What is Management?

A set of activities planning and decision making, organizing, leading, and controlling
directed at an organization’s resources human, financial, physical, and information
with the aim of achieving organizational goals in an efficient and effective manner.

EFFICIENTLY- Using resources wisely and in a cost-effective way

EFFECTIVELY- Making the right decisions and successfully implementing them

What is a Manager?
• Someone whose primary responsibility is to carry out the management process.
• Someone who plans and makes decisions, organizes, leads, and controls
human, financial, physical,
and information resources.
Management: Science or Art?
• The Science of Management
– Assumes that problems can be approached using rational, logical,
objective, and systematic ways.
– Requires technical, diagnostic, and decision-making skills and techniques
to solve problems.
• The Art of Management
– Decisions are made and problems solved using a blend of intuition,
experience, instinct, and personal insights.
– Requires conceptual, communication, interpersonal, and time-management
skills to accomplish the tasks associated with managerial activities.

Historical Background of Management

• Ancient Management
– Egypt (pyramids) and China (Great Wall)
– Chankya Kautilya (Arthasastra – administration, established dept. with
directors, job description.)
• Adam Smith
– Published “The Wealth of Nations” in 1776
• Advocated the division of labor (job specialization) to increase the
productivity of workers
• Industrial Revolution
– Substituted machine power for human labor
– Created large organizations in need of management

The Importance of Theory and History

• Why Theory?
– Provides a conceptual framework for organizing knowledge and providing
a blueprint for action.
• Management theories, used to build organizations, are grounded in
reality.
 •
Most managers develop their own theories about how they should
run their organizations.
• Why History?
– An awareness and understanding of historical developments in
management are important.
• Furthers the development of management practices.
• Avoiding the mistakes of others in the past.
Early Management Pioneers
• Robert Owen (1771–1858)
– British industrialist who was one of the first managers to recognize the
importance of human resources and the welfare of workers.
• Charles Babbage (1792–1871)
– English mathematician who focused on creating efficiencies of production
through the division of labor, and the application of mathematics
to management problems.

Theories of Management

M a n a g e m e n t
T h e o r y

C l a s s i c a B l e h a v i o u Q r au la n t i t a Ct i ov en t e m p o r a r y
T h e o r i e s T h e o r i e s T h e o r i e s T h e o r i e s

S c i e n t i f i Bc e h a v i o u M r i a s n t a g e m Se yn st t e m s
M a n a g e m T e hn et o r i e s S c i e n c e T h e o r y

B u r e a u c r Ha t a i cw t h o r nO e p e r a t i o Cn os n t i n g e n c y
M a n a g e m Se nt u t d i e s M a n a g e m eT nh t e o r y

A d m i n i s t r a H t i u v me a n M a n a g e m E e mn t e r g i n g
M a n a g e m R e en l t a t i o n Is n f o r m a t i o Vn i e w s
S y s t e m s

B e h a v i o u r a l
S c i e n c e
Classical Approaches to Management

Classical
Approach

F.W. Taylor
Henry Gantt
Frank & Lillian Max Weber Henry Fayol
Gilbreth

Bureaucratic
Scientific Mgmt Administrative
Mgmt
Mgmt

Scientific Management
 Fredrick Winslow Taylor (1856–1915)
 The “Father of Scientific Management”.
 Published “Principles of Scientific Management” (1911)
 The Theory of Scientific Management:
 Using scientific methods to define the “one best way” for a
job to be done
 Putting the right person on the job with the correct tools
and equipment
 Having a standardized method of doing the job
 Providing an economic incentive to the worker
Scientific Management
The systematic study of the relationships between people and tasks for the purpose of
redesigning the work process for higher efficiency.
 Sought to reduce the time a worker spent on each task by
optimizing the way the task was done.
Four Principles of Scientific Management
1. Scientifically study each part of a task and develop the best method for
performing the task.

2. Carefully select workers and train them to perform the task by using the
scientifically developed method.

3. Cooperate fully with workers to ensure that they use the proper method.

4. Divide work and responsibility so that management is responsible for planning

work methods using scientific principles and workers are responsible for
executing the work accordingly.

Frank and Lillian Gilbreth

 Studied fatigue caused by lighting, heating, and the design of tools and machines.
 Time and motion studies
 Breaking up each job action into its components.
 Finding better ways to perform the action.
 Reorganizing each job action to be more efficient.

SCIENTIFIC MANAGEMENT
(F.W.TAYLOR ; FRANK AND LILLIAN GILBRETH)

 SCIENTIFIC STUDY OF WORK TO IMPROVE EFFICIENCY

 SCIENTIFICALLY DESIGNED WORK NOT RULE OF THUMB
 SCIENTIFIC SELECTION AND TRAINING OF WORKERS
 DIVISION OF LABOUR AND CO OPERATION
 SUITABLE MATCH BETWEEN JOB AND WORKER
 FAIR LEVEL OF PERFORMANCE AND PAY

Henry Fayol And Administrative Theory

 This approach to management also known as Functional or Process approach.
 He believed in universality of management and reasoned that those who acquire
gen. knowledge of managerial functions and principles can manage all types of
organizations.

HENRY FAYOL’S 14 PRINCIPLES

1. Division of Labor- Job specialization for better efficiency.

2. Authority and Responsibility- Authority is the right to command to get the work
done. Responsibility is the accountability of authority.
3. Discipline- Obedient, behaviour, respectful employees are necessary for the
organization to function. 2 types of Discipline- i. Self-imposed, ii. Command
discipline.
 4. Unity of Command- Employees should get orders & instructions from only one
superior.
5. Unity of Direction- There should be one head and one plan for a group of
activities having the same objective.

6. Subordination of Individual Interest to the Common Interest- The interest of

the organization takes precedence over that of the individual employee.
7. Remuneration of Personnel- An equitable uniform payment system that
motivates contributes to organizational success. Provide maximum possible
satisfaction to e’yees & e’yer.
8. Centralization- Some authority should be given to the subordinates to make
operational decisions, this is decentralization, all major policy decisions should be
made at the top management level-it is centralization.
9. Scalar Chain- A clear chain of command from top to bottom of the firm. It
suggests that each communication going up or coming down must flow through
each position in the line of authority.
10. Order - The arrangement of things & employees where they will be of the most
value to the organization. Materials and people should be in the right place at the
right time for maximum efficiency.
11. Equity – Manager should be both fair and friendly to the subordinates. The
provision of justice and the fair and impartial treatment of all employees.
12. Stability of Tenure of Personnel- Long-term employment is important for the
development of skills that improve the organization’s performance.
13. Initiative - The fostering of creativity and innovation by encouraging employees
to initiate new ideas and carry out their plans.
14. Esprit de corps- Employees should work as a team because there is strength in
unity and the management should promote this team spirit.

Bureaucratic Theory-Max Weber

Bureaucratic Theory
 A Bureaucratic form of an organization refers to a management approach which is
based on a rigid formal organizational structure with set rules and regulations.
Elements of Bureaucracy
 Hierarchy- A well defined hierarchy of authority and chain of command.
 Division of work
 Rules, regulations and procedures- A system of rules covering the duties and
rights of employees.
 Records- proper records have to be kept for everything.
 Impersonal relationships- everything should proceed according to rules. There is
no room for personal involvement, emotions, sentiments.

Characteristics of Bureaucratic Theory

1. A well defined hierarchy of authority and chain of command.
2. A system of rules covering the duties and rights of employees.
3. Certain obedience to a superior’s command
 4. Appointment and promotion purely on the basis of merit.
5. Separation of personal lives from organizational positions.
6. Administration through well defined rules.
7. Decision making on rational (reason/logic) and objective criteria so that all
decisions are impersonal.
8. Fixed salary based on status or rank, and a guaranteed pension as security for old
age.

Weber’s
Principles of
Disadvantages
Bureaucracy
 Rigidity
 Impersonality
 Empire building
 Red tape- files move through endless official channels, resulting in delays. No
role of innovations.

