ensures that the information flows orderly, timely, and
accurately. Any information, decision, memo, reminder etc. will follow this path.
5. Informal Communication: Side by side with the formal channel of communication every
organization has an equally effective channel of communication that is the informal channel. It is not
officially sanctioned, and quite often it is even discouraged or looked down upon. But, then, it is very
much there, and has been given the name ‘grapevine’ precisely because it runs in all directions-
horizontal, vertical, diagonal. As the management experts put it, “it flows around water coolers, down
hallways, through lunch rooms, and wherever people get together in groups”.
6. Downward Communication: The Communication that flows from Top to Bottom is known as
downward communication. Any organization has an inbuilt hierarchical system, and in that, in the first
instance, communication invariably flows downwards.
7 .Upward Communication: The Communication that flows from bottom to top, which is from lower
hierarchical level to higher level, is called Upward Communication.
The main function of upward communication is to supply information to the upper levels about what is
happening at the lower levels. It is just the reverse of the previous dimension
8. Lateral Communication: When communication takes place between two or more persons who are
subordinates working under the same person, or those who are working on the same level, it is called
lateral or horizontal communication. A good example of this kind of communication is that between
functional managers. It is necessary for the reviewing of the activities assigned to various subordinates
having identical positions
9. Diagonal Communication: Diagonal or Crosswise communication includes flow of information
among persons at different levels who have no direct reporting relationships. As an example, the
Communication between the Training Supervisor and Marketing Manager, regarding the Training of a
few employees of Marketing Department, is Diagonal Communication. This kind of communication is
used to speed up information flow, to improve understanding, and to coordinate efforts for the
achievement of organization.

The objectives of business communication would include the following:

To inform: This is the foremost objective of communication. Information is power. The information
needs within and outside the organization can be met through communication
To persuade: Businesses work through persuation. It is important to persuade employees to work
efficiently, to persuade customers to buy our product and so on. The objective of communication may be
to persuade.
To educate: To disseminate knowledge and develop skills and attitudes among people working in the
organization may be another objective of communication.
To train: Communication is an integral part of any training programme. Training is required to achieve
proficiency in specific skills. Instruction, demonstration, practice and discussion during training require
communication as an integral part.
To motivate: High level of morale and motivation are a must to ensure high levels of productivity and
efficiency on a sustainable basis. Communication provides a means to keep motivation levels high.
To integrate: Large business organizations have different business units,departments and territorial
divisions, pursuing different targets. Communication provides the means for an integrated approach in
pursuing organizational goals.
To relate: Good business relations are a must for the continued success of any business organsiation.
Communication provides the means for building and nurturing mutually beneficial relationships

BARRIERS TO COMMUNICATION:-
After studying this lesson, you should be able to:
 Realise the Existence of Pitfalls or Barriers in Communication
 Know the principal barriers in Communication
 Understand some basic facts about Language, Personality , Relationship, Culture,etc, which act
as Barriers to Communication
 Know how to overcome the Barriers and make Communication effective

1. Semantic barriers: Different people assign different meanings to one specific message. This is due to
the problems with meaning, significance, and the sending and reception of the meaning and content of
the massage.
2. Organizational barriers: This type of barrier develops due to the problems with physical distance
between members with respect to their functional specialization of tasks, power, authority and status
relationship, values held, and ownership of information.
3. Interpersonal barriers: These barriers also develop in the process of communication. They are based
upon the relationships, values held, and attitudes of the participants in the process of communication.
4. Individual barriers: These are also called psycho-sociological barriers. The problem of this barrier
arises due to differences in individual competencies to think and act, which would include physical
aliments or handicaps. It is also because of individual skills in receiving and transmitting information,
which would include poor listening and improper reading skills and adverse psychological conditions.
5. Cross Cultural (geographic) barriers: Culture is a shared set of values and attributes of a group. The
communication barriers are also seen because of time, geographic locations, and the effects of time upon
reception of the message and other cross cultural factors.
6. Physical Barriers/Channel and media barriers: The effectiveness and accuracy of communication is
also affected by the physical barriers like distance, noise or channel and the media used in the process.
In this category, problems that confront the media used in the process. In this category, problems that
confront the issue of how best to communicate a message are included. (For example, it is best to
transmit a massage face to face rather than in writing).
7. Technological barriers: They are barriers which arise due to technological advancements in the field
of communication. Technology generates lot of information, which is beyond the capacity of the
recipient. Further, the media advancements on account of technological process increase the barriers.
The ideas and massage have to reach from the transmitter to receive in the same sense. If it does not
happen, it is on account of barriers in communication.
Semantic Barriers
(a) Words having similar pronunciation but multiple meaning: Sometimes, in our conversation we use
several words, which have the same pronunciation but are having many meanings. The words may be
homophones and thus there may arise difficulty in getting to the right meaning of the message.
(b) Badly expressed message: Lack of clarity and precision make the message badly expressed. Lack of
coherence, awkward sentence structure, jargons etc. Are common faults, which lead to such messages?
(c) Wrong interpretation: Whenever one interprets a symbol, his understanding may differ with others.
The Hindi word 'kaka' means uncle in one part of the country but small boy in another part of the
country. As inferences can give a wrong signal, more information may be sought to clarify doubts.
(d) Unqualified assumptions: Sometimes, the sender may send information is not clarified to the
receiver, as he does not understand the assumptions clearly.
(e) Technical Language: When technical language is used in the communication process, it creates
barriers in understanding the message in the same sense and in the same spirit. When technical jargons
or specialist languages are used in the communication and conversation process, they create tension,
confusion and misunderstanding between the sender and the receiver.

Organizational Barriers:
(a) Organization culture and climate: In every organization, there exists a unique culture and climate.
The climate and culture of an organization ultimately influence the freedom, thrust and interaction
pattern among people in an organization. As people working over there take time to adapt themselves,
bottlenecks in communication are inevitable.
(b) Organizational rules and regulations: The rules and regulations of the organization vary widely
from one organization to another. They may be so rigid that they may influence the flow of information
in a wrong direction.
(c) Status relationships: The status, power and position relationship acts as the hurdle in the
effectiveness of communications. Individuals may not be able to say what they wish to say because of
their fear for the position and power of the other party in the communication process.
(d) Complexity in organizational structure: The complex hierarchical structure of the organization
like too tall or too much of divisionalisation of the organization may not facilitate the free flow of
communication.
(e) Inadequate facilities and opportunity: The organization may not have adequate communication
facilities, equipment and mechanisms. Open door employment system, conferences, seminars and
meetings being held in the organization also influence it.
(f) Lack of cooperation between superior and subordinate: There may not be proper cooperation
between the superior and subordinate for various personal or organizational relationships, which may
held to improper communication in an organization.
 TEAM WORK:-

The process of working collaboratively with a group of people in order to achieve a goal. Teamwork is
often a crucial part of a business, as it is often necessary for colleagues to work well together, trying
their best in any circumstance. Teamwork means that people will try to cooperate, using their individual
skills and providing constructive feedback, despite any personal conflict between individuals.

“Definition and Example of Teamwork. People in the workplace perform teamwork when workers
combine their individual skills in pursuit of a goal. The goal is generally a product of the company's
mission.”

What Is a Team?
A widely understood and interesting concept in teamwork is:
T - Together
E - Everyone
A - Achieves
M - More

Importance of teamwork:-

1. Teamwork is efficient work

A key pillar of the industrial revolution, a foundation of modern civilization, was the
division of labour. And that’s just another way to say teamwork.

Employee teamwork enables your workforce to:

 Split difficult tasks into simpler ones, then work together to complete them faster

 Develop specialized skills, so that the best person for each task can do it better and faster

In a nutshell, teams make work more efficient. That can lead to better productivity, reduced costs,
greater profitability, and many other benefits.

2. Teams self-monitor
When one person does a task alone, they have total autonomy — but if that person starts to
work slowly or ineffectively, who will set them straight? Nobody, that’s who.In teamwork, many
people have responsibility for the same goal. Most significantly, teammates observe and depend on
the quality of each other’s work. When one team member’s performance dips, the others have the
knowledge and motivation to help them improve. Without management intervention, effective
teams can often regulate their own performance.

3. Teams innovate faster

For any task or problem, there are usually countless solutions. When one employee tackles a
project, they might be able to think of a few different ideas given time. But when a team tackles a
problem, the project benefits from multiple perspectives, skillsets, and experiences all at once. A
team approach can therefore lead to faster, deeper innovation.

4. Teammates learn from each other

Imagine you have a workforce of 10 designers all working in separate rooms. Each designer works
to their own strengths and suffers from their own weaknesses, with nobody to teach or learn from.

Now put them all in the same room, on the same project. Working together, they’ll soon learn each
other’s strengths and correct each other’s mistakes. And everyone’s performance will improve.

5. Teamwork can create healthy competition

But what happens to that same team of 10 designers a year down the line, when they’ve learnt all
they can from each other? They’ll soon start to compete with one another, to prove their ability and
chase promotion or other incentives within your organisation. Provided the right challenge and
rewards are in place to promote competition, team performance can keep improving.

6. Teamwork promotes strong working relationships

Finally, when employees work together and succeed as a team, they form bonds that can turn into
trust and friendship. It’s human nature. And it’s great for your organisation, since employees who
like and trust each other are more likely to:

 Communicate well with each other

 Support and motivate each other

 Work cooperatively

It’s little wonder successful organizations value teamwork so highly.

 Creativity in Decision-Making

Meaning of Creativity:-

Creativity means creating something new. In the context of business, it means creation of new ideas,
new method or new product/service.

Creativity is the “cognitive process of developing an idea, concept, commodity, or discovery that is
viewed as novel by its creator or a target audience.” — Max H. Bazerman

“Creativity is not a quality of a person; it is a quality of ideas, of behaviours or products.” — Teresa M.

