1

UNIT-I
(OVERVIW OF MANAGEMENT)
Introduction
Every organization, whether business, social, religious or political, is basically a
group of people formed to achieve some common objectives. A business organization too is a
group of people working together to achieve common goals or objectives. The individuals of
an organization use physical resources like machinery, equipment, raw-materials, buildings
etc, in the performance of the task assigned to them. If the individuals working together are
left to themselves, they may not work properly or they may not work at all. They can work
properly and efficiently only when there is mutual co-operation and co-ordination between
themselves.
Meaning of Management:
“Management” is a wider term. It carries different meanings depending on the context it is
used. It is variously described as a “discipline”, a “process” and a “group of people’ vested
with the authority to make decisions. Thus, the term management is used in three alternative
ways.
 Management as a discipline
 Management as a process
 Management as a group of people
Definition of Management
"Management is defined as the creation and maintenance of an internal environment in
an enterprise where individuals working together in groups can perform efficiently and
effectively towards the attainment of group goals". Koontz and O’Donnell.

Definition - Organization
A social unit of people that is structured and managed to meet a need or to pursue
collective goals.
All organizations have a management structure that determines relationships between the
different activities and the members, and subdivides and assigns roles, responsibilities,
and authority to carry out different tasks. Organizations are open systems--they affect and are
affected by their environment.
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ROLE OF MANAGERS
1. FIGUREHEAD: The Manager performs ceremonial and symbolic duties as head of
the organization
2. LEADER: Fosters a proper work atmosphere and motivates and develops
subordinates
3. LIASION: Develops and maintains a network of external contacts to gather
information
4. MONITOR: Gathers internal and external information relevant to the organisation
5. DISSEMINATOR: Transmits factual and value based information to subordinates
6. SPOKESPERSON: Communicates to the outside world on performance and
policies.
7. ENTREPRENEUR: Designs and initiates change in the organisation
8. DISTURBANCE HANDLER: Deals with unexpected events and operational
breakdowns
9. RESOURCE ALLOCATOR: Controls and authorises the use of organisational
resources
10. NEGOTIATOR: Participates in negotiation activities with other organisations and
individuals.
Approaches to Management
The different approaches of management are
a) Classical approach,
b) Behavioral approach,
c) Quantitative approach,
d) Systems approach,
e) Contingency approach.
a) The classical approach:
The classical approach is the oldest formal approach of management thought. Its roots pre-
date the twentieth century. The classical approach of thought generally concerns ways to
manage work and organizations more efficiently. Three areas of study that can be grouped
under the classical approach are scientific management, administrative management, and
bureaucratic management.
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(i) Scientific Management.

Frederick Winslow Taylor is known as the father of scientific management. Scientific
management (also called Taylorism or the Taylor system) is a theory of management that
analyzes and synthesizes workflows, with the objective of improving labor productivity. In
other words, Traditional rules of thumb are replaced by precise procedures developed after
careful study of an individual at work.
(ii) Administrative Management.
Administrative management focuses on the management process and principles of
management. In contrast to scientific management, which deals largely with jobs and work at
the individual level of analysis, administrative management provides a more general theory
of management. Henri Fayol is the major contributor to this approach of management
thought.
(iii) Bureaucratic Management.
He proposed that a form of organization, called a bureaucracy, characterized by division of
labor, hierarchy, formalized rules, impersonality, and the selection and promotion of
employees based on ability, would lead to more efficient management. Weber also contended
that managers' authority in an organization should be based not on tradition or charisma but
on the position held by managers in the organizational hierarchy.

b) The behavioral approach:

The behavioral approach of management thought developed, in part, because of perceived
weaknesses in the assumptions of the classical approach. The classical approach emphasized
efficiency, process, and principles. Thus, the behavioral approach focused on trying to
understand the factors that affect human behavior at work.
(i) Human Relations.
The Hawthorne Experiments began in 1924 and continued through the early 1930s. A variety
of researchers participated in the studies, including Elton Mayo. One of the major
conclusions of the Hawthorne studies was that workers' attitudes are associated with
productivity. Another was that the workplace is a social system and informal group influence
could exert a powerful effect on individual behavior. A third was that the style of supervision
is an important factor in increasing workers' job satisfaction.
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(ii) Behavioral Science.

Behavioral science and the study of organizational behavior emerged in the 1950s and 1960s..
The behavioral science approach has contributed to the study of management through its
focus on personality, attitudes, values, motivation, group behavior, leadership,
communication, and conflict, among other issues.
c) The quantitative approach:
The quantitative approach focuses on improving decision making via the application of
quantitative techniques. Its roots can be traced back to scientific management.
(i) Management Science (Operations Research)
Management science (also called operations research) uses mathematical and statistical
approaches to solve management problems. It developed during World War II as strategists
tried to apply scientific knowledge and methods to the complex problems of war. Industry
began to apply management science after the war. The advent of the computer made many
management science tools and concepts more practical for industry (ii) Production And
Operations Management.
d) Systems approach:
The systems approach focuses on understanding the organization as an open system that
transforms inputs into outputs.
e) Contingency approach:
The contingency approach focuses on applying management principles and processes as
dictated by the unique characteristics of each situation. It emphasizes that there is no one best
way to manage and that it depends on various situational factors, such as the external
environment, technology, organizational characteristics, characteristics of the manager, and
characteristics of the subordinates.
Management Vs Administration:
Sr. Basis of Administration Management
No. difference

1. Meaning It means the determination of Management is to translate threats into

objectives, plans and policies of opportunities.
an enterprise.
2. Purpose Administration aims at Management aims at achieving pre-
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determining the objectives. determined objectives.

3. Nature Administration is a decision Management is an execution or doing
making function. function.
4. Decisions Administration decides what is to Management decides who will do the
be done and when it is to be function and how he will do it, where he
done. will do it.
5. Scope The term administration is The term management is more applicable
applicable at the top level of at middle level and lower level of
management. management.
6. Usage The term administration is Management is generally used with
generally used from business reference to business enterprises.
organizations like govt., offices,
colleges, universities etc.
7. Features Administration decisions are Management decisions are mainly
affecting influenced by govt. policies, influenced by the target of enterprise.
decisions social and political
circumstances and economic
additions.
8. Relationship Administration is related mainly Management is related with the workers
with the owner and top-level and employers of organization.
managers.
9. Function It is a determinative or thinking It is an executive or doing function.
function.
10. Concerned It is concerned with It concerned with the implementation of
determination of major object policies.
and policies.

DEVELOPMENT OF MANAGEMENT THOUGHT

Evolution of management thought may be divided into three stages
1. Classical Theory
(a) Scientific Management of Taylor
(b) Administrative Management of Fayol
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(c) Bureaucratic Model of Max Weber

2. Neo-classical Theory or Behaviour Approach
3. Modern Theory or Systems Approach

1. Classical Theory
Prof. Charles Babbage, James Watt Junior and Mathew Robinson Boulton, Robert Owen,
Henry Robinson Towne and Rowntree were, no doubt, pioneers of management thought.
Features of Management in the Classical Period:
1. It was closely associated with the industrial revolution and the rise of large-scale
enterprise.
2. Classical organization and management theory is based on contributions from a number of
sources. They are scientific management, Administrative management theory, bureaucratic
model, and micro-economics and public administration.
3. Management thought focused on job content division of labour, standardization,
simplification and specialization and scientific approach towards organization.

A. Taylor's Scientific Management:

Started as an apprentice machinist in Philadelphia, USA. He rose to be the chief
engineer at the Midvale Engineering Works and later on served with the Bethlehem Works
where he experimented with his ideas and made the contribution to the management theory
for which he is so well known. Frederick Winslow Taylor well-known as the founder of
scientific management was the first to recognize and emphasis the need for adopting a
scientific approach to the task of managing an enterprise.
Elements of Scientific Management:
The techniques which Taylor regarded as its essential elements or features may be classified
as under:
1. Scientific Task and Rate-setting, work improvement, etc.
2. Planning the Task.
3. Vocational Selection and Training
4. Standardization (of working conditions, material equipment etc.)
5. Specialization
6. Mental Revolution.
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1. Scientific Task and Rate-Setting (work study):

Work study may be defined as the systematic, objective and critical examination of all the
factors governing the operational efficiency of any specified activity in order to effect
improvement.
Work study includes.
(a) Methods Study:
The management should try to ensure that the plant is laid out in the best manner and is
equipped with the best tools and machinery. The possibilities of eliminating or combining
certain operations may be studied.
(b) Motion Study:
It is a study of the movement, of an operator (or even of a machine) in performing an
operation with the purpose of eliminating useless motions.
(c) Time Study (work measurement):
The basic purpose of time study is to determine the proper time for performing the operation.
Such study may be conducted after the motion study. Both time study and motion study help
in determining the best method of doing a job and the standard time allowed for it.
(d) Fatigue Study:
If, a standard task is set without providing for measures to eliminate fatigue, it may either be
beyond the workers or the workers may over strain themselves to attain it. It is necessary,
therefore, to regulate the working hours and provide for rest pauses at scientifically
determined intervals.
(e) Rate-setting: Taylor recommended the differential piece wage system, under which
workers performing the standard task within prescribed time are paid a much higher rate per
unit than inefficient workers who are not able to come up to the standard set.

2. Planning the Task:

Having set the task which an average worker must strive to perform to get wages at the
higher piece-rate, necessary steps have to be taken to plan the production thoroughly so that
there is no bottleneck and the work goes on systematically.
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3. Selection and Training:

Scientific Management requires a radical change in the methods and procedures of selecting
workers. It is therefore necessary to entrust the task of selection to a central personnel
department. The procedure of selection will also have to be systematized. Proper attention has
also to be devoted to the training of the workers in the correct methods of work.

4. Standardization:
Standardization may be introduced in respect of the following.
(a) Tools and equipment: By standardization is meant the process of bringing about
uniformity. The management must select and store standard tools and implements which will
be nearly the best or the best of their kind.
(b) Speed: There is usually an optimum speed for every machine. If it is exceeded,it is likely
to result in damage to machinery.
(c) Conditions of Work: To attain standard performance, the maintenance of standard
conditions of ventilation, heating, cooling, humidity, floor space, safety etc., is very essential.
(d) Materials: The efficiency of a worker depends on the quality of materials
and the method of handling materials.
5. Specialization:
Scientific management will not be complete without the introduction of specialization.
Under this plan, the two functions of 'planning' and 'doing' are separated in the organization
of the plant. The `functional foremen' are specialists who join their heads to give thought to
the planning of the performance of operations in the workshop. Taylor suggested eight
functional foremen under his scheme of functional foremanship.
6. Mental Revolution:
At present, industry is divided into two groups – management and labour. The major problem
between these two groups is the division of surplus.The management wants the maximum
possible share of the surplus as profit; the workers want, as large share in the form of wages.
Taylor has in mind the enormous gain that arises from higher productivity. Such gains can be
shared both by the management and workers in the form of increased profits and increased
wages.
Benefits of Scientific Management:
The benefits of scientific management are:-
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(a) Replacement of traditional rule of thumb method by scientific techniques.

(b) Proper selection and training of workers.
(c) Incentive wages to the workers for higher production.
(d) Elimination of wastes and rationalization of system of control.
(e) Standardization of tools, equipment, materials and work methods.
(f) Detailed instructions and constant guidance of the workers.
(g) Establishment of harmonious relationship between the workers.
(h) Better utilization of various resources.
(i) Satisfaction of the needs of the customers by providing higher quality products at
lower prices.

B. Administrative Management Theory:

Henry Fayol was the most important exponent of this theory. The pyramidal form, scalar
principle, unity of command, exception principle, span of control and departmentalization are
some of the important concepts set forth by Fayol and his followers like Mooney and Reiley,
Simon, Urwick, Gullick etc.

Henry Fayol (France, 1841 - 1925):

Henry Fayol was born in 1941 at Constantinople in France. He graduated as a mining
engineer in 1860 from the National School of Mining.After his graduation, he joined a French
Coal Mining Company as an Engineer. After a couple of years, he was promoted as manager.
He was appointed as General Manager of his company in 1888. At that time, the company
suffered heavy losses and was nearly bankrupt. Henry Fayol succeeded in converting his
company from near bankruptcy to a strong financial position and a record of profits and
dividends over a long period.

Fayol's Principles of Management:

The principles of management are given below:
1. Division of work: Division of work or specialization alone can give maximum productivity
and efficiency. Both technical and managerial activities can be performed in the best manner
only through division of labour and specialization.
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2. Authority and Responsibility: The right to give order is called authority. The obligation to
accomplish is called responsibility. Authority and Responsibility are the two sides of the
management coin. They exist together. They are complementary and mutually
interdependent.
3. Discipline:
The objectives, rules and regulations, the policies and procedures must be honored by each
member of an organization. There must be clear and fair agreement on the rules and
objectives, on the policies and procedures. There must be penalties (punishment) for non-
obedience or indiscipline. No organization can work smoothly without discipline - preferably
voluntary discipline.
4. Unity of Command:
In order to avoid any possible confusion and conflict, each member of an organization must
received orders and instructions only from one superior (boss).
5. Unity of Direction:
All members of an organization must work together to accomplish common objectives.
6. Emphasis on Subordination of Personal Interest to General or Common
Interest:
This is also called principle of co-operation. Each shall work for all and all for each. General
or common interest must be supreme in any joint enterprise.
7. Remuneration:
Fair pay with non-financial rewards can act as the best incentive or motivator for good
performance. Exploitation of employees in any manner must be eliminated. Sound scheme of
remuneration includes adequate financial and nonfinancial incentives.
8. Centralization:
There must be a good balance between centralization and decentralization of authority and
power. Extreme centralization and decentralization must be avoided.
9. Scalar Chain:
The unity of command brings about a chain or hierarchy of command linking all members of
the organization from the top to the bottom. Scalar denotes steps.
10. Order:
Fayol suggested that there is a place for everything. Order or system alone can create a sound
organization and efficient management.
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11. Equity:
An organization consists of a group of people involved in joint effort. Hence,equity (i.e.,
justice) must be there. Without equity, we cannot have sustained and adequate joint
collaboration.
12. Stability of Tenure:
A person needs time to adjust himself with the new work and demonstrate efficiency in due
course. Hence, employees and managers must have job security. Security of income and
employment is a pre-requisite of sound organization and management.
13. Esprit of Co-operation:
Esprit de corps is the foundation of a sound organization. Union is strength. But unity
demands co-operation. Pride, loyalty and sense of belonging are responsible for good
performance.
14. Initiative:
Creative thinking and capacity to take initiative can give us sound managerial planning and
execution of predetermined plans.
C. Bureaucratic Model:
Max Weber, a German Sociologist developed the bureaucratic model. His model of
bureaucracy include
(i) Hierarchy of authority.
(ii) Division of labour based upon functional specialization.
(iii) A system of rules.
(iv) Impersonality of interpersonal relationships.
(v) A system of work procedures.
(vi) Placement of employees based upon technical competence.
(vii) Legal authority and power.
Bureaucracy provides a rigid model of an organization. It does not account for important
human elements. The features of Bureaucracy are:-
1. Rigidity, impersonality and higher cost of controls.
2. Anxiety due to pressure of conformity to rules and procedure.
3. Dependence on superior.
4. Tendency to forget ultimate goals of the organization.
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Bureaucratic Model is preferred where change is not anticipated or where rate of change can
be predicated. It is followed in government departments and in large business organizations.

2. Neoclassical Theory
Neo-classical Theory is built on the base of classical theory. It modified, improved
and extended the classical theory. Classical theory concentrated on job content and
management of physical resources whereas, neoclassical theory gave greater emphasis to
individual and group relationship in the workplace. The neo- classical theory pointed out the
role of psychology and sociology in the understanding of individual and group behaviour in
an organization.
George Elton Mayo (Australia, 1880 - 1949):
Elton Mayo was born in Australia. He was educated in Logic and Philosophy at St. Peter's
College, Adelaide. He led a team of researchers from Harvard University, which carried out
investigation in human problems at the Hawthorne Plant of Western Electrical Company at
Chicago. They conducted some experiments (known as Hawthorne Experiments) and
investigated informal groupings, informal relationships, patterns of communication, patterns
of informal leadership etc. Elton Mayo is generally recognized as the father of Human
Relations School. Other prominent contributors to this school include Roethlisberger,
Dickson, Dewey, Lewin etc.

Hawthorne Experiment:
In 1927, a group of researchers led by Elton Mayo and Fritz Roethlisberger of the Harvard
Business School were invited to join in the studies at the Hawthorne Works of Western
Electric Company, Chicago. The experiment lasted up to 1932. The Hawthorne Experiments
brought out that the productivity of the employees is not the function of only physical
conditions of work and money wages paid to them.
These parts are briefly described below:-
1. Illumination Experiment.
2. Relay Assembly Test Room Experiment.
3. Interviewing Programme.
4. Bank Wiring Test Room Experiment.
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The findings of the study are:-

(i) Each individual was restricting output.
(ii) The group had its own "unofficial" standards of performance.
(iii) Individual output remained fairly constant over a period of time.
(iv) Informal groups play an important role in the working of an organization.