BEHAVIOURAL APPROACH OR NEO-CLASSICAL APPROACH

Behavioural Theories
 The Hawthorne Studies
 Theory X and Theory Y
The Hawthorne Studies-Elton Mayo
 A group of studies conducted at the Hawthorne plant of the Western Electric
Company during the late 1920’s and early 1930’s.
 These studies were primarily conducted to determine the effect of better physical
facilities and material incentives on worker output.
 Mayo discovered that when workers are given special attention by management,
the productivity is likely to increase irrespective of actual changes in the working
conditions.
 Experiment suggested that an office or a factory is not only a work place but also
a social environment in which the e’yees interact with each other.
 This gave rise to the concept of the “social man”, whose interactions with others
would determine the quality and quantity of the work produced.

Criticism
 The impact of financial incentives was sometimes ignored in drawing
conclusions.
 It must be understood that inspite of the fact that the social environment is an
important factor in improving the quality and the output, it does not replace
economic benefits, especially for low level salaried workers.

Theory X and Theory Y

McGregor proposed the two different sets of assumptions about workers.

– Theory X assumes the average worker is lazy, dislikes work and will do
as little as possible.
• Managers must closely supervise and control through reward and
punishment.
• Most people need to be coerced (unwilling person), controlled,
directed, and threatened with punishment to get them to work
towards organisational goals.
• People prefer to be directed, to avoid responsibility, and to want
security; they have little ambition.

– Theory Y assumes workers are not lazy, want to do a good job and the
job itself will determine if the worker likes the work.
• Most people do not inherently dislike work; it is seen as natural as
recreation and rest.
• People will exercise self-direction and self-control to reach goals
to which they are committed.
• Commitment to goals is a function of the rewards available;
particularly esteem and self-actualisation needs.
• When conditions are favourable, the average person learns not only
to accept responsibility, but also to seek it.
• Many people have the capacity to exercise a high degree of
creativity and innovation in solving organisation problems.
 • The intellectual potential of most individuals is only partially
utilised in most organisations.

CONTEMPORARY THEORIES OR MODERN THEORY

 SYSTEMS APPROACH
 CONTINGENCY APPROACH

Systems Theory
Based on the idea that organisations can be visualised as systems

System
A set of interrelated parts that operate as a whole in pursuit of common goals

SYSTEMS APPROACH
 Resources
•Human
•Materials
•Equipment
•Finance
Open vs. Closed Systems
•Information
Closed System
A system that does little or no interacting with its environment and receives little
feedback
Open System
A system that operates in continual interaction with its environment

• Uses systems concepts and quantitative approaches from mathematics, statistics,

engineering, and other related fields to solve problems.
• Finds optimal solutions to problems by using scientific analysis
• A system is an interrelated and interdependent set of elements functioning as a
whole.

Inputs
• It is an open system that interacts with its environment. It is composed of inputs
from the environment (material or human resources), transformation processes of
inputs to finished goods (technological and managerial processes), outputs of
those finished goods into the environment (products or services), and feedback
(reactions from the environment).
• Systems develop synergy. This is a condition in which the combined and
coordinated actions of the parts of a system achieve more than all the parts could
have achieved acting independently.

The Systems Approach

• System Defined
  A set of interrelated and interdependent parts arranged in a manner that
produces a unified whole.
• Basic Types of Systems
 Closed systems
 Are not influenced by and do not interact with their environment
(all system input and output is internal)
 Open systems
 Dynamically interact to their environments by taking in inputs and
transforming them into outputs that are distributed into their
environments
Implications of the Systems Approach
• Coordination of the organization’s parts is essential for proper functioning of the
entire organization.
• Decisions and actions taken in one area of the organization will have an effect in
other areas of the organization.
• Organizations are not self-contained and, therefore, must adapt to changes in their
external environment

Contingency Approach

Contin

 This emphasizes the fit between organization processes and the

characteristics of the situation.
 It calls for fitting the structure of the organization to various possible or
chance events.
  It uses universal management practices using traditional, behavioral, and
systems viewpoints independently or in combination to deal with various
circumstances.
 The managerial behavior is dependent on a wide variety of elements.
Thus, it provides a framework for integrating the knowledge of
management thought.
 Also sometimes called the situational approach.
 There is no one universally applicable set of management principles
(rules) by which to manage organizations.
 Organizations are individually different, face different situations
(contingency variables), and require different ways of managing.

MANAGERIAL PROCESS AND FUNCTIONS

Planning –
 The management function that assesses the management environment to set future
objectives and map out activities necessary to achieve those objectives.
 To be effective, the objectives of individuals, teams, and management should be
coordinated to support the firm’s mission.

Organizing
 The management function that determines how the firm’s human, financial,
physical, informational, and technical resources are arranged and coordinated to
perform tasks to achieve desired goals.
 The deployment of resources to achieve strategic goals.

Leading
 The management function that energizes people to contribute their best
individually and in cooperation with other people.
 This involves:
 Clearly communicating organizational goals
 Inspiring and motivating employees
 Providing an example for others to follow
 Guiding others
 Creating conditions that encourage management of diversity
Controlling
 The management function that measures performance, compares it to objectives,
implements necessary changes, and monitors progress.

 Many of these issues involve feedback or identifying potential problems and

taking corrective action.

Managerial role
Managerial role - The set of specific tasks that a person is expected to perform
because of the position he or she holds in the organization.
Mintzberg identified three categories of roles – Decisional, Informational,
Interpersonal
 Key M

Interpersonal Roles
Manager is interacting with people both within their organization as well as outside.
These people include peers, subordinates, superiors, suppliers, customers, govt. officials
etc.
1. Figurehead- Managers act as symbolic figurehead performing social or legal
obligations. These duties include greeting visitors, signing legal documents.
Taking important customers to lunch. This duties are important for the smooth
functioning of the organization.

2. Leader – Manager is responsible for the activities of his subordinates, he must

lead & coordinate their activities in meeting task-related goals & he must
motivate them to perform better.
3. Liaison – the manager must maintain a network of outside contacts in order to
asses the external environment of competition, social change or changes in
governmental rules & laws. The liaison with external sources of information can

Interpersonal
be developed by attending meetings & conferences.

Informational Roles Interpersonal

1. Monitor – The manager are constantly monitoring & scanning their environment

Roles
both internal & external, collecting & studying information regarding their

Roles
organization & the outside environment affecting their organization.

1.1. Figurehead
Figurehead
 2. Disseminator of information- The managers must transmit their information
regarding changes in policies or other matters to their subordinates, peers & to
other members of the organization. This can be done through phone calls,
meetings, memorandum.
3. Spokesperson – A manager has to be a spokesman for his unit and he represents
his unit in either sending relevant information to people or making some demands
on behalf of his unit.
Decisional Roles
1. Entrepreneur - Managers are continuously involved in improving their units.
They lookout for new ideas for Pdt. improvement.
2. Conflict Handler – Manager involved as arbitrators in solving differences among
the subordinates or e’yees conflicts with the top mgmt. these involves labour
disputes, customer complaints, machine breakdowns, cash flow shortage.
3. Resource Allocator – The managers establish priorities among various projects
or programs & make budgetary allocations to the different activities of the
organization based upon these priorities.
4. Negotiator – the manager represent their units or organization in negotiating
deals & agreements within & outside of the organization.

Managerial Skills
• Conceptual skills: mental ability to think & see beyond the present situation, Top
management
• Technical skills: ability to use the knowledge, tools & techniques, help
employees solve work-related problems accounting, engineering, sales, First-line
management
• Human relations skills: able to understand and interact with people, all level
management
• Decision-making skills: ability to define problems & selecting the best courses
of action.
• Time management skills: efficient and productive use of time

Likert’s System 4 Management

• Renesis Likert has developed four models of management. His model are based
on the human resource philosophy of management.
• Likert felt that personnel are precious assets and must be treated and managed
properly.
• Likert classified management philosophies into 4 styles:

System 1: Exploitative-Autocratic

• In this type of management system the job of employees/subordinates is to

followed the decisions made by managers and those with a higher status than
them in the organization.
 • The subordinates do not participate in the decision making. Only one way
communication is there.
• The organization is concerned simply about completing the work.
• The organization will use fear and threats to make sure employees complete the
work set.
• There is no teamwork involved.
• There are rewards for those who achieve results.

System 2: Benevolent Autocratic

• In this approach, they grant some freedom to subordinates to carry out their tasks
within certain limits.
• Decision making is centralized. Decision flow from top to bottom.
• The carrot and stick policy is followed here also. Efficient employee are rewarded
and inefficient ones are punished.
• Communication is one way.

