"

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F9).' a.Com, Final students

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In accordance with the new syllabus of

The University 01 Karachi

NEW "... "':'.

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MANAGEMENT "
:-,'"

I,

By

Prefessnr Mohammed Amin Khalil!

, B. Com. , MBA
Heed, Faculty 01 Cornmarca
Govemmant Islarnla Commeroe College
Karachi
Erstwhlla Teacher 6 Rasearch Associate
Institute of Buslnesa Administration

University 01 Karachi
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Dedlceted to my father,
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'B. Com. Part II :

Papo~

III

""NAGEKEN'l'
1.

Introduct i on to Management Deve lopnent of

Kanagement Thought Early Stage of Managerial
CapitallSlll.

2.

The

J ob of

Management

Ef fect i ve

Deci d on

Making-Rational Decision Making, Problem

Solving, Guidelines for Decis ion Making.

3.' The

Planning Process, ' Choosing Objective s

(MOO),
Conmunicating Objectives ;
Ident ify
Premi se3: , Survey - geeccrcee t
Es tab lish
Policies;
0100se
Al ternative s
and
Take
Actiorf;";'Se~up: Procedure and Rul es . Establish

Budgets: TilbQtable and Standards.

of

4.

Qt'9anization for Action-Basic Elements

Organization: Efficient' OCgan i zatioo.

5.

ConceptS of Control-Phases, Types, Qlaracteri 8tics of Good COntrol System.

6.

The People Pr<'lblem-Determlning the Needs of

Staff: selection and Recroitment: OrientathlO
and Training: Performance Appraisal.

7.

'l'he

Human Dimensions of Management-Basic

Motives of People: Humanu tic Approad'l; selCactualizing person..

B . wor k ing: with Others-Groups ; Mly focmed:

they grow: Hc::lIW they fl ow.

9.

Camudcation the Process; Philosphy

Ccxrmunication; Comunicati on system .

10 . 'l1le

Mystique

Behaviour

Mel

How

of

of . Mot ivation Personality ,

Motivation,
Theories
of

MotiVation .

11. Ethics of Business: Christian Ethiics and

Ethics.
The qu estion of SOCial
Muslim
ReSponsibility in Bus iness.. The dlanging
Envircnment of Management.

CONTENTS '

Chapter I
MANAGEMENT

19

;DEFINITION, MANAGING, MANAGERS

MANAGEMENT AND DIFFERENT ERAS '0
1. B.C. Years

22

SU meria n Civilization. Egypt ian Civilization, Babylonian

Era, Th e Herbrewsl Bible Era (Bene Israel Era), Chinese

Civilization
2. Classical Era

25

Plato , Aristot le, Xenophon

3. Stages 01 Capitalism
,

28

EXAMINATION QUESTIONS

CHAPTER 2

STAGES OF CAPITALISM
EA RLY STAGES OF CAPITALIS~l

1. Prebuslness Capitalism,
2. Petty Capitalism
3. Protestam Gapitalism
INDUSTRIAL CAPITAus~l

~8

29

 FINANCIAL CAPITALlS\1

31

Businl5S C() m bi n~.ti(~ns

Steinl Drawinlsm

NATIONAL CAPITALlS~1

34

MANAGERIAL CAPITALISM 34
.RESULT-oRIE.'IoTED CAPITALISM

V'

CHAPTER 3

DEVELOPMENT OF MANAGEMENT
THOUGHT
37
JIIANAGEMENT CHAIN

38

. \...~Sdl'flti~C Management Theory

I. Charles Babbage
2. Frederick tv. Taylor
J. Henry L. Ganlt
4. 1he Gi/brrrhs
v\(1'1 'Human RcJ:uiolls Theory

1. Raben Owen
2. Dr. Hugo Munsterberg
3. Elton Mayo
4. Ch ~ster Bernard
6

44

III Administration Theory

46

I. HtllTl FayoJ
2. Mary ParksrFoil,"

. '
3. Colonel Lyndall Urw/ck
4. R,C. Davis

__ ..., '..a
'.-

.l. lIarold Koontz

"

..

'

..~.

,.'..'.. ~r.:

..... .

,. :....

5l

FUScnOI'S OF THE MANAGER

COORDINATION

'.

5!

EXAMINAnON QUESTIONS

61

~IlAPTr.R4
'"

. .,'

"LANNING . 6Z :/

DEFINITION

,'-'''

/;.~;:

"

.' .'..'

63 ..

SfEPS IN PLANNING

:~

,64

Determination of Objective '.. . ,"

';:'..'Communication of Objective
~ ..Determination of Premises :.
\~ ,.survey of Resources

Formation of Policies
\. Determination of Alternative "
Courses
Setting Procedures
Setting Rules'
Preparing Programs
.: :.
."Making Budgets
Determining Programs
., Setting Standards
. Formulating Strategies 78

":id

 TYPES OF PLANS
,_ ...

MOO

70

71

MBO and Perfonnance Appraisal

PERSONAL OBJECTIVES

73

74

DIRECTIONAL PLANNING

..

7,

TEN REASONS fOR FAIU';RE

75

CHAPTER 5
EFFECTIVE DECISION MAKING
DEFINITION OF DECISION MAKING
AND PROBLEM SOLVING
PREVF:NT/VE PROBLEM SOLVING
PROBLEM SOLVING AND ITS STEPS
. GROUP DECISmS MAKING

7.
82

84

National Group of Technique (NGll

Delphi Technique
.
.'-' / .

GUIDELINES fOR DECISION MAKING 85

EXAMINATION QUESTION

CIIAPTER6
ORGANIZATlON

B9

78

.1JEFINITION OF ORGANIZING

92 .

DEFINITION OF ORGANIZATION

93

DEFINITION OF FORMAL
ORGANIZATION 93
DEFINITION OF INFORMAL
ORGANIZATION

94

}:FFICIENT ORG.ANIZATION

95

BUREAUCRATIC MODEL OF
ORGANIZATION 96
Karl Marx's viewpoint
Max Weber's viewpoint

Busic Elements of Organlzatlon _ 97

1. Division of Labor

98

Advanrages.ofspecialtzatton
Dysfunctions of specialization
How to overcome Dysfunctions
2. Scalar and Functional Chain 100
3. Span of ControllManagement 104

4. Structure 112
DELEGATION OF AUTIIORITY
SIZE AND COMPLEXITY .. 115
DELEGATION OF AUTHORITY
SPAN OF CONTROLoR
MANAGEMENT
9

EX~MINATION QUESTIONS

Chapter 7

DEPARTMENTATION 120V

Advantages and disadvantages 01

departmantatlon 122
BASES FOR DEPARTMENTATION
123
DEPARTMENTATION BY .FUNCTIONS 123
DEPARTMENTATION BY PRODUCTS 124
DEPARTMENTATION BY TERRITORY 126
DEPARTMENTATION BY CUSTOMERS 127
DEPARTMENTATION BY PROCESS OR
EQUIPMENT 12a
DEPARTMENTATION BY SIMPLE NUMBERS 12!
DEPARTMENTATION BY TIME
DEPARTMENTATION BY PROJECTS 130
(MATRIX OF GRID ORGANIZATION)
CHAPTERS
WORKING WITH OTHER DEflNITION

135

CHARACTERISTI CS

GROUPS 133

. '
136

WHY GROUPS FORM 138

HOW GROLl'S FORM/ROLES ..
OF GROUP 139

10

11
HOW GROUPS GROWl
FLOURISHIPROGRESS 141
HOW GROUPS RANI\

142

HOW GROUPS FLOWI

WORKISUCCEW
143
GROUP CONTROL 146
COMMIlTEE 148
EXAM INAnON QIJESTIONS 151
CIIAPTER 9
.
IIUMAN RESOURSES
(PERSOJl."NEL MANAGF1..1El)
DEFINITION

154

STAFFING ACfIVITIES/STEPS

154

" 1. Dtermlnation of Needs

2. Selection and Recruiting
:. 3. Orientation and Training
, ~4~ Appraisal of Performance or
Personnel Audit. MBO
5. Compensation
6. Promotion
7. Separation
APPROACHES TO EVALUATE
JOBS 160
FAVORITE CHARACTERISTICS
OF TIlE CANDIDATE 163
NEGATIVE CHARACfERISTICS
OF TIlE CANDIDATE 164
TRAINING AND DEVELOPMEI\T

165

 EXA~IINATION QUESTIONS

168

..

' . BASIC CONTROL PRO CESS 1 71

Establishing standards
Measuring Performance
Correcting Deviations
!

PHASES OF CONTROL

172

Precontrol Phase
Concurrent Control Phase
Post Control Phase
Correct ion Phase

'. '.

TYPES OF CONTROL

174

Production Control
Inventory Control
Quality Control
FinanciaJ Control

MANAGEMENT CONTROL 178

CHARACTERISTICS OF GOOD
CONTROL SYSTEM 182

BUDGETS 185
12

Definition
Types of Budgets
Revenue and Expenditure Budgets
Capital Budgets
Cash Budgets
Time, Space, MateriaJ and Product Budgets
Balance Shoot Budgets
Master Budgets
Zero-base Budgeting (ZBB)
Milestone Budgeting

NON BUDGET;l.RY,CONTROL
DEVICES 187

.: . -

EXAMINATION QUESTIONS 192

Cha pler II '

MOTIVATION
193
.. .." . " , " ., _. ,

".

.~

(Human -DImension of Management)

'.

SELF ACCEPTANCE/SELF
IMAGE/SELF CONCEPT
201

HUMAN THE0J-IISTS

EXAMINATION QUESTIONS 206

203

Chapter 12
MOTIVATION THEORIES 207
(THE MYSTIQUE OF MOTIVATION)

./

Personality, Behavior, anti Motlvallon

Components of Personality 209
Theories of Motivation
209
The Content Theories 210

~
2.
3.
4.
S.

Classtcal Theory (Frederick Taylor)

Need or Humanlstla Theory (Abraham Maslow)
Need Theory (D.T. Han & K.E. Naugalm)
Two-Iactar Thaary (Frederick Herzberg)
Human Relations Theory (RenSls Likert)

The Process Theories

1.
2.
3.
4.

208

216

ClasSIcal Conditioning (Ivan Pavlov)

Operant Conditioning (B.F. Skinner)
Preferenc&oExpectation (Vietor Vroom)
Expanded Contingency Madel (Parter and la,,'er)
ar 'Thaary at Eqully

Theory X and
TheoryY (McGregor)
' .
- 222
.
Theory Z (Dr. William Ouchi) 223
Theory Z and Motivation
Money' and Motivation 226
Morale and Productivity 22"
14
examination Questions 229

Chapter 13
Communication

230

Dellnltlon

.:

Process 01 Communication

Communication Pitfalls and Barriers 235

Modes or Media of Communication

Up and Down Communication 239

232
234

Philosophies of Communication

237

241

Development Communication
Controlling communication
Rallnqulshlng Communicator
Withdrawn Communicator

Nine C's 01 Communication

Communication systems

243

248

Wheel Networt<
Cheln Netwo'" .
AIIChan",,' "alwort<

Transactional Analysis (TA)

250

The Child
.
The Parent
The Adult
Motivating wll~ TA

Life Positions 252

Ten Commandments lor Good Listening 253

Examination Questions
IS

255

Chapter

I~

BUSINESS ETHICS

I
I

25 6

DEFINITION
'"
SOCIAL RESPONSIBILITY OF BUSINESS 258
FACTORS OF SOCIAL .RESPONSIBILITY 25B

<.1

1. Models of Social Responsibility

Traditional Corporalion Th90ry : ;

Mstro Corporation Theory

2. Evolution of EmphasIs '
3. The levels of SocIal Responsibility

~ S6Clal A~illt '

I
I

..

.. . .. .

ETHICAL PROBLEMS BY SHAPIRO

BENEFITS OF ETHICAL CODE 264

263

Internal Benefits, Employee Benefits, Customer

Beneflts, Industry Benefits

I
I

GUIDELINES IN DEVELOPING CODE OF

ETHICS 265
MUSLIM ETHICS I NONMUSLIM ETHICS
UNBELIEVERS' ETHICS I QUESTIONS

267

Cha pter IS .

THE CHANGING ENVIRONMENTS 01'

MANAGEMENT
272

'1
I
I

TWENTIETHCl:NTURY - PAST AND

FUTURE 273
CHANGING ENVIRONMENTS ' 2 7 4 '
CHAl.l.ENGESOF THE 'NEXT DECAD,E

2'1& .

QUESTIONS
16

...

PREFACE
Although management as a subject is an American Invention
butthe traces of Its practice can be found in the oldest known
civilization. In the fast changing modern complex world, where
a human has now a deep intellect, and which is challenged
by rapid technological change and increasing phenomenon
of the competition the need for management cannot be
overemphasized.
Whether a small organization or giant, industrial or service,
commercial or welfare, profitable or nonprotltable. It cannot
be survived unless properly organized and managed. But the
question is whether the management principles are equally
beneficial and applicable though the world, there are two schools
of thought, one in favor, the other against. Why this difference
of opinion -althouqh all management experts are united to
agree 10 the importance of management.
The answer lies here: Science can be classified into two
groups. Firstly, physical sciences which are exact sciences
for they deal ~ith the things. If you act upon a thing, you can
exactly know or forecast its reaction. Hence dealing with things
is a physical science.
Secondly, social sciences thai are inexact sciences. They
are so because they deal with the humans whose reaction is
considerably unpredictable. Not only will a humans react
differently at different occasions and times, but also all hurnans
will or may react diversifiedly in response to a certain situation.
Hence, the social sciences are inexact, and management being
one of them is the most inexact of all social sciences.
Consequently, management scientists agree that there
can be no single best solution to a problem. There can always
be better than the best. Personal tactcrs cannot be ignQred

17

even in truly following management principles. Bul with the

incessant evolution and development of human mind and culture
management will continue to improve to no limit.
This modern text is designed to prepare you for your
future managerial career. Though theories, ideas, techniques,
and data are dynamic, the information and material contained
in this volume will provide you a: quick and useful reference
as well as a guide for future learning for many years to come.
Since the book has been written in your language it will be
easy for you to comprehend and pass the in good grades.
The book has been oevlaedtor B. Com. Final students in
accordance with the new syllabus of lhe University of Karachi.
The purpose of the teaching of this subject is to prepare
managers tnereaefnciv required by industries, service,
commercial, and other types of organizations. The contents
of the book include introduction to management, stages and
development of management thought, planning, decision
making, organizing, human resources, groups, controlling,
motivation, communication, business ethics, and c'~anging
environment of management.
Professor Mohammed Amln Khalld
B. com.. MBA
Karachi, July 7, 1992

18

, [

AI

Chapler 1

MANAGEMENT
. DEFINITION , MANAGING , MANAGERS,
ANAGEMENT AND DIFFERENT ERAS
1. B.C. Year.
sumertan Civltizatlon, Egypti an Civilizatio n, Babytc man
Era, The HerbrewSiBible E' ra l Oene Israel Era'. Ctune se
Civiliza tion

2. Classical Era
Plato, Aristotle , Xenophon

3. s tages of Capitalism

EXAMINATION QUESTIONS

DEFINITION
Management has been
management experts.

defined

differently

by

various

1~
dl

Accord ing to some e xpe ete

Manage ment is t he funct ion ot executive Ieaderahlp a ny where .

Others say thai

Ma nagem ent Is a technique by means of which the pur pose a nd
object ives of a parti cular h um an group are determin ed,
classified and effectuated.
According to D .S . Ca mbell
Man age ment em braces all duties and functiona that pertain to
the initiation of en ente rprise.

'. "f

-Acco r d ing to Terry

Management is a process used for accomplishment of desired
object ive. Manageme nt s ignifiu the process of pUllfng h um an
aims , knowledge, and skill in the effectiv e actio ns. It is adecieive
an d productive action tb nt leads to" euceeesful accom plish ment.
The ohjectives of an organization are achieved by man aging
the use of rro sllll r('eS Le. mon ey, men, rna t erta l et c. effective
a nd efficient ly.

e
M a n agement h a s a iM> been define d as:
Th e performing of the functions viz.