Contributions of the Hawthorne Experiment:

Elton Mayo and his associates conducted their studies in the Hawthorne plant of the western
electrical company, U.S.A., between 1927 and 1930. According to them, behavioral science
methods have many areas of application in management. The important features of the
Hawthorne Experiment are:-
1. A business organization is basically a social system. It is not just a techno-economic
system.
2. The employer can be motivated by psychological and social wants because his behaviour is
also influenced by feelings, emotions and attitudes. Thus economic incentives are not the
only method to motivate people.
3. Management must learn to develop co-operative attitudes and not rely merely on
command.
4. Participation becomes an important instrument in human relations movement. In order to
achieve participation, effective two-way communication network is essential.
5. Productivity is linked with employee satisfaction in any business organization. Therefore
management must take greater interest in employee satisfaction.
6. Group psychology plays an important role in any business organization. We must therefore
rely more on informal group effort.
7. The neo-classical theory emphasizes that man is a living machine and he is far more
important than the inanimate machine. Hence, the key to higher productivity lies in employee
morale. High morale results in higher output.

Elements of Behavioural Theory:

There are three elements of behavioural theory.
1. The Individual:
2. Work Groups:
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3. Participative Management:

3. Modern Theory (System Approach)

The systems approach to management indicates the fourth major theory of
management thought called modern theory..
Meaning of "System": The word system is derived from the Greek word meaning to bring
together or to combine.
Systems Approach Applied to an Organization:
When systems approach is applied to Organization, we have the following features of an
organization as an open adaptive System:-
1. It is a sub-system of its broader environment.
2. It is a goal-oriented – people with a purpose.
3. It is a technical subsystem – using knowledge, techniques, equipment and facilities.
4. It is a structural subsystem – people working together on interrelated activities.
5. It is a psychosocial system – people in social relationships.
6. It is co-ordinate by a managerial sub system, creating, planning, organizing, motivating,
Communicating and controlling the overall efforts directed towards set goals.
Contingency Theory:
Systems approach emphasizes that all sub- systems of an organization along with the super
system of environment are interconnected and interrelated. Contingency approach analysis
and understands these interrelationship so that managerial actions can be adjusted to demands
of specific situations or circumstances. Thus the contingency approach enables us to evolve
practical answers to problems demanding solutions
Henry Fayol's 14 Principles of Management:
The principles of management are given below:
1. Division of work:
Division of work or specialization alone can give maximum productivity and efficiency. Both
technical and managerial activities can be performed in the best manner only through division
of labour and specialization.
2. Authority and Responsibility:
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The right to give order is called authority. The obligation to accomplish is called
responsibility. Authority and Responsibility are the two sides of the management coin. They
exist together. They are complementary and mutually interdependent.
3. Discipline:
The objectives, rules and regulations, the policies and procedures must be honored by each
member of an organization. There must be clear and fair agreement on the rules and
objectives, on the policies and procedures. There must be penalties (punishment) for non-
obedience or indiscipline. No organization can work smoothly without discipline – preferably
voluntary discipline.
4. Unity of Command:
In order to avoid any possible confusion and conflict, each member of an organization must
received orders and instructions only from one superior (boss).
5. Unity of Direction:
All members of an organization must work together to accomplish common objectives.
6. Emphasis on Subordination of Personal Interest to General or Common Interest:
This is also called principle of co-operation. Each shall work for all and all for each. General
or common interest must be supreme in any joint enterprise.
7. Remuneration:
Fair pay with non-financial rewards can act as the best incentive or motivator for good
performance. Exploitation of employees in any manner must be eliminated. Sound scheme of
remuneration includes adequate financial and nonfinancial incentives.
8. Centralization:
There must be a good balance between centralization and decentralization of authority and
power. Extreme centralization and decentralization must be avoided.
9. Scalar Chain:
The unity of command brings about a chain or hierarchy of command linking all members of
the organization from the top to the bottom. Scalar denotes steps.

10. Order:
Fayol suggested that there is a place for everything. Order or system alone can create a sound
organization and efficient management.
11. Equity:
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An organization consists of a group of people involved in joint effort. Hence, equity (i.e.,
justice) must be there. Without equity, we cannot have sustained and adequate joint
collaboration.
12. Stability of Tenure:
A person needs time to adjust himself with the new work and demonstrate efficiency in due
course. Hence, employees and managers must have job security. Security of income and
employment is a pre-requisite of sound organization and management.
13. Esprit of Co-operation:
Esprit de corps is the foundation of a sound organization. Union is strength. But unity
demands co-operation. Pride, loyalty and sense of belonging are responsible for good
performance.
14. Initiative:
Creative thinking and capacity to take initiative can give us sound managerial planning and
execution of predetermined plans.
ORGANIZATION AND THE ENVIRONMENTAL FACTORS
Environmental factors play a major role in determining an organization's success or
failure. Managers should strive to maintain the proper alignment between their
organization and is environment. All organizations have both external and internal
environments.

The external environment is composed of general and task environment layers. The
general environment is composed of the nonspecific elements of the organization's
surroundings that might affect its activities. It consists of five dimensions: economic,
technological, socio-cultural, political-legal, and international. The effects of these
dimensions on the organization are broad and gradual. The task environment consists
of specific dimensions of the organization's surroundings that are very likely to
influence the organization.

It also consists of five elements: competitors, customers, suppliers, regulators, and

strategic partners. Because these dimensions are associated with specific
organizations in the environment, their effects are likely to be more direct and
immediate.
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The internal environment consists of the organization's owners, board of directors,

employees, physical environment, and culture. Owners are those who have property
rights claims on the organization. The board of directors, elected by stockholders, is
responsible for overseeing a firm's top managers. Individual employees and the labor
unions they sometimes join are other important parts of the internal environment. The
physical environment, yet another part of the internal environment, varies greatly
across organizations.

Organizations and their environments affect each other in several ways.

Environmental influences on the organization can occur through uncertainty,
competitive forces, and turbulence. Organizations, in turn, use information
management; strategic response; mergers, acquisitions, and alliances; organization
design and flexibility; direct influence; and social responsibility to adapt to their task
environments.
One important indicator of how well an organization deals with its environment is its
level of effectiveness. Organizational effectiveness requires that the organization do a
good job of procuring resources, managing them properly, achieving its goals, and
satisfying its constituencies. Because of the complexities associated with meeting
these requirements, however, experts may disagree as to the effectiveness of any
given organization at any given point in time.

STRATEGIES FOR INTERNATIONAL BUSINESS

Multinationals: The multinational strategy focuses on local responsiveness. Subsidiaries

operate autonomously or in a loose federation. The advantage of this type of approach is
that the firm can quickly respond to different local needs and opportunities. This strategy
reduces the need for communications because local subsidiaries can make many decisions.
There are heavy reporting requirements though, as the results from the subsidiaries have to be
monitored at a headquarter location.
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Global: A global strategy stresses efficiency because there is strong central control from
headquarters. Economics come from standard product designs and global manufacturing. An
extensive communications and control system is necessary to centrally manage the global
firm.

International: The international strategy is much like the multinational as there are
autonomous local subsidiaries. However, these subsidiaries are very dependent on
headquarters for new processes and products. A good example is a pharmaceuticals company.
The research labs in the headquarter company develop products for introduction around the
world. Local subsidiaries stress product approval by local governments and local marketing.

Transnational: The transactional firm attempts to do everything! It seeks global efficiency

while retaining local responsiveness. The firm integrates global activities through cooperation
among headquarters and foreign same time that it obtains the advantage of global integration,
efficiency, and innovation.
We predict that the various types of firms will tend to strive toward the transnational
model over world.

UNIT-II
PLANNING

Nature of Planning
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Planning is a dynamic process, it is very essential for every organization to achieve their
ultimate goals, but, there are certain principles which are essential to be followed so as to
formulate a sound plan. They are only guidelines in the formulation and implementation of
plans.

1. Principle of Contribution: The purpose of planning is to ensure the effective and

efficient achievement of corporate objectives,

2. Principle of Sound and Consistent Premising: Premises are the assumptions

regarding the environmental forces like economic and market conditions, social,
political, legal and cultural aspects, competitors actions, etc.

3. Principle of Limiting factors : The limiting factors are the lack of motivated
employees, shortage of trained personnel, shortage of capital funds, government policy
of price regulation, etc.

4. Principle of Commitment: A commitment is required to carry-on the business that is

established.

5. Principle of Coordinated Planning: Long and short-range plans should be

coordinated with one another to form an integrated plan, this is possible only when latter
are derived from the former.

6. Principle of Timing: Number of major and minor plans of the organisation should be
arranged in a systematic manner.

7. Principle of Efficiency: Cost of planning constitute human, physical and financial

resources for their formulation and implementation as well. Minimizing the cost and
achieving the efficient utilization of resources shall has to be the aim of the plans.

8. Principle of Flexibility: Plans are supposed to be flexible to favour the organisation

to cope-up with the unexpected environments.

9. Principle of Navigational Change: Since the environment is always not the same as
predicted, plans should be reviewed periodically
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10. Principle of Acceptance: Plans should be understood and accepted by the

employees, since the successful implementation of plans requires the willingness
and cooperative efforts from them

Importance (purpose) of Planning

 Planning provides directions

 Planning reduces the risks of uncertainty
 Planning reduces overlapping and wasteful activities
 Planning promotes innovative ideas
 Planning facilitates decision making
 Planning establishes standards for controlling.

SOCIAL RESPONSIBILITY OF MANAGERS

Social responsibility is defined as the obligation and commitment of managers to take steps
for protecting and improving society’s welfare along with protecting their own interest. The
managers must have social responsibility because of the following reasons:

1. Organizational Resources

An organization has a diverse pool of resources in form of men, money, competencies and
functional expertise

2. Precautionary measure

if an organization lingers on dealing with the social issues now, it would land up putting out
social fires so that no time is left for realizing its goal of producing goods and services.

3. Moral Obligation

The acceptance of managers’ social responsibility has been identified as a morally

appropriate position.

4. Efficient and Effective Employees

Recruiting employees becomes easier for socially responsible organization. Employees are
attracted to contribute for more socially responsible organizations.

5. Better Organizational Environment

The organization that is most responsive to the betterment of social quality of life will
consequently have a better society in which it can perform its business operations.
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PLANNING

DEFINITION

According to Koontz O’Donnell - "Planning is an intellectual process, the conscious

determination of courses of action, the basing of decisions on purpose, acts and considered
estimates".

NATURE AND PURPOSE OF PLANNING

Nature of Planning

1. Planning is goal-oriented:

Every plan must contribute in some positive way towards the accomplishment of group
objectives. Planning has no meaning without being related to goals.

2. Primacy of Planning:

Planning is the first of the managerial functions. It precedes all other management functions.

3. Pervasiveness of Planning:

Planning is found at all levels of management. Top management looks after strategic
planning. Middle management is in charge of administrative planning. Lower management
has to concentrate on operational planning.

4. Efficiency, Economy and Accuracy:

Efficiency of plan is measured by its contribution to the objectives as economically as

possible. Planning also focuses on accurate forecasts.

5. Co-ordination:

Planning co-ordinates the what, who, how, where and why of planning. Without co-ordination
of all activities, we cannot have united efforts.

6. Limiting Factors:

A planner must recognize the limiting factors (money, manpower etc) and formulate plans in
the light of these critical factors.

7. Flexibility:

The process of planning should be adaptable to changing environmental conditions.

8. Planning is an intellectual process:

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The quality of planning will vary according to the quality of the mind of the manager.

Purpose of Planning

As a managerial function planning is important due to the following reasons:-

1. To manage by objectives:

All the activities of an organization are designed to achieve certain specified objectives.
However, planning makes the objectives more concrete by focusing attention on them.

2. To offset uncertainty and change:

Future is always full of uncertainties and changes. Planning foresees the future and makes the
necessary provisions for it.

3. To secure economy in operation:

Planning involves the selection of most profitable course of action that would lead to the best
result at the minimum costs.

4. To help in co-ordination:

Co-ordination is, indeed, the essence of management, the planning is the base of it. Without
planning it is not possible to co-ordinate the different activities of an organization.

5. To make control effective:

The controlling function of management relates to the comparison of the planned

performance with the actual performance. In the absence of plans, a management will have
no standards for controlling other's performance.

6. To increase organizational effectiveness:

Mere efficiency in the organization is not important; it should also lead to productivity and
effectiveness. Planning enables the manager to measure the organizational effectiveness in
the context of the stated objectives and take further actions in this direction.

Features of Planning

• It is primary function of management.

• It is an intellectual process
• Focuses on determining the objectives
• Involves choice and decision making
• It is a continuous process
• It is a pervasive function
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Classification of Planning

On the basis of content

• Strategic Planning

– It is the process of deciding on Long-term objectives of the organization.

– It encompasses all the functional areas of business
• Tactical Planning

– It involves conversion of detailed and specific plans into detailed and specific action plans.
– It is the blue print for current action and it supports the strategic plans.

On the basis of time period

• Long term planning

– Time frame beyond five years.

– It specifies what the organization wants to become in long run.
– It involves great deal of uncertainty.

• Intermediate term planning

– Time frame between two and five years.

– It is designed to implement long term plans.
• Short term planning

– Time frame of one year or less.

– It provide basis for day to day operations.

PLANNING PROCESS

The various steps involved in planning are given below

a) Perception of Opportunities:

Although preceding actual planning and therefore not strictly a part of the planning process,
awareness of an opportunity is the real starting point for planning. It includes a preliminary
look at possible future opportunities and the ability to see them clearly and completely,
 24

knowledge of where we stand in the light of our strengths and weaknesses, an understanding
of why we wish to solve uncertainties, and a vision of what we expect to gain. Setting
realistic objectives depends on this awareness. Planning requires realistic diagnosis of the
opportunity situation.

b) Establishing Objectives:

The first step in planning itself is to establish objectives for the entire enterprise and then for
each subordinate unit. Objectives specifying the results expected indicate the end points of
what is to be done, where the primary emphasis is to be placed, and what is to be
accomplished by the network of strategies, policies, procedures, rules, budgets and programs.

c) Considering the Planning Premises:

Another logical step in planning is to establish, obtain agreement to utilize and disseminate
critical planning premises. These are forecast data of a factual nature, applicable basic
policies, and existing company plans. Premises, then, are planning assumptions – in other
words, the expected environment of plans in operation. This step leads to one of the major
principles of planning.

d) Identification of alternatives:

Once the organizational objectives have been clearly stated and the planning premises have
been developed, the manager should list as many available alternatives as possible for
reaching those objectives. The focus of this step is to search for and examine alternative
courses of action, especially those not immediately apparent.

e) Evaluation of alternatives

Having sought out alternative courses and examined their strong and weak points, the
following step is to evaluate them by weighing the various factors in the light of premises and
goals. One course may appear to be the most profitable but require a large cash outlay and a
slow payback; another may be less profitable but involve less risk; still another may better
suit the company in long–range objectives.

f) Choice of alternative plans

An evaluation of alternatives must include an evaluation of the premises on which the

alternatives are based. A manager usually finds that some premises are unreasonable and can
therefore be excluded from further consideration. This elimination process helps the manager
determine which alternative would best accomplish organizational objectives.
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g) Formulating of Supporting Plans

After decisions are made and plans are set, the final step to give them meaning is to
numberize them by converting them to budgets. The overall budgets of an enterprise
represent the sum total of income and expenses with resultant profit or surplus and budgets of
major balance sheet items such as cash and capital expenditures.

h) Establishing sequence of activities

Once plans that furnish the organization with both long-range and short-range direction have
been developed, they must be implemented. Obviously, the organization can not directly
benefit from planning process until this step is performed.

TYPES OF PLANS / COMPONENTS OF PLANNING

In the process of planning, several plans are prepared which are known as components of
planning.

Plans can be broadly classified as

a) Strategic plans

b) Tactical plans

c) Operational plans

Operational plans lead to the achievement of tactical plans, which in turn lead to the
attainment of strategic plans. In addition to these three types of plans, managers should also
develop a contingency plan in case their original plans fail.

a) Strategic plans:

A strategic plan is an outline of steps designed with the goals of the entire organization as a
whole in mind, rather than with the goals of specific divisions or departments.