Amabile

“Creativity is the process of bringing something new into being. Creativity requires passion and
commitment. It brings to our awareness what was previously hidden and points to new life. The
experience is one of heightened consciousness: ecstasy.”

Creativity improves the quality of decisions. It increases the scope of alternatives to be considered
for problem-solving. It is essential to deal with problems which are no-repetitive and novel as such
problems cannot be solved by pre-defined solutions. They require imaginative thinking for their
solution. As no problem has a single solution, creativity helps in generating new ideas that help in
taking the final decision

The creative approach to problem solving assumes the following:

1. There is always a better way of doing things. Past precedents, habits and conventional ways of doing
things cannot always guide the future courses of action.

2. Problems have diverse perspectives. Each perspective should be probed, questions should be raised
and answers should be found.

3. Things should not be taken for granted. Problems should be redefined and obvious facts should be
challenged.

4. There is always scope for improvement. Managers should move from traditional ways to modern,
computer-aided ways of managing organisations.

5. Managers should not be afraid of failures. Initial failures will lead to ultimate success.

The creativity process requires:

1. Convergent thinking,

2. Divergent thinking.
In convergent thinking, the problem is solved according to pre-defined method or course of action. It
pre-supposes solution to the problem and rationally moves towards that solution. Divergent thinking
does not solve the problem in a pre-defined way. It analyses different aspects of the problem, views it in
different ways and searches for alternative courses of action to solve that problem.

Components of Creativity:
Teresa M. Amabile enumerates three components of creativity.
1. Domain skills:
A manager can be creative in decision-making if he is theoretically and conceptually aware of the
problem and its relevance to the environmental factors. In other words, he must have knowledge of the
problem area and also the talent and ability to solve that problem. This is known as domain skill.

2. Creativity skills:
The skills to do creative things; to think of new ways of doing the work, to think of new avenues of
marketing are the creative skills that help to carry out the decision-making process.

3. Task motivation:
Managers do not perform organisational tasks for earning only financial rewards. Money or financial
considerations are not the only motives for taking up a novel task. Ego satisfaction and morale boost up
are also the considerations that lead to creativity in decision-making.

Process of Creativity:
The process of creativity consists of the following steps:

1. Problem finding or sensing:

The entrepreneur faces a problem and selects to work on it. He feels curious to solve that problem. He
thoroughly familiarizes himself with the problem, analyses its importance for the business and its
relationship with other segments of the business.

This helps in identification of the problem as close as possible to reality so that alternatives can be
generated which analyse the problem and provide solutions in the right direction. Curiosity leads to
development of ideas.

2. Preparation:
Once the problem is identified, the decision-maker concentrates on the problem and starts working on it.
He collects information, analyses how others are using it and formulates hypotheses to work on.
Information may be collected on the basis of past experience, through experience of others and also
through study of new researches and innovations done in that field. If he wants to introduce a new
product in the market, he studies the consumer buying behaviour before converting that idea into reality.

3. Gestation or Incubation:
If, in the preparation stage, the decision-maker is not able to arrive at creative solution to the problem,
he moves away from conscious deliberation to sub-conscious development of ideas. He moves away
from the problem and engages in other routine activities while still thinking of the problem in his sub-
conscious mind.

He thinks over collected information and makes decisions in his sub-conscious mind. He appears to be
idle but actually he is trying to correlate what runs in his sub-conscious mind with the happenings
around. As lot of information and ideas are already stored in his mind, sub-consciously they are
combined and related to each other and help in generation of new ideas important for solving the
problem.

4. Insight or Illumination:
He thinks of all possible solutions at all times. He thinks of ideas while eating, walking or going to
sleep. These ideas are put in writing so that he does not forget them in his conscious mind. In this
process, there is flash of ideas in his mind.

These ideas come and go at the speed of light, some of which are spontaneously rejected while others
are accepted for further analysis. Sometimes, it results in ideas which the decision maker may not have
even thought of in his conscious mind.

Social gatherings and meetings may also result in new ideas. Compaq computer company was found as
a result of social encounters. Rough sketch of portable computer was drawn on a paper napkin by three
friends over lunch which turned into setting up of Compaq computer company.

5. Verification and application:

The entrepreneur proves by logic or experiment that the idea can solve the problem and, therefore, can
be implemented. He tests the ideas empirically through mathematical models and experimentation. If it
is feasible, he applies it to solve the problem. Verification is an essential step in the creativity process
because an idea that cannot be implemented is of no use howsoever good it may be.

Climate for Creativity:

Managers create a climate that encourages creativity in the following ways:
1. Recognise the need for change:
Though people are generally resistant to change, accepting the need for change is necessary to promote
creativity. People must feel that they will be benefitted by change.

2. Encourage new ideas:

The manager should welcome new ideas. Listening to new ideas and implementing the profitable ones
encourages a creative climate in the organisation.

3. Interaction:
Interaction with people within and outside the enterprise encourages exchange of useful information and
generation of new ideas.

4. Tolerate failure:
New ideas may prove to be failures. People should not get disheartened. They should consider time,
money and energy in ideas that have failed as investment for bright future prospects.
5. Clear objectives:
Managers must have purpose for creativity. They should know what ideas to be tried, when and for
what. Clear objectives will optimize the use of time, energy and money.

What is Innovation?
Innovation is the implementation of a new or significantly improved product, service or process that creates value
for business, government or society.

Some people say creativity has nothing to do with innovation— that innovation is a discipline, implying that
creativity is not. Well, I disagree. Creativity is also a discipline and a crucial part of the innovation equation.
There is no innovation without creativity. The key metric in both creativity and innovation is value creation.

Brainstorming:-
Brainstorming is a method of effectively using brains to storm the problem. The goal is to
develop as many ideas as possible in the shortest possible time to solve a predefined problem. It is not so
much about going into detail about the ideas or choosing one of them.

Application of Brainstorming
Brainstorming is an instrument that is applied in many organizations in order to generate as
many ideas as possible within a team. The emphasis is only on the quantity of the presented ideas and
not so much on the quality. For the sake of effectiveness, it is good to have the group consist of at least
five and up to fifteen people. The composition of the group also needs proper attention. It is important
that there is a variety of knowledge, experience and backgrounds, which will allow all participants to
provide a contribution from different perspectives.

Below you will find several more rules of the game.

1. Postpone judgement – all ideas are good, are accepted and written down; criticism can wait until
later;
2. Focus on quantity – strive to gather as many ideas as possible, every idea is welcome;
3. Freewheel – feel free to jump from one idea to the next and think out loud;
4. Hitchhike – hitchhike on another person’s ideas and apply synergy; complement each other by
continuing to work on what the other says and working towards surprising solutions.
 Time Management

An individual should understand the value of time for him to succeed in all aspects of life.
People who waste time are the ones who fail to create an identity of their own.

What is Time Management?

Time Management refers to managing time effectively so that the right time is allocated to the
right activity. Effective time management allows individuals to assign specific time slots to activities as
per their importance. Time Management refers to making the best use of time as time is always limited.

Ask yourself which activity is more important and how much time should be allocated to the same?
Know which work should be done earlier and which can be done a little later.

Time Management plays a very important role not only in organizations but also in our personal lives.

Time Management includes:

 Effective Planning
 Setting goals and objectives
 Setting deadlines
 Delegation of responsibilities
 Prioritizing activities as per their importance
 Spending the right time on the right activity
 Effective Planning

Plan your day well in advance. Prepare a To Do List or a “TASK PLAN”. Jot down the important
activities that need to be done in a single day against the time that should be allocated to each activity.
High Priority work should come on top followed by those which do not need much of your importance
at the moment. Complete pending tasks one by one. Do not begin fresh work unless you have finished
your previous task. Tick the ones you have already completed. Ensure you finish the tasks within the
stipulated time frame.

 Setting Goals and Objectives

Working without goals and targets in an organization would be similar to a situation where the captain
of the ship loses his way in the sea. Yes, you would be lost. Set targets for yourself and make sure they
are realistic ones and achievable.
 Setting Deadlines

Set deadlines for yourself and strive hard to complete tasks ahead of the deadlines. Do not wait for your
superiors to ask you every time. Learn to take ownership of work. One person who can best set the
deadlines is you yourself. Ask yourself how much time needs to be devoted to a particular task and for
how many days. Use a planner to mark the important dates against the set deadlines.

 Delegation of Responsibilities

Learn to say “NO” at workplace. Don’t do everything on your own. There are other people as well. One
should not accept something which he knows is difficult for him. The roles and responsibilities must be
delegated as per interest and specialization of employees for them to finish tasks within deadlines. A
person who does not have knowledge about something needs more time than someone who knows the
work well.

 Prioritizing Tasks

Prioritize the tasks as per their importance and urgency. Know the difference between important and
urgent work. Identify which tasks should be done within a day, which all should be done within a month
and so on. Tasks which are most important should be done earlier.

 Spending the right time on right activity

Develop the habit of doing the right thing at the right time. Work done at the wrong time is not of much
use. Don’t waste a complete day on something which can be done in an hour or so. Also keep some time
separate for your personal calls or checking updates on Facebook or Twitter. After all human being is
not a machine.

For Effective Time Management one needs to be:

Organized - Avoid keeping stacks of file and heaps of paper at your workstation. Throw what all you
don’t need. Put important documents in folders. Keep the files in their respective drawers with labels on
top of each file. It saves time which goes on unnecessary searching.

Don’t misuse time - Do not kill time by loitering or gossiping around. Concentrate on your work and
finish assignments on time. Remember your organization is not paying you for playing games on
computer or peeping into other’s cubicles. First complete your work and then do whatever you feel like
doing. Don’t wait till the last moment.
 Performance Appraisal

Performance Appraisal is the systematic evaluation of the performance of employees and to

understand the abilities of a person for further growth and development. Performance appraisal is
generally done in systematic ways which are as follows:

1. The supervisors measure the pay of employees and compare it with targets and plans.
2. The supervisor analyses the factors behind work performances of employees.
3. The employers are in position to guide the employees for a better performance.