System 3: Consultative
• Manager set goals and issue orders after discussing them with subordinates.
• Major decisions are taken at top. The routine ones are left to subordinates.
• Subordinates can discuss work related matters with managers freely. There is two-
way communication.
• Greater emphasis is put on rewards than on penalties to motivate subordinates.
• Control system is flexible.

System 4: Democratic
• Managers maintain friendly relations with subordinates. The manager acts like a
friend, counsellor and mentor.
• Subordinates take active part in the process of goal-setting and decision making.
• Communication is open and transparent.
• Greater emphasis is put on self appraisal and self control, in place of close
supervision.
• Subordinates are encouraged to do things on their own, assume responsibility for
their actions.
• There is high degree of decentralization

Conclusion
• According to Likert, System 4 is an ideal one and should be adopted by
organizations so as to improve worker’s satisfaction and performance.
• And also suggested leadership training at all levels of management so that
managers can learn the basics of system 4 management.
PLANNING
The process of setting objectives, or goals, and formulating policies, strategies, and
procedures to meet them.
The process of choosing the who, what, how, when, and where of goal attainment.

Definition
Planning is deciding in advance what is to be done in future. Plan bridges the gap
between where we are and where we want to go. Harold Koontz and O’Donnell

The process of establishing goals and suitable action for achieving these goals.
Stoner and Freeman

Forecasts & Planning

 Forecasts are predictions or estimates of the future changes. Forecasts is an
attempt to probe the future by inferences from known facts.
 Planning is deciding in advance what is to be done in future. And forecasting is
what will happen in the future.
 Forecasting is a technique of planning.

Features of Planning
1. Planning is goal-oriented
2. Planning is a primary function
3. Planning is all-pervasive- it is needed & practiced at all managerial levels.
4. Planning is a mental exercise- involves imagination, foresight & sound judgment,
logical thinking.
5. Planning is a continuous process- never ending activity.
6. Planning involves choice-choice among various alternative courses of action.
7. Planning is forward looking- means looking ahead and preparing for the future.
8. Planning is flexible- planning is based on a forecast of future events. Since future
is uncertain, plans should be reasonably flexible.

Importance of planning
1. Planning provides direction- it helps what to do and when to do it.
2. Planning provides a unifying framework- contribution of the each dpt. Plan serve
as the basis of coordinating the efforts of different depts, divisions and ppl.
3. Planning is economical- utilizes its physical and HR in an economic way.
4. Planning reduces the risks of uncertainty
5. Planning facilitates decision makings- decision making involves searching of
various alternative courses of action, evaluating them and selecting the best one
6. Planning encourages innovation and creativity
7. Planning facilities control

Advantages of Planning
1. Optimum utilization of resources
2. Economy in operations
 3. Reduces uncertainties
4. Strengthens competitive ability
5. Effective coordination
6. Acts as change agents
7. Motivation
8. Effective control

Limitations
1. Unreliability of forecasts
2. Time consuming
3. High cost- information collected and processed, used of statistical techniques and
personnel.
4. Organizational politics
5. Rigidity

Being Aware of
Opportunities
& Strengths

Setting
Objectives or
Financial Pla
Example
 Hierarchy of

Standing Plans:-
1. Philosophy
 Organizations define the role that they wish to play in society in terms of
philosophy.
(lo n
 Oil and Natural Gas Commission (ONGC) states its philosophy as : “to stimulate,
continue and accelerate efforts to develop and maximize the contribution of the
energy sector to the economy of the country.
2. Purpose
 Every kind of organized group activities or operations has a purpose.
 It is the basic function or task of an organization.
 For Eg:- the purpose of bank is to accept deposits and grant loans and advances.
3. Objectives
 Objectives are the ends towards which organizational activity is aimed.
 Organizational objectives represent not only the end point of planning but also the
end towards organizing, staffing, directing and controlling
4. Strategies
  Strategy is determination of the basic long-term objectives of an enterprise and
the adoption of courses of action and allocation of resources necessary to achieve
these goals.
 Basically it is an approach used to implement a plan.

5. Policies- A policy is a general guide to action and provides direction for people
within the organization
6. Procedures and Rules
 Rules describe how a specific action is to be performed
 Procedures define a precise series of steps to be used in achieving a specific job

Single Use Plans

7. Programs
 It is an aggregate of several action plans (goals, procedures, rules etc.) that have
been designed to accomplish a mission within a specified time period.
8. Budget
 It is a statement of expected results in numerical terms.
 For Eg:- Cash budget, Sales budget.

 Types of Planning
 Strategic planning: determining how to pursue long-term goals with
available resources.
 Intermediate planning: determining subunits’ contribution with allocated
resources.
 Operational planning: determining how to accomplish specific tasks with
available resources.
Strategic Planning
Strategic planning is the process of:
 Diagnosing the organization’s external and internal environments
 Deciding on a vision and mission
 Developing overall goals
 Creating and selecting general strategies to be pursued
 Allocating resources

Tactical Planning
Tactical or Intermediate planning involves making concrete decisions regarding:
 What to do
 Who will do it
 How to do it
within a normal time horizon of a year or less
Levels of Planning

Leve

Formal & Informal Planning:-

 Formal Plan: A written record to what organization intends to do, within a time
frame.
 Informal Plan: it does not offer a written record. It is carried out without any
direction.
Functional & Corporate Planning:-

 Functional Plan: it is Unit Planning. Eg. Production, Marketing, Finance.

 Corporate Planning: A comprehensive plan that outlines the broad objectives of
a company as a whole and develops plans to achieve those objectives.
Proactive & Reactive Planning:-

 Proactive Planning is a way of thinking about managing the future risks and
challenges.
 Reactive Planning: the organization reacts to events as and when they arise.
What is Strategic Management?
 Application of the basic planning process at the highest levels of the company
 Top management sets goals for the performance of the company
 Carefully formulating, implementing, and evaluating plans and strategies
 Most important part is developing strategic plans
 Plans must remain current as changes occur inside and outside the
company
 Involves many levels of management
 Top level formally develops basic plans
 Different departments may be asked to develop plans for their own areas
 A solid plan guarantees that plans are coordinated and are supported by
everyone in the company

Definitions
 It is a continuous process, of effectively relating the organization's objectives and
resources to the opportunities in the environment. (Schellen Berger and
Boseman)

 It is a process of formulating, implementing and evaluating cross-functional

decisions that enable an organization to achieve its objectives. (F.R. David)

Elements of Strategic Management

 Four Elements of Strategic Management:-

• Strategic Analysis- analyzing the strategic situation of the organization.

Assessment of resources, strengths and weaknesses in changing environment.
• Strategic Choice – Analysis provides a basis provides a basis for strategic choice.
Basically concerned with the formulation of suitable courses of action, their
evaluation and the selection.
• Strategy Implementation- implementation means mobilizing e’yees to translate
formulated strategies into concrete action. This steps require a firm to- establish
annual objectives, motivate e’yees, allocate resources, marketing channel, budgets
etc.
• Strategy Evaluation-
• review external & internal factors that form basis for current strategies.
• Measure performance,
• Take corrective steps.

Stages of Strategic management:

The strategic management process consists of three stages:
 Strategy Formulation (strategy planning)
 Strategy Implementations
 Strategy Evaluation
Strategy Formulation
• Vision & Mission
• External Opportunities & Threats
• Internal Strengths & Weaknesses
• Long-Term Objectives
• Alternative Strategies
• Strategy Selection
Developing the grand- and business-level strategies to be used by the company
 Company’s strengths/weaknesses and threats/opportunities shape the strategies
 First step is to understand the current position of the company
 Identify mission, identify past and present strategies, diagnose the
company’s past and present performance, set objectives for the company’s
operation
 Identify the mission statement
 Outlines why the company exists
 Describes the company’s basic products and/or services and defines
markets and sources of revenue
 Designed to accomplish several goals and ensures a common purpose
within the company

Strategy Implementation
• Annual Objectives
• Policies
• Employee Motivation
• Resource Allocation
 Action stage of strategic management
 Managers determine and implement the most appropriate company structure,
motivate employees, develop short-range goals, and establish functional strategies
 Strategy must fit with current company policies
 Or conflicting policies must be changed

Strategy Evaluation
• Internal Review
• External Review
• Performance Metrics
• Corrective Actions
 Process of continuously monitoring the company’s progress toward its long-range
goals and mission
 Managers should ask:
• Does the grand strategy need revising?
• Where are problems likely to occur?
 Basic strategy evaluation strategies:
 • Review external and internal factors that are the bases for current
strategies
• Measure performance
• Take corrective action
 Emphasis is making the company’s managers aware of the problems that are
likely to occur and of the actions to take if they do arise
 Plan ahead and avoid disaster
 Strategic planning and evaluation should be done on a predetermined schedule
and as frequently as necessary, determined by internal and environmental factors

Management by objectives (MBO)

 Management by objectives (MBO) is a systematic and organized approach that
allows management to focus on achievable goals and to attain the best possible
results from available resources. It aims to increase organizational performance
by aligning goals and subordinate objectives throughout the organization. Ideally,
employees get strong input to identify their objectives, time lines for completion,
etc. MBO includes ongoing tracking and feedback in the process to reach
objectives.