\
1. Plan ning
2. Orga nizin g

3. Staffmg

,4. m~tinR
5. Con trolling

;---

.....

20

"-.
,:.

-:-. >

Management may also be de llned as "G eUin.9 things done

Ihrough the effort s of other people and the lu nctional break
down 10 at least two major responsibilitie s on 01 which Is
" "PLANNING" and th e ot her Is "CONTROLL.IN G".

Acco rding to some other people management

may be defined as
"The making of decisions and giving 01 orders so l hat
maximum of output could be obtained with the minimum of
input."
Management is the body of organ ized knowledge which
underlines tne art.
Management is what the manager does. In short. managin g
by lhe manager is manage menl.

MANAGING
Managing is the art of doing thinga an d skilfuny treating others.
-e

Knoont z defines managing as "t he design or creation and

main tenance or an internal en vir onment in an enterpr iae where
individuals. working together in u nison. can perform efficieclJy
an d effectively toward t he attainment of group goals."

What a Manager Is
What does it me an to b e a man ager? A manager is the per son
who draws plans, determ ines cbtecnves and standards. and
rakes decisions. He is respc nslbte for t he work 01 others .
A manage is many person. He Is able 10 peep into future.
He guid es, persuades , motivates, communicates, leads. Th e'
manager does not create problems, rath er solves the m, He
receiv es aut nority from hIs superiors. some amoun t 01 which
he delegates to his subordinates, He plans, directs, coordinate s,
end ccn'rcls tne acuvlties of his subord inates. He commands
Ruthorl1y ovet them. The manager creates an environment

21

conducive 10 the effic ient wOrking of the wor kers . He creates

team spiri1 among them. His all activlttas are d irected tow ard
the acco mplishment of the organiz ation 's goal s. He is many
person bec aus e he is logic ian , historian, mathematician . He

is master of contingencies and situations. The rnanaqer is

also a ps ycholog ist becaus e he is ab le to study the minds 01
his subordina tes and superiors . ! te acts also as soc ial sctentrst
since he has to study envlror."e~s prevailing within a'ld outsid e
the company.
.
He Is log ic ian because he esta blishes cause and eff ect
relation ship. thai Is. he lustltle s his decision under a given
problem situation. He is histo rian because he b est uses his

past expenence in the present situation. He acts also as

mathematician lor he determines liquidity, profitability. financial
soundn ess . and nnure prospects of the organiza tion .

MANAGEMENT AND DIFFERENT ERAS

From the manaqernent standpoint eras
the follow ing categories :

may be

div ided into

1. B. C . yea rs (4000 B.C . - 400 B.C.)

2. Classical era (400 B .C. - 100 B.C.)
3 , Stag es 01 Capitalism (50b - 1992)

The B. C. Years (Berore Cap italism)

4000 B.C. - 400 B.C.
From the viewpoint of management study the B. C. yea rs can
be d ivided into following eras :

1. Sum erian era

2. Egyptian era
3. Babylon ian era
4. Hebrew/Bible/Bene Israe l era
5. Ch inese era

"

1. Sumerian Era - 3000 B. C.

Sumerian civilization existed 3000 B. C. The wnnen documents
recovered from temples exhibit the following facts.
"

1. The sumeria n priests had authority and control over

wor ldly cocos.

2. Due 10 religious tax system the priests collected a

good dea l 01 flocks, herds , revenues, and estates .

3. To have check and control over priests an elaborate

accounting system was inst itut ed.

4. Sumerians established managerial co ntrol system by

requiring the priests to submit to the cnlet priest wr itten
reports 01 their wOrking .
5. Requi ting th e pr epar ation 01 manage ri al r eport s

prompted the sumerians to invent and develop their

sc ript.
6. They knev- and pract ised sav ings. storing, tr ade,
specialization of tabor, and sophisticated cralls and
architecture .
Alter 20 0 B.C . Sumer was gradu ally absorbed into
Babytonra .

2. Egyptians c ivilization - 4000 10 525 B. 'C.

The Egyptians recognized the Importance of organization and
administration. Their management prowess and ability can
be determined trom the folfowing tects .

a. They had expertise in mammoth constructions . They

cc nsnucte c great and giant pyramids withou t cranes
and bulldozers. The area 01 pyramids is Ihirteen acres
and contains 2,300 ,000 stone blocks each weighting
2 112 Ions and they were cut to size in quarries many
miles away from the place of pyramids. They managed
100,000 workers for lwenly years.
b. They demonstrated great skill In the mobilization and
use 01 human resources.

23

24
c. T hey kept and maintained documents showing income,

expenditure. sources of income, and uses 01 materials.

d . The milit ary , social, religious. and government aspect s
01 Egyptia n rife were highly organized .

3. Babylo n ian Era - 2150275 B. C.

5.

The Babylonians made use ct the mlnimJm wage rate principle

in about 1950 8 . C. The archa eological flndings show :

TI
TI

a. Their king Hammura bl authored a set of laws known

as the code of Hammurabi .
b. The code covered family and labor laws. II included

laws regarding personal properly. real estate. trade.

and busin ess.
C. They dealt in sales. loans. contracts, pannersnlps.
ag reements, and promisso ry notes.

d. They set laws regarding minimum wages, control,

responsibilily. and relributlon.
e. They introduced colo r cod ing methods of production
conlrol.
f. The Babylonians motivated laborers by incentive wage
plans.
g. They established piec e-rate pl an.
h. They had a sound and ettecttve system of te xtile

pi
01

TI

d<
lh

a,
m
cr
e>

m
TI

prcducucn.

4. The era of Ben e Israel (Hebrews/Bi ble)

The Hebrews knew how to manag e people and activities.
Th e foll owi ng f act s show thei r signillcant managemenl
capabil ities.

a. Joseph, the messenger 01 God, Introduced granaries

and warehousi ng system.
b. Moses led the exodus 01 over a million Jews.
c. Jews had the conce pt 01 span 01 manag ement .
d . The bible described the rationa lization of the principle
of delegation.

ar

0'
N
hi

111
01

"'
"

10

e. They established the lower courts to handle simple

cases.
f. Joseph, Moses, and Solomon had managerial talents.

5. Chinese Civilization 1500 B. C.

The Chinese introduced the of principle 01 division 01 labor.
They divided the labor according to their skill. They are the
pioneers of specialization. They managed to elicit efficiency
of labor for the organization.

CLASSICAL ERA (400 B. C.-l00 B. C.)

The classical era ranging from 400 6. C. to 100 B. C. was
dominated by t~e Greeks and the Romans. The Greeks and
the Romans both viewed traders, merchants and money-lenders
as necessary evils.
The Greek and Heman traders managed to prosper by
manufacturing and selling exotic and necessary goods. Effective
commercial institutions came into existence. Local markets
expanded. Banking system came into being. The era was
marked with competition. advertising, and public relations.
They also resorted to bankin9 advertising.
But both the nations haled trading. They loved philosophy
and law. Merchants were not allowed to own property in Greek.
Plato. and Aristotle both discarded merchant class.
But disliking of trade is not limited to Plates and Aristotle
01 the ancient eras. In 1776, in his book tilled Wealth of
Nations, Adam Smith, father of modern economics, expressed
his feelings against traders and capitalists. Napoleon Bonaparte,
the king of France, hated trade and called the British a nation
or shopkeepers. Lord Bertrand Russel, a British Philosopher,
nlso disfavored traders and declared that the governing passion
lor' his life was longing for Jove, the search for knowledge,
and unbearable pity for mankind.
')t'
~

.J

Pl ato, (427 B.C. - 347 B.C.)

Pl at o looked down upon trad e. He didn 't believe in commerce
and craftma nshi p. But h e said that the buyers and seller s are
necessary t o exist to pro vide food, clothing, and ho using. He
declared them as necessa ry evil.
Aristotle (384 322 B .C.)

Aristotle equally disliked commerce and trad e. His emphasis

was on social and economic philosophies. Under economic
philosophy,he solved economic quest ions like exchan ge, division
ofl&OOr. money, interest, an d usury. .

Xe nophon (434 .355)

Xenopbo n disagreed with P lato and Aristotle. His attitude
tewerd traders WBIl encouraging and realistic. lie viewed.
business as an Clpportunity f~ increasing state wealth . He
advocated fo:r th~ bn por t of t he goods available in . carcity and
expor t of surplus goods; He wanted t o allow fore ign ers to own
-Iand and construct ,buildings . He favored conscrip tio n for
foreigne rs . He sai d that th e foreigne rs should be given fun ds for
shipll and venture.

26

Examination QueStions
1. Defin e mana gement, managing, manage r . Also
discuss differ ent eras wi th reference to managment.
2. Explain B.C. years an d claselce l era.
3. Describe in your words early atagefl of capitalism.
4. Write nctee on the follQwing:
(a) Plato
(b) Babylonian era

(d) Chinese civilization

27

CHAPTER 2
STAGES OF CAPITALISM
EARLY STAGES OF CAPITALISM
J. Prebusiness Capltallsm
2. Petty Capitalism

3. Protestam Capitalism
INDUSTRIAL CAPITALISM
FINAr\ ( AL CAPITALISM

Business Combinations
1. Holding

Companies

2. Pools
3. Cartels

Social Drawinism
NATIOlliAL CAPITALISM
;\IASA GERIAL CAPITALl S;\l

RESULT-QRIE NTED CAPITALISM

28

_. ~

'.,

The s1ages capitalism may be divid ed into fOllowing eras.

1. Early stages 01 capitalism (500 - 1776)
a. Pre-business C apil~lism (500 - 1100)
b. Pelly bus iness Capitalism (1100 - 1400)
c. Protestant Capitalism & mercantilism (t4 oo - 1776)
2. Indu stri al

3.
4,
5,
6.

capaausm (1776 -

1890)

Financial Cap italism (1890 - 1933)

NatIonal Capitalism (1933 - 1950)
Managerial Capitalism (1950 - 1980)
Resurtor lend Capitalism (198 1 - )

1. EARLY STAGES OF
CAPITALISM/MIDDLE AGE S
Early slage s are referr ed by men of our limes to as middle
ages. Middle ages may be divided . into three penece .

A. Pre-business Capitalism (SOO - 1100)

~ ,

This era is dominated by teudat s and manors. This era 1$ \

marked by three elements :
(i) Individual sta nding and statue could not be changed by
ilidlvidual effort s.
(li) Production was made for only person al consumption,
(iii) In materia l affairs time did 001 count. Wo rkers were bam
serts. They had 10 work for 24 hours . Howe ver , regular
patterns 01 work were de veloped . Talents of workers were
made nec essary to IiII a Job, Feudal lords developed some
administrative , and accounting techn iques .

B. Pelly Cap italism (1100 - 1400)

This era lmrcduced bu siness to societ y, Produ ction was'made
net only for p ersonal consumption but also for exchanq e for

29

the first time in this era. People came 10 know the concept of
b.uying needed goods and seiling surplus goods. This era not
only enjoyed barter system but also some common system of
exchange evolved. They realized the importance of time, work,
leisure, and specialization. People knew how to Invest capital.
They practised the following.

(i) Formation 01 partnership.

(Ii) Advancing loans and goods.
(iii) Making a charge on credit sales.
They learnt that status could be attained by performing
economic activity. They believed in economic independence.
Training and ercrenucesntp were given importance. The'
essence of this era was belief In democratic economic equality.
This period is marked by high price tor capital (usury) and
poor price for goods. But it was recognized ttret the merchant
should get fair price for his goods enabling him to maintain
his standard of living. Natural growth and expansion were
end result of this period.

C. Protestant Capitalism (1400 - 1776)

This period started at the end 01 middle ages and was connected
with the private enterprise system of the U.S. The era is
registered with foreig n trade, manufacturing, colonialism,
shipping, marketing, and huge profits. Businessmen learned
techniques, policies, and practices. They hired people to work
for them.
Businessmen made a great deal of travelling within and
outside the country. Transportation, banking, import, export,
training, specialization, and hiring and firing of personnel, are
special features of this time. Some inventions were also made
putttnq a foundation stone lor industrial revolution.

30

2. INDUSTRIAL CAPITALISM

(1776 - 1890)

)/

4~

Industrial revoluUon Is a unique event ollhls era. The Industrial

capitalists believed in speciali zing, streamlini ng, and de legating

task. They used power-driven machines and worked employees

hard. Their motto was 10 minimiz e cost and maximize' sale
and profit.

_.---_._

The Industrial revolution was the result 01 the following.. ..

i nv e.nJi 0f.' ~.;"'"

k"p'lnnil'!.g machine run by h! fld.s..

~:... ?'p'.i!.1~j~i.~.sh.!~!_~~r ,~~I!!,P~~~!.
3. . e9'Vf~ L JQO,mS.
~, .,"'..IJ.1 e,
5. . Stea, [Tl.J~!lgine-
.f? .. Chlorioe_ble aching__
~ .__ ..S~re\Y ~ cultiDg.Jathe
8. Interchangeable manufacture
~ ..
-'.'-"----"- - .

During Ihis period. Adam Smith put forward land. labor,

and capital as thre e t eeters of production. J.B. Says Introduced
entrepreneursh ip as the fou rth factor. Smith said th at
specializ ation was the key to productivity. Productivity could
produce mcre fncome, high wages . large and prosperous
families. and Increased market.

3. FINANCIAL CAPITALISM

(1890 - 1933)

/, ';

<
l '''''rt,

Financiers were unaware of production methods. But Ihey

were masters of financial juggling . Their emphasis was not
on specialization. They believed in diversification and multiple
economic functions . Industrialists had always put back their

31

profits into new equipment. But tne financiers set the prollts
a side as ca sh reserves. Compet itton whk:h was seve re in
this era was,overcome by cooperative competit ion. In this era
t here existed a workable relationship between the workers ,
the co nsumers, the p roducers, and the investors. Many people

learned to dislike the financiers for usury. Perhaps due 10

this, this era faced Ihe Great Depression in 1930 s.

A. Business Combinations
About the last quarter of the ninete enth centu ry, business
discover ed how 10 earn large prolits by combining major
competing units .
. Businessmen united lagathar to bea t competihon. Bullhe
governmenl legislated t? protect the consumers and perpetuate
compet ition .
Business combinations included trusts, holding co mp anies.
carters. mergers, amalgamalions, pools, and exclusive selling
agencies.

Trust
In 1776 Adam Smit h said, "People of the sam e trade seldom
meet together even in merriment and divers ion but the
conversation ends in a conspiracy against the publi c. or on
some contrivance to raise prices." It came true when the
businessmen discove red that larger prouts could be made
more easily if a monopoly cou ld be attained by combining all
the competing units . The shareho lders of severa l competing
companies turned their stock over to a group of tru stees . The
trustees lhen controUed the separate organizalions and operated
the m 10 maximize prolit and minimize competition . Such
organi zations were known as trusts . There were vot ing trusts
also In which stock holders transferred the ir voting rights to
the trust ees. Trusts were cripple d by the pol it ical parties,
gov ernments , and federal legislatio ns in the U.S.

32

,s
,
-,

,e

Holding CompanIes
Due 10 loopholes in antit rust law s holding companies came
Into being by comblnng competh lve companies aCtivities under
single leade rship . The holding company.>is a company, Ihal

owns controlling interests In other companies known as

subsidiary companies. It is slill legal toda y, and its use has
been steadily increas ing.

Pools

"

They are written agreements. among several companies covering

e
e

>,

one or' more phases of operations such as terruo r tes. prices .

profits. output s, or pa tents. Prolil and price pools demand its
members 10 fi x minimum levels 01 prices and prouts lor their
goods. Territory poo ls divide areas among il s members to
avoid compeli tion. Output pools restrict abundant supply and
fixes production amount at small er levels 10 keep the goods
in scarcity. Pcota are now 11Iegal in the U.S.