Objectives of Performance Appraisal

Performance Appraisal can be done with following objectives in mind:

1. To maintain records in order to determine compensation packages, wage structure, salaries

raises, etc.
2. To identify the strengths and weaknesses of employees to place right men on right job.
3. To maintain and assess the potential present in a person for further growth and development.
4. To provide a feedback to employees regarding their performance and related status.
5. To provide a feedback to employees regarding their performance and related status.
6. It serves as a basis for influencing working habits of the employees.
7. To review and retain the promotional and other training programmes.

Relationship of Performance Appraisal and Job Analysis

Performance Appraisal relates to job analysis, in the sense that job analysis establishes job requirement,
which converts the analysis into standard, on which performance is judged, and results in defining the
basis for performance appraisal.
Steps Involved in Process of Performance Appraisal

The six steps involved in process of performance appraisal are as follows: 1. Establish
Performance Standards 2. Communicate Performance Expectation to Employee 3. Measure Actual
Performance 4. Compare Actual Performance with Standards 5. Discuss the Appraisal with the
Employee 6. Initiate Corrective Actions.

1. Establish Performance Standards:

The appraisal process begins with the establishment of per-formance standards. The managers must
determine what outputs, accomplishments and skills will be evaluated. These standards should have
evolved out of job analysis and job descriptions.

These performance standards should also be clear and objective to be understood and measured.
Standards should not be expressed in an articulated or vague manner such as “a good job” or “a full
day’s work” as these vague phrases tells nothing.

2. Communicate Performance Expectations to Employees:

Once the performance standards are established, this need to be communicated to the respective
employees so that they come to know what is expected of them. Past experience indicates that not
communicating standards to employ-ees compounds the appraisal problem.
Here, it must be noted that mere transference of information (relating to performance standards, for
example) from the manager to the employees is not communi-cation It becomes communication only
when the transference of information has taken place and has been received and understood by the
employees’.

The feedback from the employees on the standards communicated to them must be obtained. If required,
the standards may be modified or revised in the light of feedback obtained from the employees. It is
important to note that communica-tion is a two-way street.

3. Measure Actual Performance:

This is the third step involved in the appraisal process. In this stage, the actual performance of the
employee is measured on the basis of information available from various sources such as personal
observation, statistical reports, oral reports, and written reports.

Needless to mention, the evaluator’s feelings should not influence the performance measurement of the
employee. Measurement must be objective based on facts and findings. This is because what we
measure is more critical and important to the evaluation process than how we measure.

4. Compare Actual Performance with Standards:

In this stage, the actual performance is compared with the predetermined standards. Such a comparison
may reveal the deviation between standard performance and actual performance and will enable the
evaluator to proceed to the fifth step in the process, i.e., the discussion of the appraisal with the
concerned employees.

5. Discuss the Appraisal with the Employee:

The fifth step in the appraisal process is to communi-cate to and discuss with the employees the results
of the appraisal. This is, in fact, one of the most challenging tasks the manager’s face to present an
accurate appraisal to the employees and then make them accept the appraisal in a constructive manner.

A discussion on appraisal enables employees to know their strengths and weaknesses. This has, in turn,
impact on their future performance. Yes, the impact may be positive or negative depending upon how
the appraisal is presented and discussed with the employees.

6. Initiate Corrective Action:

The final step in the appraisal process is the initiation of corrective action when it is necessary. The
areas needing improvement are identified and then, the measures to correct or improve the performance
are identified and initiated.
The corrective action can be of two types. One is immediate and deals predominantly with symptoms.
This action is often called as “putting out fires.” The other is basic and delves into causes of deviations
and seeks to adjust the difference permanently.

This type of action involves time to analyse deviations. Hence, managers often opt for the immediate
action, or say, “put out fires”. Training, coaching, counselling, etc. is the common examples of
corrective actions that managers initiate to improve the employee performance.

Advantages of Performance Appraisal

It is said that performance appraisal is an investment for the company which can be justified by
following advantages:

1.Promotion: Performance Appraisal helps the supervisors to chalk out the promotion programmes for
efficient employees. In this regards, inefficient workers can be dismissed or demoted in case.
2.Compensation: Performance Appraisal helps in chalking out compensation packages for employees.
Merit rating is possible through performance appraisal. Performance Appraisal tries to give worth to a
performance. Compensation packages which include bonus, high salary rates, extra benefits,
allowances and pre-requisites are dependent on performance appraisal. The criteria should be merit
rather than seniority.
3.Employees Development: The systematic procedure of performance appraisal helps the supervisors
to frame training policies and programmes. It helps to analyses strengths and weaknesses of
employees so that new jobs can be designed for efficient employees. It also helps in framing future
development programmes.
4.Selection Validation: Performance Appraisal helps the supervisors to understand the validity and
importance of the selection procedure. The supervisors come to know the validity and thereby the
strengths and weaknesses of selection procedure. Future changes in selection methods can be made in
this regard.
5.Communication: For an organization, effective communication between employees and employers is
very important.

Through performance appraisal, communication can be sought for in the following ways:

a. Through performance appraisal, the employers can understand and accept skills of subordinates.
b.The subordinates can also understand and create a trust and confidence in superiors.
c. It also helps in maintaining cordial and congenial labour management relationship.
d.It develops the spirit of work and boosts the morale of employees.
6.Motivation: Performance appraisal serves as a motivation tool. Through evaluating performance of
employees, a person’s efficiency can be determined if the targets are achieved. This very well
motivates a person for better job and helps him to improve his performance in the future.
 Career Planning and Development
OBJECTIVES
Objectives:-
OBJOBJECTIVESCTIVESES
1. Explain the relationship between continuous learning, managing change, and career planning and
development.
2. Explore individual and group differences in career interests, needs, and values.
3. Develop a personal five-year career plan.
4. Gain an understanding of ways organizations can assist individuals in pursuing their career goals.
5. Evaluate the implications of various career management activities for organizational effectiveness.
6. Gain an appreciation of emerging issues in the management of careers.

The Career Planning Process

Career planning is the process through which individuals identify and implement steps to attain their
career goals.

There are five basic steps in the career planning process:

(1) Self-assessment,
(2) Investigating career opportunities
(3) Goal setting,
(4) Action planning, and
(5) Evaluation.

1. Self-Assessment

Examine personal interests, skills, values, and abilities. Opportunity Exploration Seek
information on available job opportunities from family, friends, online job boards, job fairs. Examine
the skills and abilities required.

Goal Setting/Reality Checking

Decide which job/occupational opportunities fit both personal interests and skills/abilities. Set
specific target job objectives for a defined time period.

Action Planning

Outline all steps needed to reach a specific career goal—formal training, internships, job searchstrategy
development, network building, further career exploration, etc.

Evaluation

Review progress on steps in the action plan, realism of goals, and accuracy/currency of self-
assessment. Revise career plan based on new information.
Protean Careers

The goal: psychological success.

1. The career is managed by the person, not the organization.
2. The career is a lifelong series of identity changes and continuous learning.
3. “Career age” counts, not chronological age.
4. The organization provides
 Work challenges
 Relationships
5. Profile for success
 From know-how . . . to learn-how.
 From job security . . . to employability.
 From organizational careers . . . to protean careers.
 From work self . . . to whole self.

Douglas Hall calls these new careers protean careers because individuals can change their career’s
shape from time to time, adjusting it to fit changes in both the person and the environment.

Spiral and Transitory Careers

A combination of individual and environmental forces thus appear to be shaping

today’semerging career patterns. From an individual perspective, Brousseau and colleagues
relatedifferences in underlying career motives to differences in the frequency and direction ofpeople’s
movements within and across different kinds of work.8 Those who value personal development and
creativity, for example, are more likely to seek out cross-functional moves than are those who seek
power and achievement through upward hierarchical promotions. But Brousseau et al. also note a trend
over time, with today’s organizations becoming more receptive to spiral or transitory career patterns
than to the linear or expert patterns that predominated in years gone by. The reasons can be traced to the
organization’s external and internal environment. Stable external and highly structured internal
environments favored individuals who pursued linear or expert careers.

The new need to develop highly qualified multinational managers has led to several new principles
of international career management:
1. Selection should be made from among currently successful employees whose careers will benefit and
who are likely to contribute gained knowledge and experience to the organization.
2. Individuals selected should be developed specifically for international assignment. Pre departure
training should focus not only on the technical expertise necessary to complete the assignment but also
on in-depth training for both the employee and the employee’s family regarding cross-cultural
differences in social life, political atmosphere, religion, and language.
3. Career planning is essential to show how the international route will expand the potential of the
employee. Presenting the big picture of where the expatriate cycle will continue beyond the actual
assignment is critical to success and can relieve feelings of abandonment.
4. Ongoing communication with expatriates is necessary to keep the individual up-to-date on home-
country policies, projects, plans, and staffing changes. This keeps the manager in tune with the
organization and aids in reentry.
5. Reentry jobs should use the skills and experience the individual has acquired during the assignment.
This can be done by assigning previous expatriates as mentors or by providing a forum for sharing the
experience.
6. Training for home-country managers should be an ongoing function. This training can teach an
awareness of the value of international experience and the ways it can be utilized within the
organization.

Difference between Objectives and Policies

Objective:
 Objective is the goals to be achieved.

 Objectives are the foundations of a business. A business without objective is like a directionless
passenger who does not know where to go.

 Objectives decide the purpose of an organization. They are the path setters for other actions.

 Objectives are set at top level of management.

Policies:

 Policies are the broadways of achieving business objectives.

 Policies provide only the means of reaching goals. These may be essential but not indispensable.

 Policies are not of primary importance. These only provide guideline for reaching the objectives.