 Management By Objectives (MBO)

 Specific performance goals are jointly determined by employees and
managers.
 Progress toward accomplishing goals is periodically reviewed.
 Rewards are allocated on the basis of progress towards the goals.
 Key elements of MBO:
 Goal specificity, participative decision making, an explicit
performance/evaluation period, feedback

Objectives of MBO
 To measure and judge performance;
 To relate individual performance to organizational goals;
 To clarify both the job to be done and the expectations of accomplishment;
 To foster the increasing competence and growth of the subordinates;
 To enhance communications between superior and subordinates;
 To serve as a basis for judgments about salary and promotion;
 To stimulate the subordinates motivation and
 To serve as a device for organizational control and integration.

Steps in a Typical MBO Program

1. The organization’s overall objectives and strategies are formulated.
2. Major objectives are allocated among divisional and departmental units.
3. Unit managers collaboratively set specific objectives for their units with their
managers.
 4. Specific objectives are collaboratively set with all department members.
5. Action plans, defining how objectives are to be achieved, are specified and agreed
upon by managers and employees.
6. The action plans are implemented.
7. Progress toward objectives is periodically reviewed, and feedback is provided.
8. Successful achievement of objectives is reinforced by performance-based
rewards.

Advantages of MBO
 Improved Planning: MBO produces clear and measurable performance goals. A
network of goals is created and appropriate action plans are formulated for goal
achievement. There is effective matching of goals and resources. Clear goals and
action plans generate concrete thinking and lead to result-oriented and forward
planning. MBO forces managers to plan for results rather than plan for work. It
ensures that goals of each department are consistent with the overall objectives of
the organization.

 Team Work: MBO results in better communication between superior and

subordinates which reduces conflict. The whole management team is actively
involved in goal setting. There is integration of lower level goals with
organizational goals. Different individuals are fused into a co-operative team.
MBO clarifies the job assignment and responsibility of each individual.

 Objective Appraisal: MBO permits impartial appraisal because employee

performance is evaluated against verifiable and mutually agreed criteria. The
performance of every individual is evaluated in terms of the mutually agreed
targets. Under MBO the superior does not evaluate the subordinate but his
performance. MBO also allows employees to monitor and control their own
performance. Such self-appraisal facilitates personal development. MBO helps to
develop managers who have potential for growth.

 Motivation and Morale: MBO leads to better interpersonal relations through

involvement and recognition of people at all levels. It provides greater
opportunities to make personal contribution and to accept more responsibility.
Participative goal setting and two-way communication improve the commitment
and morale of employees. Superior managers assume a supportive role and
subordinates are allowed to exercise self-direction and self-control. This results in
innovation and creativity on the part of subordinate managers.

Limitations of MBO
 Goal-setting Problems: Very often it is very difficult to set truly verifiable and
measurable goals. Over-emphasis on quantifiable and easily measurable goals
may result in neglect of crucial qualitative goals like job satisfaction. Similarly,
over-emphasis on short-term goals may be at the cost of long-term goals. Goals
once set may be followed rigidly leading to inflexibility in the organization.
  Time Consuming: MBO requires a great deal of time in setting measurable goals
through consensus. In the initial stage several meetings may have to be held to
bring confidence in subordinates. The formal periodic reviews and final appraisal
sessions also consume a lot of time.

 Increased Paperwork: MBO results in a plethora (excess of) of newsletters,

instruction booklets, training manuals etc. Subordinates have to fill in forms and
submit detailed reports on their performance.

 Participation Problem: MBO requires mutual goal-setting by the superior and

the subordinate. In many cases, the goals are set by the superior because he has no
time to discuss it with the subordinate or he is not willing to share power with the
subordinate. In other cases, the subordinate may not be willing to set goals for
himself because he is incompetent or he fears criticism from the superior.

 Inflexibility: MBO may introduce inflexibility in the organization. Once goals are
set down, the superior may not like to modify them due to fear of resistance from
the subordinates.

Essentials of MBO program

 Regular critical review and restatement of an organization's overall tactical and
strategic plans.
 Clarification with each manager of his key results and performance standards.
 Acceptance by each manager of his contribution and commitment to these results
and standards.
 Establishment of strict procedures for control and self-control of progress,
performance and potential review.
 Provision of conditions in which these results can be achieved:
a. an effective organization
b. sound managerial control information.

Process of MBO
1. Preliminary setting of objectives at the top level- these objectives set by the
superiors care preliminary as they must be regarded as tentative and subject to
modification as the chain on verifiable objectives is worked out by subordinates.
Verifiable objectives are profits, market share, growth etc.
2. Clarification of Goals- every goal and sub goal should be someone’s clear
responsibility and accountability.
3. Setting of Subordinates objectives
4. Recycling of objectives- objectives are set after thorough consultations and
discussions between the superiors and subordinates. Thus it is a joint process
requiring interaction and recycling among staff. This process creates a feeling of
commitment and involvement of all staff at various levels.
5. Performance Appraisal
Decision Making
• Decision making is the process of choosing the best among the available
alternatives with a purpose under a given set of circumstances.
• “Selection of action from among alternatives, it is the core of planning.” (Harold
Koontz and Heinz Weihrich)
• “The process of choosing a course of action from two or more alternatives.”
(John A Pearce and Richard B. Robinson)

Decision Making Conditions

• CERTAINITY: Decisions are made under the condition of certainty when the
manager has perfect knowledge of all the information needed to make a decision.
This condition is ideal for problem solving. The challenge is simply to study the
alternatives and choose the best solution. For example, personnel problems are
common in regard to pay raises, promotions, vacation requests, and committee
assignments, as examples.
• RISK: In a risk environment, the manager lacks complete information. This
condition is more difficult. A manager may understand the problem and the
alternatives, but has no guarantee how each solution will work. Risk is a fairly
common decision condition for managers.
• Uncertainty: When information is so poor that managers can't even assign
probabilities to the likely outcomes of alternatives, the manager is making a
decision in an uncertain environment.
• This condition is the most difficult for a manager. Uncertainty forces managers to
rely heavily on creativity in solving problems:
• It requires unique and often totally innovative alternatives to existing processes.
Groups are frequently used for problem solving in such situations.

Types of Decisions
1. Basic and Routine Decisions : Basic decisions are unique, one time decisions
demanding large investments, creativeness, and good judgment on the part of
managers. For eg. Decisions about launching a new pdt., n buying more advanced
machines. They are strategic decisions which affect the future of an organization.
Routine decisions are repetitive in nature and are generally
concerned with short term commitments. They are operational decisions which require
less analysis and concentration. For eg. Supervisor can decide whether an e’yees absence
is excused or unexcused.
2. Programmed and Non-programmed Decisions : a Programmed decision is one that
is routine and repetitive. Rules and policies are established well in advance to solve
recurring problems quickly.
Non-programmed decisions deals with unique/unusual problems. A
decision made in response to a situation that is unique, is poorly defined and unstructured
and influences important consequences of the organization. For eg. Downsizing of
e’yees, where to locate a new company warehouse etc.
3. Personal and Organizational decisions: decision to study, or retire early are
examples of personal decisions. Such decisions are taken by managers in their individual
capacity. These cannot be delegated.
Organizational decisions are made by managers in their official
or formal capacity. They are aimed at furthering the interests of the organization. These
decisions can be delegated.
4. Long run-Short run decisions: decisions affecting the long run plans, activities and
business are called long run decisions. Includes plant location, JV programs.
Short run decisions affecting short run plans, activities and business.
Includes: offering special discounts for clearance sale, over time payment for e’yees.
 The De