It is further classified as

i) Mission:

. The mission is a statement that reflects the basic purpose and focus of the organization
which normally remain unchanged. The mission of the company is the answer of the question
: why does the organization exists? Properly crafted mission statements serve as filters to
separate what is important from what is not, clearly state which markets will be served and
how, and communicate a sense of intended direction to the entire organization.
 26

Mission of Ford: “we are a global, diverse family with a proud inheritance, providing
exceptional products and services”.

ii) Objectives or goals:

Both goal and objective can be defined as statements that reflect the end towards which the
organization is aiming to achieve. However, there are significant differences between the two.
A goal is an abstract and general umbrella statement, under which specific objectives can be
clustered. Objectives are statements that describe—in precise, measurable, and obtainable
terms which reflect the desired organization’s outcomes.

iii) Strategies:

Strategy is the determination of the basic long term objectives of an organization and the
adoption of action and collection of action and allocation of resources necessary to achieve
these goals.

b) Tactical plans:

A tactical plan is concerned with what the lower level units within each division must do,
how they must do it, and who is in charge at each level. Tactics are the means needed to
activate a strategy and make it work.

c) Operational plans

The specific results expected from departments, work groups, and individuals are the
operational goals. These goals are precise and measurable

i) Single-use plans

It apply to activities that do not recur or repeat. A one-time occurrence, such as a special sales
program, is a single-use plan because it deals with the who, what, where, how, and how much
of an activity.

Ø Programme:

Programme consists of an ordered list of events to be followed to execute a project.

Ø Budget:

A budget predicts sources and amounts of income and how much they are used for a specific
project.

ii) Standing plans

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Standing plans are usually made once and retain their value over a period of years while
undergoing periodic revisions and updates. The following are examples of ongoing plans:

Ø Policy:

A policy provides a broad guideline for managers to follow when dealing with important
areas of decision making. Policies are general statements that explain how a manager should
attempt to handle routine management responsibilities.

Ø Procedure:

A procedure is a set of step-by-step directions that explains how activities or tasks are to be
carried out. Most organizations have procedures for purchasing supplies and equipment, for
example.

Ø Rule:

A rule is an explicit statement that tells an employee what he or she can and cannot do. Rules
are “do” and “don't” statements put into place to promote the safety of employees and the
uniform treatment and behavior of employees.

d) Contingency plans

Intelligent and successful management depends upon a constant pursuit of adaptation,

flexibility, and mastery of changing conditions. Strong management requires a “keeping all
options open” approach at all times — that's where contingency planning comes in.
Contingency planning involves identifying alternative courses of action that can be
implemented if and when the original plan proves inadequate because of changing
circumstances.

OBJECTIVES

Objectives may be defined as the goals which an organization tries to achieve. Objectives are
described as the end- points of planning. According to Koontz and O'Donnell, "an objective is
a term commonly used to indicate the end point of a management programme."Objectives
constitute the purpose of the enterprise and without them no intelligent planning can take
place.

Features of Objectives

• The objectives must be predetermined.

• A clearly defined objective provides the clear direction for managerial effort.
• Objectives must be realistic.
• Objectives must be measurable.
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• Objectives must have social sanction.

• All objectives are interconnected and mutually supportive.
• Objectives may be short-range, medium-range and long-range.
• Objectives may be constructed into a hierarchy.

Advantages of Objectives
• Clear definition of objectives encourages unified planning.
• Objectives provide motivation to people in the organization.
• When the work is goal-oriented, unproductive tasks can be avoided.
• Objectives provide standards which aid in the control of human efforts in an organization.
• Objectives serve to identify the organization and to link it to the groups upon which its
existence depends.
• Objectives act as a sound basis for developing administrative controls.
• Objectives contribute to the management process: they influence the purpose of the
organization, policies, personnel, leadership as well as managerial control.

Process of Setting Objectives

• Objectives are required to be set by management in every area which directly and vitally
affects the survival and prosperity of the business.
• The objectives to be set in various areas have to be identified.
• While setting the objectives, the past performance must be reviewed, since past
performance indicates what the organization will be able to accomplish in future.
• The objectives should be set in realistic terms i.e., the objectives to be set should be
reasonable and capable of attainment.
• Objectives must be consistent with one and other.
• Objectives must be set in clear-cut terms.
• For the successful accomplishment of the objectives, there should be effective
communication.

MANAGEMENT BY OBJECTIVES (MBO)

Definition

“MBO is a process whereby the superior and the mangers of an organization jointly identify
its common goals, define each individual’s major area of responsibility in terms of results
expected of him, and use these measures as guides for operating the unit and assessing the
contribution of each of its members.”

Features of MBO

1. MBO is concerned with goal setting and planning for individual managers and their units.
 29

2. The essence of MBO is a process of joint goal setting between a supervisor and a
subordinate.

3. Managers work with their subordinates to establish the performance goals that are
consistent with their higher organizational objectives.

4. MBO focuses attention on appropriate goals and plans.

5. MBO facilitates control through the periodic development and subsequent evaluation of
individual goals and plans.

The typical MBO process consists of:

1) Establishing a clear and precisely defined statement of objectives for the employee

2) Developing an action plan indicating how these objectives are to be achieved

3) Reviewing the performance of the employees

4)Appraisingperformancebasedonobjectiveachievement

1) Setting objectives:

For Management by Objectives (MBO) to be effective, individual managers must understand

the specific objectives of their job and how those objectives fit in with the overall company
objectives set by the board of directors.
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2) Developing action plans

Actions plans specify the actions needed to address each of the top organizational issues and
to reach each of the associated goals, who will complete each action and according to what
timeline. An overall, top-level action plan that depicts how each strategic goal will be reached
is developed by the top level management. The format of the action plan depends on the
objective of the organization.

3) Reviewing Progress:

Performance is measured in terms of results. Job performance is the net effect of an

employee's effort as modified by abilities, role perceptions and results produced. Effort refers
to the amount of energy an employee uses in performing a job.

4) Performance appraisal:

Performance appraisals communicate to employees how they are performing their jobs, and
they establish a plan for improvement. Performance appraisals are extremely important to
both employee and employer, as they are often used to provide predictive information related
to possible promotion.

STRATEGIES

According to Koontz and O' Donnell, "Strategies must often denote a general programme of
action and deployment of emphasis and resources to attain comprehensive objectives".

Characteristics of Strategy

• It is the right combination of different factors.

• It relates the business organization to the environment.
• It is an action to meet a particular challenge, to solve particular problems or to attain desired
objectives.
• Strategy is a means to an end and not an end in itself.
• It is formulated at the top management level.
• It involves assumption of certain calculated risks.

Strategic Planning Process / Strategic Formulation Process

1. Input to the Organization:

Various Inputs (People, Capital, Management and Technical skills, others) including goals
input of claimants (Employees, Consumers, Suppliers, Stockholders, Government,
Community and others)need to be elaborated.
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2. Industry Analysis:

Formulation of strategy requires the evaluation of the attractiveness of an industry by

analyzing the external environment. The focus should be on the kind of compaction within an
industry, the possibility of new firms entering the market, the availability of substitute
products or services, the bargaining positions of the suppliers, and buyers or customers.

3. Enterprise Profile:

Enterprise profile is usually the starting point for determining where the company is and
where it should go. Top managers determine the basic purpose of the enterprise and clarify
the firm’s geographic orientation.

4. Orientation, Values, and Vision of Executives:

The enterprise profile is shaped by people, especially executives, and their orientation and
values are important for formulation the strategy. They set the organizational climate, and
they determine the direction of the firm though their vision.

5. Mission (Purpose), Major Objectives, and Strategic Intent:

Mission or Purpose is the answer to the question: What is our business? The major Objectives
are the end points towards which the activates of the enterprise are directed.

6. Present and Future External Environment:

The present and future external environment must be assessed in terms of threats and
opportunities.

7. Internal Environment:

Internal Environment should be audited and evaluated with respect to its resources and its
weaknesses, and strengths in research and development, production, operation, procurement,
marketing and products and services.

8. Development of Alternative Strategies:

Strategic alternatives are developed on the basis of an analysis of the external and internal
environment. Strategies may be specialize or concentrate. Alternatively, a firm may diversify,
extending the operation into new and profitable markets.

9. Evaluation and Choice of Strategies:

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Strategic choices must be considered in the light of the risk involved in a particular decision.
Some profitable opportunities may not be pursued because a failure in a risky venture could
result in bankruptcy of the firm.

10. Medium/Short Range Planning, Implementation through Reengineering the

Organization Structure, Leadership and Control:

Implementation of the Strategy often requires reengineering the organization, staffing the
organization structure and providing leadership. Controls must also be installed monitoring
performance against plans.

11. Consistency Testing and Contingency Planning:

The last key aspect of the strategic planning process is the testing for consistency and
preparing for contingency plans.

TYPES OF STRATEGIES

According to Michel Porter, the strategies can be classified into three types. They are

a) Cost leadership strategy

b) Differentiation strategy

c) Focus strategy

a) Cost Leadership Strategy

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This generic strategy calls for being the low cost producer in an industry for a given level of
quality. The firm sells its products either at average industry prices to earn a profit higher than
that of rivals, or below the average industry prices to gain market share..

Firms that succeed in cost leadership often have the following internal strengths:

• Access to the capital required to make a significant investment in production assets; this
investment represents a barrier to entry that many firms may not overcome.

• Skill in designing products for efficient manufacturing, for example, having a small
component count to shorten the assembly process.

• High level of expertise in manufacturing process engineering.

• Efficient distribution channels.

b) Differentiation Strategy

A differentiation strategy calls for the development of a product or service that offers unique
attributes that are valued by customers and that customers perceive to be better than or
different from the products of the competition.

Firms that succeed in a differentiation strategy often have the following internal strengths:

• Access to leading scientific research.

• Highly skilled and creative product development team.

• Strong sales team with the ability to successfully communicate the perceived strengths of
the product.

• Corporate reputation for quality and innovation.

c) Focus Strategy

The focus strategy concentrates on a narrow segment and within that segment attempts to
achieve either a cost advantage or differentiation. The premise is that the needs of the group
can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys a
high degree of customer loyalty, and this entrenched loyalty discourages other firms from
competing directly.

POLICIES

Policies are general statements or understandings that guide managers’ thinking in decision
making. They usually do not require action but are intended to guide managers in their
commitment to the decision they ultimately make.
 34

Essentials of Policy Formulation

The essentials of policy formation may be listed as below:

• A policy should be definite, positive and clear. It should be understood by everyone in the
organization.
• A policy should be translatable into the practices.
• A policy should be flexible and at the same time have a high degree of permanency.
• A policy should be formulated to cover all reasonable anticipatable conditions.
• A policy should be founded upon facts and sound judgment.
• A policy should conform to economic principles, statutes and regulations.
• A policy should be a general statement of the established rule.
Importance of Policies

Policies are useful for the following reasons:

• They provide guides to thinking and action and provide support to the subordinates.
• They delimit the area within which a decision is to be made.
 35

• They save time and effort by pre-deciding problems and

• They permit delegation of authority to mangers at the lower levels.

PLANNING PREMISES.
If premises are not formulated correctly and realistically the plans will be
without any foundation. Also of the premises of plans change the plans too will have to be
modified. There are many factors which are to be considered. This can be divided in to
internal and external.
Planning premises may be classified as under.
1. Tangible and intangible
2. Controllable, semi-controllable and uncontrollable
3. Constant and variable and
4. Foreseeable and unforeseeable
5. Internal and external

1. Tangible and intangible:-

Tangible premises are quantifiable like money, units etc. Intangible are not so like
morale motivation. Through intangible premises cannot be expressed numerically they cannot
be ignored while planning.

2. Controllable, semi controllable and uncontrollable:-

There are certain factors which are subject to the decisions of the management. For
instances, it is within the jurisdiction of the management to decide what policies, procedures,
rules etc., will be followed in the organization. Such factors are known as controllable
premises. Semi-controllable premises are those over which management has partial control.
The examples of such premises are the demand of industry on the firms share in the market.

Uncontrollable:-
Premises where there is absolutely no control are called uncontrollable premises like
war. But this will have impact on the plan. Therefore planning should not be rigid but flexible
to change with unpredictable.

3. Constant and variable premises:-

Constant premises are those which have the similar fashion irrespective of the action.
They are definite, known and well understood.
Ex: - men, money and machine.
Variable premises are those which vary in relation to the course of action taken, such
as the union – management relations.

4. Foreseeable and unforeseeable:-

Foreseeable premised are those which are definite and well – known and can before
seen with certainty. Examples are the requirements of men, money and machines.
Unforeseeable premises are strike, nature etc.

5. Internal and external premises:-

 36

The factors which exist within a business enterprise, furnish the basic for the internal
premises. The factors may be.
a) Basic policies and programmes
b) Capital commitment
c) Sources of raw materials and parts
d) The company sales forecast

FORECASTING
Forecasting can be broadly considered as a method or a technique for estimating many future
aspects of a business or other operation. There are numerous techniques that can be used to
accomplish the goal of forecasting. For example, a retailing firm that has been in business for
25 years can forecast its volume of sales in the coming year based on its experience over the
25-year period—such a forecasting technique bases the future forecast on the past data.
FORECASTING METHODS
QUALITATIVE FORECASTING METHODS
Qualitative forecasting techniques generally employ the judgment of experts in the
appropriate field to generate forecasts. A key advantage of these procedures is that they can
be applied in situations where historical data are simply not available. Moreover, even when
historical data are available, significant changes in environmental conditions affecting the
relevant time series may make the use of past data irrelevant and questionable in forecasting
future values of the time series.

In the Delphi technique, an attempt is made to develop forecasts through "group

consensus." Usually, a panel of experts is asked to respond to a series of questionnaires. The
experts, physically separated from and unknown to each other, are asked to respond to an
initial questionnaire (a set of questions). Then, a second questionnaire is prepared
incorporating information and opinions of the whole group. Each expert is asked to
reconsider and to revise his or her initial response to the questions. This process is continued
until some degree of consensus among experts is reached. It should be noted that the
objective of the Delphi technique is not to produce a single answer at the end. Instead, it
attempts to produce a relatively narrow spread of opinions—the range in which opinions of
the majority of experts lie.
SCENARIO WRITING.
Under this approach, the forecaster starts with different sets of assumptions. For each set of
assumptions, a likely scenario of the business outcome is charted out. Thus, the forecaster
 37

would be able to generate many different future scenarios (corresponding to the different sets
of assumptions). The decision maker or businessperson is presented with the different
scenarios, and has to decide which scenario is most likely to prevail.
SUBJECTIVE APPROACH.
The subjective approach allows individuals participating in the forecasting decision to arrive
at a forecast based on their subjective feelings and ideas. This approach is based on the
premise that a human mind can arrive at a decision based on factors that are often very
difficult to quantify. "Brainstorming sessions" are frequently used as a way to develop new
ideas or to solve complex problems. In loosely organized sessions, participants feel free from
peer pressure and, more importantly, can express their views and ideas without fear of
criticism. Many corporations in the United States have started to increasingly use the
subjective approach.

QUANTITATIVE FORECASTING METHODS

Quantitative forecasting methods are used when historical data on variables of interest are
available—these methods are based on an analysis of historical data concerning the time
series of the specific variable of interest and possibly other related time series. There are two
major categories of quantitative forecasting methods. The first type uses the past trend of a
particular variable to base the future forecast of the variable. As this category of forecasting
methods simply uses time series on past data of the variable that is being forecasted, these
techniques are called time series methods.
TIME SERIES METHODS OF FORECASTING.
Before discussing time series methods, it is helpful to understand the behavior of time series
in general terms. Time series are comprised of four separate components: trend component,
cyclical component, seasonal component, and irregular component. These four components
are viewed as providing specific values for the time series when combined.
In a time series, measurements are taken at successive points or over successive periods. The
measurements may be taken every hour, day, week, month, or year, or at any other regular (or
irregular) interval.
TIME SERIES FORECASTING USING SMOOTHING METHODS.
Smoothing methods are appropriate when a time series displays no significant effects of
trend, cyclical, or seasonal components (often called a stable time series). In such a case, the
 38

goal is to smooth out the irregular component of the time series by using an averaging
process. Once the time series is smoothed, it is used to generate forecasts.

CASUAL METHOD OF FORECASTING.

As mentioned earlier, causal methods use the cause-and-effect relationship between the
variable whose future values are being forecasted and other related variables or factors. The
widely known causal method is called regression analysis, a statistical technique used to
develop a mathematical model showing how a set of variables are related.
DECISION MAKING

The word decision has been derived from the Latin word "decidere" which means "cutting
off". Thus, decision involves cutting off of alternatives between those that are desirable and
those that are not desirable.

In the words of George R. Terry, "Decision-making is the selection based on some criteria
from two or more possible alternatives".

Characteristics of Decision Making

• Decision making implies that there are various alternatives and the most desirable
alternative is chosen to solve the problem or to arrive at expected results.
• The decision-maker has freedom to choose an alternative.
• Decision-making may not be completely rational but may be judgemental and emotional.
• Decision-making is goal-oriented.
• Decision-making is a mental or intellectual process because the final decision is made by
the decision-maker.
• A decision may be expressed in words or may be implied from behaviour.
• Choosing from among the alternative courses of operation implies uncertainty about the
final result of each possible course of operation.
• Decision making is rational. It is taken only after a thorough analysis and reasoning and
weighing the consequences of the various alternatives.