 Policies are determinant at all levels of management.

 Question Bank

UNIT IV - MANAGEMENT OF HUMAN AT WORK

Part-A Multiple Choice Questions

1. The motivation theory was developed by

a) Henry Fayol b) Maslow c) Taylor d) Taguchi

2. The process of increasing the knowledge and skills of people for a definite purpose is called
a) Communicating b) Appraising c) Training d) Motivating

3. When ratings are collected from superior, customer and peers, it is called
a) 180° feedback b) 90° feedback c) 360° feedback d) Negative feedback

4. The word-------------- denotes a function, a task, a discipline

a) Management b) Motivation c) Leadership d) Controlling

5. Persons who are able to influence others and who possess managerial authority axe termed as
a) Manager b) organizer c) Leader d) Visionaries

6. Management art is the application of

a) Principles b) Science c) Operational activity d) Discipline

7. A statement that sets out what the organization wishes to achieve in the long-tem is referred to
as
a) Vision b) Mission c) Strategic context d) Value

8. Managers requires efficiency, intelligence and_______

a) Strength b) Ability c) Knowledge d) Unity

9. The process of influencing people so that they will strive willingly and enthusiastically towards
the achievement of group’s goals is called
a) Communication b) Creativity c) Leadership d) Time management
10. Which one of the following is not a traditional method?
a. Assessment centre b. Paired comparison c. Critical incidents d. Group appraisal

11. First steps in appraisal process is

a) Defining job b) Training session c) Feedback session d) Interview session

12. Which is the simplest and most popular technique for appraising employee performance?
a) Rating Scale b) Critical incident c) Cost accounting d) Bars

13. Time management refers to managing

a) Work effectively b) Time effectively c) Schedule d) Effective process

14. Which of these is a key feature of a team?

a) Mutual independent b) Decreased motivation
c) Unlearning skills from others d) Working in same department is a team

15. ________consists of all the pattern, networks and systems of communication within an
organization.
a) Grapevine b) Interpersonal communication
c) Organizational communication d) Open communication
16. The technique that have been used to evaluate an employee in comparison with other
employee___________
a) Ranking b) Forced choice c) Essay evaluation d) Critical incident

17. In management by objectives, goals are set by

a) Supervisor and subordinates b) Top management
c) Finance manager d) Operation manager

18. Communication taking place at all levels is known as

a. Interpersonal b. Organizational c. Managerial d. Impersonal

19. The actual achievement compared with the objective of the jobs is a measure of
a) Job performance b) Job evaluation c) Job Description d) Job allocation

20. The leader who involves employees in decision making and gets inputs from employees, but
makes the final decision himself is using the leadership style
a) Democratic-Participate b) Democratic-Consultative
c) Democratic-Delegative d) Laissez- faire

21. Team Creativity can be promoted by

a) Establishing a competitive
b) Establishing Challenges for the team environment to promote creative team
c) Evaluating ideas during idea generating stage
d) Stressing deadline to encourage intensity

22. A process through which a employee come to know about his skills, interests and motivation is
called
a) Career b) Career management c) Career planning d) Career Development

23. Getting work done with a minimum of effort, expense or waste is the definition of
a) Effectiveness b) Management c) Planning d) Career Development

24. The process by which a sender transmits content is known as

a) Encoding b) Decoding c) Feedback d) Receiver

25. The vertical flow of communication from lower level to one or more higher level
a) Downward communication b) Upward communication
c) Formal communication d) Horizontal communication

26. ------------is the process of stimulating people to actions to accomplish the goals
a) Bonus b) Motivation c) Incentive d) Promotion

27. Communication between two or more people is called ___________

a) Organizational communication b) interpersonal communication
c) Extra personal communication d) intrapersonal communication

28. In what order do managers typically perform the managerial function?

a) Organizing, planning, controlling & leading b) Organizing, leading ,planning &controlling
c) planning, Organizing, leading & controlling d) Leading controlling ,Organizing & planning

29. The process of influencing people so that they will strive willingly and enthusiastically towards
the achievement of group goals is called
a) Creativity b) Communication c) leadership d) Time management
30. Motivation contributes to good_______
a) Industrial relations b) Profit c) Planning d) Organization

31. The process for increasing the knowledge and skill of people for a definite purpose is called
a) Recruiting b) Compensation c) Training d) Performance appraisal

31. Evaluating an employee’s performance of a job is known as

a) Managerial appraisal b) Performance appraisal
c) Organization appraisal d) All of the above

32. Career planning will explore at

a) Self assessment b) Entrepreneurial opportunities c) Career goal d) Planning goal

33. Managing by investigating situations in which actual results differ significantly from planned
result is called
a) Management by objective b) Management by Exception
c) Active based management d) Enterprise resource planning

34. Which need includes the basic human needs of food, clothing and shelter?
a) Physiological needs b) Psychological needs c) Self esteem d) Self actualization

35. __________ refers to the learning opportunities designed to help employees grow.
a) Training b) Development c) Education d) All of the above

36. What do you call a style of leadership that takes account of others' views, opinions and ideas?
a) Laissez-faire b) People-oriented c) Democratic d) Autocratic

37. Managerial communication helps in the smooth flow of

a. Scheduling b. Information c. Organization d. Management

Part-B
1. Elaborate staffing with examples
2. List out the objectives of staffing
3. Different between a leader and a manager.
4. What are the functions of Human resource management?
5. Define Motivation. Draw Maslow's need triangle
6. Write a note on managerial effectiveness
7. Briefly discuss about various leadership styles
8. What is team work and creativity?
9. Discuss on the stages of team formation.
10. List out and brief the drawbacks of oral communication.
11. Differentiate policies and objectives
12. Write short notes of brain storming.
13. What are the level strategies? Describe any two.
Part-C
1. Discuss on the need and importance of human resource management.

2. Explain the types of Motivation theories used by the managers to improve work productivity.

3. Describe in detail the various types of leaderships style with merits and demerits

4. What are the types of Managerial communication? Describe their advantages and disadvantages

of example.

5. Discuss about barriers to communication in detail with examples

6. Explain the different methods of performance appraisal

7. Explain in details the objectives and advantages of performance appraisal

8. Discuss the process and advantage of career planning.

 UNIT-5 MODERN MANAGEMENT CONCEPTS

SYLLABUS:-
 Management by Objectives (MBO) - Principles and Steps - Advantages and Disadvantages
–
 Management by Exception (MBE)
 Strategic management
 SWOT analysis
 Enterprise Resource Planning (ERP)
 Supply Chain Management (SCM)
 Activity Based Management (ABM)

Introduction
A management system in which the objectives of an organization are agreed upon so that
management and employees understand a common way forward. Management by objectives aims to
serve as a basis for
(A) Greater efficiency through systematic procedures,
(B) greater employee motivation and commitment through participation in the planning process
(C) Planning for results instead of planning just for work. In management by objectives practice,
specific objectives are determined jointly by managers and their subordinates, progress toward agreed-
upon objectives is periodically reviewed, end results are evaluated, and rewards are allocated on the
basis of the progress.

The objectives must meet five criteria: they must be

(1) Arranged in order of their importance,

(2) expressed quantitatively, wherever possible,
(3) Realistic,
(4)Consistent with the organization‘s policies,
(5) Compatible with one another
Meaning and Definition of MBO
Management by Objectives (MBO) is a process of defining objectives within an organization so
that management and employees agree to the objectives and understand what they need to do in the
organization.
The term "management by objectives" was first popularized by Peter Drucker in his1954 book
'The Practice of Management.
It aims to increase organizational performance by aligning goals and subordinate objectives
throughout the organization. Ideally, employees get strong input to identify their objectives, time lines
for completion, etc. MBO includes ongoing tracking and feed back in the process to reach objectives.
 Management by Objectives (MBO) was first outlined by Peter Drucker in 1954 in his book 'The
Practice of Management'. In the 90s, Peter Drucker himself decreased the significance of this
organization management method, when he said: "It's just another tool. It is not the great cure for
management inefficiency... Management by Objectives works if you know the 90% of the time you
don't."

Features of MBO

1.It is a technique and philosophy of management

2. Objective setting and performance review are made by the participation of the concerned managers.

3. Objectives are established for all levels of the organization

4. It is directed towards the effective and efficient accomplishment of organizational objectives.

5. It is concerned with converting an organizational objective into a personal objective on the

presumption that establishing personal objectives makes an employee committed which leads to better

performance.

6. The basic emphasis of MBO is on objectives. MBO tries to match objectives with resources

7. Objectives in MBO provide guidelines for appropriate systems and procedures.

8. Periodic review of performance is an important feature of MBO.

9. MBO provides the means for integrating the organization with its environment, its sub-systems and

people.

10. Employees are provided with feedback on actual performance as compared to planned performance

Process OF MBO

MBO is a process for accomplishing enterprise objectives, enhancement of employees

commitment and participation.
This process consists of a number of steps. They are:

1. Setting of organizational objectives:

The first step in MBO is to set verifiable objectives for the organisation. The objectives that are
set also indicate the measures for achieving the objectives. The objective setting usually commences at
the top level of the organisation and moves downwards to the lowest managerial levels. It goes in
sequence like this:
(a) Defining the purpose of the organisation
(b) Long-range and strategic objectives
(c) Short-range organizational objectives
(d) Departmental objectives
(e) Individual manager’s objectives.