Cartels
Pools In other countries than US are referred to as cartels.
They are legal outside the U.S.

-n

B. Social Darwinism

n
.e
.e

Chartes Darwin ccocectoaneee the blologlcal evolution according

which all organisms evolved from primillve types through the
natural laws of survival.

,II

.g
e

o
:h
ts

Spencer applied Darwin's theory to social development.

According 10 him the weaker social inslitutions and busln ess :
might ha ve to be sacrlttced to develop th e stronger movem ents.
In other words he meant the survival of the Intest.

:0

s,

J .l

4. NATIONAL CAPITALISM

(1933 - 1950)

17 0e?\~1,

The abuses of Industrial capitalism gave rise I? national

capitalism whose pitfalls lad to managerial capitalism.
.Natlonal capitalism Is a national control 01 the capitalistic
system which the aim was to remedy Inequities created under
lndustrlal and" financial capitalism. Ownership 01 business

remained in private hands but In the Interest of public the

.ccvemment intervened. The principle 01 laissez tatre was
abandoned. The governments lightened controls and enacted
protective legislations

Aocordlng to Drucker, management boom has come to

an end and now the time of management work has ceme.

The large corporations blend the talents and abilities of a

great number of individuals. Now people manage rather than
own their companies.

.National capital givesthe lesson that the public must realize

the extreme importance of business in the .grcwth and
continuation of our way oflife. On the other hand,business must'
learn that responsibility for public well-being is not Justa
gimmick. Business must serve the public as well as make a
profit. Public eruetts a commodity to be earned and treasured
by business.
" jVS
'1 ,1-" o,Jfl

5. Managerial Capitalism 0950 - )

,),,~

Managerial capitalism is a professional capitalism. There is a

shift from' family management. to professional management.
Now the businesses are in the hands professional and skilled
managers. Industrialists and capitalists are dependent of them.
Managerial capitalists must know the whole business. They
must be product oriented, prC?cess conscious, financially
responsible, and public spirited. They must ambitiously pursue

34

their own ends without endangering the goals of the company

as a whole.
According to Drucker, management boom .hee ended, and
now the time of management work has come, The large
corporations blend the talents and abilities of a great no. of
individuals, Now people manage rather than own their
companies,

6. RESULT ORIENTED CAPITALISM

(1981-)
\1 ,}, : , i\\,
, t)!'
u
When Peter Drucker says that the manageriaJboom has come
to an end, he means the end of managerial power. In other
words, the managerial power has been subdued by the
subordinate. Newly developed concepts of participation, theory
Y and Z, and MBO compel managers to introduce pressures
and viewpoints of their subordinates into decisions, On the
other hand, the lop management is not interested in how
subordinate manaqers plan, organize, control, and how they
spend their time. Now it is Interested as to what are the net
short-and long-term results of the performance of the lower
level managers. So the current era is result-oriented capitalism.
cut even in this era managerial power and authority in decision
making cannot be ignored.

]'j

I'
I:

,,

Examina tion Questions

t . Explain early stages 01 capitalism.
2. Define prebu slneas, petty , and Protestant capitalism
Differe ntiate between industrial and financial capitalism.
4. What do you understand by social darwlnlsm? De you
agree with this theory? Why or why not?
S. What are holding compan ies , pools and cartels? Would
you' like Pakistanis 10 establish cartels?
8. Differentiate between national and managerial capitali sm.
What Is result-oriented capitalism ? Ollferentlale it with
managerial capitalism .

36

,. ..

CHAPTERJ
DEVELOPMENT OF MANAGEME1',.
THOUGHT
n.

MANAGEMENT CHAIN

)U

Id

n.

-n

I Scientific Management Theory

I . Ouides Babbage
2. Frederick W. Taylor
) . Henry L. Gantt
4. 1hL GUbre/hs
11 Human Relations Theory
I . Robert Owen

2. Dr. Hugo MUI1S1erberg

3. Elton Mayo
4. Chester Bernard
~II

Administration Theory

I . Henri Fayoi

2. Mary Parker Follett

3. Colonel Lyndail Urwick:
4. R. C. Davis
5. Harold Koontz
FUJIOCTIOJlOS OF THE MAJIOAGER

COORDINATlO:-l
. EXAMI:-lATlON Q UESTIO~S
37

o DEVELOPMENT
THOUGHT

OF

MANAGEMENT

Management Chai n
The evoluti on and development of management thought ca n be
explained in a chain of three lin ks. All t he links of the chain are
80 important th at the concept of management ca n not be
explained wit hout anyone or t hant . The chain is as follows:
1. Scientific M a nage m e n t
managemen t )

( P r od u cti on .. orien ted

2. Human Relations lEmplo~oriented manegement)

31 Administration (Production. a nd employee-o riented

management or result-oriented ma nageme nt)

I. SCIENTIFIC MANAGEMENT
Scle ntiltc management conducts a business or allairs by
standards and norms establlshod by facls, or truths inferred
from systematic cbaervattons. experiences. or experiments.
The 'following four m.anagemen t experts advocated scie ntific
ma nageme nt:
1. Char les Dabbage
2. Fredrick W. Taylor

3. Henry L. Gantt
4. 'The Gilb e."ths

1. Charles Babba ge

Professor Chnrles Babeege WQ!I not only t he pioneer of scientific

~-;'~ageme~t b~t ' al~o the father of computer. In 1822 he
inventWailferince maChIne"whIch wasa ~;;Chanical calculator .
In 1833 he invented anothe r devi ce in the calcula tor which is
st ill II basic element in the modem compctere. He wrote many
booka in w h ich "e n th e Ec on omy of Mach in ery and
Manufecturere" whi ch he wrote in ] 832 was the most popular

38

Charles Babbage advanced th e foll owing principl es of

nlanagement:

t , Ul vlsfon of Labor: labor ShOuld be divided aecoming

to specialization to Increase etticlency.
, " --.--

2. Management and productfon: Manage ment

activities should be separated from techniques of production.
.
Scientific methods should be adopted in production. .

3. Management Problems: Managemenl should fQcus

its attentjcn on problems of production, employee relations,
time-saving, lime-study, control of weete, and use 01 by~
products.

4. Mar keting management: marketing management

should be effective. Advertising, selling, produci development,
and reduction in unIt price are necessary to capture market.
According 10 Charles Babbage the following are the
advantages of the division 01 labor:
1. SInce the worker learns only one skill learning and
training time Is reduced.
2. Shift from one trade or skill 10 another is possible in
less time.
3. Because 01 repetlUon of work, the worker can gaIn
I
proficiency and ettlciency quickly.
4. Due 10 specification 01 each part 01 the Job, Ihe
development of special equipment and tool s are
facilitated.
To evaluate its productivity and cost he developed the
lollowing questions:

39

1. What are the defects In the product made by Ihe

machine '1
2. What are qual~les In the prod.Jet made by the machine 7
3. What is the prime cost 01 the machine ?
4. What is the malnienance and repairing cost of the
mach ine ?
5. What Is the operating cost of the mach ine ?

FrederIck W. Taylor
FrederiCk Taylor is popularly known as l ather 01 scientific:

llrrriiQi""mElnl.'ln -1875 he slaned hi s career as apprenuce . -in

l lJ71f.'li1lQlned'Mldvale Sleel Works, PhUadelphia, as machine
operator. During service he continued his studies In the evening
and he obt ained his degree in doct or ate. Later he Ietched the
hIghest positron in Ihe same company. His contribution in
manag ement is greal. He inv ented many ifllJrements and tools

used in faclory. His experience as laborer. apprentice. machine

operator, foreman, head mecha nic, and f inally as cnlet engineer
helpe d tlim u nderstand the viewp oints , weak nesses, and
strenglhs of not only workers but also the man age ment.
Whe n he advanced his theory of sclentitlc mana g ement
he had to lace a great op position not onl y from the laborers
but also American eenc re ee. In 19 12, he was call ed up by
the Congress to cla rify his position. The charge aga inst him
was that he wanted to over load the worke rs and wanted them
to be unemployed. Th ere he clarified his pcsncn. and said.

"Sc~n l lfk: manage ment is not devic e 01 perf orman ce. II

is not a new sys tem to determine cost. It ls not a wage
p ayment scheme. It Is not a bonus system. Il ls not 31 premium
system. It Is not a piece-rate wage system. It is not a time
study or motion study.

. -actemue management is a mental revo lution on the pan

01 worke rs and manag emenr. It teaches the workers 10 k now '
4(

h.

,?

h.

'_i~

In

10

,.

19
In
Is

"er

Id

"-e

'y
m
n

f.
It

rt

their duties, their co-workers and superiors. Management should

also know Its duties and responsibilities toward its workers."

Taylor's Principles 01 Management

Taylor advanced the following management ptlnclplee:

1. Management should scientifically develop what

constituted a day's work of each worker (determination
of each worker's duties by time and motion study). It
will help the management to get rid of the rule of
thumb method used in the determination nf nifties.
<. $clei'ltifiC selection and lrainlngof workers are necessary
for improving productivity.
3. Management and workers should cooperate with each
other, and they should abandon confrontation:
4. Managerial and non-manaqerlal work should be
separated. Planning, organizing, and directing
responsibilities should be performed by the managers
rather than the workers.
Like Professor Charles Babbage, Taylor also ignored the
human aspect 01 management. He was a stern person and
treated the workers as machines and tools. He wanted the
worker to be as stupid and dullard as an ox so that the
worker can work as much as the management desires.
It is interesting "to note that the rayrcra ecrenunc
management was so warmly accepted and welcomed and
haunted by the manufacturers and businessmen that the Payers
principles 01 management were completely ignored. and
therefore delayed in their adoption. Had it not happened the
history of modern management would have advanced much
earlier.

Henry Ganll
Henry L. Gantt is another pioneer of scientific management.
As stated earlier that the main focus of screnunc management

41

. Is on ~he maximization 01productivity ignoring human element,

a more important aspect of management.

I
-J

I
'I:

Henry Ganll wee one 01. Taylor's coll eague s. He. unlike
Char les Babbage and Taylor . introduced human factor in his

theory 01 ecientltlc manaqement. He gave due importance 10

sell-respect. ego, and morale of the workers. He related morale
altha worker wil t', ",noduetivity. He introduced bonus payment
system. He invented a chart known as Gantt t. hart which is
used even today. He put his particular attentlon on training to
improve performance of worke rs. He was utterly against

autocratic and Incompetent management. He favored an action

ben efitting human cause: and opposed the one d amag ing It.
He believed in democratic relations in business and Indust.ry.

The Gilbreth.
Frank Gilbreth and tuswlte LIllia n Gilb reth are among those

who strongly advocated sclentitic management. We wlll discuss

husband and wile separately in the lines 10 rollow.

Frank Gilbreth
Frank Gilbreth is recognized as efli ciency expert. He started
his career as br icklaying apprentice. Due to his ability and
deep knowledge of management he reached the h~est position of chief supe rintend ent in a cons truction company. Then he
ab andoned th e construction work and opened a management
consulting firm to improve human productivity and efficiency.

lPe

Frank Gilbreth put his emphasiS on tind ing

one-best
way to do any job through time and motion study. He reduced
each lOb to its most bask: movements. He reduced bric klaying
movements trom 1e 10 onry 5. Thro ugh motion stucles he eet

up work standards and controlled wasted motions and energy.

42

n, .

,.
is

'0

. In 1907, he had a meeting w ith Ta ylor. Impressed by hi m,

Glfbreth Impl emented principles 0' ecrennnc management He
pra ctised sc ient ific principles In his privat e life too. He shaved
hJs face wit h two blades and managed 10 save his 44 secon ds.
BUI finally he gave ~ up beca use one day he cut his Jhrca t .

is

He had to bandag e his Iniu ry which look his two minutes.

Accord ing to him It was not his Injured throat that made him
leave u sing two blades. II was .two minutes whic h h e wasted

Fr ank Gilbreth' s ma naeenatprecuces we re as foll ow s:

I.

11

st
1

1. He tried-to find one best way to do any work through

mot ion study .
2. He developed field rules for his employees eliminat ing
wasted time and shoe leather.
3. He developed rules. The promotions and higher pays

ware subject to their enfo rcement and observation .

4. He proh ibited smoking during the work.
5. Record keeping was ma de compulsory.
6. Decision making was centralized at tho cnrce.
7. He allow ed unions but its membership was subject to
his permission. Such a practise is now known as 'yellow
dog cont ract.'
8. He Introduced wh istle sy st em to start and stop the
work in unison.
. 9 . Monthly performance reports were made essential and
were prerequisite lor promot ions.
10. He emphasized reward and respect for his employees
10 motiv a~e them 10 work efficiently.

..

Lillian Gilbreth
Ltlllan , the wife of Frank Gilbreth, stood by her husband In
the sclentlttc management move meet. She pioneere d In the
pers onnel management. Sh e advoc ated scientific hir ing,
selectlc n.tpl acement. orientatio n, and training of per son nel.
She was the first lady in l hoUS t o receive a ph . D.....tn.,

pSyChoioQYYi,191S.-'S}learid
type's "or IMehlTves.~..

tle'( husba~d i~t~~duced two

Dlrecl Incentlves
Oppcrtunltlea for pride . ambition , compelll ion, perso nal
recognition, and accom plishment

Indirect Incentlves
Promot Ion, pay, shorter working hours . allow ance s, and.etne r
benetlts.

Frank Gilbrel h's emphasis was on human aspect of

manauement. but lillian's locus was on performance. Both
the tal ents have given new di mensio ns to th e world 01
man agement.

II. HUMAN RELATIONS THEORY

Human relatio ns aspect 01 management is \. Ie second link In
the manaqement Chain, as sugg ested by Robert M. Fulmer.
He say s thai lhe discu ssion 01 management evolu tion is.
inco mplete wit hout this Impo rtant link. This aspect 01
manage ment is human-orient ed , while scientific management
is prccocuc n and work-oriented. The 'ollowlng authors are
lhe pionee rs of human relations in ma nagement.
1.
2.
3.
4.

Rob ert Owen

Dr. Hugo Munslerberg
Elton Mayo
Chesler Be rnard

Robe rt Owen
Robert Owe n supported the human asp ect of management.
He was the successful manager 01 a textile mill in Scotland
in 1800's. He valued his workers as esse ntia l machines. He
said that huma n mach ines are more impor tant than Inanimate
machines . Keeping hum ans in proper a nd wo rking orde r Is as
necessary as machin es. so thai th ey can penorm the work

44

ttii lCuwliy. 01 iocu slng his attentron on numen psyc nolOgy,

needs, and moHvatio n he manag ed 10 rec eive more than fitly
percent return on the amount spent on his employees. According
10 him, expenditure over employees is actually Investment
which pays back itsell. II employees socia l and p ersonal need s
are sattsl'ied. the company's overall prollt pc strcn will improve .

Dr. Hugo Munslerberg

Or, Munsterberg is popularly known as fath er of indu strial
psychology. He received his Ph. D. degree from the L1pzig
Universi1y01Germany in 1885 . AI 27 yea rs 01age he received
a medical degree in 1887. In 1892 he was " ",ad by Experimental
Psycho logy Department 01 Harvard Unive rsity, USA. By 1908
he was the recipient of lhe highe st salary 31 the Un ive rsity .
Americans treated him as the authority on everyt hing , He
wr ote thirt y books, articles, and mon ographs .

Dr. MunSlerberg 's contribution to Industrial psychology and

manag ement is 01 t remendous value'.~e focus ed his enenucn
on the fo!lOwing PsyCholo:gica l tactcr s of Ihe workers.
1. How to ttnd such people whose ability and capabilities
are In harmony with the dem and and nature of work ?
2. What are t hose psyc hological factors und er which a
worker perfo rms and ut ilizes his potenti alit ies and
capabili ties besl ?
3. How can a bus iness effec t ~ worker 10 produce tne
maximum?