TYPES OF DECISIONS

a) Programmed and Non-Programmed Decisions:

 39

Herbert Simon has grouped organizational decisions into two categories based on the
procedure followed. They are:

i) Programmed decisions:

Programmed decisions are routine and repetitive and are made within the framework of
organizational policies and rules. These policies and rules are established well in advance to
solve recurring problems in the organization.

Programmed decisions have short-run impact. They are, generally, taken at the lower level of
management.

ii) Non-Programmed Decisions:

Non-programmed decisions are decisions taken to meet non-repetitive problems. Non-

programmed decisions are relevant for solving unique/ unusual problems in which various
alternatives cannot be decided in advance. b) Strategic and Tactical Decisions:

Organizational decisions may also be classified as strategic or tactical.

i) Strategic Decisions:

Basic decisions or strategic decisions are decisions which are of crucial importance. Strategic
decisions a major choice of actions concerning allocation of resources and contribution to the
achievement of organizational objectives.

ii) Tactical Decisions:

Routine decisions or tactical decisions are decisions which are routine and repetitive. They
are derived out of strategic decisions. The various features of a tactical decision are as
follows:

• Tactical decision relates to day-to-day operation of the organization and has to be taken very
frequently.

• Tactical decision is mostly a programmed one. Therefore, the decision can be made within
the context of these variables.

• The outcome of tactical decision is of short-term nature and affects a narrow part of the
organization.

DECISION MAKING PROCESS

 40

1. Specific Objective:

The need for decision making arises in order to achieve certain specific objectives. The
starting point in any analysis of decision making involves the determination of whether a
decision needs to be made.

2. Problem Identification:

A problem is a felt need, a question which needs a solution. In the words of Joseph L Massie
"A good decision is dependent upon the recognition of the right problem". The objective of
problem identification is that if the problem is precisely and specifically identifies, it will
provide a clue in finding a possible solution.

Diagnosis:

Diagnosis is the process of identifying a problem from its signs and symptoms. A symptom is
a condition or set of conditions that indicates the existence of a problem.

Analysis:

Diagnosis gives rise to analysis. Analysis of a problem requires:

• Who would make decision?

• What information would be needed?

• From where the information is available?

Analysis helps managers to gain an insight into the problem.

3. Search for Alternatives:

A problem can be solved in several ways; however, all the ways cannot be equally satisfying.
Therefore, the decision maker must try to find out the various alternatives available in order
to get the most satisfactory result of a decision. A decision maker can use several sources for
identifying alternatives:

• His own past experiences

• Practices followed by others and

• Using creative techniques.

4. Evaluation of Alternatives:

After the various alternatives are identified, the next step is to evaluate them and select the
one that will meet the choice criteria. /the decision maker must check proposed alternatives
against limits, and if an alternative does not meet them, he can discard it.
 41

5. Choice of Alternative:

The evaluation of various alternatives presents a clear picture as to how each one of them
contribute to the objectives under question. A comparison is made among the likely outcomes
of various alternatives and the best one is chosen.

6. Action:

Once the alternative is selected, it is put into action. The actual process of decision making
ends with the choice of an alternative through which the objectives can be achieved.

7. Results:

When the decision is put into action, it brings certain results. These results must correspond
with objectives, the starting point of decision process, if good decision has been made and
implemented properly.

Characteristics of Effective Decisions

An effective decision is one which should contain three aspects. These aspects are given
below:

• Action Orientation:

Decisions are action-oriented and are directed towards relevant and controllable aspects of
the environment. Decisions should ultimately find their utility in implementation.

• Goal Direction:

Decision making should be goal-directed to enable the organization to meet its objectives.

• Effective in Implementation:

Decision making should take into account all the possible factors not only in terms of
external context but also in internal context so that a decision can be implemented properly.
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UNIT-III
FUNCTIONAL AREA OF ORGANISATION

Nature and Purpose of Organizing

Concept or Nature of Organizing or Organization:

There are two essential Concepts regarding with Organizing:

 Organization as a Process: The concept of organizing can be considered as a process,

because a large number of events or activities are done under the process of
organizing with-a-view to accomplish the preset goals in an appropriate way.

 Organization as a Structure of Relationship: Organization refers to a structure of

relationship due to involvement of a large number of groups.

 Organization is a group of Individuals: Organization can consider as a group of

individuals who comes together and make co-operative relationship with each-other
and contributing their efforts with a view to attain preset goals

 Organization is a process: The feature of organization can put to be as a process,

because a large number of events are done under organizing process towards the
attainment of predetermined goals, such as determination of various activities,
grouping of activities, allocation of work among-st the employees and delegation of
authority as well. Hence, organization is a process.

 Organization is a ‘Means’ not an ‘End’: Organization is a means to reach out the

goals of an enterprise. In fact organization provides such platforms to enterprise
where all the activities are clearly predefined, as a result of this enterprise easily
obtain its goals.

 Organization is an important Function of Management: It is an essential feature of

organisation.

 Organization is related to its Objectives: Organization is directly concerned with the

objectives of enterprise. In the absence of objectives there is no life of organization. If
there is an organization then the objectives must be attached with it. Hence,
Organization is related with its goals.
 43

 Communication is the life of organization: It is also an important feature of

organization. Communication can be treated as a life of organization, because in the
lack of proper network of communication there is no existence of organization. Infect
the foundation of an organization properly depends on communication. On the whole
it is clear that organization is the system of communication.

FORMAL AND INFORMAL ORGANISATION

DISTINQUISH FORMAL AND INFORMAL ORGANISATION
Formal Organisation
1. It is created deliberately and is
consciously
Planned.
2. It is based on delegation of authority and
may grow to immense size.
3. It is deliberately impersonal and the
emphasis is on authority and functions.
4. Rules, duties and responsibilities are
written and clearly defined.
5. It is shown on the organisation chart.
6. It provides for division of labour and has
a social contacts.
definite structure.
7. Formal authority attached to a position.
8. Formal authority flows downwards.
9.Formal organisation is created to meet
Organizational goals.
10. It is permanent and stable.
Informal Organisation
1.It is natural and arises spontaneously.
2. It arises on account of social interaction
of
people and tends to remain small.
3. It is personal with emphasis on people
and their relationships.
4. It has unwritten rules and traditions.
5. It has no place in the formal chart. It cuts
across formal channels.
6. It is structure less and develops out of
7. Informal authority attaches to a person.
8. Informal authority flows upwards or
horizontally.
9. Informal organisation arises from man’s
quest for social satisfaction.
10. It is relatively fickle and unstable.

ORGANISATION CHART
 44

An organizational chart is a diagrammatical form, which shows important aspects of

an organisation including the major functions and their respective relationships, the
channels of supervision and the relative authority of each employee who is in charge of
each respective function”.
TYPES OF ORGANISATION CHARTS
1. Vertical Chart
It shows the organisation structure in the form of a pyramid. The lines of command
proceeding from top to bottom in vertical lines. The highest position or person is placed at
the top and after that the next highest. This process goes on up to the lowest level.
Therefore, it is also known as top to down chart. The lowest position is shown at the
bottom. Vertical chart is the most widely used chart.
1. Horizontal Charts
In horizontal chart the pyramid lies horizontally instead of standing vertically. The
highest position is shown at the extreme left and the lowest position at the extreme right. In
between each successive subordinate position extend from left to right. Therefore, it may
be called left to right chart.
3. Concentric or Circular Chart
In a circular chart, the highest position is shown in the centre and the lowest position
at the outermost circle. Distance of a position from the centre indicates the degree of
closeness to the top position. It is more difficult to draw and often confusing. Positions of
equal status lie at the same distance from the centre. Such a chart is a better representation
of the personal relationships as it eliminates the status implications. It also avoids the
problem of space in designing the chart.
Advantages / Uses of Organisation Charts
1. An organisation chart shows clearly the various positions in the organisation and how
they relate to one another.
2. It shows at a glance the lines of authority and responsibility. From it individuals can
identify the limits of their authority. It serves as a blue print of the organisation and
helps to clarify assignment of duties.
3. It provides a basis of planning organizational change.
4. It provides guidance to outsiders as to who they should contact.
 45

5. An organisation chart serves as a valuable guide to the new personnel in

understanding how their positions fit into the total organisation. It is, therefore, useful
in the orientation and training of employees.
6. It helps to point out inconsistencies and deficiencies in organizational relationships.
Preparation of charts forces managers to think more specifically about organisational
relationships, if any. In this way, an organisation chart serves as a means of
organisation improvement.
7. An organisation chart provides a framework for classification and evaluation of
personnel. It also facilitates communication.

Disadvantages / Uses of Organisation Charts

1. Organisation chart shows only the formal relationships and fails to reveals the
informal relations existing in the organisation. In practice, informal relationships
exercise significant influences on the functioning of the organisation.
2. An organisation chart depicts the formal structure only at a given time. In other
words, it shows a static state of affairs and does not represent flexibility which exists
in a dynamic organisation.
3. It introduces bureaucratic rigidity in the formal relationships. Updating of charts is
difficult and therefore they resist change.
4. Very often organisation charts shows relationships which are supposed to exists rather
than what actually exist in the organisation.
5. Organisation charts often fail to show how much authority an individual can exercise
and how far he is responsible. They suffer from over simplification.
6. Poorly designed charts may cause confusion and misunderstanding among the
organisation members. They may also create feelings of superiority and inferiority
which lead to conflicts in the organisation.

STRUCTURE AND PROCESS OF ORGANISATION

ORGANISING.
Koontz and O’Donnell have defined organizing as “the grouping of activities
necessary to attain objectives, the assigning of each grouping to manager with authority to
 46

supervise it, and the provision for coordination horizontally and vertically in the enterprise
structure”.
ORGANISATION STRUCTURE
1. Line Organisation
Line organisation is the oldest type of organisation. It is also known as scalar or military
organisation. In this type of organisation, there is a vertical line of authority running from the
top to the bottom of the organisation. The man at the top has the highest authority and it is
reduced at each successive level down the hierarchy. Every person is in direct chain of
command. He gets orders from the man immediately above him and is directly accountable
to only one superior.
2. Functional Organisation
Functional organisation is based on the concept of “Functional Foremanship” developed
by F.W.Taylor. He suggested that there should be eight specialists (rather than one foreman)
to guide workers in the factory. Four of them should be concerned with the planning f work
and the other four with the execution of plans. Functional foremanship is a pattern of
supervision at the shop floor level rather than an organisation structure.

3. Line and Staff Organisation

Line and Staff Organisation is a combination of line and functional structures. Under
it, line authority flows in a vertical line in the same manner as in the line organisation. In
addition, staff specialists are attached to line positions to advise them on important matters.
These specialists do not have power of command over subordinates in other departments.
They are purely of advisory nature.

4. Project Organisation
Project and Matrix structures are of recent origin, developed after World War II.
When an organisation has to execute large projects of long duration, it may adopt a project
organisation. Under project organisation each project is organized as a semi-autonomous
project division.
 47

5. Matrix Organisation
Matrix structure has been defined as “any organisation that employs a multiple
command system that includes not only the multiple command structure but also related
support mechanism and an associated organizational culture and behaviour pattern”.
In matrix organization thee is a permanent functional set up. In addition, temporary
project groups are created to handle infrequent short-term projects. Personnel are drawn
from functional departments. Their activities on the project are coordinated and controlled by
the project manager. Upon completion of the project, the project team is disbanded and the
personnel return to their original departments. During his assignment to a project, an
employee has two bosses – his permanent head in the functional department and the project
manager.
6. Committee Organisation
A committee is a group of persons formed to discuss and deliberate on problems and
to recommend or decide solutions. Its area of operation is determined by its constitution. It
may be authorized to deal with all or specific activities
PROCESS OF ORGANISING
1. Determining the activities to be performed
The first step in the organizing process is to identify the activities required for the
accomplishment of organizational objectives. For this purpose the total work has to be
divided into number of functions and sub-functions. For example, in a manufacturing
concern the activities may be divided into purchase, production, sales, storage, advertising
correspondence, accounting etc. Division of work should be based on the principle of
specialization.
2. Grouping of Activities
Once the activities are identified they are grouped into departments and divisions on the
basis of their similarity and relatedness. Identical or closely related activities are grouped
together in one department. For example, the activities relating to purchase, storage and
production may be grouped in one department, sales, advertising and shop display in another
department and accounting and correspondence in third department. Each department is
placed under the charge of a departmental manager.
 48

3. Assignment of Duties
After grouping activities, each group of activities is assigned to a position most suited for
it. While assigning duties specialization, qualifications, experience and aptitude of people
should be duly considered
4. Delegation of Authority
Appropriate amount of authority is delegated to each individual for enabling him to
perform the duties assigned.
5. Defining Authority and Relationships
After granting authority, relationships between different members of the organisation are
created.
DEPARTMENTATION
Departmentation may be defined as the process of grouping individual jobs into
departments. It involves grouping of activities and employees into departments so as to
facilitate the accomplishment of organisation objectives.
TYPES OF DEPARTMENTATION
1. Functional Departmentation
Under functional departmentation each majo0r or basic function is organized as a
separate department. Basic functions are the functions the performance of which is vital and
essential to the survival of the organisation.
2. Product Departmentation
In product departmentation, every major product is organized as a separate
department. Each department looks after the production, sales and finance of one product.

3. Territorial departmentation
Territorial departmentation is very useful to a large scale enterprise whose activities
are geographically spread. Banks, insurance companies, transport companies are examples of
such enterprises
4. Customers Departmentation
Under this type of departmentation, activities are grouped according to the type of
customers.
 49

5. Process Departmentation
Under this basis, activities are grouped on the basis of production process or
equipment involved. This is generally used in a manufacturing enterprise and at lower levels
of organisation.
6. Departmentation by Numbers
In case of departmentation by numbers, activities are grouped on the basis of the time
of their performance by a certain number of persons.
Line and Staff Organisation
The combination of line organisation with this expert staff constitutes the type of organization
known as line and staff organisation. The 'line' maintains discipline and stability; the 'staff'
provides expert information. The line gets out the production, the staffs carries on the
research, planning, scheduling, establishing of standards and recording of performance. The
authority by which the staff performs these functions is delegated by the line and the
performance must be acceptable to the line before action is taken.

Types of Staff
The staff position established as a measure of support for the line managers may take the
following forms:
1. Personal Staff: Here the staff official is attached as a personal assistant or adviser to the
line manager. For example – Assistant to managing director.
2. Specialized Staff: Such staff acts as the fountainhead of expertise in specialized areas like
R & D, personnel, accounting etc. For example-R & D Staff
3. General Staff: This category of staff consists of a set of experts in different areas who are
meant to advise and assist the top management on matters called for expertise.
For example-Financial advisor, technical advisor etc.
 50

Line and Staff Organization

Managing Director

Personal Personal Personal

Manager Manager Manager

Plant
Superintendent

Quality control inspector Repairs and maintenance

officer

Foreman shop A Foreman shop B Foreman shop

Advantages or merits of line and staff organisation

•It brings expert knowledge to bear upon management and operating problems. Thus, the line
managers get the benefit of specialised knowledge of staff specialists at various levels.
•The expert advice and guidance given by the staff officers to the line officers benefit the
entire organisation.
•As the staff officers look after the detailed analysis of each important managerial activity, it
relieves the line managers of the botheration of concentrating on specialized functions.
•Staff specialists help the line managers in taking better decisions by providing expert advice.
Therefore, there will be sound managerial decisions under this system.
•It makes possible the principle of undivided responsibility and authority, and at the same
time permits staff specialization. Thus, the organisation takes advantage of functional
organisation while maintaining the unity of command.
•It is based upon planned specialization.
 51

•Line and staff organisation has greater flexibility, in the sense that new specialized activities
can be added to the line activities without disturbing the line procedure.

Disadvantages or demerits of line and staff organisation

 Unless the duties and responsibilities of the staff members are clearly indicated by
charts and manuals, there may be considerable confusion throughout the organization
as to the functions and positions of staff members with relation to the line supervisors.
 There is generally a conflict between the line and staff executives. The line managers
feel that staff specialists do not always give right type of advice, and staff officials
generally complain that their advice is not properly attended to.
 Line managers sometimes may resent the activities of staff members, feeling that
prestige and influence of line managers suffer from the presence of the specialists.
 The staff experts may be ineffective because they do not get the authority to
implement their recommendations.
 This type of organisation requires the appointment of large number of staff officers or
experts in addition to the line officers. As a result, this system becomes quite
expensive.
 Although expert information and advice are available, they reach the workers through
the officers and thus run the risk of misunderstanding and misinterpretation.
 Since staff managers are not accountable for the results, they may not be performing
their duties well.
 Line mangers deal with problems in a more practical manner. But staff officials who
are specialists in their fields tend to be more theoretical. This may hamper
coordination in the organisation.