2. Setting of subordinates’ objectives: Since organizational objectives are accomplished through

individuals, each individual manager should know in advance what he is expected to accomplish. The
objectives of the subordinates are set by the superior with their consultation and agreement. This process
makes them committed.
3. Matching resources with objectives: When objectives are set, there should be a connection between
objectives and resources. This helps the organisation in allocating the sources in an economical manner.
4. Implementation of MBO:
Managers require efficiency. Intelligence and ability in order to attain the common objective of the
organisation. They must be properly remunerated and motivated so that they will put on best efforts in
management by objectives. Top level executives must not enforce their control through management by
objectives; otherwise it will change into control by objectives.
5. Evaluation and feedback:
The objective fixed must be evaluated with the results obtained. The managers at all levels must have a
watch on the activities of the subordinates to attain the objectives and after a specified period the results
achieved have to be evaluated.
6. Performance Appraisal:
Performance appraisals are a regular review of employee performance within organizations. It is done at
the last stage of the MBO process.
Advantages of MBO
Some of the important features and advantages of MBO are:
1. Motivation –Involving employees in the whole process of goal setting and increasing employee
empowerment. This increases employee job satisfaction and commitment.
2. Better communication and Coordination –Frequent reviews and interactions between superiors and
subordinates help to maintain harmonious relationships within the organization and also to solve many
problems.
3. Clarity of goals
4. Subordinates tend to have a higher commitment to objectives they set for themselves than those
imposed on them by another person.
5. Managers can ensure that objectives of the subordinates are linked to the organization's objectives.

Disadvantages

There are several limitations to the assumptive base underlying the impact of managing by objectives,
including:
1. It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes.
2. It underemphasizes the importance of the environment or context in which the goals are set. That
context includes everything from the availability and quality of resources, to relative buy-in by
leadership and stake-holders..
3. Companies evaluated their employees by comparing them with the "ideal" employee. Trait appraisal
only looks at what employees should be , not at what they should do .
4. Difficulty of converting broad objective into subordinate objectives.
5. Difficulty in measuring performance.
6. Difficulty in providing feedback.
7. Difficulty in setting long-range objectives and planning.
8. Difficulty in adjusting to the fast changing environment
 Topic – 2

MANAGEMENT BY EXCEPTION
Management by exception:-

“Practice whereby only the information that indicates a significant deviation of actual results from the
budgeted or planned results is brought to the management’s notice”.

Fig: Management by exception

It is a management technique by which managers concentrate only on exceptional deviations instead of

trying to correct each and every deviation. The advantage of the technique of Management by Exception
is that it allows the manager to concentrate on problems that need his attention and to avoid dealing with
those that can be well handled by the subordinates themselves

 Manage by exception. Only require reporting when there is a deviation from the plan.
 Management by exception (MBE) is a management strategy in which managers will only step in
when there are significant deviations from planned outcomes

Management by exception consists of four steps:

1. Setting the objectives

 The first step in the process of management by exception is to set realistic targets to use as a
benchmark. Key areas could include sales, production, and expenses.
 Businesses usually look at records to determine the correct norms. If you want to build in a small
percentage of growth, go ahead, but be realistic. Budgets present a great starting point. After all, if
you have set limits on costs and targets for turnover and profits, you can use them to monitor
progress.
2. Assessing performance to see whether performance is on track
 Before you can assess performance, you need accurate, real-time performance records.
 What data will you collect?
 How will you collect it?
 How often will you assess it? The first two of these questions depends on you and your business, but
the final one has a general answer: the more frequently you can assess performance data, the faster
you’ll pick up deviations, investigate them, and address them.

3. Analyzing work or records to determine where performance deviates from objectives

 There was no significant deviation. In that case, there’s no need for further action.
 One or more deviations are significant. If you reach this conclusion, it’s time to take action. If the
data is analyzed by an employee or a junior manager, they must know who will take the required
action and what to report to their superiors.
 If you are handling a deviation, the first step is to see why it happened. It could simply be a mistake
in the data. Alternatively, there could be a very good reason for the deviation.

4. Investigating and solving the exceptions to the norm

 Now that you know what performance criteria have not been met or have been exceeded and why it
happened, it’s up to you as a manager to decide what corrective action to take. In addition, you need
to decide whether the exception is likely to recur and whether it impacts other targets. The
changeable nature of the business environment, both internal and external, means that you will need
to keep revisiting and revising your benchmarks.

Advantages of Management by Exception:

1. It saves time. Manager attends to real problems at a particular point of time.
2. Concentrated efforts are possible, as this system enables the manager to decide when and where he
should pay his attention. It identifies crisis and critical problems.
3. Lesser number of decisions is required to be taken, which enables the manager to go into detail.
4. This enables to increase span of control and increase the activities for a manager.
5. Use of past trends, history and available data can be made fully.
6. It alarms the management about the good opportunities as well as difficulties.
7. Qualitative and quantitative yardsticks are provided for judging the current position.
8. It prevents management from over managing.

Limitations of Management by Exception:

Management by exception is not a solution to all management problems; it has its limitations as well.

Some of them are:

1. It requires a comprehensive observing and reporting system.

2. It increases paper work.

3. The system is silent till the problem becomes critical.

4. Some important factors, like human behavior, are difficult to measure.

 Topic – 3

STRATEGIC MANAGEMENT
Introduction

Organizations are facing exciting and dynamic challenges in the 21stcentury. In the
gloabalizedbusiness,companies require strategic thinking and only by evolving good corporate strategies
can they become strategically competitive.
A sustained or sustainable competitive advantage occurs when firm implements a value –
creating strategy of which other companies are unable to duplicate the benefits or find it too costly to
initiate. Corporate strategy includes the commitments, decisions and actions required for a firm to
achieve strategic competitiveness and earn above average returns. The goals of corporate strategy are
challenging not only for large firms like Microsoft but also for small local computer retail outlets or
even dry cleaners.
Meaning of strategy

Strategy narrowly defined means “the art of the general” (the Greek stratos, meaning ‘field, spread out
as in ‘structure’; and agos, meaning ‘leader’). The term first gained currency at the end of the
18thcentury, taken from the military. Strategy is a set of key decisions made to meet objectives. A
strategy of a business organization is a comprehensive master plan stating how the organization will
achieve its mission and objectives.
Definitions of Strategy

According to Prahlad“Strategy is more than just fit and allocation of resources. It is stretch and
leveraging of resources”. According to Porter “Strategy is about being different. It means deliberately
choosing a different set of activities to deliver a unique mix of value.

Need / importance of Strategy

Strategic management is basically needed for every organization and it offers several benefits.
1. Universal/ common to all
2. Keeping pace with changing environment
3. Minimizes competitive disadvantage
4. Clear sense of strategic vision and sharper focus on goals and objectives
5. Motivating employees6.Strengthening Decision-Making
7. Efficient and effective way of implementing actions for results
8. Improved understanding of internal and external environments of business

Levels of strategy
A typical business firm should consider three types of strategies, which form a hierarchy are :
1. Corporate strategy: Which describes a company’s overall direction towards growth by managing
business and product lines? These include stability, growth and retrenchment. For example, Coco cola,
Inc., has followed the growth strategy by acquisition. It has acquired local bottling units to emerge as the
market leader.
2. Business strategy: Usually occurs at business unit or product level emphasizing the improvement of
competitive position of a firm’s products or services in an industry or market segment served by that
business unit. Business strategy falls in the in the realm of corporate strategy. For example, Apple
Computers uses a differentiation competitive strategy that emphasizes innovative product with creative
design.
3. Functional strategy: It is the approach taken by a functional area to achieve corporate and business
unit objectives and strategies by maximizing resource productivity. It is concerned with developing and
nurturing a distinctive competence to provide the firm with a competitive advantage. For example,
Procter and Gamble spends huge amounts on advertising to create customer demand.
4. Operating strategy: These are concerned with how the component parts of an organization deliver
effectively the corporate, business and functional -level strategies in terms of resources, processes and
people. They are at departmental level and set periodic short-term targets for accomplishment

Process of Strategic Management

Strategic Management consists of four basic elements.
1.Environmental scanning
2.Strategy formulation
3.Strategy implementation
4.Evaluation and control

1. Environmental scanning: is the monitoring, evaluating, and disseminating of information from the
external and internal environments to key people within the corporation. Its purpose is to identity
strategic factors –those external and internal elements that will determine the future of the corporation.
The external environment consists of variables (Opportunities and Threats) that are outside the
organization and not typically within the short-run control of top management. These variables form the
context within which the corporation exists. The internal environment of a corporation consist of
variables (Strengths and Weakness)that are within the organization itself and are not usually within the
short run control of top management. These variables form the context in which work is done.
They include the corporation’s structure, culture, and resources. The simplest way to conduct
environmental scanning is through SWOT analysis. SWOT is an acronym used to describe those
particular Strengths, Weakness, Opportunities, and Threats that are strategic factors for a specific
company.
2. Strategy formulation is the development of long-range plans for the effective management of
environmental opportunities and threats, in light of corporate strengths and weaknesses. It includes
defining the corporate mission, specifying achievable objectives, developing strategies and setting
policy guidelines.
3. Strategy implementation is the process by which strategies and polices are put into action through
the development of programs, budgets and procedures. This process might involve changes within the
overall culture, structure, and/or management system of the entire organization. Most of the time
strategy implementation is carried out by middle and lower level managers with top management’s
review. Sometimes referred to as operational planning, strategy implementation often involves day-to-
day decisions in resource allocation. It includes programs, budgets and procedures.
4. Evaluation and control is the process in which corporate activities and performance results are
monitored so that actual performance can be compared with desired performance. Managers’ at all
levels use the resulting information to take corrective action and resolve problems. Although evaluation
and control is the final major element of strategic management, it also can pinpoint weaknesses in
previously implemented strategic plans and thus stimulate the entire process to begin again
Some important terms related to strategic management

Mission
Organisation/company mission statement is the basic issue point of the strategic management.
Organisation/ company mission will guide future execution policies and objectives. It sets the policies
and objectives which are formulated for execution of policies and objectives of business organisation.
The mission statement contains the business philosophy of strategic decision makers, a definition of the
organisation/ company’s business, a statement of the major goals of the organisation/company. The
organisation/company mission explains the product, market, and technological areas of the business. A
company’s mission statement is typically focused on its presents business scope –“who we are and what
we do”, mission statements broadly describe an organisation present capabilities, customer focus,
activities and business makeup
Vision
A strategic vision is a road map of a company’s future -providing specifics about technology and
customer focus, the geographic a product markets to be pursued, the capabilities it plans to develop, and
the kind of company that management is trying to create.
Values: Beliefs that are shared among the stakeholders of an organization. Values drive an
organization's culture and priorities and provide a framework in which decisions are made.
 Topic – 4

ENTERPRISE RESOURCE PLANNING (ERP)

What is ERP?
Enterprise Resource Planning (ERP) covers the techniques and concepts employed for the integrated
management of businesses as a whole, from the viewpoint of the effective use of management resources,
to improve the efficiency of an enterprise. ERP packages are integrated (covering all business functions)
software packages that support the above ERP concepts. Originally, ERP packages were targeted at the
manufacturing industry, and consisted mainly of functions for planning and managing core businesses
such as sales management, production management, accounting and financial affairs, etc.
However, in recent years, adaptation not only to the manufacturing industry, but also to diverse
types of industry has become possible and the expansion of implementation and use has been
progressing on a global level.ERP software is designed to model and automate many of the basic
processes of a company, from finance to the shop floor, with the goal of integrating information across
the company and eliminating complex, expensive links between computer systems that were never
meant to talk to each other .