3. Ellon Mayo
1.
d
e
e
IS

1<

Erion Mayo is t itled as the lather 01 human relati ons. He

became celebrated for his Hawthorne eepenrrents. He strong ly
advocated human sM:le 01 managemenl. He cond ucted many
researches, exp eriments , and studies to find the impact of
working co nditions and environments on the elfi d ency and
Quality 01the worke rs. His these studies are popu larly known
a s Hawthorne experiments. Under ' them he condu cted the
fallowing .

(1)/IIumlnatlon experiments
Th ese experime nts were conduct ed to know the rel ati ons
betwee n the strength of light and the volume of work .

(II) Retay room experlmsnts

These were conducted to lea rn the impact of plac e of work ,
length of rest hours, length of working hours, method 01 payment
and free lunch on the workers' produ ctivily. The se exper iments
lasted for live years.

(/II) Benk-wl rlng room experiments

Th is study staJ1ed in November 1931 and lasted till May 1932 .
Its primary objective was to m ake an observational anafysls
ot the informal work group . The work group compr ised nine
wirers, thr ee seeerers. and two inspectors.

(Iv) Mass Interviewing at Hawthorne

Iactors were

Through the questionnaire the following

In relattcn to productivity .

analyzed

Absence , advance me nt, dirt , f atigue, furn itu re , l ans ,

educ atio n, worki ng hours, m ed ical, overtime, monotony, light ,
Interest, thrift, vacatcn, ventilation, washrooms , welfare, working
space , and many more.
The results 01 the stud ies at Hawthorne we re as Icu ows :
(I) In bus iness a nd Ind ustrial matters human side Is tar
mo re Impo J1ant tnan the machi nes and me lhods.
(ii) Socla l laclors attect wo rke rs prod uctivity . Busi ness is
a part of ever-ett soc ial system .
(iii) Th e efficie ncy of the work ing g roup s can be Improve d
by effec tiv e leading , motivation, coun seling,
comm unicati ng , and guid ing .
(Iv) Specia l attention or behav ior , whethe r pcs ftlve or

negative, Improves productivity of the employee.

(v) Productivity is the result of employee behavior.
(vi) Respectful behavior with the subordinate will increase
his productlvlty.
The results of Hawthorne studies are referred to as
Howthorne effects.

4. Chester I. Bernard
Chester Bernard is the founder ofsyslems theory. System
has been defined as Ma set of things connected or
'Interdependent, and interacting se-as to term a complex unity."
A system Is a whole ccrnpceec of parts In orderly arrangement
according to some plan or scheme. The systems theory PUiS
that' the whole is greater than the sum of its' parts.
According to Bernard, no actlvlty can be effectively
performed until it organized urider a 'system. Due to mental,
bloloqioat.llmltattons, a truman .canncroc things alene. These
limitations lead,him to achieve the cooperation of others. This
cooperation gives rise to formal or informal organization. Formal
organization is defined as a system of weu-detlned jobs with
a definite measure of authority, responsibility, and accountability,
the wnore consciously, designed. -tntcrmat organization is what
people de in terms of needs, emotions, and attitudes; not
terms of procedures and regulatjon~,

is

In

Bernard suggests that the survival of formal orqanlzatton

depends on the -following.
(i) People are able to' communicate: wilh one another,
(ii) The group interest is facilitated.
(iii) The g~oup members have the same objectives. Their
goals should not be contnctory.
A formal orcantaattcn should have the following
characteristics.

(I) It musl have a syslem 01 funct ions. as ma rket ing ,

accounting , pUrchasing, public relat ioning , odds and

sods.

(Ii) There should be a motiv ation system, as salary , bcrws

allowances, pro mot ion, commendation, etc.
(UI) 1ll&fe should be au~rity and decision making sys tems.
Barnard concludes that people like to be org anized
and led rath er than manag ed.

III. ADMINISTRATION
It Is the th ird link In the. manage ment chain which centers on
results. According to Robert Fulmer, administrat ion is ettective
only with best workers, 10015, and coordination.
This schoo l 01. thought is the res un 01 the studies 01 the
ronowing rnanaqem ent experts :
1. Henri Fayol
2. Mary Parker Follett
3. Colo nel Ly ndall Urwlck
4. R. C. Davis

5. Ha rold Koontz

1. Henrl Fayol
Henrt Fayal was a min ing engineer and Indust riali st . He Is
referred to as the fathe r of modem management. In 1888,
when he took ch arge of Commentary Fourchambault a s its
manag ing director , it was nearly bankrupt In a short period
of time Fayc t managed to bail out the compa ny and led it 10
yellow brick road (prosperity). The development of modern
management w as delayed because Fayol's teaching s were
overshadowed by those of Taylor until 1949.

Fayol divided activities 01 Industrial company Into shl

groups : (1) Technical (production); (2) Commerctal (marketing);
(3) Financial (sources and uses 01 funds) : (4) Security (safety
01 life and propert y, and jOb) ; (5) Accounting, (auditing and
statistics); and (6) Managerial (planning, organizIng, directing,
coordinating, and controlling). He declared managerial functions
or acllvilies the elements of managem ent

Managerial qualitlas
Fayol delermined the following essential qualities 01marJagers:
1.

2,
3.
4.

5.
6.

MenIal (menta l vigor , ada ptabil it y, ludgm ent ,

understanding , and learning) .
PhySical (hearth, vigor, address, stature)
Moral (honesty, Iirmness, lnitlative. loyally, dignity,
tecttumess. ability to assume responsibilit y).
TechnIcal (functiona l)
Educallonal (understa nding general situauons)
Experience

In 1914, Henri Fayol advanced the following fourteen

prlnclples 01 man agement which he-consi dered as ttexlbre
and universal regardless of changing environment.

PRINCIPLES OF MANAGEMI;NT
LISTED BY FAYOL

r . Division 01 Work
When an organization comes into exi stence work musl be
divided according to skill and soecranzeuon. Specialized activity
when performed incre ases the eulctency 01 t he organiratiOIl.

2. AOthorily and Responsibility

According to Fayo l authority must be delegated to gel tne
work. done. Authority is the combination 01 official and personal
factors . Ofl icial authority is the power which has b een given
by Ihe comp any, and per sonal autho rity is the inlelligence,
experience , moral wo rth cIC., which are personal.

. 3. DIscipline
- Discipline is obedience and respect for agr eemen t leading to
comp any' s goals. Wj~ hOul discipline there will be chaos and
confu sion. and company's goals will net be acco mpliShed.
DisCipline requir es good superiors at all levels.

4. Unity 01 Command
According to Fayc t, employees should receive orders trom
only one superior who 15 lnvn ediately above him in the line,
otherw ise the re will be a clash 01 authOrity and activities ow ing
to which the work will not be perfor med smoothly .

5. Unity 01 Dlractlon
According 10 it . each group of activities having lhe same
objecti ve must have one plan and one head.

6. Subordina tion of Individuals 10 General

Interest
When there is a crash between two employees the manayemenl
must reconcile their differences. otherwise it would be dillicult
to reach company goals.

7. Remuneration
Remunerat ion to the employees must be tair and based on
equity. Salaries and fringe be nefits musl be ~ no u gh to motivate
workers.

a"

Cen tra"~allon

By the p rincipl e 01 centralizati on Fayol means th at bow. much

authoril y should be de legated to th e employ ees and retained
by t he super . The larger the organization the h~he r will be
the degree of d elegation 01 authorily . Decentra li zation Is the
division of wo rk and delegation of authorfty.

g, Scalar Chain
10
00
ed .

Ther e should be a cha in 01 sup erio rs d own Irom the hig he st

to the lowest echelon. Super t -JOUS texcesslve ) levels sho uld
be avoid ed.

10. Order
By order Fayol refer s 10 matertat and soc ial orde r. It means

m
e,
19

ne

a place!or every thing or ev eryone. and every thing or everyone

in its or his place

)1. Equity
" Management must maintain equity among the employees. Equity
will fac ilit ate 10 draw maximum loyally Irom employees ,

Vi. Stablllly

Job secu rity should be prov,fded 10 the empl oyees to gel thei r
maximu m 01 output. High l abor turnover cau ses greate r costs
and involves many ha zards .

" ,:;,.r:c
13. Inltlatlve tf 1,.t.!;

ml
ull

on
lie

och
oed
be
the

01 T.'!!'-'!re ,/.," , ""~r

.II mean
~"
-. - '
s thinking out

t" c :

' )''--"< ,- - I":

' - " ~.:''
'. ' , ~ ;

! l' J,

and execut ing 411 pl an. Thos e whp are

high ach ievers and have lnitiative should be encou raged: They
get sati sfaction o nly when their ide as are honored.

, 14. Esprit De Corps

11 reters to team wo rk and ccnectlve fo rce 01 emplo yees which

must be used in the best interest of the o rg ani zatio n . Team
spirit makes it possible to get maximum 01 output wllh a
minimum of inpu t.

Why are Fayol 's principle, preferred to

Taylor's?
Fayol's pr inciple s are followed and pref erred all ove r the world

01 managemenl. Betore t um. Taylo r's principles of m anage ment

were accepted as th e only key to man agem ent problem s. But
alte r-the Introd uction of,Faycl'a p rtnc'ples . Taylo r' s pri nciples
were abando ned . Americans, who liked and followed Taylor"s
principles, welcomed and preferred Payers. very enthus iastically.
"'. J

The reason behind it was the teet that Taylor's principles

covered only prcoucten vlewpclnt ct management and ignored

human aspect. On the other hand, savors principles take
into account not only production side but also human relations'

factor.
Payol's principles of management have great potentiality
to give greater productivity and create higher morale of the
worker than Taylor's.

2. Mary Parker Follett

Mary Parker Follett is popularly known as political philosopher
and social critic. She favored group lhinking, togetherness,
participation, creativity, humanitarianism, and other human
aspects of management. In 1920, she wrote a book titled The
New State centering on the leadership and management of
governments. She pinpointed many flaws and malpractices in
several trusted social and political spheres. Her.manaqernent
works can be interwoven into the three links of management
chain - scientific management, human relations and
administration. She Is the lady who developed now widely
accepted principles of coordtnatlcn. She clarified conditions
for developing harmonized efforts.

3. Colonel Lyndall Urwlck

The colonel worked successfully ,as a military officer, civil
servant, and management consultant. He was one of the
disciples of Henri Fayol and advanced his teachings and
philosophy of management. The colonel has a great contribution
to the field of modern and operation management pioneered

by Payol.

4. R. C. Davis
R. C. Davis had great knowledge because he thoroughly studied
at the library of congress everything on management including
all schools of thought evolved by several management authors.

52

,
,
,

Out of his study 01 management he developed a ccmpeehen ewe

Harold Ko ontz is v ery popular among co mmerce and bus iness

administration stud ents and teachers . He is also wide ly k nown
lor his Manage ment Theory Jungle meaning so many dive rsilied

theory of functions and proc esses of management.

5. Harold Koontz
e

schools of and approaches to the study and co ncepts of

'.n
e
'I
n

"

"

managem ent that lead reader s and students 10 confusion. He

says that It Is lu We 10 li nd one best po ssible appro ach 01
. management: Stude nts should develop thei r own thoughl by
studying ditterent appro ache s 01 management. He asse rts
that the dillerences and diversifications are only superficial,
not literal. All th e schools 01 thought guide toward the
accomplishment of ooa ls with the minimum 01 inputs and
maximum 01 ou tpu ts. Th ese d jnerences occur simply because
of the lack 0' und erstanding 01 the readers. 11 is so because
they study these approaches cursor ily, not deeply.

Haro ld Koo ntz is the cc -authcr of lhe Worldfame book,

Principles of Man ag ement , tr anslated into 13 important
language s of the world including Urdu.

FUNCTIONS OF MANAGER
If

Planning

d
n

It means selecting the objecll ves, formulating the poli cies ,

programs, and pr oce dure s to achieve the se cbj ecuv es .
Objective s are grouped into mose ot individua ls, departmems .
and the enterprise. Planning Involves decision making and
selectin g a definite course 01 action from among various
altematives. The responsibility 01 planning goes on the sroujcers
of managers, whether they are at th e top , middle or bottom
otthe organization structure. Ills looking ahead and con cerned
wit h the future . Pl a1ln ing is wha l to do. when 10 do. ho w 10

..

53

do . w ho a~ wh y is 10 do. It provide s yardstick again st which

actual perfo rmance is measured.

Organizing
The next function of the manager is organizing. It Involves
the establishment 01 detmtt e structure of roles . It Includes
>grou~ping 01 activiti es, assignment of lhese acti vities 10
organizational groups, the delega',:on of auth ority and co-:
ordination of the authority oetecereo . Since one man can n I
perform all the runctions , the act' ,ilY must be spill etr true
buying, selli r J. prc ducf J , accounting to achi eve enterpri se
objective s. In organizing a bu siness a full adv antage 01
specia lizati on is enjo yed. The org ani za lion mus t lit lhe task
anc .101 v ice versa . The or ga nizat ion structure is net an end
In il sell but a me ans 10 an en d .
Orga nizing creates or ganiza tion, and o rga nization creates
management. Orga!llzation whi ch is a g roup 01 persons is
termed ow ing 10 time, physical , and ab ility ltmlt orlcns .

Staffi ng
It includes hiring , selecting, pl ac ing , transferring and flr ing . It
is the nmctlcn 01 a man ager 10 define man pow er requirements
for the job to be done , determin e workman's compe nsation
and train th e worke r s. The cbjeclive ot staNing is II> cre ate
such a team which is lo yal to company and its oblectives .
Wage and sa lary adm inistration , pe nsion, bonus, gratui:;' , group
Insurance, provi:lenl lund , employes welf are, transfer, promotion.
retirement, leave , medical co me und er tre purview 01personnel
admintstrauon. Personnel administrat ion is the new term . used
for staffing . St alling starts even belore .. iring and contin ues
eve n after firing .
'I

Directing or

Lea~ ing

11 in velves gu iding, supervising 01 sub-or dinates . The superior

manage r must teach his subcrdrnatee t he enterprise tradit ion.

history. objectives ~ nd policies . Subordinates must learn the

organization structure, roreroepertrnenret retaton stup 01 activities
and respcnslbmttes. They should also know their duties and

autncnues.
Directing improves the performance 01 the workers. It
moti vates the m to wo rk with zeal and ccnudence.' The
suoe rvlsc r's leading, communicating. motivating, and persuading
come under the tuncttcn ol. di recting. Now bett er term leadIng
is us ed for direcllng .

" Conlrolllng
Controlling mea sures actual performance and corrects the
weakn ess in 1M pencrmarce . II also ensures to accomplish
plans. Control competevents 10 take plac e acco rding to p lan.
Through controlling workers are made responsible lor the
errors they make and then they are correc ted to improve the
performance. Cont rolling means 10 look back, while plannin g
is 10 look ahead . There are ttuee- bastc cont rol proc esses. :
(t) Establishing standard

Iii) Measu ring petformance

(ii i) Correcting deviations from standard and plans

COORDINATION
cocrcrnaucn is ever present al every level 01 managemenl ,
and pervad es all managerial funct ions. It has been defined
as an orderly eync hrcnizatlon Of unilication of individual and
group ettorts . It tacllitates harmonizatio n of individual and
grou p goals . The bigger tht,. .)fganizali on and t he resutec
complelCity, the more essentia l becom es til e cccrdlnatlon. .
Coordination is reconciling differences in approach, interpretation
o f pla ns , liming. enons , and in te re sts 01 indiv id u al s,
subo rdinates, comp eers, and superiors.

5~

PRINCIPLES OF COORDINATION
Mary .par ker Follett has gr eat contribution in the d evelopment
of coordination principles , These principles are:

1. Principle 01 Direct Contact

Direct contact prays a vital role in the acccmp nshment of
coordination. Direct contact may be lopdowri ; bcucm-up, and
horizontal. It facilit ates tece-te -tace communication ,

underst anding. exchange 01 idea s. and h armonized

interpretation
plans, policies' and p ~ cedures '-

of

2. Principle of Achieving Coordination at Early

Stages
Coordination is necessary to achieve at an earty slage 01
planning. Unification 01 activities becomes difficult alt er plans
ar e put 10 ope ration .