Decentralization
They are related terms but no interchangeable. Delegation a process but decentralization is
the situation produced by larger delegation. Thus the amount of delegation determines the
extent of decentralization. No organization is possible without delegation but there can be an
organization without decentralization.
The degree of decentralization in an organization is high in the following circumstances.
1. The number of decisions made at the lower levels is large
 52

2. The more important decisions are made at lower levels

3. When most of the activities are decentralized

Factors Affecting the Degree Of Decentralization

1. Significance of the Decision:
Decision involving high investment. Competitive strength or relation to employee’s
morale motivation etc is not decentralized. The top-management restores such power.
2. Size of organization:
as the organization grows it is difficult to perform all activities. It may be advisable to
divide the organization into a number of semi-autonomous units on product basis or territorial
basis.
3. History of the organization:
Decentralization also depends on whether it has developed as a set or the departments
were set-up later and basically retained by the top management.
4. Territorial Dispersing of Activities:
Physical separation of plants may call for some decentralized decision making .
5. Top management attitude and philosophy:
It may be due to the belief of the top management of decentralization.
6. State control techniques:
In an organization where the control system is self-correcting and reports of
deviations from the standards are promptly sent the chief, he can go for large measure of
decentralization.
7. Availability of competent subordinate managers:
The chief in favour of decentralization may find himself handicapped due to the
incompetent subordinates.
8. Uniformity of policy:
Where the uniformity of policy is of critical nature centralization may be favoured.
9. Diversity of product lines:
 53

Where several lines of products with different items in each line are dealt in by a
company, the specialized knowledge for handling dissimilar units may make decentralization
necessary.
10. Technological developments:
The new technology of a specific product may demand a good deal of
decentralization for those concerned with its production.
11. Environmental influences:
Government control and regulations, tax policies, trade unionism, competition etc.
influence the level of decentralizations.
12. Desire for independence:
It depends on the individuals or groups to desire the degree of independence: they
may also be frustrated by the delay in getting decisions by long lines of communication.
13. decentralized performance:
Certain facts such as economics of division of labour, the opportunities of using
machines, raw materials etc., will be considered. The kind of decentralization may be
geographic or physical in nature.
14. Recentralization of authority:
Some time the organization may recentralize authority once decentralized. It means
centralization of authority over a certain type of activity. It may be due to top management
feel that they lost control over subordinates of falls in business etc.
15. Decentralization not necessarily participative management.
16. The desired degree of decentralization.
Advantages of decentralization
1. It reduces the burden of top executives:
It enables the top management to concentrate on their primary job of policy
formulation, planning Co-ordinating etc. and relieve them from routine and time consuming
operations.
2. It simplifies the problem of management succession:
It develops future manages by experience. It also helps during expansion. It also helps
during expansion.
3. It helps in taking prompt and accurate action:
 54

It helps to get decision-making, authority and responsibility at the place of action and
results in prompt action. The problem of communication is also simplified.
4. It facilitates diversification:
Decentralization is suitable when there are many products and helps to higher
efficiency of their respective departments.
5. It motivates subordinates for high goals:
The satisfaction due to power, prestige, status and independence leads to high morale,
initiative etc.
6. It leads to effective supervision:
The autonomous units are independent as regards authority to make changes in work
assignment, take disciplinary action, change production schedule or to recommend promotion
schedule or to recommend promotions. This helps for effective supervision.

7. It leads to effective control:

Decentralization requires centralized control. By making both measurement and
accountability more clear, decentralization promotes effective control:
1. It improves the performance of managers.
2. The results for which managers can be held to account for are more easily determined.
3. These can be a quicker response to environmental factors.
Disadvantages of decentralization
1. Increased costs:
It is suitable for large organization. The overhead costs will be high relation to the
division.
2. Need for generalist manager:
Capable manages are highly needed and decentralization and decentralization needs
more number of able managers.
3. Grater need for control at policy level:
The independence generated by decentralization requires adequate establishment of
policies at the centralized level. Inadequacies of controls have forced certain organization to
recentralize the operations.
4. Lack of divisibility of all operations:
 55

Even a large enterprise which does not adopt the divisional structure is prevented
from this structure of decentralization.
5. It increases the problem of co-ordination.
6. The manager may se his position threatened when the subordinate becomes very effective.
7. Difficult to take decisions at emergencies.
Elaborate the types of training in organizations and performance appraisal methods

DELEGATION OF AUTHORITY
Delegation of authority is “the process a manager follows in dividing the work
assigned to him so that he performs that part which only he, because of his unique
organizational placement can perform effectively and so that he can get others to help with
what remains”. In simple words, to delegate means to entrust authority to a subordinate.
STEPS INVOLVED IN THE PROCESS OF DELEGATION
1. Determination of results expected
First of all, a manager has to define the results he wants to obtain from his
subordinates for the achievement of organizational objectives.
2. Assignment of duties
The manager then assigns specific duties or tasks to each subordinate. He must
clearly define the function of each subordinate. While assigning duties and responsibilities,
he must ensure that the subordinates understand and accept their duties. Duties should be
assigned according to the qualifications, experience and aptitude of the subordinates.
3. Granting of authority
Assignment of duties is meaningless unless adequate authority is given to
subordinates. They can discharge their responsibilities without adequate authority. By
granting authority, subordinates are permitted to use resources, to take decisions and to
exercise discretion.

4. Creating accountability for performance

The subordinates to whom authority is delegated must be made answerable for the
proper performance of assigned duties and for the exercise of the delegated authority. The
extent of accountability depends upon the extent of delegation of authority and responsibility.
A person cannot be held answerable for the acts not assigned to him by his superior.
 56

PROBLEMS INVOLVED IN DELEGATION

On the part of Delegator
1. Some managers may not delegate authority because of their lure for authority. They
are autocrats and think that delegation will lead to reduction of their influence in the
organisation. They want to make their presence felt and desire that subordinates
should come frequently for approval. They like to dominate the whole show.
1. Some managers feel that none can do the job as well as they can do. They think that
if they delegate, work will not be done as it ought to be done. They consider
themselves indispensable and do not want to give other people’s ideas a chance.
2. When a manager is incompetent his work methods and procedures are likely to be
faulty. He keeps all the authority to himself for fear of being exposed. He is afraid
that if he lets the subordinates make decisions they may outshine him. He is afraid of
losing his importance.
3. Few managers are inclined to accept the risk of wrong decisions which the
subordinates might take. Therefore, they do not delegate authority and take all the
decisions themselves. They are unwilling to take calculated risk.
4. A manager may not delegate authority because he feels that the subordinates are not
capable and reliable. He lacks confidence in his subordinates.
5. A manager is not likely to delegate authority when he cannot issue suitable directions
to guide the activities of subordinates.
6. A manager will hesitate to delegate authority if he has no means to ensure that the
authority is being properly used by the subordinates.
On the part of Subordinates
1. Subordinates may not like to accept delegation when they lack self-confidence.
2. Some subordinates are unwilling to accept authority due to the desire to play safe by
depending on the boss for all decisions. They have a love for spoon-feeding.
3. A subordinate who is afraid of committing mistakes and does not like to be criticized
by the boss is likely to avoid delegation of authority.
4. When the subordinates are already overburdened with duties, they do not like
additional responsibility through delegation.
 57

5. Subordinates are likely to avoid delegation when adequate information working

facilities and resources are not available for proper discharge of duties.
6. Subordinates may not come forward to accept delegation of authority when no
incentives are available to them.

On the part of the Organisation

Sometimes superiors want to delegate authority and subordinates like to accept
delegation. But delegation may be hampered due to weaknesses in the organisation
structure. Some of these weaknesses are as follows:
1. Inadequate Planning
2. Splintered authority.
3. Lack of unity of command.
4. Absence of effective control techniques.
5. Non-availability of competent managers.
6. Unclear authority relationships.
7. Environment of mutual distrust.

STAFFING
Meaning and definition of staffing: Every enterprise needs human forces to get physical
resources utilized for achieving its objectivities. The success of a business enterprise depends
to a large extent upon the abilities, caliber and motivation of its employees. Therefore, it is a
vital function of management to recruit, develop, and maintain a team of capable, efficient
and dedicated employees. This function of management is known as “staffing”.
According to Theo Haimann, “staffing is concerned with the placement, growth and
development of all those members of the organization whose function is to get the functions
done through the efforts of others”.
According to Knoontz and O’ Donnell “the managerial function of staffing involves
manning the organization structure through proper and effective selection, appraisal and
development of personnel to fill the roles designed into the structure”.
 58

Thus, staffing function is the process of identifying, assessing, placing , evaluating and
development of individuals at work. In broader sense, the staffing function of management
mainly consists of the following:
1. To prepare manpower planning and determine manpower requirements of the
organization in term of the quantity and quality of human force needed.
2. To make all necessary arrangements for acquiring required human force through
proper recruitment and selection.
3. To maintain human force in the organization for a longer period of time by
formulating and implementing effective labour policies.
4. To develop the manpower to its maximum by providing scientific training and
conducting various development programmes both for non-managerial as well as
managerial employees.

Need for staffing:

Staffing is a dynamic function. It is a never ending process. It is a continuous function of
management. Its need arises right from the formation of an enterprise and it goes on till the
organization remains functional. The staffing function assumed great importance due to
increasing size of organizations, rapid advancement of technology and growing complexity of
human behavior, ect.
Importance of staffing:
Staffing function is one of the basic functions in the process of management. It is closely
related to other functions of management, such as planning, organizing, directing and
controlling. The significance of staffing functions arise from the key and important role
assumed by human resources in organization.
Staffing function does not only ensure availability of required human force at all time, but it
also helps in securing capable and qualitative umen inputs through effective recruitment and
selection. Effective staffing provides the following benefits:
1. Staffing helps in discovering and obtaining competent personnel for various jobs.
2. It makes for higher performance by placing right persons on the right jobs.
3. It improves job satisfaction and morale of employees through objective assessment
and fair compensation of their contributions.
 59

4. It facilitates optimum utilization of human resources and in minimizing costs of

manpower.
5. It ensures the continuity and growth of the organization through the development of
managers.
6. It enables the organization to cope eith the shortage of executive talent.

Selection process & techniques

An outline of the basic selection procedure for selecting candidates is as follows:
1. Requisition: the selection process commences from the receipt of a requisition by the
personnel department.
It includes
- the number of personnel required
- the qualifications or qualities required in those personnel.
2. Recruitment: on the basis of the requisition received by the personnel department, the
same will search into various sources of recruitment. For this, it will prepare a recruitment list
i.e. the likely candidates who are to be called for undergoing detailed selection procedure.
3. Application blank/preliminary interview: each person whose name appears on the
recruitment list is sent a blank application form – called the application blank, to be duly
filled in by the candidate. It contains the following particulars.
- Personal data includes age, gender.
- Educational and technical qualifications
- Experience
- Extra-curricular activities
- References
4. Scrutiny of application forms: the filled application forms are carefully scrutinized on the
basis of job-specification and other organizational requirements.
5. Tests: candidates, whose applications are accepted, are usually supposed to take certain
tests like trade tests, psychological tests, special tests etc. to prove their stability for the jobs.
 60

Requisition

Recruitment

Application blank /
preliminary
interview

Scrutiny of
Tests
applications
R S
E E
Interview
J L
E E
C Medical
C
T examination T
E References E
D D
Final selection

Placement

6. Interview: interview is a significant means of testifying the validity of information about

the candidate. They are mostly held for managerial, skilled and technical types of jobs. It
brings out the thinking capacity of the candidate and their answering ability. It includes
special interview, stress interview, in depth interview, directive interview, single candidate
interview etc.
7. Medical examination: Its purpose is to judge the physical fitness or competence of an
individual, to perform any type of job. It helps to arrange for suitable physical safety
measures, in view of the physical requirements of individuals.
8. References: a candidate likely to be eligible for selection, might be asked to furnish certain
references i.e. the names, addresses and designations of some men of status, trust and
confidence, who might be used by the employer for ascertaining the reliability of the
candidate.
 61

9. Final selection/issuance of letters of appointment: candidates who clear through all the
stages in the selection procedure are finally selected for appointment to various jobs in the
organization. They are issued ‘letter of appointment’ by the management.
10. Placement: selected candidates are placed on the suitable positions in view of matching
with the nature, volume and composition of work.

TECHNIQUES OF SELECTION :
Application Blanks:
 Personal Background information
It include name present and permanent address, sex, date of birth, marital status, health,
height and weight, nationality, number of dependents etc.
 Educational Attainments
 These include list of schools, colleges, institution untended, period of study, major subject
etc.
 Work experience
It covers experience in all previous jobs with greater particulars about the nature and quantum
of work handled etc.
 Salary
 Personal items
 References.
Evaluation of Application forms:
 Weighted method
 Clinical Method
 Biographical inventories
Psychological Test :
 Aptitude tests
 Achievement tests
 Situational tests
 Interest tests and
 62

 Personality tests.
Aptitude test :
 Intelligence test
 Mechanical aptitude test
 Psychomotor test
 Clerical Aptitude test.
Achievement Test :
 Job Knowledge test
 Work sample test
 Situation test
 Group Discussion
 In basket
 Interest test
Personality Test :
 Objective test
 Projective
Interview Types :
 Preliminary Interview
 Informal Interview
 Unstructured interview.
Core interview
 Background information interview
 Job and probing interview
 Stress interview
 Formal and structure interview
 Group interview
 Panel interview
 Depth interview
 63

Career Development Process

The Career Development Process involves the completion of a variety of activities geared to
help you to, initially, determine or confirm your desired life direction. We believe this is the
initial action that must be taken in order to select an appropriate career or college major.
Completing the four steps of the Career Development Process will take time. Taking action
on the results can have a widespread and life-changing impact. Therefore, before you take
action, it is strongly recommended that you confirm your career or college major decision
with a qualified counselor and or other trusted persons. It may be sufficient for you to
complete one, two or maybe all of the follow-up options presented in each one or more of the
four steps.
Regardless of what options you select, on completion, you will want to combine whatever ou
learned with the information you may already have. After careful consideration of significant
influencing factors, you should be in a better position to make a good decision about a career,
college major and other big decisions in life.

Step 1 - Self Assessment (INSIDE)

The first and most important step of this process is Self Assessment. Step 1 focus is on the
INSIDE of a person. After the successful completion of Step 1, you should have a good idea
in terms of who you are and what’s most important in your life, ingredients considered by
career specialists as crucial for determining accurate direction.

Step 2 - Career Exploration (OUTSIDE)

The second step of the process involves Career Exploration. Step 2 focus is on the
OUTSIDE of a person. While it is important to know the first step you ought to take in order
to make a good career or college major selection, it is also important to become aware of
significant influencing areas outside of you that will need to be factored in before you finalize
any big decision. Key areas on the outside of you include the World-Of-Work; Family,
Faith/Beliefs; Leisure-Time and so on. It would be wise to consider and thoroughly examine
supportive as well as non supporting aspects of each of these key areas prior to your career
and/or occupational choice.
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Step 3 - Decision Making (CLOSER LOOK)

Step 3 will require you to begin the process of Decision Making. It will require TAKING A
CLOSER LOOK and, eventually making a decision. This is the point where you take what
you have learned from your self assessment and career exploration and conduct more detailed
research. The main goal is to narrow down possible options, consider any significant
influencing factors, and select the career or college major you believe to be the best fit.

Step 4 - Taking Action (MATCHING UP)

Taking Action involves MATCHING UP the results of your self-assessment results and the
most supportive aspects within significant influencing areas in Step 2. The main goal is to
actually begin to do what you decided to pursue as a career or college major. This might
entail enrolling into a college or training program; registering for a class; conducting a job
search; creating a resume; filling out an application; participating in an interview, and so on.

TYPES OF TRAINING IN ORGANISATIONS

A. On-the-job training Methods:

Under these methods new or inexperienced employees learn through observing peers or
managers performing the job and trying to imitate their behaviour. These methods do not cost
much and are less disruptive as employees are always on the job, training is given on the
same machines and experience would be on already approved standards, and above all the
trainee is learning while earning. Some of the commonly used methods are:

1. Coaching:

Coaching is a one-to-one training. It helps in quickly identifying the weak areas and tries to
focus on them. It also offers the benefit of transferring theory learning to practice. The
biggest problem is that it perpetrates the existing practices and styles. In India most of the
scooter mechanics are trained only through this method.

2. Mentoring:
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The focus in this training is on the development of attitude. It is used for managerial
employees. Mentoring is always done by a senior inside person. It is also one-to- one
interaction, like coaching.

3. Job Rotation:

It is the process of training employees by rotating them through a series of related jobs.
Rotation not only makes a person well acquainted with different jobs, but it also alleviates
boredom and allows to develop rapport with a number of people. Rotation must be logical.

4. Job Instructional Technique (JIT):

It is a Step by step (structured) on the job training method in which a suitable trainer (a)
prepares a trainee with an overview of the job, its purpose, and the results desired, (b)
demonstrates the task or the skill to the trainee, (c) allows the trainee to show the
demonstration on his or her own, and (d) follows up to provide feedback and helpa. To
deliver step-by-step instruction

b. To know when the learner has learned

c. To be due diligent (in many work-place environments)

5. Apprenticeship:

Apprenticeship is a system of training a new generation of practitioners of a skill. This

method of training is in vogue in those trades, crafts and technical fields in which a long
period is required for gaining proficiency. The trainees serve as apprentices to experts for
long periods. They have to work in direct association with and also under the direct
supervision of their masters.