Evolution of ERP
The history of ERP can be traced back to the 1960’s, when the focus of systems was mainly
towards inventory control. Most of the systems software was designed to handle inventory based in
traditional inventory concepts. The 1970’s witnessed a shift of focus towards MRP (Material
Requirement Planning).This system helped in translating the master production schedule into
requirements for individual units like sub assemblies, components and other raw material planning and
procurement. This system was involved mainly in planning the raw material requirements.
Then, in 1980’s came the concept of MRP-II i.e. the Manufacturing Resource Planning which
involved optimizing the entire plant production process. Though MRP-II, in the beginning was an
extension of MRP to include shop floor and distribution management activities, during later years,
MRP-II was further extended to include areas like Finance, Human Resource, Engineering, Project
Management etc. This gave birth to ERP (Enterprise Resource Planning) which covered the cross-
functional coordination and integration in support of the production process. The ERP as compared to its
ancestors included the entire range of a company’s activities. ERP addresses both system requirements
and technology aspects including client/server distributed architecture, RDBMS, object oriented
programming etc

The advantages of ERP

Installing an ERP system has many advantages -both direct and indirect. The direct advantages
include improved efficiency, information integration for better decision making, faster response time to
customer queries, etc. The indirect benefits include better corporate image, improved customer
goodwill, customer satisfaction, and so on.
The following are some of the direct benefits of an ERP system:
1. Business Integration:
The first and most important advantage lies in the promotion of integration. The reason why ERP
packages are considered to the integrated, is the automatic data updating (automatic data exchange
among applications) that is possible among the related business components. Since conventional
company information systems were aimed at the optimization of independent business functions in
business units, almost all were weak in terms of the communication and integration of information that
transcended the different business functions.
In the case of large companies in particular, the timing of system construction and directives
differs for each product and department/ function and sometimes, they are disconnected. For this reason,
it has become an obstacle in the shift to new product and business classification. In the case of ERP
packages, the data of related business functions is also automatically updated at the time a transaction
occurs. For this reason, one is able to grasp business details in real time, and carry out various types of
management decisions in a timely manner, based on that information.

2. Flexibility:
The second advantage of the ERP packages is their flexibility. Different languages, currencies,
accounting standards and so on can be covered in one system, and functions that comprehensively
manage multiple locations of a company can be packaged and implemented automatically. To cope with
company globalization and system unification, this flexibility is essential and one can say that it has
major advantages, not simply for development and maintenance, but also in terms of management.
3. Better Analysis and planning Capabilities:
Yet another advantage is the boost to the planning functions. By enabling the comprehensive and
unified management of related business and its data, it becomes possible to fully utilize many types of
decision support systems and simulation functions. Furthermore, since it becomes possible to carry out,
flexible and in real time, the filing and analysis of data from a variety of dimensions, one is able to give
the decision-makers the information they want; thus enabling them to make better and informed
decisions.
4. Use of Latest Technology
Fourth advantage is the utilization of the latest development in information Technology (IT). The
ERP vendors were quick to realize that in order to grow and to sustain that growth; they had to embrace
the latest developments in the field of information technology. Therefore, they quickly adapted their
systems to take advantage of the latest technologies like open systems, client/ server technology,
Internet/Intranet, CALS (Computer- Aided Acquisition and Logistics Support),electronic-commerce.

Various phases of ERP implementation,

ERP Implementation Life Cycle is the process of implementation of the enterprise resource planning in
any organization. It involves many steps and stages right from the start, planning for project
implementation, analysis, design, implementation, transition and operations. ERP implementation
lifecycle highlights the different phases of implementing an ERP system. It starts from the projection of
the ideal ERP package that is suitable for the company. The steps involved in the life cycle of the ERP
implementation are:
Selection of packages:

This is the first step of the life cycle where the perfect ERP package has to be selected in agreement that
fits your business environment. In the selection process, ERP packages that are not suitable they are
eliminated. The package has to be carefully selected and testified. The right choice will determine the
success of the ERP implementation. A proper study and research should be done before the selection.

Project Planning:

Proper planning of the implementation process of the project shall be made and designed. Resources
should be allocated and the team members have to be selected.

Analysis GAP:

GAP analysis is an important step in the life cycle of ERP implementation step. GAP analysis is
performed to analyze the current situation of the organization and its future position as needed.

Re-engineering is needed to make the implementation process involves many changes and alterations.
The job responsibilities of employees and the number of employees can be altered as well. This step is
done to make the business process more efficient.

Training:

Training of employees starts with the implementation process in the life cycle of the ERP
implementation. Employees of getting used to the new system in order to run the system smoothly later.
Get the time at this stage to learn the software and its features and become self-sufficient in order to be
able to operate later, when consultants and suppliers to end and go.

Testing:

Testing is an important step and is carried out so that the errors can be found and resolved before the
actual application process.

Application:

This step is performed when data conversion is done and the work of the database is over. After setup
and testing is completed, the actual implementation is done. Once the new system is implemented, the
old system is removed. The end user is trained on how to use the new system.

Maintenance:
Maintenance is carried out in the post-implementation life cycle of ERP implementation phase. The
problems are identified and employees learn how to deal with it. Maintenance is also an important stage
in the life cycle.

These are the stages of ERP project goes through a cycle of life of the ERP implementation. It is
important to complete these steps with attention to detail in order to run the ERP project successfully.
After the application is done, maintenance is also important and the system must be regular updates to
keep up with changes in technology.

Topic – 5

SWOT Analysis:-
SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition,
Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some
measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered to be external
factors over which you have essentially no control.

SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the
business and its environment. Its key purpose is to identify the strategies that will create a firm specific
business model that will best align an organization’s resources and capabilities to the requirements of
the environment in which the firm operates.

In other words, it is the foundation for evaluating the internal potential and limitations and the
probable/likely opportunities and threats from the external environment. It views all positive and
negative factors inside and outside the firm that affect the success. A consistent study of the
environment in which the firm operates helps in forecasting/predicting the changing trends and also
helps in including them in the decision-making process of the organization.
An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats) is given below-

1. Strengths - Strengths are the qualities that enable us to accomplish the organization’s mission. These
are the basis on which continued success can be made and continued/sustained. Strengths can be either
tangible or intangible. These are what you are well-versed in or what you have expertise in, the traits
and qualities your employees possess (individually and as a team) and the distinct features that give your
organization its consistency.

Strengths are the beneficial aspects of the organization or the capabilities of an organization,
which includes human competencies, process capabilities, financial resources, products and services,
customer goodwill and brand loyalty. Examples of organizational strengths are huge financial resources,
broad product line, no debt, committed employees, etc.

2. Weaknesses - Weaknesses are the qualities that prevent us from accomplishing our mission and
achieving our full potential. These weaknesses deteriorate influences on the organizational success and
growth. Weaknesses are the factors which do not meet the standards we feel they should meet.

Weaknesses in an organization may be depreciating machinery, insufficient research and

development facilities, narrow product range, poor decision-making, etc. Weaknesses are controllable.
They must be minimized and eliminated. For instance - to overcome obsolete machinery, new
machinery can be purchased. Other examples of organizational weaknesses are huge debts, high
employee turnover, complex decision making process, narrow product range, large wastage of raw
materials, etc.

3. Opportunities - Opportunities are presented by the environment within which our organization
operates. These arise when an organization can take benefit of conditions in its environment to plan and
execute strategies that enable it to become more profitable. Organizations can gain competitive
advantage by making use of opportunities.

Organization should be careful and recognize the opportunities and grasp them whenever they
arise. Selecting the targets that will best serve the clients while getting desired results is a difficult task.
Opportunities may arise from market, competition, industry/government and technology. Increasing
demand for telecommunications accompanied by deregulation is a great opportunity for new firms to
enter telecom sector and compete with existing firms for revenue.

4. Threats - Threats arise when conditions in external environment jeopardize the reliability and
profitability of the organization’s business. They compound the vulnerability when they relate to the
weaknesses. Threats are uncontrollable. When a threat comes, the stability and survival can be at stake.
Examples of threats are - unrest among employees; ever changing technology; increasing competition
leading to excess capacity, price wars and reducing industry profits; etc.
Steps in SWOT Analysis:-
The primary aim of strategic planning is to bring an organization into balance with theexternal
environment and to maintain that balance over time (Sackett, Jones, and Erdley2005). Organizations
accomplish this balance by evaluating new programs and serviceswith the intent of maximizing
organizational performance. SWOT analysis is a preliminarydecision-making tool that sets the stage for
this work.