3. Principle or Reciprocity 01 all Factors

According to this principle all factors, alia Irs. mailers, or
problems are Interrelated In a given sltuatlcn. These factors
are sa much interwoven and correlated thai they cannot be
viewed and analyzed separately or they will mislead the

manager. .

4. Horizontal Coordination I. More Important

Than Vartlcal
Thls principle stales that vertical coordlnalion Is not so much
dillicult because 01 incessant, regular, and direct c ontact
between the boss and his subordinates. The real test of
coordinatio n is at horizont al level. Hor izontal coordfnailon is
necessary 10 Interchange information, interpret plans, imptement
ecnec uiee. accom modate the requireme nts 01 each othe r, and
smoolh the working 01the company as a whole. All the heads

and personnel of d illerenl departments should maintain links

between themselves to exchange inlormaUon. know changed
situations and cond itions, increase understanding , and make
it sure that plans are going ahead as per schedules.

TECHNIQUES OF COORDINATION
By the following tech nique s the manager can achieve
coordination:

1." Supervisor
Supervisors should teach their subordinates concept, principles
and appucancn of coordination.
He should ensure that his
,
subordinates and their work are related with other Individuals
and groups.

2. Organization
Good organizatio n Itsell is a good device to accomplish
coordination. Good organization means proper grouping of
aotMlles . clearly-defined jobs and dulles . clear-cui d elegation
01 authority. distinct correlation b..tween dilterent divisions,
and a well directed system of responsibilities.

3. Wrillen COmmunication
Writlen communication is very useful and ettective 10 achieve
coordination. Writl en communicaHon Includes letters. memos,
reports, bulleti ns, policies, procedures, programs, and other
plans.

4. Group meelings
Group meetlnqs are conscious efforts to accomplish a high
quality of coordinati on. lis purpose is 10 facilitating unification
and relating the ell ens of various groups and departments.

57

5. LIaison OffIcer
like'Supervisor, li aison cmcer Is a good "medium for achie ving

coordination. A liaisonofficer is appointed 10 unify departmental

and group activities. He keeps in touch wit h all departments
and convey necessary Information to 1hem.

,
~NI VERSALITY

OF MANAGEMENT

Dclinition;Allhough like medica l and accou r..ing, management has not yet
achieved profession al status , yet the techniques, pri nciples, and
process of mangement ere universal. Unlvers aJity of management

refers tothe transferabll itycflts principl es,techniques, functions.

and skills from one time, place. or job to another. All these
management practices are equally practicable and applicable

everywhere in the world Irrespective of (he nature of the job,

dltferences in the customs, habits, and social laws . Manageri al
functions. tech niques can he practised in every or ganlzed effort .
Wh ether it is a business, shop, industry, government offlce,
educational, social, pro f itable or nonprofitable organ ization ,

management principl es, function s and techniques are prufltahl y

and productively applied . A successful manager of a compan y
o r a Held can he equally successful in the other . Th at is why a
manager
a company can he safely tr ansferred from one
department company. or area to another . A captain of a cricket
team can he succesful as a manager of tne hank . A reured arm y
~ cn e ral can succcsfu lty holt! a posit ion of chairman in a company
or president of a country . In Pakistan it is a routine pr actice of
transfertng bureaucrats from one department,institu .ion to
anothe r with quite different work.

0"

Arguments fur Universality

Different experts have thr own light favorab ly o n the universalit)' of management whose poi nts an: as follows .

S8

I.

Apart, from the nature of the job, management level, industry,

company, or country, every manager performs the same
functions. He has to plan, organize, lead, and control, no
matter he is working in the capacity of a junior or senior
manager, head of an organization, army general, or president
of. the country ..

II. According to Fayol and Urwlck, managemnt has some

principles, like unity of command or division of work which
can be ignored nowwhere.

III Every organized effort has some basic principles, factors,

and rules. Every business. educational, goverment or religious organization has common baslc managerial principles.
If there is a difference at all, it is that of a techntcal skill or
nature of a lob. Unversatity never means that one particular
job should beperformed by every manager. But it means thai
all jobs have principles ill common that must he followed h:every type of manager.
IV Universality of management can be.judged from the fact that
a hockey captain can become an efficient manager in a hank.
An army general can effectively hold a posit ion of a company
or a country.calthough the nature of technical work is quite
different in hoth the places; but the principles ofperforming
the Jobs are the same.

Arguments against Unlversnlhy

There are many management expet~ who oppose management

principles as universal. Opposing arguments are as follows:
I. Though management functions, principles, techniques, and
practices are equally acceptable in diversified environment
and conditions, their practicability has some natural limitations. As far as human, analytical, managerial skills, and
dcclslon making abilities <ire concerned these are of course
transferable. But if a job demands a particular technical skill,

59

it can be performed only by its expert or specialist. Doctors

arxl physicicns cannot do engineer jobs .The pilot of an airplane cannot steer a ship. An accountant cannot work as a
production engineer. A manager of one culture, environment.
or custom may not adapt to another.
2. Univerality of management refers to transferabilily of its
principles, techniques, functions, and skill from one time,
place. or job to anomer. But in actual situation it is not
practicable. An army general who has acquired austere
discipline and rigidity cannot become a successful head of a
university. Applying Ibis principle. experience and rigid
discipline in the university will spoil the atmosphere of
soft-disciplined university. Inversely. if the disciplin of a
university Is applied in the army, what wltI happen?The army
will be destroyed.
3. Objectives of every company are different, They may not be
transferable. A manager. accustomed to a unique almosflhere
in 3 charitable institution which has a ttberat policy to dlstribute funds to the needy people, is sure to fail in a bank
which has to be austere and rigid in advancing loans.
4. Most management principles an; based on personal expertences and have no scientific tooting. Hence, they are contlictory or they have to be violated.

S. The prtncipleof functional authority is actually a violation of

the principle of unity of command. The first principle
necessitates two bosses of a subordinate. The second principle. on the other hand, requires only one boss for a sul1ordinate. Matrix organizations is also a viclatkm of unity of
command. Matrix allows a subordinate to have IlS many as
flvc bosses ever .: him.

EXAMINATION QUESTIONS
1. What is management chain? What is it composed of?
Explain.
2. What is scientific management? Explain briefly the
theories advanced by scientific management theorists.
3. Compare views (if Taylor and his contemporary Gantt
;an the view of scientific management.
.'4';" Describe briefly the theories on human relations.
,YCompare scientific management with human relation
management. Which viewpoint do you prefer?
6. 'Had the work of Henri Fayel not been-overshadowed
by enthusiasm for Taylorlsm, the history of management
might well have been different and the prlncin1es of
general management would have advanced much
earlier." Discuss (Hint; Compare Taylor's scientific
management with Faycl'e administration).
Discuss administration theory from the viewpOints of
r
,
the following management authors:
a} Fayol
'fb} Mary Parker follett
c) R. C. Davis
../. d} Colonel Lyndalt
e) Harold Koontz
\ ) / What are the functions of the manager? Do you think
like coordination, planning is present rn nu other
managerial activities.
~ What is coordination? What are its principles and
techniques?
J,-Q":"OiSCUSS the contribution made by Henrt Fayol to the

, 7,/

development of management -thouqht. In what aspects

saver's contribution oruers from that of Taylor.

61

CIIAPTER4
PLAJ'1NING

DEFINITION

ST EPS IN PLANNING
Determ ination of Objective

Communication of Objective
Determination of Premises
Survey of Resources
Formation of Policies
Determination of Alternative
Courses
Setting Procedures
Setting Rules

Preparing Programs
Making Budgets
Determining _Programs
Setting Standards _/
Formulating Strategies

TYPES OF PLANS

_MOO
MB O and Performance Appraisal

PERSONAL O BJ ECT IVES

DIRECTIONAL PLANNING

TEN REASONS FOR FAILURE

(,1

PLANNING AS A PROCESS
Those who don't plan are sure to fail. Those who don't plan
are leaving the things to chances. Operating on chances is
dangerous which an organization cannol alford. Planning is
the primary task of management. It precedes all other
managerial functions viz, organizing, staffing, leading, and
controlling. Failing to plan is planning to fail. Planning reduces
.
.
the chances of failure.

..

Planning is more than forecasting. /I involves the process

of selectlnq objectives, determining a course and following
that Course in order 10 achieve objectives. It answers aft five
Ws (What, When, Why, Where, Who).
Planning makes things happen thai would not otnerw.sc
occur. It makes future happen the way we determine. It onsets
uncertainty and chances. Planning includes assessing future
and making provision for it, as sees Henri Fayot. Decisions
which are planning are made on ttie basis of assumptions or
premises. John McHale says, "The future of the future is in
the present". This means that the future depends upon the
soundness of the decisions made to-day.
Planning pervades all managerial Iuncncns. It exists in
organizing, stalling, leading. and contrOlling.

6J

PLANNING STEPS

v
When planning we have to follow the undermentloned slaps:

,,"-

l'

1, Choose objectives,
2. Communicate objectives.
3, Identify premises.
,
,,
4. Survey resources.
5. Establish policies.
6.; Choose alternative courses.
7. Create procedures and rules.... \'
8. Establish budgets.
9. Establish lime tables/schedules.
10. Decide on standards.

1. Choose objecllves

I,

end

I,

/)

Objectives are goals, purposes, or

points. Managerial
planning starts with settinq objectives. Planning involves
selection of enterprise and departmental goals, and.
determination of the means of attaining them. Enterpri~e
objectives range from profit making to survival. According to
Peter F. Drucker, there are eight key areas in which objectives
of performance should be set:
a.

Market standinq:

High, medium, low or somewhere

between high and low standing.

, what
b. Innovation: The company should innovate to
extent and what cost.

c. ProductiVity: How can the productivity of individuals

departments, arid the enterprise be increased and to wha

extent'?

d. Physical resources: . How

much capital should b

allocated to tlxedassets, current assets'? .

Ie
64

e. Financial resources: Determination 01 the ratio 01

various linancial sources and their uses. Sources include capital.
loans, and retained earnings. Then howthese resources will
be used.

f. Human resources:

Determination 01 size of
organization and its levels, number of employees. and their
job descriptions.

g. Profitability:

Determination of expected profits,

Introduction 01 a new productor servIce, preparation of sales
budgets.

h. Social responsibility:

Producing the goods and

services to satisfy the needs of the consumer at a price equally
acceptable to the producer, seller. and consumer.

"5

o
5

at

Objectives are needed in every activity. The survival 01

the enterprise depends on the accomplishment of them. The
selling 01 objectives precedes any business activity.

2. Communicate objectives
Once oblectlveshava been set they must be communicated
10 every contributing member. It is a manager's responsibility
to coordinate and unify all diversified goals in order to com'bine
efforts. The predetermined goals cannot be accomplished unless
the efforts and actlvittes of the following parteotthe organization
are coordinated:
(I) top management, (II) production department, (iii)
l11arketing department, (iv) finance department, (v) managerial
stall. and of course (Vi) workers.

Objectives act as a yardstick against which actual

pertormanca is measured. On this concept MBO (Management

by objective) has been developed the paris of which are as
lollows:

65

B. MBnagtlrS

are measured b y what they accompl is

How they spend their li me is not taken into acco unt .

b. Managers

are in the knowle dge 01 their ob/eCl lves.

c. Managers

and subordinates partlclpate in seiling the

objectiv es.

3. Identify premises
Premises are assumptions 01 planning . Premi sing is mor
than forecasting. They are the asses sment 01 future. Premise,
are ot lhree kinds:

8. Uncontrollable premises: Th ey include lega

environment, social and socccccer tectcrs. political conditions
technological chang e, compet njcn. and demographiC dynamiCS
These uncontrollable premises cannot be controlled by human
and tneretore . the bu siness men have to adapt th eir oblecuve
and polic ies to the need 01 the time.

b.

Sem/~controlJable

premises:

These are premises

wh ich can be controll ed only to some extent. Prouts . labor
unions, pr ice, and tabor turnover are semi-controllable tactcre.

c. Controllable Premises: The orpanlzatlcn command s

these prem ises. They include expa nsion of the cc rnpany ,
introducti on 01 a new product. reduction LlI a product line.
market research. and advert ising campaign.
Premises reply 10 Ihe lollowing qu eslions:

W hat
Whal
What
Wha t
What

volume 01 sales?
price s?
tecn nlcal develo pment?
various policie s?
product? What its color , size, shape , model?

66

Whal cosls'?
Whal wage rates'?
How to finance needs?
Premises may be internal. external , tangibl e, intangible,
long term, or shon term ~

4. Survey resources
Selti ng 01 obj ect ives and identif ying premises depenljj on
available resources . If available resources are not taken Into
account, objectives will be Ideal and sure to fail. The objectives
and actlv !ties that have been de termtned are reconsidered
and revised 10 the expediency of avai lable resources, and
existing situat ion . Limitation 01 staff , money. facilities , time,
markets,
environmen ts pUt a bar on objectives. In sho rt,
id eal object ives should not be made. Prospective celecuvee
should b e accompllshable by Ihe available resources:

and

5. Establish Policies
.~.2llfl e s are g~ne!.C!I..stat eme ~~, thaI 2ui~.~i_~~~~~s,,!E.~~~
~~k l ng . They deli mit area which explains whit to do. They
"confin's' "wers and authority. Policies uid thin in and aClion"' ~ ,_ e"y pr6v, e a...l"~.~e~ __ with in which a de.cision is 10 b;t
made. Policies slrailj"aCke:i' maveriCks':' sell starters. and nigll" "
achieve rs. Acco rding to Fulmer. policies are subsurute lor
common sense ; The y are deliberate, logical. and intelligent
plans .
M

.' ~

Policies may be l"1>li ed. origina ted. appeared. or externally

imposed , Implied pcncv is not st ated and Is adopted as a
routine. Originated policy is one issued by the top management.
Ap peal ed policy is one tor mutat ed o n th e request 01
subordinates. Externally urcoseu policy stems from Jabor unions,
govern ments, and social and traditio nal laws. Deliberate policy
prohibits illogical and unsound pressu res. However, policies
should be fle xible and l augh!. They are chart er of action.
" ..
.

67

-"_

- .~ ~._-~-- . -

6.. Choose Alternallves

When all possible courses 01 acttcn have been id e n til ll~ d they
stIould be keenly evaluated and analyzed. Feasible and sultable
course of action stlOuJd be singled Out. Feasibility is.determined
on lhe criteria 01 cost. terre, riSk, and shoe leather. Decisions
have 10be made when there are anemanves . In the absence
01 alternatives , there is not cec tstcn making. On the extstence
-01

an obvious best course of action , no deliberation

is needed.

A decision exists only where different 'alternatives are Slightly

different from each other , ' "

7. Creata procadures end rules

Procedures : :.-;
Procedur es establish a custo mary method or handling future
actvttres. They involv e a select ion 01a cocrsect action . Th ey
detall the exact m anner in wh ich a certa in acti vity must be

---. _._--

accomplished. Procedures
are
slep by -ste~ guide 10 action.
..
.. .- . ...
_.-_. ..-.....,.

They att

su~liCl~~_o~ .~~E~njz~1!9n:...Tt!!Lset a chro_r~*IO~~

sequence of steps 10 pe rtcrm en acllvity successfully and in

If aesfred -manl1 er.-t fley a're policy"mailers'macfi"ir;- ad-;a-~~~-.
'P roce di.i res" refleCI a practical aspect 01 plan. '
. ~ - - - - ",. _ ; .. -- -,- _. ~

---"- ... _.
" ..

"

..