6. Understudy:

In this method, a superior gives training to a subordinate as his understudy like an assistant to
a manager or director (in a film). The subordinate learns through experience and observation
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by participating in handling day to day problems. Basic purpose is to prepare subordinate for
assuming the full responsibilities and duties.

B. Off-the-job Training Methods:

Off-the-job training methods are conducted in separate from the job environment, study
material is supplied, there is full concentration on learning rather than performing, and there
is freedom of expression. Important methods include:

1. Lectures and Conferences:

Lectures and conferences are the traditional and direct method of instruction. Every training
programme starts with lecture and conference. It’s a verbal presentation for a large audience.
However, the lectures have to be motivating and creating interest among trainees.

2. Vestibule Training:

Vestibule Training is a term for near-the-job training, as it offers access to something new
(learning). In vestibule training, the workers are trained in a prototype environment on
specific jobs in a special part of the plant.

3. Simulation Exercises:

Simulation is any artificial environment exactly similar to the actual situation. There are four
basic simulation techniques used for imparting training: management games, case study, role
playing, and in-basket training.

(a) Management Games:

Properly designed games help to ingrain thinking habits, analytical, logical and reasoning
capabilities, importance of team work, time management, to make decisions lacking complete
information, communication and leadership capabilities. Use of management games can
encourage novel, innovative mechanisms for coping with stress.

(b) Case Study:

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Case studies are complex examples which give an insight into the context of a problem as
well as illustrating the main point. Case Studies are trainee centered activities based on topics
that demonstrate theoretical concepts in an applied setting.

(c) Role Playing:

Each trainee takes the role of a person affected by an issue and studies the impacts of the
issues on human life and/or the effects of human activities on the world around us from the
perspective of that person.

(d) In-basket training:

In-basket exercise, also known as in-tray training, consists of a set of business papers which
may include e-mail SMSs, reports, memos, and other items. Now the trainer is asked to
prioritise the decisions to be made immediately and the ones that can be delayed.

PERFORMANCE APPRAISAL METHODS

1. Critical incident method
This format of performance appraisal is a method which is involved identifying and
describing specific incidents where employees did something really well or that needs
improving during their performance period.
2. Weighted checklist method
In this style, performance appraisal is made under a method where the jobs being evaluated
based on descriptive statements about effective and ineffective behavior on jobs.
Process of weighted checklist
• HR department and Managers / Supervisors will set up checklist for each position.
• If the rater believes strongly that the employee possesses a particular listed trait, he checks
the item; otherwise, he leaves the item blank.

3. Paired comparison analysis

This form of performance appraisal is a good way to make full use of the methods of options.
There will be a list of relevant options. Each option is in comparison with the others in the
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list. The results will be calculated and then such option with highest score will be mostly
chosen.
Advantages and disadvantages of paired comparison analysis
• It is useful where priorities are not clear.
• It is particularly useful where you do not have objective data to base this on.
• It helps you to set priorities where there are conflicting demands on your resources.
• This makes it easy to choose the most important problem to solve, or select the solution that
will give you the greatest advantage.
4. Graphic rating scales
This format is considered the oldest and most popular method to assess the employee’s
performance.
In this style of performance appraisal, the management just simply does checks on the
performance levels of their staff.
Advantages of the rating scales
• Graphic rating scales are less time consuming to develop.
• They also allow for quantitative comparison.
Disadvantages of the rating scales
• Different supervisors will use the same graphic scales in slightly different ways.
• One way to get around the ambiguity inherent in graphic rating scales is to use behavior
based scales, in which specific work related behaviors are assessed.
• More validity comparing workers ratings from a single supervisor than comparing two
workers who were rated by different supervisors.
5. Essay Evaluation method
In this style of performance appraisal, managers/ supervisors are required to figure out the
strong and weak points of staff’s behaviors. Essay evaluation method is a non-quantitative
technique. It is often mixed with the method the graphic rating scale.
Disadvantages of essay evaluation
• Manager / supervisor may write a biased essay.
• A busy rater may write the essay hurriedly without properly assessing the actual
performance of the worker.
• Apart from that, rater takes a long time, this becomes uneconomical from the view point of
the firm, because the time of rater is costly.
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• Some evaluators may be poor in writing essays on employee performance. Others may be
superficial in explanation and use flowery language which may not reflect the actual
performance of the employee.
6. Behaviorally anchored rating scales (BARs)
This formatted performance appraisal is based on making rates on behaviors or sets of
indicators to determine the effectiveness or ineffectiveness of working performance. The
form is a mix of the rating scale and critical incident techniques to assess performance of the
staff.
Rating scales
Each behavior can rate at one of 7 scales as follows (you can set scales depend on your
requirements)
• Extremely poor (1 points)
• Poor (2 points)
• Below average (3 points)
• Average (4 points)
• Above average (5 points)
• Good (6 points)
• Extremely good (7 points)
Advantages and disadvantages of behaviorally anchored rating scales:
• This method are very useful and exactly.
• It is very difficult to develop this method because you need to identify what is “good level”
etc.
7. Performance ranking method
The performance appraisal of ranking is used to assess the working performance of
employees from the highest to lowest levels.
Managers will make comparisons of an employee with the others, instead of making
comparison of each employee with some certain standards.
8. Management By Objectives (MBO) method
MBO is a method of performance appraisal in which managers or employers set a list of
objectives and make assessments on their performance on a regular basis, and finally make
rewards based on the results achieved. This method mostly cares about the results achieved
(goals) but not to the way how employees can fulfill them.
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Advantages of MBO
• It is based on the assumption that the individual (employee) knows more than anyone else
about her/his own capabilities, needs, strengths, weaknesses and goals.
• A further advantage of MBO is that the emphasis is on the future rather than on the past.
Appraisal thus becomes a means to a constructive end.
9. 360 degree performance appraisal
The style of 360 degree performance appraisal is a method that employees will give
confidential and anonymous assessments on their colleagues. This post also information that
can be used as references for such methods of performance assessments of 720, 540, 180…
Advantages of 360 degree appraisal
• Offer a more comprehensive view towards the performance of employees.
• Improve credibility of performance appraisal.
• Such colleague’s feedback will help strengthen self-development.
• Increases responsibilities of employees to their customers.
• The mix of ideas can give a more accurate assessment.
• Opinions gathered from lots of staff are sure to be more persuasive.
Disadvantages of 360 degree appraisal
• Taking a lot of time, and being complex in administration
• Extension of exchange feedback can cause troubles and tensions to several staff.
• There is requirement for training and important effort in order to achieve efficient working.
• It will be very hard to figure out the results.
• Feedback can be useless if it is not carefully and smoothly dealt.
• Can impose an environment of suspicion if the information is not openly and honestly
managed.
11. Behavioral Observation Scales
The method based on the scales of observation on behaviors is the one in which important
tasks that workers have performed during their working time will be assessed on a regular
basis.
Rating scales
We use 5 scales as follows to identify frequency of behavior.
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MOTIVATION & DIRECTONS– UNIT – IV

Objectives of Motivation

1. Increase Willingness to Do the Job

Increasing worker motivation means workers willingly carry out the tasks required by
the job. This also means managers are less likely to pull teeth to try to get a worker to
perform tasks.

2. Increase Performance

Increasing worker motivation serves to help organizations meet internal and external
goals. Increasing worker motivation has shown to increase job performance levels.
Administrators should help workers feel as part of a team in the organization.
Increased worker performance usually means increased customer satisfaction.

3. Increase Retention

An administrative team that includes the workforce in decision-making processes for

strategic planning in achieving organizational goals has shown to increase worker
retention.

4. Increase Job Satisfaction

A poor working environment can make any good worker lose motivation. Job
incentives such as competitive pay, benefits and programs such as tuition
reimbursement, flexible hours, scheduling and time-off show increased levels of
worker job satisfaction.

5. Supervisor and Manager Role

Supervisors may be the problem. Managers, who are flexible and understand,
recognize and respond to worker's needs may have employees who are more
motivated. Supervisors who are difficult to work with may have workers who are less
motivated and therefore have workers who have decreased levels of job performance.

DIRECTING
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Definition of Directing:

Koontz and O’ Donnell defined directing as “The inter – personal aspect of managing
by which subordinate and led to understand and contribute effectively and efficiently to the
attainment of enterprise objective.

Characteristic of Directing:

The directing function has the following characteristics.

1. It is the function of the superior and runs. The organization in a scalar chain, (i.e) top
management directs middle management which, in turn directs operating
management.
2. It is not merely giving orders but also supervising he performance of subordinates.
The supervisor, this is a guide, interpreter, teacher and coordinator for subordinates.
3. It is performed by all managers at all levels of the organization. Every manager
spends time and effort in performing. This function, it is very well understandable that
the fireman supervising and directing the operators will devote more time and effort
to this function the chief executive of the organization.
4. Directing is a continuing function. A manager need to direct, guide, teach, motivate
and lead his subordinator on continuous basis.
5. The important characteristics of the directing function is that is deals with the human
factor the human factor of production in much more than this phrase implied. It
comprise complex individual with needs desire and attitude.
6. It embodied productive power that is required in and organization.
Elements of Directing :

The Directing has the following elements :

1. Supervision
2. Motivation
3. Leadership
4. communication
Importance of Directing :

Importance of the managerial function of directing could be desired under the

following two categories.

i. Basic importance of directing :

conceptually is the actual management function. It is that stare in the performance in

initiated on the part of subordinator through issuance of necessary order and instrumentation;
and seeing instruction are carried out, an per the intentions of the manager – director.

ii. Other points of Importance :

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Some of the other major pointing out to the significance of directing might be stated
as under :

1. Integration of individual and group objective

2. Facilities Co-ordination
3. Overcomes resistance to charge
4. Stability of work force
5. Best utilization of resources – physical and human.
6. Keeping Sub – coordinator well – informed
7. survival and growth of the enterprise.

CREATIVITY AND INNOVATION

An Important factor in managing people is creativity. A distinction. The term
creativity usually refers to the ability and power to develop new ideas.

Innovation, on the other hand, usually means the use of these ideas. In an
organization, this can mean a new product a new service (or) a new way of doing things. It is
implied that organization not only generate new ideas but also translate them into practical
application.

The creative process:

The creative process is seldom simple and linear. Instead, it generally consists of four
overlapping and interacting phases : (The following are :

1. Unconscious Scanning.
2. Institution
3. Insight
4. Logical formulation.
1. Unconscious scanning:

The first phase, unconscious scanning, is difficult to explain because it is beyond

conscious. This scanning usually requires an absorption in the problem which may be vague
in the mind. Yet managers working under time constraints often make decision prematurely
rather then dealing thoroughly with ambiguous ill – defined problem.

2. Intuition:

The phase (intuition) connects the unconscious with the conscious. This stage may
involve a combination of factors that may seem contradictory at first. Intuition needs time to
work. it requires that people find new combination and integrate diverse the concept and
ideas. Thus, one must think through the problem. Intuitive thinking is promoted by several
techniques such as brain storming and sanctions.

3. Insight :
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The third phase insight, is one of the creative process. It is mostly result of hard work.
For example; may ideas are needed in the development of a usable product, a new service
(or) new process. Interestingly insight may come at times when the thoughts one not directly
focused on the problem at hand.

4. Logical formulation :

The last phase in the creative process is logical formulation (or) verification. Insight
needs to be tested through logic (or) experiment. This may be accomplished by continuing to
work or on idea (or) by inviting critiques from other. Brown and Sloan idea of
decentralization, for example, needed to be tested against organization reality.

INNOVATION

Peter Drucker suggest that innovation applies not only to high – tech companies but
equally to low – tech, established business. Worth while innovation is not a matter of sheer, it
requires systematic and rational work, well organized and managed for results.

Innovation comes about because of some of the following situations.

1. The unexpected event, failure (or) success.

2. the Incongruous – what is assured and what really is .
3. the process (or) task that needed improvement.
4. changes in the market (or) industry structure.
5. changes in demographics.
6. changes in meaning (or) in the way things are perceived.
7. Innovation based on knowledge.

On bright – ideas may be very risky and are, at times, not successful, exp General Electrics
ambition plans for the “factory of the future” may have been a costly mistake. These plans
may have been based on unrealistic forecast and GE’S unrealistic expectations to automatic
industry.

HARMONIZING OBJECTIVES

People do not work in isolation, rather they work to a great extent and enterprise
objectives. Unfortunately, these objectives are not always harmonious likewise, the goals of
sub – ordinates are not always the same as those of the superior, therefore, one of the most
important activities of managers is to harmonize, the needs of individuals with the demand of
enterprise.

LEADERSHIP

Koontz and O’ Donnell Write :

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Leadership is the ability of a manager to induce Sub – ordinates (followers) to work

with confidence and Zeal.

Types of Leadership: (Leadership Styles)

Leadership style is define as the position that a leader usually taker with regard to
how much decision making freedom he (or) she allows subordinates to have.

As early as 1944 kurt lewing constructed a leadership model that had three styles :

1. Autocracy, 2. Democracy, 3. Laissez - fair

A lot of research is going on to further update the list of leadership styles.

The following are:

1. Authoritarian (or) autocratic style

2. Paternalistic style
3. Democratic (or) Participative style.
4. Laissez–faire (or) free – rein style.
5. Expert (or) functional leader.
6. Institutional Leader.

1. Autocratic Leadership Style:

An Autocratic leader is one who keeps the decision making authority within his
exclusive province and makes his subordinates act as he directs without providing scope for
him Sub – ordinates to influence the decision.

Autocratic leaders basically make decision without consulting the subordinates. Such
autocratic are also known as task makes (or) dictator. Such leader maintain a high degree of
control.

They set very hear, quantifiable, short term objectives using rewards for successful
accomplishment and punishment for non achievement. They are task oriented hence when
immediate productivity gains are revised, autocratic leaders provide to be very effective.

Advantages of Autocratic leader:

1. They achieve results

2. They give the perception
3. They are profit and conscious.
4. They work well in emergency situation.

2. Paternalistic style:
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Many mangers are best desired as paternalistic. While they are heavily work –
centered, they also have consideration for their Sub – ordinates.

The basic philosophy is best described with a cliché’s ; “work hard and I will take
care of you”. Such a leader helps guides, profits and keeps the follower heavily working
together as member of a team.

In much organization, the paternalistic leadership styles is quite popular with sub-
ordinates.

3. Democratic (or) Participative style:

Leaders adopting this style folly involve their sub-ordinates in the decision making
process. The final decision is the end product of combined effort of all.

This democratic leadership style is based on decentralization of authority and decision

making.

Advantages of democratic leadership style.

i. Improved decision making

ii. Willingness to accept change
iii. Leadership identification
iv. Development of high achievement drive.
v. Improves organizational stability.
4. Laissez – fair (or) free – rein style:

Under the laissez – fair leadership style, the entire decision making authority is
entrusted to sub-ordinates. Such a leader does not direct.

The laissez – fair leadership style, can work in organization whose subordinates are
highly completed and duty – conscious and motivated to such an extent that they can do,
better, without a leader manager.

Advantages of laissez – fair leaders:

1. It enhances employees creativity and initiative.

2. It increases employees moral and motivation
3. The work assignments are at minimum.
4. Laissez – faire leader is not involved in close supervision.

5. Expert (or) functional leader:

An expert of functional leader does not command any formal authority in the literal
sense of the term. Its only stands out become of him special qualification for the job handled
by him.
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The expert leader is essentially task – oriented and most of him time’s spent thinking
about doing things faster and better.

6. Institutional Leader:

AUTOCRATIC LEADER

Follower Follower Follower

Democratic (or) Participative

Leader

Follower Follower Follower

Free – Rein

Leader

The Flow of
Follower Follower Follower

Influence with three leadership styles

The institutional leader is one who wields power over him follows due to the position (or)
office occupied by him in the organizational hierarchy. At times, he may also desire power
from his personality and behavior. By virtue of such positional and personal power, he
manipulator and controls the activities of other to accomplish the grove objectives. The
institutional leader may (or) may not be an expert in his field of activity. When he lacks the
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enterprise, he may suffer from a sense of inadequacy, leading to an interiorly complex, and to
compensate for it, he may exert to an exceptional extent to achieve his objectives.

MOTIVATION

Meaning and definition of motivation:

Motivation is defined by different authors (or) managerial fractions in different ways. Some
of them one expressed.

According to koontz and O’ Donnell defined as : motivation is a general term applying to the
entire class of drives, desires, needs, wishes and similar forces”

Edwin B. flippo defined motivation as “process of attempting to influence others to do your

will through possibility of gain (or) reward”.

Characteristics of motivation:

The following characterization of motivation are:

1. Motivation is a psychological phenomenon :

2. Motivation is based on needs
3. Goals are motivator
4. Motivation is different from satisfaction
5. it is a continuous process.
6. Motivation is related to a person in totality.