Problem Identi
Identification Decisio

“My salespeople Pric

need new computers”
Techniques of Group decision making
Wei
1. Brainstorming- a technique that encourages group members to generate as many
novel ideas as possible, on a given topic without evaluating them. War
2. Delphi Technique- the formal procedure for obtaining the consensus of a number
of experts through the use of a series of questionnaires. Scre
3. Nominal group technique. This method involves the use of a highly structured
meeting, complete with an agenda, and restricts discussion or interpersonal Reli
communication during the decision-making process. This technique is useful
because it ensures that every group member has equal input in the decision-
making process.
Scre

ORGANIZATION Analysis of S
Alternatives
 • Organizing is concerned with the arrangement of an organization’s resources-
people, materials, technology and finance in order to achieve enterprise
objectives.
• It involves decision about the division of work, allocation of authority and
responsibility and the coordination of tasks.
• Koontz & O’Donnell defines Organization is a structural relationship by which
an enterprise is bound together and the framework in which individual effort is
coordinated.
• Allen defines Organizing is the process of identifying and grouping the work to
be performed, defining and delegating responsibility and authority and
establishing relationships for the purpose of enabling people to work most
effectively together in accomplishing objectives.

Process of Organizing
• Identifying the work- the work must be classified in a systematic way so that
each person in the organization gets a separate and distinct tasks.
• Grouping the work- similar activities must be grouped together.
• Establishing relationships- formal relationships would provide a framework for
assigning duties and responsibilities to individuals.
• Delegating Authority- Authority is the right to act, to issue orders. While
assigning duties, the manager should clearly specify authority and responsibility
limits, so that the subordinates knows in advance as to what type of work is
expected of him by the superior.
• Providing for coordination and control- the activities and efforts of various
individuals must be coordinated. The performance must be measured, evaluated
and controlled at frequent intervals. If deviation occur, remedial steps taken
immediately.

Importance of Organization
• Enlarges Abilities – division of work enables an individual to specialize in the
job.
• Facilitates administration- avoiding overlapping of work and duplication of
effort. Confusions and misunderstanding over who is to perform what work, is
avoided by specifying the role of managers.
• Facilitates growth and diversification- utilization of talents and resources,
proper control over activities, opportunities are seized quickly and exploited fully.
• Permits optimum use of resources-
 Human, technical and material resources are put to good use.
 Right persons are given right jobs.
 Proper allocation of work.
 People know well in advance what they are supposed to do.
• Stimulates creativity-
 It offers stimulating opportunities to ppl at all levels, to use their skills on jobs,
best suited to their nature.
  Delegation helps ppl at lower levels to do more challenging work.
• Facilitates coordination- clear authority relationships and proper assignment of
work facilitates the task of achieving coordination at all levels.

Principles of Organization by Koontz

1. The purpose of organizing- facilitates the achievement of organization’s objectives.

 Principle of unity of objective- organization structure is effective when it helps
the achievement of enterprise objectives.
 Principle of organizational efficiency- an efficient organization structure
operates without wastage of resources, allows maximum utilization of HR, offers
clear lines of authority and responsibility and provides a means for personal
development.
2. The Cause of Organizing-
 Principle of Span of Management- A manager should have a limited no of
subordinates reporting to him directly.
3. The structure of organization (authority)- it is the means by which groups of
activities can be put under a manager. It enables the top management to coordinate
enterprise work effectively. A manger can show proper direction and create an
environment for sound individual performance.
 Principle of scalar chain- a scalar chain or chain of command refers to the
unbroken line of authority from the top level to the bottom of the organization.
 Principle of authority and responsibility- the superior must state clearly what
he expects, when he expects it to be done and by whom. Responsibility is the
obligation of a subordinate to perform the duty as required by the superior.
 Principle of unity of command- for any given activity an employee should be
made accountable to only one superior.

4. The structure of organization (departmentation)- the primary purpose of organizing

is to provide a basic structure in the form of a departmental framework.
 Principle of functional definitions- the duties, authorities and responsibilities of
every individual must be clearly defined. People at various levels must know what
they are supposed to do, when, and for whom. They must also know the limits to
their behavior.
5. The process of organizing- the process of organizing becomes easy when the
following principles are applied sincerely-
 Principle of balance- a balanced and proportionate emphasis to diff dept. and
activities in relation to their overall contribution to objectives.
 Principle of stability- stability refers to the organization's ability to withstand
changes so as to meet organizational goals in an efficient manner.
 Principle of simplicity- the structure should be simple so that individual follow
the assignment of work and allocation of duties and responsibilities.

Organizations
 • Organization
– Is a collection of people working together to achieve a common purpose
(or simply a big group).
• Organization structure
– Is the arrangement of people and tasks to accomplish organizational goals.
• Organizational design
– Is the process of creating a structure that best fits a purpose, strategy, and
environment.

Organizational Structure: Specification of the jobs to be done within an organization

and the ways in which they relate to one another. This allows the organization to achieve
its goals. At some organizations the structure is rigid, at other it is more flexible.

Organizational Design
Definition: The process of defining and coordinating organizational structure
elements. This is an architectural task.
Purpose: To create a design that will coordinate organizational tasks & motivate
people to achieve objectives.
Challenge: To choose appropriate levels and types of vertical and horizontal
differentiation and integration.

Determinants of Organization
• Every business needs structure to operate. Organizational structure varies
according to a firm’s mission, purpose, and strategy.
• Size, technology, and changes in environmental circumstances also influence
structure.
• Although all organizations have the same basic elements, each develops the
structure that contributes to the most efficient operations.
Key Elements:
• Work specialization
• Departmentalization
• Chain of command
• Span of control
• Centralization and decentralization
• Formalization

Work Specialization:The degree to which tasks in the organization are subdivided into
separate jobs.
Division of labor:
• Makes efficient use of employee skills
• Increases employee skills through repetition
• Specialized training is more efficient.
• Allows use of specialized equipment.

Departmentalization: The basis by which jobs are grouped together.

Grouping Activities By:
 • Function
• Product
• Geography
• Process
• Customer

Authority: The rights inherent in a managerial position to give orders and to expect the
orders to be obeyed.
Chain of Command: The unbroken line of authority that extends from the top of the
organization to the lowest echelon and clarifies who reports to whom.
Unity of Command: A subordinate should have only one superior to whom he or she is
directly responsible.
Centralization: The degree to which decision making is concentrated at a single point in
the organization
Decentralization: The degree to which decision making is spread throughout the
organization.
Formalization: The degree to which jobs within the organization are standardized.

Span of Control :The number of subordinates a manager can efficiently and effectively
direct.
Wider spans of management increase organizational efficiency.

Narrow Span Drawbacks:

• Expense of additional layers of management.
• Increased complexity of vertical communication.
• Encouragement of overly tight supervision and discouragement of employee
autonomy.
 Tall versus Fla
Tall hierarchy

– Formal organizational structure

• Is an official statement of the reporting relationships, rules, and
regulations that guide and govern the conduct of business by the
organization.
– Informal organizational structure
• Is a set of unofficial working relationships providing the flexibility
that take care of events and transactions not covered by the formal
structure.
• Is revealed using social network analysis to trace informal social
relationships and communication channels.

Bases of Departmentation
 • Functional: Based on functions performed (e.g., production, sales, research)
• Product: Based on products and services produced (e.g., food, cleaning supplies,
pharmaceuticals)
• Customer: Based on customers served (e.g., convenience stores, supermarkets)
• Geography: Based on physical location
• Matrix: Based on a combination of function, product, customer and/or
geography. Creates dual authority and dual responsibility

Functional Departmentalization

• Advantages
• Efficiencies from putting together similar specialties and people with
common skills, knowledge, and orientations
• Coordination within functional area
• In-depth specialization
• Disadvantages
• Poor communication across functional areas
• Limited view of organizational goals
 Department

+
A Produ
Allows specialization in particular products and services
+ Managers can become experts in their industry
+ Closer to customers
– Duplication of functions
– Limited view of organizational goals
Geography Based

Manager

South Region East Region West Region

Product
 • Advantages
• More effective and efficient handling of specific regional issues that arise
• Serve needs of unique geographic markets better
• Disadvantages
• Duplication of functions
• Can feel isolated from other organizational areas

Process Departmentalization

+ More efficient flow of work activities

– Can only be used with certain types of products

Customer Departmentalization

+ Customers’ needs and problems can be met by specialists

- Duplication of functions
- Limited view of organizational goals

Divisional Organization: Organizational structure in which corporate divisions operate

as autonomous businesses under the larger corporate umbrella

International Organization: Approaches to organizational structure developed in

response to the need to manufacture, purchase, and sell in global markets

Matrix Organization: Organizational structure in which teams are formed and team
members report to two or more managers
  A matrix is a highly flexible form that is readily adaptable to changing
circumstances.
 Matrix structures rely heavily on committee and team authority.
 Some companies use the matrix organization as a temporary measure to complete
a specific project. The end of the project usually means the end of the matrix.