Rules:
.' ~~~ .!..~_QY~.!_91_ re~!r~~.

aCI ?~~ . Th~~ ~r!'l codes QJ_

.ai.sclplioes..' They aCI . a.!..-sta~in9~oidli!.r $:.JlulU.....a~. .,yell-s
. !!'.lH~.9.Qo~i' Thii-~el~!'..mine -:;' cours~.o~ 8!!gD .reguired 10
be lollow.e.Q_under a:. gJve i~ ljUal i()n. ~T heY point 'ou t- hoW"'a

specified and cseflnite actio n is 10 be taken in a certainecrc nc n.

They ' are non-chang ing and short orders. They reflect a

managerial decision and are followed without any sequence,

They are set in advance. ~xamples a~e.:
No smoking

_~~,,!~~_~.pasS i~g
No Ihoroughlare
No admission without permiss ion

tio-ooi-cllslufb "

"-" _.-.--"' .

8. Establis h BUdgats
~ jlu.dgalls a .~.!!~~, of eXR~.I~_~u.I1 ..ex PJe !i_e.d_ ~!!J
nemerlcat terms. Bud gets are numb ertaed programs, They
'"
--...-

may be expressed eilhe r In financ ial terms or In the terms 01

man-hours. units of products . macnlne-nours . or any cftier
numericall y measurable term s. Budg el has also been defined ,
as le,lIing'money whe re to go rather th an asking It where n
went.
There Is always the ca reer 01 overbudgellng . BUdgets
answer what. Where, .wnen and how much. In-:addi!lon 10
overbudgeling, there Is also a danger 01 inllexibility . Budgeting
strait jackets managers al all levels .

\\~ 'hVt ~ /i.d,) !~ .

9. Pro grams
~ograms are a compOSil!<?!1_ ~~~I ~ie ~J>!.0~!.d~!o
.'Hl~~ rils neg!,!~~ :iar:iJCl _arry .o_ut JI _p,afl .!~. l!rtt!~'~y. .._~
are concern edwllh" t ime schedules.

--..-

'- - -'.'~~-~" ."

..

'.'-" " ~ '.... ....

-,

Programs must be ' supported by capital and bUdget,' or

they will go tuttle . The)' may have the ir derlvatlons and
subdivis ions. A company ntd)' have a program of e'xpanSion.
purchase of building or machin ery. hiring, renovation , or a
new p roduct launching .

10. Dacld lng on stan dard s

.'

_.'- _ -, '.

Estab lishing .standards is very Imperativ e. Stand ards provide

- ....

a;El!~!!...9.L.Q.1.. it~ .~. }'.~J.~ S.t i.9_~_'!911~~~~i ch acty.~.1~..eJ:Wm~

!s measured. Standards MEtRlans. l~ also act as a controlling
devlCe."'tor s~essful appraisal standardsshould be practicable
and understa ndable . They may be quant itati ve or qualitative .
They slmplily the task 01supervlslon. Ad equate and clear-cut
standards incr ease the span 01 control. A sup ervisor can'
mana ge a gre ater number of person s wo rking und er him.
Futu re standards are plans and past stan dards are cont rols

- ,

69 ,

de.o (Ii ,, -./

.

....,1...

(
11. Formulallng strategies
STRATEGIES (e'! ~

. b -;;.

. , "-:

f fr t

..

.Q!eus. ~Ihe proces of deciding

R.N. Anthony. detl"

~eclives of th!-organll!t~~ . ~(i(lcjC!i!!.s. on cl'iang"s j n

these ~j~~..~Q. .~,~~~!~~es used to @1.tJjn

these objectives, and deciding on the poUcie~JML.8IiLlQ

govern IheaCQUiSii iOn:'use~a'nd "is'PositlOn0i'i~;8e resources.-

_

. _ _

'_' h

. _

. .

... _

Ma
em

Samuel C. cenc defines strategy 8S, "a broatf and {leneral

ptan developed10 reac ~~ :!!~2Q:!L~!'.Q~~i'iiik; ~!..~~E.r.

~egv mJsloe consistent whh the gaals Or Ih4nirgarnzattOn.

...

In the formulation ot the strategy , the loUowlng questions

should be asked , as asserts Carto.
What are the .o bJectlves of the organization?
Where Is the ~ roa n izat ion presently going?
'1'1 :what kind of envIronment does the organlzallon now
exist?
What can be done to better a,chleve organizalionaJ objectives
in the tuturs?
StrategIes may be grand' or competitive.

Grand Strategtes
Their emphasIs Is on the type 01 basic goals and on the
pol icies to achieve Ihese goals. They refl ect the nature of the
.
company and its bu siness.

Competitive Strategies

These are prepared kJJ8plng in view the po licie s and plans 01

competil ors. They are meant to dispel or neutralize the impact
of the policies 01 the competitor.

Types of plens
Objecli ves
Policies

70

Ha'
be.
Th'

are
lac
10 I

un<

Ml

Procedures
Programs/time tables/Schedules
Rules
Budgets
For details see Steps in Planning

MBO
Management by objective is the approach by whtch both
employee and superior jolnlly set performance goals and duties.
Having participated in the fixation of his own goals, the employee
becomes more involved, dutiful, and active in performance.
These go~ls so set are n'ot only mutually agreed upon but
are concrete, eennite. short-term, and measurable. MBO
lacilitates employees to adjust their time schedules tram time
10 time to attain Ihe goals In planned lime. II helps employees
understand objectives and duties clearly.

MBO has three elements

1. M..!n!ge!.~ {~ubordlna~.~ ~~~~~!~2J.ll~~~..~J!:I.!'as~r~
'l.'!hat they acc~rlJl1!ish rather thAn ho~,,!!1~y_Wfl~ !heiL
time. In plain terms management should be resultoriented. MBO approach centers on not how you spend

your office hours, rather on how much you produce.

2. Manage'rs must be well-informe~LQL!!!ID(. obiegl!l{"li~
Managers' objectlVesare their duties that Ihey,musl
perform. For proper and eltectlve performance it is
essential that they are In the knowledge of what they
are to perform and what are the plans and standards.
3. Managers and their subordinates should jointly set
gertOrmanceoije:ctiv~. Due to parUcipaiio'n in (he
fixation 01 their own goals, they become more involved
and duty-conscious. Participation is a good motivator
encouraging the worker to be more efficient.

7I

"JBO approach wlJl yie ld no res uits /I

(1) Goals are long-term.
(Ii) Employees have no partlclpattcn in goal!setling .
(iii) Objectives are not clearly defined.
(iv) Objectives are not ccmmunlcated to the reje vant
personnel.

Advantages of MBO
1. Organliatlon Is clearly defined'
In setting MBO. organization roles and struc tur e have 10 be
clearly cennec. . Clea rly c ennec authority is delegated. Key
resuns to be accomplished receive prope r and due attention .

2. Better management
The quality of management is Improved because MBO focuses
Its attention In planning, organizing, and controlling .

3. Personnel commitment
Since he has participated in the satlilg 01 goals. the subordinate
m~r'lag9 r is committed , .dutiful, and active.in pertcrruance.He
has , high morale.

4. Effective Control

,.

MBO net on ly facilitates planning but also sparks and imp roves
controlling Manage rs are sell di rected and ccntrcnee .

Dysfunctions of MBO

1. Danger of Inflexibility

Subordinate managers are not-allowed 10 aoiust their goats

10 the need 01 time . If cond itions have ~ha_nge d the goals
may become obsolete .

2. Ignorance of long-term goels

Too much emphasis is concentrated as snort -term goals. wh!le
long -range plans are ignored .

72

3. Inability to teach the philosophy 01 Mf!O

The conce pt and phi losophy ~t MBO Is sell-direction wh ich is
overlooked .

4. Dlfllculty In se/l/ng goals

Too much concern lo r econo mic resu lts make it difhcull to

set truly verifiable goals,

5. MuCh papar work Involved

Detai led wntten goals. their communication, and pe rtcrm ance
evaluation Increases the volume 01 paper work .

M B 0 and Performance Apraisal

Pcrformaacc o f tbc manager mu st be me asure d in orderto determine
his e fficncy or la ck of it. The objective of appraisal is to
(1) allocate Of reallocate resources of enterprise.
(2) det ermine natu re and type of rewa rds to managers.
(3) provide qu ick and timely feedba ck for managers . .
(4) create a congenial at mospher e facilitating good b oss-sub crdlnere
.relationships.
.
A mod ren a ppro ach being used for the app raisal of perform
ance is the concept o f MBO As an appraisal or controllingdevicc,MBO
facilitates
( I) performance and makes the work er conscious of the qu alityand
amount of his work .

(2) mutual goal setting which leads the subordina te ma nager to

self comm itment.
(3) concentratio n on goals which in turn allo....'s the subordinate to
ju dge hisown pote ntia! and skin and ut ilize them to their maximum.
A man age r with a table clear (If pa pers etc. and just relaxing is
de finitely more efficie nt" than the one nvcrly busy with much work
rending becau se the former has already pulled his weight (com pleted
his part of job). By M BO managers arc not measured by how they
spend their time, rather bywhat theyaccomplish. Theyarc not ranked
by their loyalty and honesty. The pe rsonal and possibly biased
judgmen t is shifted 10 nonper sonal, unbiased, and objective cvalua.
tion.
.

73

However, to achieve such an evaluation, supenors musl be

d ear, specif ic, and considerate about what their subordinates arc 10
do. If the goa ls are set by mutual und erstanding and properl y
~.

comm unicated, a nd a regular fecdba ck is furnish ed. MBO will sure

fire prove 10 be an effective and successful appraisal and controlling

,i'

device. A lthough the manager has a ve to power in bissubo rdlnetc's

1.: 11al setting, he rarely uses this power.

I
r

Personal obJectlvos
Personal objectives "ra as jmccu am -as busine ss or
organi zatio nal objectrves. Satisfa ction ot personal

obJeclives

Is the source of relaxation. haPpiness, pleasure, and !essening

tension. Having and concenlrallng on a lew and spacinc
objectives is far better than many. According to a study 01
52 ,000 readers of "Psycho logy Today, ~ "Happiness is the maner
of settln g personal standards, not chasing alter other people's."

DIFlECTIONAL PLANNING
(PLANNING WITHOUT OBJECTIVES)
Oire<:tional pla nning refers to planning wllhoul OO~. Planning
i~With goal but atso withOut one. According to
Michael McCaskey some types of proposed wor k have no
distinct objec tiv es until we get lnvotved wilh them. Here . first .
we start the work without specific r&SU't in mind, then alterwards
things begin 10 take shap e pointing to so me specluc end .

Dillerence between Plennl ng with Objectives and

Planning without ObJectives
Planning with Goats

Planning withoul Goals

It 1s directed towards internal

1, It is directed towards
external and organizatio nal goalS.

ooatstA-f"e./;O"-\ c ...... $ .

74

2. Goals are e ieur et,

specific , measurable,
and rational.

Goals are not specific.

defined. and measurable.

3. 11 requires energy and

efforts .

u Is supertlclal and copious .

4.

Planning and executing

Planning and executing go

are separate, stages . .

In unison .

Aflwt.1.,

t.,l.~ f~tn." "l. ,

'T't-<>

fX'
.

f M t..fJ v,,! tt ;'lx,y.d

\. . 5. ~li'!J ,"""matlon
not
r&qul,." IQ be 8A~d ,

i ...

k~(.(1f-';:: 1~'Id, :'-' .

6. Spectru m

narrow.

7. Il
l;

't "

of task Is

ts

... ~.J..,. ~ a>\1 ~ '~l \. \! "1

~ c:,..(': (>. . ~ ~ ~_ ""L,'" ()~

"'I,?\J.&

I~

tl

, ...~

-.NIl" li llor allon IS 16 6e

.-&Ralvzed:--

_~

~"

"

Spectrum of task is wide.

.'lrle.,.), r>r f" I'-'- :!::t.:c.,Jo,(,.~ ( ':'f/<

-JGLJJ:t9i;e
'

e- n well.
defined objectives.

It Is
bkHef-t hOs8'who
prefer variet y, change. and
complexity.

t;fo..J,t, I c ..t', {,.

8. It is useful for jobs and

It is uselui for the ta~~ ~!, (" J t )
companies which are
measurable and stable. '< ,.'( 1 c r l I ( t
s~.and JDiljW1[able. - --:- :,..- "., j];:-';"';-;:':.~" ;~' fr,.' e.
, / 1 t . ,:~
t/(/r;..f /' tr. ;.-Icr l. (( !... rl.c.
,"' ~ (l""l l ' >.. ( :<;
v

JI"

"d'''ri ri1i'h soNs FOR

FAILU'RE .

Kjell A. Ringbakk made a survey by studying over 350 European

and American corporations to establish the reaS?ns for failure.
They are explained as under :

1. Corporate pla nning is not unif ied into the lolal

management system. There is no coordination.
2, Plannlrig is not systematic. II is 81 random. Managers

have no unders tanding of the dilferent aspects 01

planning.
3. All Jevels of management do nol plan.

7S

4. Responsibility for planning Is understood to be vested

solely In planning departments.
5. Management assumes that they will be hundred percent
successful because of planning.
\
6. Too much is attempted at onetime.
7. Management plans its work, but fails to work its plans.
8. Extrapolation and financial planninrt are taken as
planning.
9. In planning adequate Information Is not obtained.
10. Too much attention is given on one aspect of planning
while others are overlooked.

1.

2.
3.

4.
5.
6.

7.

6.

9.

76

Examina tion Que.llons

1. Deline planning '? E:tplain steps Involved In It.
2. What are the types 01 plans? Explain .
3. What is a budget? 00 you think budge t Is not only a
plan but also a controlling device? Support your answer .
with sound reasons .
4. Define cblectlves. rule s. schedules , and strategies.
5. What Is MBO? What are ns Ingred ienls?
6. Wh111 is the import ance 01 pers ona l objectives of the
manager in his organizational life?
7. What is directiona l planning? Compare it with planning
with goals.'
8. What are the len reason s for failure?
9. Eva luat e the ut ility of MBO as a techn ique 01
performance appraisal. Also etscuss its d isadvantages.

77

CHAPTERS

EFFECTIVE DECISroN-MAKING

DEFINITION OF DECISION MAKING

AND PROBLEM SOLVING

PREVENTIVE PROBLEM SOLVING

PROBLEM SOLVING AND ITS STEPS

GROUP DECISION MAKING

National Group of Technique (NGl)

Delphi Technique

GUIDELINES FOR DECISION MAKING

EXAMINATION QUESTlO:-;

78

,,

n '

. _

~~-~ ~!-""~:~ _ _L...

,I )

~ ;,J;.w..fitt rrI'Oeet '~

(:

('

, ,JI

"

ktr,-."ta .t':) ~d', '...i.

~~ ~c-.,.._1-:~ ... cLo...-";,

cJ,)

~)

aa ~F ~ C-- C.l....ffIW ,

(5) De. c. ,' ~,'f\IoV

-"n ('~jl2

Decision making is different from problem-solving . Decision

making involves (1) premising (2) identifying alternatives, (3)

The evaluationof alternatives. and(4) selection ora best possible

coursefurmamong these alternatives. On the other hand, problem
solving refers to identifying problems, analyzina: complex: situatioos. and exploiting the opportunities. Actually. for dynami c
managers, prob lems are opportunities in disguise. Problem

solving leads to decisionmaking, Problem solving is the means

to an end. and decision making is at' e!ld in.ltself.
PREVENTIVE PROBLEM SOLVING
Problems are blessings in disguise. Charles Kettering Says .
"Procl erns are the price 01 progress. Do,!'1bring m e anylhln g ,
but trouble. Good news weakens me."

For tbose managers who lack Kellering's per severance

and dynamism ma y solve the lollowing queslions in order to
prevent problems :

79

'

\ftt:J:~ _l/I' l_~~~__,

1.. Whl.l Is right?

2.
3.
4.
5.
6.

What can go wrong?

What could 'cause this problem to occur?
What preventive action can I take?
What is my contingency plan?
When will my alternative plan go into acllon?