Step 1 of SWOT analysis involves the collection and evaluation of key data. Dependingon the
organization, these data might include population demographics, communityhealth status, sources of
healthcare funding, and/or the current status of medicaltechnology. Once the data have been collected
and analyzed, the organization’s capabilitiesin these areas are assessed.

In Step 2 of SWOT analysis, data on the organization are collected and sorted intofour categories:
strengths, weaknesses, opportunities, and threats. Strengths and weaknessesgenerally stem from factors
within the organization, whereas opportunities andthreats usually arise from external factors.
Organizational surveys are an effective means ofgathering some of this information, such as data on an
organization’s finances, operations,and processes

Step 3 involves the development of a SWOT matrix for each business alternativeunder consideration.
For example, say a hospital is evaluating the development of an ambulatorysurgery center (ASC). They
are looking at two options; the first is a wholly ownedSC, and the second is a joint venture with local
physicians. The hospital’s expert panelwould complete a separate SWOT matrix for each alternative.

Step 4 involves incorporating the SWOT analysis into the decision-making processto determine which
business alternative best meets the organization’s overall strategic plan.A practical example of Step 2 of
SWOT analysis
 Fig:SWOT Matrix

Fig:SWOT Matrix

Advantages of SWOT Analysis:-

SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it
involves a great subjective element. It is best when used as a guide, and not as a prescription. Successful
businesses build on their strengths, correct their weakness and protect against internal weaknesses and
external threats. They also keep a watch on their overall business environment and recognize and exploit
new opportunities faster than its competitors.

SWOT Analysis helps in strategic planning in following manner:-

a. It is a source of information for strategic planning.

b. Builds organization’s strengths.
c. Reverse its weaknesses.
d. Maximize its response to opportunities.
e. Overcome organization’s threats.
f. It helps in identifying core competencies of the firm.
g. It helps in setting of objectives for strategic planning.
h. It helps in knowing past, present and future so that by using past and current data, future plans
can be chalked out.

SWOT Analysis provide information that helps in synchronizing the firm’s resources and capabilities
with the competitive environment in which the firm operates.
SWOT ANALYSIS FRAMEWORK:-

Limitations of SWOT Analysis:-

SWOT Analysis is not free from its limitations. It may cause organizations to view
circumstances as very simple because of which the organizations might overlook certain key strategic
contact which may occur.

Moreover, categorizing aspects as strengths, weaknesses, opportunities and threats might be very
subjective as there is great degree of uncertainty in market. SWOT Analysis does stress upon the
significance of these four aspects, but it does not tell how an organization can identify these aspects for
itself.

There are certain limitations of SWOT Analysis which are not in control of management. These
include:

a. Price increase;
b. Inputs/raw materials;
c. Government legislation;
d. Economic environment;
e. Searching a new market for the product which is not having overseas market due to import
restrictions; etc.

Internal limitations may include-

a. Insufficient research and development facilities;

b. Faulty products due to poor quality control;
c. Poor industrial relations;
d. Lack of skilled and efficient labour.
 Topic - 6
SUPPLY CHAIN MANAGEMENT

Introduction
There is a great deal of material that is moved in any organization. Organizations collect raw
materials from suppliers and deliver finished goods to the customers. It is logistics that executes this
function. In other words, logistics is the function that moves both tangible materials (e.g. raw materials)
and intangible material (e.g. information) through the operations to the customers (as a finished
product). In continuation to this explanation, we would introduce what a supply chain means.
A supply chain consists of a series of activities involving many organizations through which the
materials move from initial suppliers to final customers. There may be different supply chain for each
product.
The chain of activities and organizations is named differently as per the situation. If the emphasis
is on operations then it is called process; if the emphasis is on marketing then it is called logistics; if the
emphasis is on value-addition then it is called value-chain; if the emphasis is on meeting customer
demand then it is called demand chain; if the emphasis is on movement of material then we use the most
general term i.e., supply chain. This unit will introduce you with the concept of a supply chain.

Meaning of logistics
Logistics is the process of planning, implementing and controlling the efficient, effective flow
and storage of goods, services and related information from point of origin to point of consumption for
the purpose of conforming the customer requirement”.

Meaning of supply chain management (SCM)

Supply Chain Management is a set of approaches utilized to efficiently integrate supplier,
manufacturer, and warehouse and stores so that merchandise is produced and distributed at the right
quantities, to the right location and at the right time, in order to minimize system under costs while
satisfying service level requirements

Elements of SCM:
1. Order processing:
The starting point of physical distribution activities is the processing of customers‟ orders. In
order to provide quicker customer service, the orders received from customers should be processed
within the least possible time. Order processing includes receiving the order, recording the order, filling
the order, and assembling all such orders for transportation, etc. the company and the customers benefit
when these steps are carried out quickly and accurately.
The error committed at this stage at times can prove to be very costly. For example, if a wrong
product or the same product with different specifications is supplied to the customer, it may lead to
cancellation of the original order (apart from loss in the credibility of the firm). Similarly, if the order is
not executed within a reasonable time, it may lead to serious consequences. High speed data processing
techniques are now available which allow for rapid processing of the orders.
2. Warehousing:
Warehousing refers to the storing and assorting products in order to create time utility. The basic
purpose of the warehousing activity is to arrange placement of goods, provide storage facility to store
them, consolidate them with other similar products, divide them into smaller quantities and build up
assortment of products. Generally, larger the number of warehouses a firm has the lesser would be the
time taken in serving customers at different locations, but greater would be the cost of warehousing.
Thus, the firm has to strike a balance between the cost of warehousing and the level of customer service.
3. Inventory Control and Management:
Linked to warehousing decisions are the inventory decisions which hold the key to success of
physical distribution especially where the inventory costs may be as high as 30-40 per cent (e.g., steel
and automobiles). No wonder, therefore, that the new concept of Just-in-Time-Inventory decision is
increasingly becoming popular with a number of companies. The decision regarding level of inventory
involves estimate of demand for the product.
A correct estimate of the demand helps to hold proper inventory level and control the inventory
costs. This is not only helps the firm in terms of the cost of inventory and supply to customers in time
but also to maintain production at a consistent level. The major factors determining the inventory levels
are: The firm‟s policy regarding the customer service level, Degree of accuracy of the sales forecasts,
Responsiveness of the distribution system i.e., ability of the system to transmit inventory needs to the
factory and get the products in the market. The cost inventory consists of holding cost (such as cost of
warehousing, tied up capital and obsolescence) and replenishment cost (including the manufacturing
cost).
4. Transportation:
Transportation seeks to move goods from points of production and sale to points of consumption
in the quantities required at times needed and at a reasonable cost. The transportation system adds time
and place utilities to the goods handled and thus, increases their economic value. To achieve these goals,
transportation facilities must be adequate, regular, dependable and equitable in terms of costs and
benefits of the facilities and service provided.
5. Information monitoring:
The physical distribution managers continuously need up-to-date information about inventory,
transportation and warehousing. For example, in respect on inventory, information about present stock
position at each location, future commitment and replenishment capabilities are constantly required.
Similarly, before choosing a carrier, information about the availability of various modes of transport,
their costs, services and suitability for a particular product is needed.
About warehousing, information with respect to space utilization, work schedules, unit load
performance, etc., is required. In order to receive all the information stated above, an efficient
management information system would be of immense use in controlling costs, improving services and
determining the overall effectiveness of distribution. Of course, it is difficult to correctly assess the cost
of physical distribution operations. But if correct information is available it can be analyzed
systematically and a great deal of saving can be ensured
6. Facilities:
The Facilities logistics element is composed of a variety of planning activities, all of which are
directed toward ensuring that all required permanent or semi permanent operating and support facilities
(for instance, training, field and depot maintenance, storage, operational, and testing) are available
concurrently with system fielding. Planning must be comprehensive and include the need for new
construction as well as modifications to existing facilities.
Facility construction can take from 5 to 7 years from concept formulation to user occupancy. It
also includes studies to define and establish impacts on life cycle cost, funding requirements, facility
locations and improvements, space requirements, environmental impacts, duration or frequency of use,
safety and health standards requirements, and security restrictions. Also included are any utility
requirements, for both fixed and mobile facilities, with emphasis on limiting requirements of scarce or
unique resources.

SCM team can flawlessly execute the following processes:

 Planning – the plan process seeks to create effective long- and short-range supply chain
strategies. From the design of the supply chain network to the prediction of customer demand,
supply chain leaders need to develop integrated supply chain strategies.
 Procurement – the buy process focuses on the purchase of required raw materials, components,
and goods. As a consumer, you're pretty familiar with buying stuff!
 Production – the make process involves the manufacture, conversion, or assembly of materials
into finished goods or parts for other products. Supply chain managers provide production
support and ensure that key materials are available when needed.
  Distribution – the move process manages the logistical flow of goods across the supply chain.
Transportation companies, third party logistics firms, and others ensure that goods are flowing
quickly and safely toward the point of demand.
 Customer Interface – the demand process revolves around all the issues that are related to
planning customer interactions, satisfying their needs, and fulfilling orders perfectly.