An Example of a Matrix Organization

Organizational Design for the 21st Century

• Boundaryless Organizations minimize or eliminate traditional boundaries and
structures.
• Team Organizations having little or no underlying functional hierarchy and rely
almost exclusively on project-type teams.
• Virtual Organizations have little or no formal structure. They typically have
only a handful of permanent employees, a very small staff, and a modest
administrative facility.

Team Structure:The use of teams as the central device to coordinate work activities
Characteristics:
• Breaks down departmental barriers.
• Decentralizes decision making to the team level.
• Requires employees to be generalists as well as specialists.
• Creates a “flexible bureaucracy.”

Virtual Organization
A small, core organization that outsources its major business functions.
Highly centralized with little or no departmentalization.
Concepts:
Advantage: Provides maximum flexibility while concentrating on what the organization
does best.
Disadvantage: Reduced control over key parts of the business.

A Virtual Organization

Boundaryless Organization
An organization that seeks to eliminate the chain of command, have limitless spans of
control, and replace departments with empowered teams.
T-form Concepts:
Eliminate vertical (hierarchical) and horizontal (departmental) internal boundaries.
Breakdown external barriers to customers and suppliers.

Classical vs. Neoclassical Theory

• Classical Organizational Theory: The approach that assumes that there is a
single best way to design organizations.
 – This approach assumes that managers need to have close control over
their subordinates and calls for designing organizations with tall
hierarchies and a narrow span of control.
• Neoclassical Organizational Theory: An attempt to improve on the classical
organizational theory that argues that not only economic effectiveness, but also
employee satisfaction, should be goals of an industrial organization.
– This approach assumes that managers do not have to carefully monitor
their subordinates and calls for designing organizations with flat
hierarchies and a wide span of control.

The Contingency Approach

 The contemporary approach that recognizes that no one approach to
organizational design is best, but that the best design is the one that best fits with
the existing environmental conditions.
 Mechanistic Organization: An internal organizational structure in which people
perform specialized jobs, many rigid rules are imposed, and authority is vested in
a few top-ranking officials.
 Organic Organization: An internal organizational structure in which jobs tend to
be very general, there are few rules, and decisions can be made by lower-level
employees.

Factors Affecting Organizational Structure

 Why
WhyDo
Do Structures
Structures Di
D

Line Authority and Staff Authority

 • Line authority entitles a manger to direct the work of an employee.
A manager with line authority has the right to direct the work of employees and to
make certain decisions without consulting anyone
• Staff authority is used to support, assist, and advise the holders of line authority.
• Whether a manager’s function is classified as line or staff depends on the
organization’s objectives.
• Line has command authority (decision-making) necessary to reach the goals for
which line is accountable.

1. Line Organisation-
 Simplest form of organisation.
 Common among small companies.
 Hierarchical structure, Authority flows in a direct line from top to bottom.

Merits-
1. Line of structure is simple & authority is easily assignable.
2. Easy to develop a sense of belonging to the organisation.
Demerits-
 1. Rigid form of Organisation.
2. Line authority become too dictatorial.

2.Line & Staff Organisation –

 Functional Specialists are added to the line.

 A staff is basically advisory in nature & does not possess & command authority
over line manager.
 Staff Consists of 2 types-
 General Staff- they are similar to executives & serves as assistants to top
management. They are not specialist & have no authority or
responsibility. They known as special assistant, assistant manager.
 Specialised Staff- This group has a specialised background in functional
areas & provide expert staff advice & service to all employees on a
company wide basis. For eg- Advisory staff like legal, PR.

Centralization & Decentralization

Centralization: Concentration of decision making and actions at high level management

Advantages
• Provide Power and prestige for manager
• Promote uniformity of policies, practices and decisions
• Minimal extensive controlling procedures and practices

Disadvantages
• Delay in Decision-making
• Delay in Communication
• Under utilization of organizational human resources
• Employee dissatisfaction

Decentralization: Consistent delegation of authority to the lower levels where the work
is performed
Advantages
• Raise morale and promote interpersonal relationships
• Bring decision-making close to action
• Develop Second-line managers
• Promote employee’s enthusiasm and coordination
• Facilitate actions by lower-level managers
Disadvantages
• Top-level administration may feel it would decrease their status
• Managers may not permit full and maximum utilization of highly qualified
personnel
• Increased costs. It requires more managers and large staff
• It may lead to overlapping and duplication of effort
Delegation of Authority
• Process off assigning work from a top organizational level to a lower one or from
superior to subordinate and giving that person the authority to accomplish them
• A downward flow of authority from HIGHER level in the organization to
LOWER level
The Delegation Process
1. Allocation of duties
2. Delegation of authority
3. Assignment of responsibility
4. Creation of accountability
• Authority: It is a right to take a final decision and command others. It moves in a
downward direction
• Responsibility: It is an obligation to perform a duty. It cannot be delegated.
• Accountability: subordinates must be held answerable to their carried out duties

Types of Authority
• Formal: Delegated within an organization for e.g. superior-subordinate authority
• Functional: Authority based on specialized knowledge like staff authority or the
authority delegated to assist line managers
• Personal: Authority based on seniority and relationship

Factors determining degree of authority delegation

• Organization’s size...
• Importance of duty or decision...
• Task complexity...
• Organizational culture...
• Qualities of subordinates

Main principles of Delegation

• Responsibility cannot be delegated
• Authority and responsibility should be equal in proportion

Barriers to successful delegation

• Lack of superior’s ability to direct the subordinates
• Lack of confidence in subordinate
• Absence of control
Major Causes of manager’s refusal to delegate
• Tendency to do things personally
• Desire to dominate the knowledge, information, and/or skill’s

Major Causes of subordinate’s refusal for accepting delegation

• Decision-making is a hard mental work, and people seek ways of avoiding it
• Fear of criticism for mistakes
• Lack off necessary information and resources to do a good job
• Overload of work
 • Positive incentives may be inadequate
Direction
• Direction is the managerial function of guiding, motivating, leading and
supervising the subordinates to accomplish desired objectives.

• Direction is the interpersonal aspect of managing by which subordinates are led to

understand and contribute effectively to the attainment of enterprise objectives.-
Koontz and O'Donnell.
• The process and techniques utilized in issuing instructions and making certain that
operations are carried on as originally planned.- Haimann

Features
1. Deals with people
2. Seeks performance- direction makes things happen. It translates plans into
action.
3. Provides a link- it provides an important link between different functions in an
organization. Without direction the individual goals and organizational goals
would never be accomplished
4. Pervasive- direction is performed by all managers at all levels. Every manager is
expected to supervise, motivate, lead and communicate with his subordinates to
get the results.
5. Dynamic and continuous- whenever plans change, the techniques of direction
also change.

Importance
• Initiates action
• Achieves integration
• Motivates people
• Facilitates changes
• Attain balance and stability- balance between individual needs and
organizational demands.

Principles
• Principle of harmony of objectives
• Principle of unity of command
• Managerial communication
• Leading the people- leadership
• Principle of maximum individual contribution
• Use of motivation techniques
• Principle of follow-up

Elements of Direction
• The directing function of management consists of the following elements
(Newman):
i. Issuing orders and instructions to subordinates
ii. Follow-up instructions
iii. Standard practice
iv. Explanations
v. Consultative direction

Morale
• Morale is an attitude of an employee towards his job, his superior, and his
organization. It is not static thing but it changes depending on working conditions,
superiors, fellow-workers, pay and so on.
• “Morale as a state of mind or a willingness to work which in turn affects
individuals and organizational objectives.” Michael J. Jucius.
• Individual morale
• Group morale- it reflects the general esprit de corps of a collective group of
people.