3.

1. What Is Right?
An efficient manager must remain alert to any problem that
can developto a great crisis. Some problems may go unnoticed.
no mailer how important they are. Crises, like opportunities,

Ac

ev

often go unrecognized. When problems go unnoticed then

they again appear In the form of a calamity. The manager
should be able to foresee potential problems. He must
distinguish between the right and the wrong.
To determine what is right following questions may be
asked:

4.

Is the existing price level right? Is the promotion policy

proper? Are the product design, packaging, and ingredients
to the market standards'? Are the middlemen chosen right? Is
the salary structure updated? Determination of what is right
is actually an analytical approach to the prospective problem.

Tr,
sir

2. What Can Go Wrong?

rer

Or

0'

Til

Murphy's Law of management states that if anything can go

wrong, it will.
Managers should be pessimistic to 'expect the worst and
then making the most of it. A problem recognized is elready
half-solved, as claimed by Baker.

sir

ex
he

5.

M:
un

After a number 01 potential problems have been identified

they should be grouped. The ranking of the nature of the
problem is as follows and should be dealt with accordingly:

80

pre

Illc

an

a. Serious problems tha t must be avoided at all COSt9 .

b. Average problems t hat should be eliminated with
considerab le efforts .
e. Minor and trivial problems that require cursory and
superfk:lal eue eucn.

3. What Gould Gause this Problems

to Occu r?

According 10 Pierpont Morgan, "There are two reasons for

eve rything -the obvious reason and the real reason". The
manager must be able ' to lind out the real reason 01 t he
problem . He sho-ud have in-depth thi nking . It a problem has
appeared H becomes easy 10 determine the reason. On the
other hand, lt is difficult 10 d etermine the causes 01 pol enUal
problems. In such a case a manger should rely on experience
and jUdgment to Jist possibl e causes 01 a given potential
problem. Timely idenlilicalion 01 the causes of the pro btern
will be like "Stncn in l ime saves nine."

4. What prevenllve Acti on?

Once the problem has been toenimeo. remedy becomes easier.
Dilfi cullies do nol come up before alert and vigilant perso ns.
Trouble is less likely to visit a prepared o rg a n i z ~ ' i on . A very
sftnple precautionary step would eliminate this potenua t problem.
The analysis 01 Ihe potennat problem enables a manager 10 :
reduce the chances of ' a problem development merel y b y
simple steps and measures. Preventive acucn is just like re ~ ' aJ'
exercise which is done to prevent obesity. blood pressure,
heart and other di seases.

5. What Is My Gon tlngency Plan?

M::lnagers are acvtsed to be ready lor any unexpected
unforeseen calamity eve n after he has ~ enli tje d the potential
problem. causes, and preventive action. Watchful and argus
li1anagers always have a contingency plan to face any sudden
nnd unexpected dilemma .

81

6. When Will My Alternative Plans Go In to

Act foa?
For contingencyactions a manager shOuld astablish a triggering
mecha nism that should wor1<. in lima and prope rly - 10 g el
over the crisis. Sometimes, individuals are credited w ~ h pati ence
simp ly because they don't have the ab ility to make a deci sio n.
Good managers know when to put tnetr alte rnative plan mtc
acttcn . Alt erna1ive courses 01act io ns must be deve loped well

before the appearance 01 the expected problem.

5
A
cJ
th
m

re

6.

n
na

dl,

Problem sol" lng

co

The Steps in Problem SolvinglAnalysis

To analyze a problem the following steps should be taken:

7.

1. State the problem

co:

AI
The problem should be clearly and specifically stated and defined .
Clearly Slated and defined problems make soiut jcn easy.

im
ret
d",

2. Define th e present level

The presentstate of affairs and situation should be clearly defined.

8.

Definitionofth eproblem explains what, why, who, when. where.

and how

aln

De

rea
an>

3. State the objective

is .

A manager should know where he is and where he wants to go.

The difference is the objective. Once the objectives are clearly
and concretely defined working for them becomes easier.
Objectives should be realistic so that they can be accomplished.

4. List t he possible causes

The planner must know and try to find out all possible causes of
the problem. Once the possible causes have been determined its
remedy can be adopted.
8>

opt

9.
Pia
ll lt~

he
We
ad

5. Select th e most likely cause

After all the possible causes have been listed , a manager should
choosethe mostimportant or most likelycauseo f theproblem-so
that remedy may be determined accordingly. Identification of the
more likely cause makes the prcblem-solver'ajeb easy. This step
requires to go deep down the problem.

64 List alternatlve solutio n

Th e problem-sol ver should develop sound and workable alternative ways to solve the proble m. Able menage ri es confine
thems elves 10 a few and relevant alternatives . They should
consider only fruitful and useful possibi lities.

7. Analyze alt ernative actions

Alternativ e courses sho uld be weighed in te rms of time, effort,

cost, and risk. One alternative may look more profitable but may
involvegreater risk. Another may be expensivebut entails quicker
rerum . So analys is shou ld be very careful and according
demand of time.

tothe

8. Make th e declslon
Decisio n process includes the selection of the best possible
alternative course of action. Best course is one that invo lves
reasonable amount of risk, time, effort, cost. After a carefu l
analysis of the alternative, make a decision confi dently. Decision
is the basis of future activity . Right decision in the right time
ope ns the venue for success .

9. Make an action plan

Plan the detailsof the eve nts that will have to occur to follow the
altern ative selected . Programs and objectives of each step should
he given proper atte ntion In order to' accomplish the sotutlou
Workaholic lind dynam ic managers get afoot after they hove 1J.l:td,.'
a decision.
83

10. Accept the-credit graciously

When the plans have been executed completely and successfu lly
the cred it, praise, and recognition from the colleagues and peers
should be accepted humbly and graclously . Successful managers
should not be over-bearing and blusteri ng on their success. They

should not start looking down upon oth~ managers

Group Decision

~'faking

T wo minds are bette r than one. This maxim is widely applied in

decision makingunder modern management system. Decisions
made hy a group rather than an individu al are far better . Group
deci sion making Improves morale and produ ctiv ity of subordinate
managers . If a group decisl c a comes to a fiasco, ind ividual 's face
can he saved , William Occhl . a Japanese-American manag ement
expe rt and thecirst, favours employee participation in dec ision
making in his Th eory Z .

Group decl slon making may be implemented in the following .

method s.
I . Nominal Group T echnique (N .G .T.)

2. DelphiTechnique

NOMINAL GRO UP TECHNIQUE

To follow this technique

:1 comm ittee is formed . During the

sess ion its members arc asked to put forward their written suggestions to a certain pr oblem . At this mome nt no discussion is
made . Once the suggestions from all memb ers arc received they
Me written on a board or chart. If some suggestion is vagu e, it
;$ clarifi ed from the relevant person . At the second stage t hes e

suggesti ons ar e comb ined together and put into a list. Then starts
debate on these suggestions. f\l 0.1 is adopted because of the
fol low ing reasons:

64

1.' Participants come forward with maximum suggestions.

2. Original suggestions are not biased with those or

others' .
3. People are not under presure In presenting or suppressing their opinions .
. ".,_
4. Bias in the decision is minimized and controlled to
a good extent ,
. .
~

"

. DELPHI TECHNIQUE
Delph i Is the old aort abandoned name of the ancient cit! in
Greece where the pnest and pr iestess used to receive divine
comnwncatjons. The Priest and Priestess 01 Detptu atsc sent
thelr couriers to the wise and lnteuectuat wit h the errand to
send theIr expert c oi-ti on about a problem to help th e termer
to make sound decisions . Hence . this type 01 group deci sion
making ~.S ~O l n e d as O&IJ:lhi tec hnq ue.

:\
Under the modem Delphi Iecrmlque a questionn aire is
prepared and sent tc several experts separately. These experts,
usuauv 'm anagers, are jnvtteo to answer th e questi onnaire .
This survey with different questionnaires is repeated usually
tour or five l imes untn tne experts' opi nions begin to agree on
the p roblem.
.
,"

.,

Delphi technq ue discourages extremity 01 lhe view'Point

and encourages mildness. It also averts Ihe oisacvantaqee
and d ysfunct ions 01 the commntee',' .

GUIDELiNES FOR DECISION MAKING

Following guide!ine s make the decision 'making process easy,
and sound decision becomes possible .

. 15

,
I!
"

-1.
2.
3.
4.
5.
6.
7.
8.

Marshal the facts

Consult your feeling
Use wise timing
Don't infer 1'00 much
Get on the right wavelength
Keep the decision flexible
Follow through
Have courage

1. Marshal the facts

Decisions can not be sound if they are made without necessary
information and facts, Non availability of facts and data provides
a good excuse for the managers who just don't want to make
a dectslon
Managers well-acquainted with the necessary and relevant
internal and external data are always in a better posltton 10
make sound decisions. '

2. Consult Your Feeling

Freud once said thai in making important decisions we should
nol only consroe. the pros and cons but also the deep inner
needs of our nature. Power of intuition should also be utilized.
Doctslons without suflicient information may be made if the
predictive abtlttv is special, measurable, and dependable. Sixth
sense, premonition may come true. Sometimes material and
worldly information are outweighed by inner feelings. Strong,
inner feelings may make the manager to assume a great
arnourv of risk.

3. Use Wise Timing

Time factor is very important. Alter the lapse of proper lime
decision becomes void. Right action in the righi time brings
note fruits. Managers should avoid laxity, dullness, and
condescence in decision making. They should be out for'
opportunities.

86

4. Don't Inler t oo much

We should net depend too much on Interring or lntuit tcn.
Many l imes. the assumptions we make are 10 be good lor
noth ing.
Inferring reters to drawing conclusions on the basis of
assumptions. In Inferring cc nctue'c ne may be drawn w ithout
directly seeing, hearing, l eeling and gathering tacts. Bul It is
necessary and desirable in scientific study and research.

5. Get on the Right Wavelen gt h

Right wavelength means right communlcalion 10 right man.
Co mmu nication sk ill is vual in de ci sion ma king . There should
be skilful commun icatio n among the problem perceiver. data
collector, oeclacn maker, and executors . The best decision
will be useless if il Is not property communicated. Barriers In
commun ication shoukl be reduced to a mlnlmum.

6. Keep the Decision Flex ible

Things may change. They may not happen as planned. Barri ers
may co me in the , way. To meet suc h a sftuatlo n declsl cn s
may be changed - or their Implem entation sho uld be del ayed
lo r so me tuture dale . Inl1exible decis ion may cost hIgh a nd
result In irreparable sosses .

7. Follow Through
"Thinking", says Otto Fenichel,- is usually preparation for actlcn .
Peop le who are atratd of acttons increase the prepatatlc n."
Once we have dec ided , we shou ld com e inlo action . Timely
actions save costin term s 01 time , shoe leather, and money.
Sound ness of actions also depends on our mood - and
temperament. When we are depre ssed and down in the dum ps
our actio n s le nd 10 be aggressive, off ensive , and destru ctive .

87

-r-,

The-nne art of executi ve decision making consists in not

decidirio questions mat are not now pert inent , in not deck:ling .
prematurely , in not making decisions that ot~ers shOuld make.
as says Chesler Bern ard.

8. Have Courage
"One person w ith courage makes ma jority," says Andr ew
Jackson. Managers should have cocraae. The y should be
enterprising and promising . They shoutd ha ve risk -tak ing
courage . When a decision has to b e made. it is gOod to talk
to others. It takes cou rage 10 stand alone and take imllalive
espec ially amidst OPPO sition. and to make othe rs agree w ith
yOU : Courageous man agers are high achieve rs with initiative.

' :.

88

Exam ination Quastlons

1. Deline decision m~klng and problem. Also dtscuss
preventive probiem solving.
2. Can you SlOP a problem trom happening? Why or
why not, and hOw?
3. When a prctnem has occurred , are you in position

to solve 1I? Ho:";'? ;

4. Whal is group decision making? What are its kind s?
Expla i!1 .

, C

5. What a re the gUidclinas for decision making. Do you

t hink by following t hem you' can solve _a proble m?
6. Can you difter enli ate between prob lem solving and
decision making?
., ' , )

89

,;

CHAPTER 6

:1

ORGANIZATION

DEFINITION OF ORGANIZING

DEFINITION OF ORGANIZATJOS

DEFINITION OF FORMAL
ORGANIZATION
DEFINITION OF INFORMAL
ORGANIZATION

Efflelenl Organi~atlon

BUREAUCRATIC MODEL OF
ORGAlllZATION

Karl Marx's viewpoint

Max Weber 's viewpoint
Basic Elements orOrg.anjz.afion
I. Division of Labor

Advantages of specialization
DYsfunctions of specialization
How /0 overcome Dysfunctions

2. Scalar and Functional Chain

j~

Ii!
1::
~l
,,
!

.
j

90

DELEGATION OF AUfHORITY

Some basis rules of delegation and

difficults attached to it
Personal Attitude and Delegation

SPA!'>' OF CO:vTROL OR
.

~IANAGEilIENT

Definition
Factors of Span
Graicunas's Theory of Span of Control

Sir Jan Hamilton and Span

. Lyndall f . Urwick and Human limitation
4. Struc ture

Depanmentation
Job Analysis

Organization Levels
Organization Chart

SIZE AND COMPLEXITY

Size
Complexity
Mechanistic System
Organic System
Worhty's study of Sears Company
EXAMINATION QI'ESTlO"S

91

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, . ' . +.

ORGANIZING
Organ izing crea tes mana~eme nl. 'Organizj ng is a grouping 01
aetlv!tieTl'fecessafYfoaccoiTIpUSh group's g oals. In orde r 10
ecccrronsn goals, carry oul plans, and make.II possible lor
emp loyees and managers 10 work eltl,eientl y. an intentio na l "
slruclure Is design ed. This Intentional stmcture designs and
specmes roles of perSons li tled in the or~aniz~'i~ Fhart. ~~---.:.
activity must be o rga nized before it is performed . brga nizi ng
Is
proce'ss cjiestatiishiiig~acirViiY-"'a~l ho rily r~laIlo-ns hiP
"an entorprls e~' j's a se cond 'fUnction 0' l ht'"'rnanager. 'frsl
'b eing planning.
j ~'

tne

of

ii

Organizing process involves:

(i) DelerminalJon of activities
i ii) Grouping 01 activitie s
(iii) Assignment of activities
) iv) Delegation of authority
(v) Unificat ion of all ass igned activities (Ocordlnatlon) )

.'

92

ORGANIZATION
An organizalion.Js, a soci~~n. It is a system of
relationship In an undertaking. An organization may also be
reterred.tc as an enterprise itself-It is an intentional structure
of rotes for persons along with their authoritY.,ll i a coopera.tigg
of two or more pers0Q&.
.+'- -" ~""'"

-.-

When an individual alone is unable to pertcrm or complete

an activity he brings into being an organization. Organization
is the result of three limitations 01 an individual:

(1) Skill1imilalion
(2) Physical limitation
(3) Time limitation

These limitations compel him to make an organization 10

an,i zi1!iOn .S2!ll;.2,,~~!2.E!;!D,g~~e~.~
get the work done.

0w

or, mo~:p"~L~~,~~,.~.;!!?I2J!),;~.,~~g&QJ1'

It continues
to"s(i'i'vlve as long as it lias a goal or goals to accomplish.
After one goal is accomplished the other must appear or the
organization will or should come to an end.

Formal Organization
It may be defined in different way> as follows:

1. It is a system of well-defined jobs with a definite measure"

of authority, responsibility, and accountability, the whole
con-sc'j'ouS"IY designee:--..-.. ,.-.

/2.

II is more or less arbitrary structure to which an individual

must adjust. It tells Ihe worker 10 obey orders and
..----,,,,
~ ~._----"--'....
..
.~ork c~operati':.~ly with ottiers~
~,,;fj/ It is the retlectton ot organization chart.
,-..j,(' Formal organization is the creation 01 management.
","-"-,

93

'"

"--,

."