Benefits of supply chain management

 Supply chain management creates efficiencies

 Raises profits
 Lowers costs
 Boosts collaboration and more
 SCM enables companies to better manage demand
 Carry the right amount of inventory
 Deal with disruptions
 Keep costs to a minimum and meet customer demand in the most effective way possible

Topic - 7
ACTIVITY BASED MANAGEMENT/ COSTING [ABM/ ABC]

Meaning of ABM
Activity-based management (ABM) is a method of identifying and evaluating activities that a business
performs using activity-based costing to carry out a value chain analysis or a re-engineering initiative to
improve strategic and operational decisions in an organization. Activity-based costing establishes
relationships between overhead costs and activities so that overhead costs can be more precisely
allocated to products, services, or customer segments. Activity-based management focuses on managing
activities to reduce costs and improve customer value.
Activity-Based Management (ABM) manages activities to improve the value of products or
services to customers and increase the firm’s competitiveness and profitability. ABM draws on ABC as
its major source of information and focuses on the efficiency and effectiveness of key business
processes and activities. Using ABM, management can pinpoint avenues for improving operations,
reducing costs, or increasing values to customers. By identifying resources spent on customers,
products, and activities, ABM improves management’s focus on the firm’s critical success factors and
enhances its competitive advantage.
Application of ABM
ABM applications can be classified into two categories: operational ABM and strategic ABM.
Operational ABM enhances operation efficiency and asset utilization and lowers costs; its focuses are on
doing things right and performing activities more efficiently. Operational
ABM applications use management techniques such as activity management, business process
reengineering, total quality management, and performance measurement. Strategic ABM attempts to
alter the demand for activities and increase profitability through improved activity efficiency. Strategic
ABM focuses on choosing appropriate activities for the operation, eliminating nonessential activities
and selecting the most profitable customers.
Strategic ABM applications use management techniques such as process design, customer
profitability analysis, and value chain analysis. Exhibit 5.8 illustrates questions that strategic and
operational ABC/ABM (ABC/M) can help to answer and the tools that are used. Some of the key tools
of ABC/M are activity analysis, activity-based costing, performance measurement, total quality
management, business process improvement, and reengineering. Another technique, value-added
analysis, is explained here. We take a look now at activity analysis and value added analysis.

Activity Based Management Model Analysis

 Cost Driver Analysis: For the purpose of managing the activity costs, the factors that result in the
activities to take place are to be identified.

 Activity Analysis: Activity Analysis is all about finding out the activities of the organizations and its
centres, that are ought to be utilized in the activity-based costing. Based on the costs and benefits of
the alternatives, the activities are divided into the number of activity centres. Further, it ascertains
value added and non-value added activities:

 Value Added Activities: The activities which are very essential for the completion of the process
are categorized as value-added activities.

 Non-Value Added Activities: Those activities which are not having any worth for both external or
internal customers are termed as Non-value added activities. Indeed these activities do not enhance
the quality of the product rather they have a negative impact on the cost and prices of the product
or services as they create wastes, delays, increase the overall value etc.

 Performance Analysis: It involves discovering a proper measure to analyse the performance of the
activity centres.

Activity Based Management aims to manage the organization with these analysis and also ascertains
what directs the firm’s activities and how they can be improved.

To be competitive a firm must assess each of its activities based on its need by the product or
customer, its efficiency, and its value content. A firm performs an activity for one of the following
reasons:
It is required to meet the specification of the product or service or satisfy customer demand.
 It is required to sustain the organization.

 It is deemed beneficial to the firm

 Value-Added Analyses
Eliminating activities that add little or no value to customers reduces resource consumption and
allows the firm to focus on activities that increase customer satisfaction. Knowing the values of
activities allows employees to see how work really serves customers and which activities may have little
value to the ultimate customers and should be eliminated or reduced.

A high-value-added activity increases significantly the value of the product or service to the customers.
Removal of a high-value-added activity decreases perceptively the value of the product or service to the
customer. Inserting a flange into a part, pouring molten metal into a mold, and preparing a field for
planting are examples of high-value-added activities. Installing software to protect a computer from
spam is a high-value-added activity to customers annoyed by bombardments of unwanted e-mail.
Designing, processing, and delivering products and services are high-value-added activities.

A low-value-added activity consumes time, resources, or space, but adds little in satisfying customer
needs. If eliminated, customer value or satisfaction decreases in perceptively or remains unchanged.
Moving parts between processes, waiting time, repairing, and rework are examples of low-value-added
activities. Inventory, transportation, waiting, and correction are examples of low-value-added activities.

Application of ABM in Business

1. Cost Reduction: Activity-based management facilitates the organization to identify the costs against
activities to determine the ways to reduce costs and even eliminate the entire activity if it is not adding
any value to the products.
2. Activity-Based Budgeting: ABB supplies a framework for forecasting the input required as per the
budgeted level of activity. A comparison is made between actual results and estimated results to outline
the activities with a high level of variances from the budget for a probable reduction in the supply of
inputs.
3. Business Process Reengineering: It entails examining and redesigning the processes and workflows of
the organisation for improving the performance and also gaining excellence in business operations. It
involves making significant changes regarding the way in which organisation operates currently. ABM
helps in improving the business process efficiency and effectiveness.
4. Benchmarking: Benchmarking is the process of making a comparison of the products and services
offered by the company with that of the other organisations. It aims at identifying the ways to improve
products and services of the firm.
5. Performance Measurement: Nowadays, most of the firms concentrate on activity performance by
observing the efficiency and effectiveness of activities, so as to compete successfully in the market .

15ME401 -ECONOMICS AND PRINCIPLES OF MANAGEMENT

 Question Bank

UNIT V - MODERN MANAGEMENT CONCEPTS

Multiple Choice Questions
Part-A

1.The process by which superior and subordinate managers jointly identity common goals and
Responsibilities is called
a) Management bye exception b) Management by objective
c) Enterprise resource planning d) Activity based management

2.Managing by investigating situations in which actual results differ significantly from planned
result is called
a) Management by exception b) Management by objective
c) Enterprise resource planning d) Activity based management

3. Management by objectives aims to serve as basis for

a) Realistic b) Greater efficiency through systematic procedures
c) Compatible with one another d) Arranged in order

4. MBO is a process of accomplishing

a) Appropriate systems b) Personal objectives c) Planned performance d) Enterprise
objectives

5. MBO is a process of defining objectives with_______

a. Management b. Organization c. Stock values d. Enterprise

6. A cross functional system that is driven by integrated suit of software module is called
a) Compute data processing b) information management
c) Enterprise resource planning d) Activity based management

7.Which management concept suggests that low-importance decisions be handled by

Subordinated so that managers can focus on high-importance decisions?
a) Management by exception b) Management by objectives
c) Participatory management d) Inclusionary management

8. The final step of the strategic management process is___________

a) Doing an internal analysis b) Formulating strategies
c) Implementing strategies d) Evaluating

9. _______aim to co-ordinate the individual goals with the top organizational goals
a) Management by exception b) Management by objectives
c) Staffing d) Controlling

10.The sequence of a typical manufacturing supply chain is

a) Storage–Supplier–manufacturing–storage–distributor–retailer–customer
b) Supplier–Storage-manufacturing–storage–distributor–retailer–customer
c) Supplier–Storage-manufacturing– distributor–storage–retailer–customer
d) Supplier–Storage-manufacturing–storage– retailer–distributor–customer
11._______ encompasses all activities associated with the flow and transformation o[
Goods from raw material stage to the end user.
a) Production line b) Supply chain
c) Marketing channel d) Warehouse

12. A supply chain is a sequence of firms that perform activities required

a) To find products are similar
b) To facilitate wholesalers inventory selections
c) To create and deliver goods to consumers
d) To support the acquisition of raw material

13. The purpose of supply chain management is

a) Provide customer satisfaction b) improve quality of a product
c) Integrating supply and demand management d) increase production

14. Which of the following is true for supply chain management?

a) The physical material moves in the direction of the end of chain
b) Flow of cash backwards through the chain
c) Exchange of information moves in both the direction d) All of the above

15. Logistics is the process of

a) Implementing b) Strategic growth c) Business integration d) Flexibility

16. Which is the following allows individuals ERP system to communicate with each other?
a) Global ERP b) Web integrated ERP
c) Web integrated MRP d) EMRP

17._________ is the heart of any ERP system.

a) Processor b) Information c) Database d) Customer

18.A cross functional system that is driven by integrated suite of software module is called
a) Compute data processing b) information management
c) Enterprise resource planning d) Active based management

19. The direct advantage of ERP is

a. Getting ideas b. solving issues c. Logistics is the process of

20. MBO tries to match objectives with

a. Procedures b. Resources c. Strategies d. Profits

21. The SWOT approach assesses an organization's

a) Speed, wants, order, timing b) Structure, work force, organization, types
c) Strengths, weakness, opportunities, threats d) Signs, worries, objectives, techniques

22. In activity based management, costs of all activities for individual products or services is
called________
a) Purpose level costs b) Output-unit level costs
c) Input-unit level costs d) Activity level costs
23. MBO was first outlined in the year
a.1955 b. 1956 c. 1954 d. 1957

24. Managers requires efficiency, intelligence and_______

a. Strength b. Ability c. Knowledge d. Unity

25. MBE leads to dispersal of______

a. Authority b. Parameter c. Concentration d. Vital issues

26. MBO tries to match objectives with

a.Procedures b. Resources c. Strategies d. Profits

27. Which one of the following is the advantages of MBO

a. Providing feedback b. Measuring performance c. Motivation d. Planning

Part-B
1. Explain management by exceptions
2. What are the levels of strategy? Describe any two
3. List the various steps involved in strategic planning.
4. Define SWOT analysis with Example
5. Describe supply chain management (SCM) with a neat block diagram.
6. How supply chain management can be made effective?
7. Write short notes on Enterprise resource planning.
8. What are the advantages of ERP?
9. Briefly describe Activity based management.
10. What are the advantages of SCM?
11. Write down the Features of MBO
12. List out importance of importance of Strategy

Part –C
1. Explain the process of Management by objectives and enumerate its advantages and
disadvantages
2. Describe Management by Exceptions, with a case study.
3. Who can form a Strategy in an organization and explain the element of strategy management in
detail with examples.
4. Discuss about SWOT analysis in a competitive situation of the Organization and its advantage
and disadvantage
5. Explain the various phases involved in ERP implementation life cycle
6. Describe in detail the Activity Based Management (ABM).
7. Explain the process of Supply chain management (SCM) and its advantage and
disadvantage.