Factors Affecting Morale

• The organization
• Leadership
• Co-workers
• The nature of work
• Work environment
• The employee

Morale and

Maintenance of Morale
High
1. Remuneration
2. Job security

Productivity
3. Participation

High
 4. Organization structure
5. Grievance redressal
6. Employee counselors
7. Flexible working hours
8. Job rotation
9. Sound leadership

Co-ordination
G.R.Terry defines co-ordination as “the task of blending efforts in order to ensure the
successful attainment of an objective. It is accomplished by means of planning,
organizing, directing and controlling”

Need for coordination

• Team Work
• Functional Differentiation
• Unity in diversity
• Division of work and specialization

Techniques of coordination
• Chain of command
• Team work
• Clear objectives
• Procedure and programs
• Liaison department

Types of Coordination
• Internal Coordination
 Vertical coordination
 Horizontal coordination
• External coordination

Problems
• Interpersonal relations
• Approaches towards the achievement of goals
• Organizational policies

Motivation
The processes that account for an individual’s intensity, direction, and persistence of
effort toward attaining a goal.
Key Elements
1. Intensity: how hard a person tries
2. Direction: toward beneficial goal
3. Persistence: how long a person tries
Features of Motivation
• Motivation is an internal feeling
• Motivation produces goal-directed behavior
• Motivation can be either positive or negative
• Motivation is different from job satisfaction

A Simple M

Importance
• Productive use of resources
• Increased efficiency and output
• Achievement of goals
• Development of friendly relationships
• Stability in workforce

Motivation
NEED-Creates desire to f
needs (food, friendship,
Motivation is to inspire people to work, individually or in groups in the ways such as to
produce best results. It is the will to act. It is the willingness to exert high levels of effort
towards organizational goals, conditioned by the efforts and ability to satisfy some
individual need.
recognition, achievement)
To motivate others is the most important of management tasks. It comprises the abilities
to communicate, to set an example, to challenge, to encourage, to obtain feedback, to
involve, to delegate, to develop and train, to inform, to brief and to provide a just reward.

The psychological forces acting on an individual that

determine:

• Direction-possible behaviors the individual could engage in.

• Effort-how hard the individual will work, the strength of the person’s work related
behaviour.
• Persistence-Motivation is continuously goal directed so that once a goal achieved, a
higher goal is selected and efforts are exercised towards this higher goal.

Sources of Motivation
1. Positive Motivation- Praise and recognition, Delegation of Authority and
Responsibility.
2. Negative Motivation – Demotion, Fired, Punishment.

Theories of Motivation

1. Abraham Maslow’s “Need Hierarchy Theory”

One of the most widely mentioned theories of motivation is the hierarchy of needs theory
put forth by psychologist Abraham Maslow. Maslow saw human needs in the form of a
hierarchy, ascending from the lowest to the highest, and he concluded that when one set
of needs is satisfied, this kind of need ceases to be a motivator.As per his theory this
needs are :

(i) Physiological needs :

These are important needs for sustaining the human life. Food, water, warmth, shelter,
sleep, medicine and education are the basic physiological needs which fall in the primary
list of need satisfaction. Maslow was of an opinion that until these needs were satisfied to
a degree to maintain life, no other motivating factors can work.

(ii) Security or Safety needs :

These are the needs to be free of physical danger and of the fear of losing a job, property,
shelter. It also includes protection against any emotional harm.

(iii) Social needs :

Since people are social beings, they need to belong and be accepted by others. People try
to satisfy their need for affection, acceptance and friendship.
(iv) Esteem needs :

According to Maslow, once people begin to satisfy their need to belong, they tend to
want to be held in esteem both by themselves and by others. This kind of need produces
such satisfaction as power, prestige status and self-confidence. It includes both internal
esteem factors like self-respect, autonomy and achievements and external esteem factors
such as states, recognition and attention.

(v) Need for self-actualization :

Maslow regards this as the highest need in his hierarchy. It is the drive to become what
one is capable of becoming, it includes growth, achieving one’s potential and self-
fulfillment. It is to maximize one’s potential and to accomplish something.

As each of these needs are substantially satisfied, the next need becomes dominant. From
the standpoint of motivation, the theory would say that although no need is ever fully
gratified, a substantially satisfied need no longer motivates. So if you want to motivate
someone, you need to understand what level of the hierarchy that person is on and focus
on satisfying those needs or needs above that level.

2. ERG Theory

Alderfer's Hierarchy of Motivational Needs: Clayton Alderfer reworked Maslow's

Need Hierarchy to align it more closely with empirical research. Alderfer's theory is
called the ERG theory -- Existence, Relatedness, and Growth.

• Existence needs refers to our concern with basic material existence requirements; what
Maslow called physiological and safety needs.
• Relatedness needs refers to the desire we have for maintaining interpersonal
relationships; similar to Maslow's social/love need, and the external component of his
esteem need.
• Growth needs refers to an intrinsic desire for personal development; the intrinsic
component of Maslow's esteem need, and self-actualization

A ld e

Need s
3. Frederick Herzberg’s Motivation-Hygiene Theory OR Two Factor
Theory
H ig h e -slet v e l
Fredericks theory is also known as two-factor theory or Hygiene theory. He stated that
there are certain satisfiers and dissatisfiers for employees at work.
needs
GGrroowwtht
Intrinsic factors are related to job satisfaction, while Extrinsic factors are associated
with dissatisfaction. He devised his theory on the question : “What do people want from
their jobs ?” He asked people to describe in detail, such situations when they felt
exceptionally good or exceptionally bad. From the responses that he received.

He concluded that opposite of satisfaction is not dissatisfaction. Removing dissatisfying

characteristics from a job does not necessarily make the job satisfying. He states that
presence of certain factors in the organization is natural and the presence of the same
does not lead to motivation. However, their nonpresence leads to demotivation. In similar
manner there are certain factors, the absence of which causes no dissatisfaction, but their
presence has motivational impact.

1) SATISFACTION (MOTIVATION): Intrinsic factors stood out as

strong determiners of job satisfaction:
• achievement
• recognition
• work itself
• responsibility
• advancement

2) DISSATISFACTION (HYGIENE): The determinants of job

dissatisfaction (Extrinsic factors) were found to be:
• company policy
• administrative policies
• supervision
• salary
• interpersonal relations
• working conditions and job security

Process Theory of Work Motivation:

4. Expectancy Theory: Vroom’s Expectancy theory

The most popular motivational theory has been the Expectancy Theory (also known
as the Valence-Instrumentality- Expectancy Theory) propounded by Victor Vroom. His
theory is commonly known as expectancy theory. The theory argues that the strength of a
tendency to act in a specific way depends on the strength of an expectation that the act
will be followed by a given outcome and on the attractiveness of that outcome to the
individual to make this simple, expectancy theory says that an employee can be
motivated to perform better when their is a belief that the better performance will lead to
good performance appraisal and that this shall result into realization of personal goal in
form of some reward. The key elements to this theory are referred to as Expectancy
(E), Instrumentality (I), and Valence (V).
Expectancy – A worker must be confident that his efforts will result in better
productivity and that he has the ability to perform the task well.

Instrumentality – the worker must be confident that such high performance will be
instrumental in getting desired rewards.

Valence – The worker must value these rewards as desired and satisfactory.

Motivation = Valence (V) x Expectancy (E) x Instrumentality (I)

David McC

Leadership
• According to Koontz and o’ Donnell “it is the art of including the subordinates to
accomplish their assignments with zeal and confidence.
Leader V/s Manager
• Managers perform administrative functions in addition to leadership such as
planning, organizing, and controlling. Leadership involves motivation, setting a
direction, and inspiring people. The fundamental difference between a manager
and a leader:
♦ A manager administers, but a leader innovates
♦ A manager maintains, while a leader develops
♦ A manager focuses on systems and structures, whereas a leader’s focus is on people
♦ A manager relies on control, but a leader inspires trust
♦ A manager does things right, a leader does the right thing.