Importance of motivation:

Motivation is one of the most important factors determining organizational efficiency.

Every superior in the organization must motivate his sub-ordinates for the right type of
behavior.

The performance of human being in the organization is dependent on the ability and
motivation.

Performance = Ability X motivation.

Motivation brings out the following advantages:

1. Best utilization of resources

2. Will to contribute
3. Reduction in labor problem.
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4. Size able increase in production and productivity.

5. Basis of Co-operation
6. Important upon skill and knowledge.
7. Acceptance of organization changes.
8. Better image.
9. It promotes self discipline
THEORIES OF MOTIVATION

I. Maslow’s Need Hierarchy Theory:

This is one of the most popular theories of motivation is the hierarchy of needs theory
developed by on American Psychologist Abraham Maslow and popularized as Maslow’s need
hierarchy theory. It was developed in early 1960s.

Self
Actualizationnnnn
n

Esteem Needs

Social Needs

Safety Needs

Physiological Needs
Hierarchy of Needs:

According to Maslow’s hierarchy of needs theory and individuals needs are

arranged in a hierarchy from the lower – level physiological needs to the higher – level needs
for self – actualization. The fire needs suggested by Maslow are presented in the (shows) the
above figure.

1. Physiological Needs:

According to Maslow, the most fundamental of all needs are physiological.

Food, clothing, shelter and sex are illustration. Deprived for everything else bring of
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secondary importance, the organization helps individual satisfy their basic needs by providing
reasonable good salary, benefit and working condition.

These needs are the foremost and powerful motivator. These are also known
as biological needs which are essential for survival and preserving human life.

2. Safety Needs:

Security and safety needs are second in priority. These are the needs which
allow feed physically a psychologically safe.

Everybody needs economics security and physical protection these needs

includes – protection against threat, job security, property, insurance, provision for old age.
He wants to be protected from danger arbitrary behavior of their superior’s etc. management
can offer pension, insurance and job security to fulfill their needs.

3. Social Needs:

The social needs include the needs to belong – to be accepted by others and
to give and receive friendship and love. Theses needs are also sometimes referred to an
belonging needs.

In a weak situation, social needs are concerned with relating to friendly

associates, identification with good company, and participation in organized social activities.
Social affiliation helps make the job livable.

4. Esteem Needs:

These needs are related to the two prolonged desire to have a positive self
image and to have own contribution appreciated by other.

Esteem needs are egoistic needs. Esteem needs are classified into two

Types

1. Self esteem includes self respect, confidence, competence and feeling that he is doing
something worthwhile.
2. Public Esteem: it means esteem (or) image in the eyes o public such as power praise,
public appreciation, recognition, status and prestige. Everyone Wishes respect and
fame. He thinks that he is the most able person and others most think of him and
respect him.
These needs are infinite and server as strong motivators.

5. Self – actualization Needs:

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Once esteem needs are reasonably well satisfied, the highest level of need,
self actualization becomes important. It is the needs to realize one’s capacities and
potentialities by achieving specific goals.

It is the need “to become everything that one is capable of becoming” in an

organization, a person attempting to satisfy these needs seeks challenging work
assignments that allow for creativity and opportunities for personal growth and
advancement.

II. Herzberg’s Theory of Needs:

Frederick Herzberg of case – western Reserve University, U.S.A. Conducted

a study over zoo engineers and accountants in nine companies about their “exceptionally
good feelings” and exceptionally bad feelings” towards their jobs.

The theory holds that two types of factors affect motivation. One of them is
referred to as hygiene factors and the other is called motivators.

Hygiene (or) Maintenance Factors:

Factors that seemed to make individuals feel dissatisfied were associated with
the job context. Theme factors are termed as hygiene factors (or) maintenance factors.
Hygiene factors are essential to maintain a reasonable level of satisfaction among
employees. They don’t motivate but provide better working condition.

Hygiene factors are elements associated with condition surrounding the job.

The Hygiene factors include:

i. Pay / salary
ii. Working Conditions
iii. Supervisors (Technical aspects of supervision)
iv. Company policies and administration
v. Benefits
vi. Status
vii. Security
viii. Interpersonal Relation.

Herzberg’s findings suggested that is these condition were, poor, they could lead to physical
(or) psychological withdrawal form the job. Can create dissatisfaction.

Motivational Factors:

Factors that seemed to make individual feel satisfied with their jobs were
associational with the content of the job these factors are termed as motivators (or)
motivating factors.
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The motivating factors:

1. Achievement
2. Possibility of growth
3. Responsibility
4. Advancement opportunity.
5. Recognition.

These are concerned with the work itself, rather than its surrounding physical administrative
(or) Social environment. They are internal to the job itself and it the worker is to be truly
motivated, the job itself is the major source of that motivation.

III McClelland’s Achievement Theory:

According to David McClelland, “ there are three major relevant motives (or)
need that lead an individual to work :

1. The need for achievement – the desire to excel, to achieve in relation to a set of
standards, and to strive to succeed.
2. The need for affiliation – the desire for friendly and close interpersonal relationship.
3. The need for power – the desire to make others behave in a way that they would not
home have other wise.

Needs for Achievement:

McClelland’s has identified the following characteristics of the people with a

high need for achievement.

a. Moderate goals.

Achievement – motivated people only tent to achieve available goals. They do not
work for impossible goals. Neither fo they aim at goal that can be achieved too easily.

b. Indifference to reward.

People with high achievement need are not much concerned with the reward of
success in their Endeavour. Their satisfaction consists in solving a problem (or) achieving a
goal. This gives them an opportunity to measure their performance in comparison to other.
They do not work for money (or) recognition as a reward for success, but for success by
itself.

Needs for Affiliation (NAFF):

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Man is a social animal. He seeks interaction, and wants to be with people toward
whom he feds a sense of belonging and who accept him in their company. Affiliation is a
common social need, but some people feed it more intensely them others.

Need for affiliation is the root cause of informal groups ina formal structured
organization. Thus people having common benefits, feelings and emotions tent to get together
to escape monotony (or) a feeling of lack of competence.

Need for power

The need for power is the desire to influence others and control one’s environment as
important as important motivator in organization.

Need of power has two terms:

i. Personal Power
ii. Institutional Power.

i. Personal Power:

It is a need of power in which individuals want to dominate other for the sake of
demonstrating their abilities to manages. They except followers loyal to them personally
rather than to the organization.

ii. Institutional Power:

Individual with a high need for institutional power focus on working with other to
solve problem and organizational goals. They want getting things done in organized manner.
They are also willing to sacrifice some of their own self – interest for organization.

The individual with high institutional power are the best managers because they are
oriented toward Co-coordinating the effort of others to achieve long term organizational
goals. They find political organizations, military (or) civil service most attractive because
control and influence is attached with the position in these organization.

IV. McGregor’s “X” and “Y” theories:

Douglas McGregor has based his theories of motivation on assumptions about basic
human nature. He focused on leader’s assumption about which factors were most important
in motivating people at work. McGregor’s research suggested that managers assumptions
about worker motivation tunneled to fall into one of two categories.

McGregor felt that such assumptions exert a heavy influence on how managers
operate McGregor has termed his theories as ‘X’ the only (negative / pessimistic) and ‘Y’
theory (positive /optimistic)
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‘X’ Theory:

‘X’ theory is traditional in its outlook theory X is negative theory. Theory ‘X’
managers tent to assume that worker are lazy, need to be compel, they have little ambitions,
they are focused mainly on job so Crudity.

McGregor believed that managers who believe in theory X one likely to treat workers
accordingly. Hence such a manager self up authority and control centralized.

Manager attempts to motivate strictly through economic incentives worker have to

option except to obey the direction workers are mentally dependent on management.

The theory is based on certain very negative assumptions on discussed below :

a. Internet dislike for work.

People in general have a deep aversion to work. they do it half heartedly.

b. lack of ambitions.

They are not keen to accept only responsibility. Most of the time they would preterm
being directed by their superiors.

c. Lack of Creativity.

most worker proffer the status – quo. They are averse to break new ground, (or) try
out Unconventional methods to solve problems.

d. satisfaction of physiological and safety needs being the only goal. The main motivation
for workers is abdicate wages and job security (or) the threat of being deprived of them.

e. workers and of less importance, they are indifferent to the organizational needs, they
think to be on instrument. Workers are in nature.

Theory X suggests that workers are to be directed controlled and punished to achieve
the desired results. Autocratic type leadership is suitable for such employees.

“Y” theory:

The “Y” theory is the exact opposite of the negative / positive ‘X’ theory where as ‘X’
theory grossly minimizes the role of worker in the process of management, ‘Y’ theory
emphasizes active partnership and Co-operation between worked and management so as to a
accomplish the enterprise objectives. ‘Y’ theory is based on the following assumption :
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a. Work as natural as play:

in favorable conditions a worker would take to work as naturally as play (or) any
other interesting activity work in a purposeful activity and once the worker understands its
purpose, he will exert himself to perform it to the best of his ability.

b. Self – Control :

Workers are committed to the objective at enterprise. They are self controlled and no
punishment is required.

c. Creating :

Recognition of creativity and self motivation on the part of workers depends on the
attitude and pre-disposition of the management. It there is a positive outlook, workers may be
encouraged to display initiative and creativity in resolving work problems.

d. Money not the only motivator :

Without doubt, a person is promoted to work to satisfy him physiological and safety
needs. But it is wrong to think that motivation can only occur at these two levels. Given
favorable conditions, workers would willingly recognition from other

e. self – Direction:

As people are by nature self – directed and creative, it is only left to the management
to provide a right environment for this purpose. Such environment will consist in-built
flexibility, promotion of authentic relationship, internal commitment and psychological
success.

V. Equality Theory :

This theory (Equality Theory) of Motivation was formulated by J. Stoncy Adams. It is

based on the assumption that members of an organization have a strong expectation of
equality, fairmen (or) justice in treatment, on the part of management.

Persons Outcomes Others’ Outcome Positive Ideality

=

Persons Inputs Others inputs

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Persons Outcomes Others outcome

<

Persons Input Others Inputs

Employees with short tenure in the current organizations tend to have little information about
– others inside the organization, so they relay on their own personal experiences. On the other
hand, employees with long tenure relay more heavily on Co – workers for comparison.

The top level employees who are highly informative better knowledge about people in other
organization

Equity theory in concerned not only with the awards but also with regard to what others
receive. Based on one’s inputs such as effort, experience education and competence, one
compares outcome such as salary levels recognition, and other factors. If there is any
imbalance between the input and outcome, tension is created

VI. Expectancy Theory:

Victor Vroom’s put fourth this expectancy theory. He explained that a

person’s is determined by the participated values of all the outcomes (positive and negative)
of the action, multiplied by the strength of the person’s expectation that his / her action will
achieve the desired outcome.

The motivational relationship is expensed in the formula.

Valence X executor = Motivation

Valence X expectancy

Motivation
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Action

Goal achievement

Satisfaction

This theory focuses on three Relationship :

1. Effort – Performance Relationship : if a person put form his effort it leads to

performance.
2. Performance reward relationship : Good Performance of a person will lead to the
attainment of a desired outcome that is rewarded.
3. Reward – Personal Goals relationship : If a person get better reward he will be in a
position to achieve him personal goals.

Individual Effort

Individual Performance

Organizational Rewards

Personal Goals
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These time the expectancy theory helps to explain why a lot of worker are not motivated on
this job and merely do the minimum necessary to get by.

Ability and Opportunity:

Performance of an employee is based on ability and opportunity there fore performance

= F (A x M)

Where A = Ability

M = Motivation

If neither ability nor motivation is inadequate, performance will be greated individual

intelligence and skills must be considered in addition to motivation in order to evaluate the
employee performance.

Performance of an employee is also based on the opportunity, so, now out equation will be.

Performance = F (A x M x O)

A = Ability

M = Motivation

O = Opportunity

Even though on individual may be willing and able, these may be some constraints in
performing this is shown below.

Performance dimension:

Ability
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Performance

Motivation Opportunity

COMMUNICATION

Meaning and definition :

Communication is a two – way exchange of ideas and informal that leads to a
common understating.

Definition of communication:
According to koontz and O’ Donnell defined communication “as the transfer of
information from one person to mother whether (or) not it elicits confidence., but the
information transferred must be understandable to the receiver” characteristics of
communication.

The following are essential Features of communication :

1. it is a co-operative process involving two – people sender and a receiver. One person
alone cannot communicate.
2. It involves both information and understanding. Sharing of understanding would be
possible only when the person only when the person, to whom the message is meant,
understand it in the same sense in which the sender of the message wants him to
understand.
3. It includes all means by which meaning is converse from one person to another. The
most popular means are spoken works written words, facial expression gesture etc.
4. Its purpose is to motivate a response, whether (or) not it elicit confidence.
5. It is the basis for action and cooperation. This action and cooperation is for the
purpose of accomplishing organizational goals.

Significance (or) important of Communication :

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Before examining the various ways that managers communicate, it is necessary to

understand that communication means to the effective managers. Communicating is
important for a number of reasons.

i. Aid to managerial Performance :

ii. Good communication leads to managerial effectiveness :
iii. Aid to co ordination :
iv. Communication leads to power :
.v. Managers spend most of their time communicating :
vi. Aid to public relation :

PROCESS OF COMMUNICATION
Communication is a dynamic process, just as is the meaning (or) reality it sacks to
describe. The communication process helps in improving the communication ability.
The process applies to all types of communication – ranging from prone calls and face
– to face conversations to written communications.

The basic communication process consist of following components :

i. Sender
ii. Encoding
iii. Medium
iv. Recipient
v. Decoding
vi. Feedback.

The process of communication consist of the following steps (or) stages :

i. Message :
This is the background step to the process of communication; which by farming the
subject matter of communication; necessitates the start of a communication process. The
message might be a fact (or) an idea, (or) request (or) a suggestion.

ii. Sender :
The actual process of communication is initiated at the hands of the sender; who takes
steps to sent the message to the recipient.

iii. Encoding :
Encoding means giving a form and missing to the through expressing it into – words,
symbols, gesturer, graph, drawings etc.

iv. Medium :
It refers to the method (or) channel, through which the message is to be conveyed to
the recipient. for example an oral communication might be made through a peon (or) over the
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telephone etc; while a written communication might to be rested through a letter (or) a notice
displayed on the notice board etc.

v. Recipient (or Receiver) :

Technically a communication is complete, only when it comes to the knowledge of
the intended person (i.e) the recipient (or) the receiver.

vi. Decoding :
Decoding means the interpretation of the message by the recipient ; with a view to
getting the meaning of the message, as per the intentions of the sender. It is at this stage in the
communication is philosophically defined as “the transmission of understanding.

Vii. Feedback :
To complete the communication process, sending feedback to communication, by the
recipient to the sender is imperative. ‘Feedback’ implies the reaction (or) response of the
recipient to the message, comprised in the communication.

Message Message Message Message

Sender Encoding Channel Decoding Receiver

Barriers to communication

1. Barriers due to organization structure :

The organization structure has an important influence on the ability of the member of
the organization to communicate effectively . now – ad ayes the organization structure of
most big enterprises is complex involving several layers of supervision and long
communication lines. Organization structure creates. Problem because communication may
breakdown at – any level of supervision due to faculty transmission.

2. Barriers due to Ration ship :

When authority responsibility relationship among superiors and sub – ordinates are
not clearly defined ; superiors and sub – ordinates both might find confused as to when to
contact and convey their problems. Suggestion etc.

3. Filtering :
The sender manipulates the information so that the receiver sees the message more
favorably. As the information go to higher officials they have to be condensed and
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synthesized so that the top officials are not over loaded with information. The major
determinant of filtering is the number of level in an organization structure.

4. Selective perception :
The message encoded by the sender is perceived by the reviver according to his own
ideas, motivations and experience background etc. receiver also do project their interest and
expectations as they decode their messages.

5. Lack of Ability to Communicate :

All persons do not have skill to communicate. Skill in
communication many come naturally to some, but an average man may need some sort of
training and practice by ways pf interviewing, public speaking etc.

6. Defensiveness :
When the receiver feeds that he is being threatened and they fend to read in such a
way that it reduces their ability to achieve mutual understanding. This means that they
become defensive (i.e) they verbally attack others and also portions other motives.

7. Situational Factors :
Barriers may also arise due to specific situation, (e.g.) physical conditions like noise
(or) insufficient light, information overload, etc., when there is a noise (or) a number of
persons are Speaking simultaneously, communication can’t be effective.

And it an executive is overloaded with information and does

not have time to organize the information, he will not be able
to communicate effectively.

8. Languages
Words mean different things to different people. Wards and languages we use are
influenced by Age, education and Cultural backgrounds. In organization employees so each
one would have his own language of expressing his opinion (or) ideas. Hence there should be
a uniformity of language in on organization for the effective communication to take place.