QUALITIES OF A GOOD LEADER

• INTELLIGENCE
• COMMUNICATION SKILLS
• LISTENING SKILLS
• OBJECTIVITY
• ABILITY TO INSPIRE OTHERS
• POSITIVE ATTITUDE
• EMOTIONAL STABILITY
• SELF CONFIDENCE AND SENSE OF RESPONSIBILITY
• VISION AND FORESIGHT
• PLEASING PHYSICAL APPERANCE AND A DYNAMIC PERSONALITY
• HUMAN RELATIONS SKILLS
• TECHNICAL SKILLS

IMPORTANCE OF LEADERSHIP
• HELPS IN INSPIRING AND GUIDING THE EMPLOYEES.
• SECURES COOPERATION OF MEMBERS IN THE ORGANISATION.
• CREATES CONFIDENCE.
• DEVELOPES AND MAINTAINS A CONDUCIVE ENVIRONMENT.
• DEVELOPS TEAMWORK.
• IMPROVES JOB SATISFACTION.
• ESTABLISHES CORDIAL REALIONSHIP B/W TOP MANAGEMENT AND
SUBORDINATES.

CHARACTERISTICS OF LEADERSHIP
 Ability to inspire others
 Problem solving skills
 Emotional Stability
 Ability to understand human behavior
 Good Communication skills
 Willingness to take risks
 Dedication to organizational goals

Leadership Styles
• Autocratic or Dictatorial Leadership – Autocratic leaders keep the decision
making authority and control in their own hands and assume full responsibility for
all actions.
• Participative or Democratic leadership – In this the subordinates are consulted
and their feedback is taken into the decision making process.
 • Laissez-faire or Free-reign Leadership – the leader is just a figure-head and
does not give any direction but delegates the authority to subordinates so that they
must plan, motivate, control and otherwise be responsible for their own actions.

Formal and Informal Leadership

Formal – Formal leadership occurs when a person is appointed or elected as an authority

figure.
Informal- Informal leadership emerges when a person uses interpersonal influence in a
group without designated authority or power. These leaders emerge in certain situations
because of their charm, intelligence, skills.

Key Characteristics of Charismatic leaders

1. Self Confidence- They have complete confidence in their judgment and ability.

2. A vision- This is an idealized goal that proposes a future better than the status
quo. The greater the disparity between idealized goal and the status quo, the more
likely that followers will attribute extraordinary vision to the leader.

3. Ability to articulate the vision- They are able to clarify and state the vision in
terms that are understandable to others. This articulation demonstrates an
understanding of the followers’ needs and, hence acts as a motivating force.

4. Strong convictions about vision- Charismatic leaders are perceived as being

strongly committed, and willing to take on high personal risk, incur high costs,
and engage in self-sacrifice to achieve their vision.

5. Behavior that is out of the ordinary- Those with charisma engage in behavior
that is perceived as being novel, unconventional, and counter to norms. When
successful , these behaviors evoke surprise and admiration in followers.

6. Perceived as being a change agent- Charismatic leaders are perceived as agents

of radical change rather than as caretakers of the status quo.

7. Environmental sensitivity- These leaders are able to make realistic assessments

of the environmental constraints and resources needed to bring about change.

Theories of Leadership

Trait Theory
Theories that consider personality, social, physical, or intellectual traits to differentiate
leaders from nonleaders. It describes leadership in terms of certain personal and special
characteristics that are not acquired by knowledge and training but are considered
inherited. This theory emphasizes that leaders are born and not made and that leadership
is a function of inborn traits. These traits are intelligence, understanding, perception, high
motivation, socio-economic status, initiative and understanding of interpersonal human
relations. As all individuals do not have these qualities, only those who have them would
be considered potential leaders.

Weaknesses of Trait theory-

• Some traits can be acquired by training and may not be inherited.
• All the traits are not identical with regard to the essential characteristics of a
leader.
• It fails to explain the many leadership failures in spite of the required traits.
• It ignores the environmental factors that may differ from situation to situation

Behavioral Theories
This theory studies leadership by looking at leaders in terms of what they “do”.
Leadership is shown by a person’s acts more than by his traits. The leadership
effectiveness is determined in terms of leader-subordinate interaction and outcome

Ohio State Studies

Initiating Structure
job-oriented leadership behavior that managers engage in to ensure that work gets done,
subordinates perform their jobs acceptably, and the organization is efficient and effective,
optimum utilization of resources and personnel.
Consideration
The extent to which a leader is likely to have job relationships characterized by mutual
trust, respect for subordinate’s ideas, and regard for their feelings.

University of Michigan Studies

Employee-Oriented Leader
Emphasizing interpersonal relations; taking a personal interest in the needs of employees
and accepting individual differences among members.
Production-Oriented Leader
One who emphasizes technical or task aspects of the job.

Fiedler’s Contingency Theory

• Fred Fiedler proposed the contingency theory in 1967, a theoretical explanation
for interaction of three situational variables that affect the group performance.
These variables are-
1. leader-member relations - the degree to which the employees have confidence and
trust in the leader.
2. Task structure - the degree to which the subordinates jobs are described in detail. It
involves clarity of goals, clearly defined steps to complete the task.
3. Position power - the amount of formal authority the leader possesses by virtue of his
or her position in the organization. It refers to the degree to which a leader can make
decisions about allocation of resources, rewards.

F ie dle’sr C o n tin

Path-Goal Theory
• The theory proposed by House and Mitchell claims that the effectiveness of
leaders can be measured from their impact on their subordinates motivation, their
ability to perform effectively and their satisfaction with their tasks.
• The effective leaders can motivate subordinates by:
– Clearly identifying the outcomes workers are trying to obtain from their
jobs.
– Rewarding workers for high-performance and goal attainment with the
outcomes they desire
– Clarifying the paths to the attainment of the goals, remove obstacles to
performance, and express confidence in worker’s ability.
• The path goal model takes into consideration the 4 types of leadership behaviour,
these are:
• Directive- It is the style in which the leader provides guidance and direction to
subordinates regarding job requirements for job accomplishment.
• Supportive – it is a style in which the leader is concerned with the needs of his
subordinates. The leader is friendly and treats his subordinates as equals.
• Achievement-oriented – This type of support helps the subordinates to strive for
higher performance standards and increase their own confidence in their ability to
meet challenging goals.
• Participative – This approach encourages subordinates participation in the
decision making process.

The Pa

Communication
– The sharing of information between two or more individuals or
groups to reach a common understanding
 Types of Communication-
• Verbal Communication
• Nonverbal

Barriers to Effective Communication

– Messages that are unclear, incomplete, difficult to understand
– Messages sent over the an inappropriate medium
– Messages with no provision for feedback
– Messages that are received but ignored
– Messages that are misunderstood
– Messages delivered through automated systems that lack the human
element

CONTROLLING
IT IS THE PROCESS OF COMPARING ACTUAL PERFORMANCE WITH
STANDARDS AND TAKING ANY NECESSARY CORRECTIVE ACTION

Features
1. Control is a positive force
2. Control is a continuous process
3. Control is forward looking
4. Control process is goal oriented
 5. Control is based on planning

Importance
• Achievement of goals
• Execution and revision of plans
• Facilitates decentralization of authority
• Promotes coordinates
• Cope with uncertainty and change

Esta

Types of Control
1. Feedback control- it enables manager to use information on past performance to
bring future performance into line with planned objectives.
2. Concurrent control- this techniques immediately consider any problem and
Me
of actu
analyze it to take necessary and corrective steps before any major damage is done.
3. Predictive or feed forward control- the control system anticipates problems that
the management encounters in future.

Management by Exception (MBE)

Feedback
• According to this principle, a manager should give more attention to unusual or
exceptional items.
• Only important deviations from established standards should be brought to the
notice of management on a priority basis.

Com
perfo
 • And leave the minor deviations to be taken care of at lower levels.

• Benefits-
1. It saves time.
2. It identifies critical problem areas.
3. It reduces the frequency of decision making.
4. It leads to concentration of efforts on important things.
5. It is necessary in big organizations.

Resistance to Control
• Over control
• Inappropriate control
• Unachievable standards
• Unpredictable standards

Overcoming resistance to control

• Employee participation
• Precise and understandable standards
• Realistic standards
• Timely communication of findings
• Accurate findings

Techniques of Controlling

1. Break-even Analysis
2. Budgetory control
3. Human resource Accounting
4. PERT and CPM
5. MIS
6. TQM
7. KAIZEN Approach

ALL THE BEST