Effective Communication : (Over coming Barriers to communication )

An Effective system is one that ensures smooth flow of information in the organization and
overcome barriers to communication.
Effective communication is the responsibility of all persons in the organization. Managers as
well as non-managers, who work toward a common aim.

The following guidelines can help overcome the barriers to communicate.

1. Clarity of message :
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Sender of message must clarity in their minds what they want to communicate. This
means what they want to communicate. This means that one of first steps in communicating
is clarifying the purpose of the message and making a plan to achieve the intended end.

2. Encoding and Decoding :

Effective communication required that encoding and decoding be done with symbols
that are familiar to the sender and the receiver of the message. Thus the manager should avoid
unnecessary technical jargon, which is intelligent only to the expert in their particular filed.

3. Planning of communication :
The planning of the communication should not be done in a vacuum. Instead, other
people should be consulted and encouraged to participate : to collect facts, analyze the
message and select the appropriate media.

4. Effective listening :
The Sender must listen to the receiver words attentively so that the receiver may also
listen to the sender at the same time. It is also necessary for every, employee to update his
knowledge by reading company notices, builders, reports etc.

5. Vague Language :
Use of technical language must be avoided, as far as possible. However, where the use
of technical language is inevitable; the technical terms must be explained (or) translated into
the layman’s language.

6. Superiority – Complex :
The superiors must give up their superiority – complex –as a sign of psychological
health; ands communicate with sub-ordinates freely manner.

7. Individual perception :
Recipients must have a broad outlook and appropriate the viewpoint of the sender; in
making the communication.

8. Reaction to messages :
Communication is complete only when the message is understood by the receiver.
And one never knows whether communication is understand unless the sender gets feedback.
This is a accomplished a reply to a letters, and encourage receiver to give their reaction to the
message.

9. Fear of superiors :
Subordinates must important a free and impartial feedback to communication, and the
superiors, too, on their part must allay the fears of sub-ordinates – by praising them for
fearless comments.
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10. Receptive to new ideas :

The employees should be prepared to accept new ideas and change themselves
accordingly. They should be willing to receive information from internal and external to
receive information from internal and external sources which call for change in the
organization.

UNIT - V

Define controlling.

Controlling may be defined as the process of analyzing actual operations and seeing
that actual performance is guided toward expected performance.

According to Koontz and O’Donnell, “the managerial function of controlling is the

measurement and correction of the performance of activities of subordinates in order to make
sure that enterprise objectives and the plans devised to attain them are being accomplished”.

NATURE OF CONTROLLING

1. Control is an essential function of management

This function is performed by every manager at all levels of the organisation. Control
is in fact a follow-up action to the other functions of management. The other managerial
functions cannot be completed effectively without performing the control function.

2. Control is an ongoing process

It involves continuous measurement of results and review of standards. It does not

stop anywhere “Just as the navigator continually takes reading to ascertain whether he is
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relative to a planned course, so should the business manager continually take reading to
assure himself that his enterprise or department is on course”.

3. Control is forward-working

Control is forward working because past cannot be controlled. However, always the
past performance is measured and in the light of such measurement corrective action for a
future period is identified.

4. Control involves measurement

Control is a process of measurement, comparison and verification. It involves a check

on the performance of individuals and does not curtail the freedom of action.

5. The essence of control is action.

The purpose of control is achieved only when corrective action is taken to correct
deviations and performance is adjusted to predetermined standards.

6. Control is an integrated system

It is set of interlocking sub-systems or a coordinated structure of activities.

ADVANTAGES OF CONTROLLING

1. It enables management to verify the quality of various plans and policies. A control
system ensures the achievement of objectives.
2. Control helps managers to discharge their responsibilities.
3. Control keeps the subordinates under check and creates discipline among them.
4. Effective control ensures efficiency and effectiveness in the organisation.
5. Control helps in achieving coordination which is the essence of management.

TECHNIQUES OF CONTROL

1. Budgetary Control

A budget is a statement expressed in financial terms, e.g., sales revenue, total

expenditure, etc., or in physical terms, e.g., units of output, number of employees etc.

As a financial plan, a budget indicates estimated revenues and costs for a certain
future period. A budget serves as an important device of managerial control. It provides a
standard by which actual operations can be evaluated. A business enterprise may prepare and
use various types of budgets some which are given below:

(i) Master Budget

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(ii) Functional Budgets

(a) Sales Budget
(b) Production Budget
(c) Materials Budget
(d) Cash Budget
(e) Production Overheads Budget
(f) Distribution Overheads Budget
(g) Administrative Overheads Budget
(iii) Capital and Revenue Budgets
(iv) Fixed and Flexible Budgets
(v) Zero-Base Budgeting.

2. Break-Even Analysis

A business is said to be break even when its total sales are equal to its total costs. It is
a point of no profits no loss. At this point, contribution is equal to fixed cost. A concern
which attains break even point at less number of units will definitely be better from another
concern where break even point is achieved at more units of production.

Total Fixed Cost

BEP = ---------------------------------------

Contribution Per unit.

The technique of break even analysis can be made easy with the help of graph or
mathematical formula. Graphical representation of break even point is known as the break
even chart. Break Even Chart shows the profitability at various levels of activity and
indicates the point at which neither profit nor loss is made.

Break even point is known as ‘no profit, no loss point’. So the chart is also known as
break even chart. At this point, the total costs are recovered and profit begins.

3. Programme Evaluation and Review Technique (PERT)

PERT is an integrated management control system designed to plan time and cost of
completing a project. A programme consists of several activities and sub-activities. These
activities must be completed in a proper sequence to minimize time and costs involved.

4. Critical Path Method (CPM)

CPM is used for planning and controlling the most logical sequence of activities for
completing a project. It is helpful in the optimum use of resources. Like PERT, it identifies
the critical elements of a project and facilitates control by exception.
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CPM is widely used for construction projects and plant maintenance. Under CPM
every activity is critical but in case of PERT only some of the activities are treated as critical.
CPM is generally applied where activity timings are relatively well known. But PERT is
more useful in projects where timings are uncertain.

Control as a management process

A. Controlling, one of the four major functions of POLCA management, is the process of
regulating organizational activities so that actual performance conforms to expected

organizational standards and goals.

1. Controlling is largely geared to ensuring that the behavior of individuals in the

organization contributes to reaching organizational goals.
2. Controls encourage wanted behaviors and discourage unwanted behaviors.

B. A control system is a set of mechanisms that are designed to increase the probability of
meeting organizational standards and goals.

C. Controls can play five important roles in organizations.

1. Control systems enable managers to cope with uncertainty by monitoring the specific
activities and reacting quickly to significant changes in the environment.
2. Controls help managers detect undesirable irregularities, such as product defects, cost
overruns, or rising personnel turnover.

3. Controls alert managers to possible opportunities by highlighting situations in which things

are going better than expected.
4. Controls enable managers to handle complex situations by enhancing coordination within
large organizations.
5. Controls can decentralize authority by enabling managers to encourage decision making at
lower levels in the organization while still remaining in control.

D. Control responsibilities differ according to managerial level.

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1. Strategic control involves monitoring critical environmental factors that could affect the
viability of strategic plans, assessing the effects of organizational strategic actions, and
ensuring that strategic plans are implemented as intended.
a. Strategic control is typically the domain of top-level managers who must insure core
competencies are developed and maintained.
b. Long time frames are involved, although shorter time frames may be appropriate in
turbulent environments.

2. Tactical control focuses on assessing the implementation of tactical plans at departmental

levels, monitoring associated periodic results, and taking corrective action as necessary.
a. Tactical control is primarily under the direction of middle managers, but top-level
managers may at times get involved.
b. Time frames are periodic, involving weekly or monthly reporting cycles.
c. Tactical control involves department-level objectives programs, and budgets.

3. Operational control involves overseeing the implementation of operating plans,

monitoring day-to-day results, and taking corrective action when required.
a. Operational control is the responsibility of lower-level managers.
b. Control is a day-to-day process.
c. The concern is with schedules, budgets, rules, and specific outputs of individuals.

4. For controls and three levels to be effective they must operate in concert with one another.
THE CONTROL PROCESS
A. The basic process used in controlling has several major steps.

1. Determine areas to control.

a. It is impractical, if not impossible, to control every aspect of an organization’s
activities. Major controls are based on the organizational goals and objectives developed
during the planning process.

2. Develop standards spelling out specific criteria for evaluating performance and
related employee behaviors.
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a. Standards are often incorporated into the objectives set in the planning process.
b. Standards serve three main purposes related to employee behavior.
1) Standards help employee understand what is expected and how their work will be
evaluated.
2) Standards provide a basis for detecting job difficulties that are related to personal
limitations of organization members.
3) Standards help reduce the potential negative effects of goal incongruence, a condition in
which there are major incompatibilities between the goals of an organization member and
those of the organization.
3. Make a decision about how and how often to measure performance related to a given
standard.
a. MBO is a popular technique for coordinating the measurement of performance throughout
an organization.
b. The means of measuring performance depends upon the performance standards that have
been set, as well as data, such as units produced, quality of output, or profits.
c. Most organizations use combinations of both quantitative and qualitative performance
measures.
d. The period of measurement usually depends upon
1) The importance of the goal to the organization
2) How quickly the situation is likely to change
3) The difficulty and expense of rectifying a problem if one were to Occur

4. Compare performance against standards.

a. Reports that summarize planned versus actual results are often developed.
b. Management by exception is a control principle which suggests that managers should be
informed of a situation only if control data show a significant deviation from standards.
c. Mangers may compare performance and standards through personal observation.
d. The 360-degree feedback system described in chapter 10 is being used by a number of
organizations as an evaluation approach.

5. Recognize above-standard performance both to give precognition to top performing

employees and also to aid improving performance on regular bases.
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6. Assess the reason why standards are not met, and take corrective action.

7. Adjust standards and measures as necessary.

a. Standards and measures need to be checked for relevance.
b. Managers must decide whether the cost of meeting certain standards is worth the resources
consumed.
c. Exceeding a standard may signal opportunities, the potential to raise standards, and/or the
need for possible adjustments in organizational plans.

B. Managers can take a number of approaches to deciding what to control.

1. Resource dependence is an approach based on the view that managers need to consider
controls mainly in areas in which they depend on others for resources consider control mainly
in areas in which they depend on others for resources necessary to reach organizational goals.
a. Strategic control points are performance areas chosen for control because these are
particularly important in meeting organizational goals.
Strategic control points meet four conditions.
1) Dependence on a resource is high because the resource is important and limited in
availability.
2) The probability that the expected resource flow will be unacceptable is high because of
anticipated problems with quantity, quality, or timeliness.
3) Instituting a control system is feasible.
4) The cost of instituting the control system is acceptable.

2. Mangers need to develop an alternative to controls if they are needed, but cannot be
instituted due to problems of feasibility or cost.
a. The dependence relationship can be changed so that controls are unnecessary, e.g., lining
up several suppliers.
b. The nature of the dependence relationship can be changed so that a control system is
feasible and/or cost-effective, e.g., job simplification or vertical integration.
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c. Organizational goals can be changed so that the resources in question are no longer
necessary.
CONTROLLING ORGANIZATIONAL PERFORMANCE THROUGH
PRODUCTIVITY AND QUALITY

Types of controls
A. Controls can be classified according to their timing or place in the productive cycle.
1. Feed forward control focuses on the regulation of inputs to ensure that they meet the
standards necessary for the transformation process.
a. The emphasis is upon preventing problems.
b. Other names for feed forward control are “preliminary control,” “precontrol,”
“preventative control” and “steering control.”
2. Concurrent control involves the regulation of ongoing activities that are part of the
transformation process to ensure that conform to organizational standards.
a. Checkpoints are in place to determine whether to continue the process, take corrective
action, or stop work altogether.
b. Other names for concurrent control are “screening” and “yes-no control.”
c. This type of control is not appropriate for work that requires creativity or innovation.
3. Feedback control is regulation exercised after a product or service has been completed in
order to ensure that the final output meets organizational standards and goals.
a. Feedback control is used when feed forward and concurrent controls are not feasible or are
too costly.
b. Feedback control serves a number of functions:
1) To serve as a final means to check for deviations not detected earlier
2) To provide information that will facilitate the planning process
3) To provide information regarding employee performance
c. Other names for feedback control are “post action control” or “output control.”

4. Multiple control systems are systems that use two or more of the feed forward,
Concurrent, and feedback control processes and involve several strategic control points.
1. Multiple control systems develop because of the need to control various aspects of a productive
cycle, including inputs, transformation, and outputs.
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2. Computer software companies provide examples of processes complex enough to require multiple
controls.

C. The degree to which human discretion is part of a control process determines whether it is
cybernetic or non-cybernetic.
1. A cybernetic control system is a self-regulated control system that, once it is put into operation, can
automatically monitor the situation and take corrective action when necessary, e.g., a heating system or
some computerized inventory systems.
2. A non-cybernetic control system is a control system that relies on human discretion as a basic part of its
process.

CONTROLLING FOR ORGANIZATIONAL PERFORMANCE

What Is Organizational Performance?
Performance is the end result of an activity. Managers are concerned with organizational
performance—
The accumulated end results of all the organization’s work processes and activities.

Measures of Organizational Performance

Employees need to see the connection between what they do and the outcomes. The most
frequently used
Organizational performance measures include organizational productivity, organizational
effectiveness, and
Industry rankings.

1. Organizational productivity is the overall output of goods or services produced divided

by the
inputs needed to generate that output. It’s the management’s job to increase this ratio.
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2. Organizational effectiveness is a measure of how appropriate organizational goals are and

how
well an organization is achieving those goals.

TOOLS FOR MONITORING AND MEASURING ORGANIZATIONAL

PERFORMANCE
Managers might use any of the following types of performance control tools: financial
controls, information
controls, balanced scorecard approach, or benchmarking best practices approach.
A. Financial Controls.
1. Traditional Financial Control Measures.
a. Financial ratios are calculated by taking numbers from the organization’s primary financial
Statements—the income statement and the balance sheet.

The four key categories of financial ratios are as follows.

1) Liquidity ratios measure an organization’s ability to meet its current debt obligations.
2) Leverage ratios examine the organization’s use of debt to finance its assets and whether it’s
able to meet the interest payments on the debt.
3) Activity ratios measure how efficiently the firm is using its assets.
4) Profitability ratios measure how efficiently and effectively the firm is using its assets to
generate profits.

b. We have also discussed budgets as a planning tool. However, budgets are also control
tools. They provide managers with quantitative standards against which to measure and
compare actual performance and resource consumption.

2. Other Financial Control Measures. Managers are using measures such as EVA (economic
value added) and MVA (market value added).
a. Economic value added is a tool for measuring corporate and divisional performance by
calculating after-tax operating profit minus the total annual cost of capital.
b. Market value added adds a market dimension by measuring the stock market’s estimate
of the value of a firm’s past and expected capital investment projects.
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B. Information Controls.
Controlling information can be vital to an organization’s success. We need to look at the
development and use of management information systems.
1. A management information system is a system that provides managers with needed and
usable information on a regular basis.
a. Managers need usable information, not just data
b. Data are raw, unanalyzed facts. Information is analyzed and processed data.

2. Information can help managers control the various organizational areas efficiently and
effectively.
It plays a vital role in the controlling process.

C. Balanced Scorecard Approach.

1. The balanced scorecard is a performance measurement tool that looks at four areas—
financial, customer, internal processes, and people/innovation/growth assets—that contribute
to a company’s performance.
2. The intent of the balanced scorecard is to emphasize that all of these areas are important to
an organization’s success.

D. Benchmarking of Best Practices

1. Benchmarking is the search for the best practices among competitors or non-competitors
that lead to their superior performance.
Research shows that best practices frequently already exist within an organization, but
usually go unidentified and unused.
Internal benchmarking best practices program.

Establishing Quality Management Systems

By implementing international quality standards like ISO-9000, European Quality Award,
Deming Prize, or Malcom Balridge Award; an organization can boost its productivity and
quality. This will give leverage for a continuous improvement and consistent quality products
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for customers and keeping the employees happy as well. One can also adapt TQM philosophy
of Deming, Juran or Crosby or Taguchi to outperform their competitors in the global market.

DIRECT CONTROL Vs PREVENTIVE CONTROL

DIRECT CONTROL

1. Cause of negative deviations from standards.

Uncertain, lack of knowledge, experience or judgment.

2. Questionable assumptions underlying direct control.

Assumption that the performance can be measured

Assumption that the personal responsibility exists

Assumption that the time expenditure is warranted

Assumption that the mistakes can be discovered in time

Assumption that the person responsible will take corrective steps.

PREVENTIVE CONTROL

Assumption:

Qualified managers can make a minimum of errors.

Management fundamentals can used to measure performance

Application of management fundamentals can be evaluated

Advantages

1. Greater accuracy

2. Encourage self control

3. Lighten the managerial burden

4. Impressive

Thus control is a very important process through which the managers can ensure that actual
activities confirm to planned activities. It is mainly used to measure progress, to uncover
deviations and to indicate corrective action.
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