_,."" " - , , , )

Informal.Orgbnlzatlon

---_

If Is whal people do in lerms_Qf needs. emotionst-and atiiludes,

-"- aislikes. Informal

together beca u ~eof their personal likes
not in terms.- of proc-ed::";;
_.....and
.. ~e~.J1a1ions:Her~people"w&R
..
{and

groups"maye'x ist' wilhin~10 ~~a'r o'rga~ i;ali~n: It 'h'a-s no ptace

in the organization chart. !U_ {1_ ~p which emerg~~~ ~~

reSIJ..'t.9.'J}i!I21.io.OS.lr.ieods/1.IpJ, ne~m~~ and harmonious hobbies

and ltllnklng .

. - --~._- -- ....._'"._ -

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ORGANIZATION VS. EFFICIENT ORGANIZATION

Organization :

It is merely getting people on one platform to accomplish certaiJi'go~ds':_

,-

-, ,

,-

'." '-,",.-

"

Emdent erganlzatlon :
It !~,_gr9!:\RiI:tg,g!.~:~i~,itiesand people in such a way as to minim,~_~.:::7gs.t and.maxim
---~

iitnlu'tiitiF.:------=:: -.-.

The difference between the two is elaborated in the following:

Organization

Eflicent Organization

1. Grouping of people and Grouping of people and actlactivities to achieve goals. vitles to achieve goals With a

minimum of cost.
2, It is like arranging a mess- It is like arranging a message
age in alphabatical order, not in alphabatical order,

e.g. AAEEGMMNTwhich rather in orderly and natural

has no relevant meaning. arrangement of letters giving
This alphabetical order does clearly its relevant.meaning,
not define proper relation- e.g, MANAGAMENT, This
ship of letters of the mess- orderly and meaningful
age, so organization does arrangement of letters estaproper blishes a proper relationship
not
define
relationships among its among them. Efficj.ent
organization defines proper
parts.
relationships among its parts,
3, It exists when its all com- It exists when its aU component parts exist with most
ponent parts exist.
productive. relationships
among one another.

'.

4, Group satisfaction is notthe Group satisfaction is a must.

definite outcome.

95

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Bureaucratic Mode' 01 Organization

"

Bure;avc rilC't is Q syslaW..2.f..gp"'9'mnent byOfficl~I S re~p on 5 lbJ e

;nly to .!~,i.',""d ft!2ar.tDJRn.l al. l: hiefS.

Bure'aucracy"ls'a comp'oS'i e

w07cfol bureau, and Greek

word 'x rato s', meaning power. So

l!ureaucracy m~ans power 01 bureaucrats.
,

- '

_.

'

"

-, _. ,

,c.,..

KARL MARX

Karl M '!.~--. ,~~!ieved

bureaucracies.
used I)y_.t~e ~(Qintlnt
.... that
..-.- ..
-.... -.- ..' . -'are
.~-,
capital ist c la ~s 10, controt ,I,he, o.lher,-<,'ower .scctar cJas~ ,,~..:.
According to him. bure aucracies are cha racterized by :
"

,}./ !.:_~"

-) \ ". U
',.. ' ;'

:{l) Strict hierarchy and ctscip une

,. ,' : J ,',' J
i iiil l;;Compete~t ofliciaJ~
i

' ,'(ii} Veneration of author ity

(tvl l ack of initiative and imagination

(v) Fear 01 responsibility
1f -

(vi) Proce ss 01 self-aggra ndizement

MAX WEBER

(i!

~~!'':~!. ~~.!f~~~e!~~~ ,~J~!?n~.~!p!>:-~!rn)~~~logy

thou ght of bureaucr ac't as an ideal organi zation structu re.

According
.....
_ i"o him.'t'he
-.n. . t,ur~auclaCY
_ _is tha t type
_,. 01 orga
.. nizali9n
, ."
.~

~_

!~all!~.~tj. $~laJ.iD.nali.mlion. ,

Max v'eber nas spec.ned the rorrow ing characterist ics or

bureaucrecs as in ideal crqantaatlon.

(/) Spec/allza tloll ena tnvtston of Labor

of

Specialization an'd aiv lsion _l abO~ resutt:in fi~ed--:--(if iicial duties .

These dutie s are dir ected toward the accompli shment 01
ente rpri se goars

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Tbe organization of ~c;!.~tqUg,w.s.,ttJl'...Bf!O.cJQ\.n.9J..hl.ri1r-Gh)' .
This bureaucratlc characterlstlc forces control over every
membef Intne sliUCtUie. Acmrolng to Heme" SItt16n:'Orhi'erarchy
the bureaucracy 15"' in the nalural order of things.

in

(iii) A system

of Abstract Rules

Weoor~si8teU6aIi:iOi,iiiiJOU~'orgalliialfooW.,9IJiAiALfM09]P.flS
are bc!~.nc;I~y"~~e s. He states that a rational approach to
organization requires a set of forma l rules to ensure' unifor mity
w e ll '!.~!~,IQ2Sl..u.$t em

and coo rdi nation 01 elfort . A

ot-.

reg_,!l~~!.i~!,!~.!!f>~o.PJ.g;.:ldes tnLB!WlJ1!XJM.. .~ L~~L ,Rules . _"

~Qnt~!lVfLaOd. , persist, wtle,.~ a.,s, fJ.er.soDs. Jre:p~ot.l~ , ~h.\Waf!:~ ..
,

','

0!1)!!'eerso!,a/_Reli't/~.nshi.e
f:l!~~h.P~~;~~_ I!U' n le mbe{~ -9:Lo. rg ~ f!I.t~tlO(1 ,ShoJJ~. be" .
n(m-emo,tlonaJ. It sh ou ld be based o n ration,\lit,y anp .w.ithout

hahed, passion,' ;neet1on~ 'Qre~ritfiusiasm: 'S~peri'o~s must avoId,

einOlionalahach'rm;';i'I~ S~~;di~~t~s:"cuanls, and' cu~t9l1Wi';w

",

II fTtia;~~;;":[:~~l;w? ; :':I:;;;':'-:-' "-'

. " The most ccmmcn ol?ieption, ~atx>JlJ , bureaucracy is tbatn
has red tape. !!..ed 1~~!.!:!.~t,?_.T,'!!Iy",Cl~,.~lJp~~!gL~!..!!J
tnvofved

in~~:,mI}QJ~!oos,.,.d.one,-

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BASIC ELEMENTS OF ORGANIZATION

,":5...co ~din~U,Qj3 . $cott...ttle(&.Ar~JQ,u.,C~~&t9.J{I-IWlt 9n.w.hicll
c l tS,~!~~15lrg anlz atiQn...l/)~2n~J~_b.!;J,Ut.
.
-" 1 .

DivisiOn 01 labor

./ 2. scalar chain 01 command

",'''3. Span of control/Span of management

"4. Organization structure

"

A. DIVISION OF LABOR

t
According to this faclor; an activity, once It has been deterrnhed.
must be divided according to specializ ation. Division 01 labor
and sptclalizatlon ~eate the concept of deLp.;rtme'ntaUon .

DlvfsJOn-'~r

labo'r' ~ntails' the 10Ilowrng~"Coricepts :

._ .

1. Specializ ation .,
2. Oepartmentatlon
3. Horizontal Organization
. Delegation 01 authority

..It , Iso p.roduces lhe concept of sca lar chain and span 'of

.cOntrol.,OiViS!oru>Uabor"!i'W t'!k_~~.~,a ~19,~.0000_~ '

__ P~C.e: s~,~ 1!J ~cim~. te!J' tM._-- structure
_..... -... . . .'., 01 organ
.... ,._...izat
. . ion.
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Adam Sm ith in 1776. and Charles Bab.b,ag.a. .111..J834

efIlRbUJied.,tbi:rmp(,n,a.~eoIdiVTdi;; th6 'activity 10 get the

W9.rt\.ll<>ne.ellicienUy.

' '' _.,....

. .

Advantages of Specialization,Division of Labor

By specleuaeucn tonoWing'ends are accomplished :
/ 1. Sklll and expertise of the worker expands .

,.../2 , Time is saved when tile work er moves from one process
to another.

/ 3: It encourages Inventions and innova Uons.

~

4. Productivily is enhanced .
....5. It lac ili1ates the preparation 0' job specif ication.

Dysfunctions of specialization

Division 01 labOr or specialization has neg ative asp ect s 100 .

They are as tollows:

Specialization creates monotony , bored om, and

dissatisfact ion . Monoton y, in the long run, resu lts in
th e downturn 01 fndividual productivity .

Ii

./2.

It dehumanizes the activity performed' by the labor.

They have to wOrk as if they are robot. Workers dislike
mechanical pacing, and repetition of operation.

Another study shows that specializations makesthe worker

>"'.....,.,"..,." .' '."._..
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dull, pressure-ridden. and frustrating.

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How to overcome Dysfunctions of

Specialization
The cons of epeclaueatron can be overcome by.the following

strategies:
/ ( 1) Job enlargement

. ",,;(2) Job Rotation

AS) Participation

(1) Job eil/argemenf

II is just the opposite 01 dividing work. Different tasks are
combined into one so that the employee performs d'ifferent
operations. Job enlargement is the Increase in the span 01
control. er;.~n .~_~~~!~~~.t~~~.J:LuJ,!1J~~s.,9,f.91ULEt~. jhat a rn,~Q'!.9.~r
can. P.~!f.o.rm..-

IinpactslAdvantages of Job Enlargement

.....1. More training is needed.
/2. Boredom decreases, interest increases .
.;3; Efficiency increases as a result of more training and
tess boredom.
4. It heightens worker morale.
5. It brings down production cost.
.'1'5: ltimproves the quality of product.
7. Organizational levels may be reduced.
8. Close supervision becomes unnecessary. Job
enlargement should be to an optimum level. Alter that
extent it may cause absenteeism, and the Job may
become difficult or confusing.

(2) Job Rotation

Job rotatlcn Is not on ly a method 01 managerial de velopment

and tr ainIng but also may be used as a device to overco me

the dysfunctions of spec raurancn. In this method, an Individual

is nansterrec from one position to another. It reduce s disinterest
and monotony - which Is created by Ihe repetition 01 Iha
sam~ la sk. It lacilitates management 10 fill a sudd enly vacant
positions by tho rotated personnel.

(3) 'The
parttclpatlon
,
Participation refers 10 giving worke rs the opportun ity 10 ha ve

a say In the marking 01 a declsjcn. It means committing a

worker 10 a decision. Subo rdinates enjoy more voice abou t
their own job. Participation calls for the sacrifice of a part 01
authority by a superior. This sacrifice will p ay back in the
form 01 high mo rale and satisfa ction 01 the emp loyee .
,!, lOb ma y also be made interesti ng by the follow ing
guide lin es:

') ~

The jOb sh ould be co nstituted ';,ijJtlJ clear-cut parts 01

Iho work proc ess so that employ ees ca n cle arlv see
the lucid res ults 01 thei r task .
The worker should be allowe d to varY their speed 01
work according to their mood.
Each job shOuld have some chajterqe, skill. or j.Jdgmenl. .

B. SCALAR AND FUNCTIONAL CHAIN OF

COMMAND
{It is a seco nd element of c rqanlz atlo n without wh ich it ca nno t
surv ive. It refers to a chai n 01 comma nd which for ces control >
over eve ry memb er In th e structure. Scalar Chai!J.~J,WQe sts
thats\.tb-QIdlnateS.s.tllWld .r ec.e i)le. ,ordE
,lri 'Tr.om one superior
onlY' but this prlnc lp'le Is viol ated in functional aUlho~i'ty:: Scalar
chain creates man age ment levels which are toplevel . middle

~o o

leve l, and low level 01 man agem ent. In other words. it creates

~~~~cal __~!~_a.n.r.~~tlcm)

'" ," ,. "

. Delegation and Authority

!.

Q!,legatton, ts an es sential part of scala r Ch.atn_. Scalar chai n

cannot be possible wit hout "delegation. A manager cannol
delegate a hundred percent power because it will driv e him
out of the Organlzation)He cannot retefn a hund red percent
powe r and authority b ecause he will be 100 ov erburdened 10
perfo rm his real managerial task, and his subord inates will
stand surp lus .

~espo~~~~.~~j,! !!.~~~.!~er:nen~,.?f~~I~g~liOE_!'.!.~~tt~rit0 It

is asslgned through the whole organizalional struetur,Wfie n

a person ;otns an flrganlzation he accept s the

perform the

res po ~ibllit i e s

ob ll gal ~n

to

01 the position.

According 10 Koontz and o'ocenen tne effective delegalJon

should have:

1. Recepliveness: Welcoming the tdeas, opinio ns , and

initi atives of subord inates.)

2. Willingness:

( Releasing decision mak ing power to

subord inates .

3. Bead/ness : To let others make mistakes. Managers

snc uld guide, counsels. mct fvate his subord inates.
4. Trust: The delegator should t rust his subord inates .

5. Broad -Controls: ' Control s

be used to keep up the

work standard .

!.

rhe. -P!~!19JP..I.~t _~ ~~ ~!-!1.&n .alsa .s.uggest-s -lhe 'p rtnc1ple

01 u nIfQrmit y.oL.command, which ensures the order to come
Irom one sup erior only:

101

Th~ extent of del~galiOn

centralization

.,

determines the

or"'dec'entraiZ'aiion:}
," ,.,, ;,,--

., .-

degre e

01

"-r- -'-"" "'.,_. "-,r , li e

<' . (

.J ( -~n (-l'-: ~ ) /. 1\ r -/ t. / .IIl1 I I l (! ~'1--'; ,' ~( ._' . - ~ .:~;t .0", " I ... .:
' 1,~ f- '{ .t _:_. I !, ~ l(! e[ ,. -,\.( .f .; !' t'r':: -. r, 1,.
Delegetlon 01 Author lly " "~ H v: -: r '

tt refers to vesting of organization ~wer or right to tne decisions

In a. subordinate by a superviso r It Is a pillar of organiz~U_ion.
The conClS!l Of org anlzaUon stal es hat it comes I nJ~ extstence

ciOii-e:'oeiegation createS

to delegate authority 10 ,get ~ rk

super-subordinate retaucnstup. ~J!.2.)m e_~1 ~~ P~ ~ O_! n'l!i~
at
the task
is nOI
.P9 s s l~ le without it.
_...... .; ' , .
.
."
.-- '

Some Beslc Rules 01 Delegation and Difficulties

Alleched to It:

i , ( A hundred
2.

/ ' 3.
4.
5.
__ 6.

, 7.

percent authorit y cannot be delegatecY or

the ,delegat inp superior will lose his job to his
subordinate.
A hundred percent authority cannot be retained. or it
will render the subordinate to b ecome surplus. and
the superior will b e.overburdened with mana gerial and
non managerial tasks.
No superior can deleqate authority he does 04." have.
Delegation of authority ts subject to be revoked by
tne deleg~lor.
.
11 determines whether orga nization is centra lized or
decentra lized .
Ultimate respon sibil ity cannot be delegated by the
superior.
The grea ter the number of decisions made lower down
the management chain, 'the more authority Is to be

oeiecateo.

1,-

-'.

8. II wi' be etteetlv~ only when;aUl horily ~nd job are

clearty defined, ihbordlnates are trained, ~13per controls
are established, and ~ctlve teed-back system is
enforced.
9. UsuaRy the superior does not wish 10. delegate "his
authority.

Personal Altlluda and Qelegatlon

Pers onal annceee have an Importa nt bearing on delegation.
Personal attitude has the- following Impacts.

(I) Receptiveness
It is wnlingness of th e deleg ator to welcome the ideas 01 his
subord inates. Usually the superior does not d elegate because
he Is unaware 01 the art princi ples : and requirem ents 01 (he
de legation.

(iI) Willingness to lei go

ThO delegator must be w illing to allow ot hers 10 make decisiOns

in th is place. Authority sho uld be delegated 10t he subordinate

:
who Is well-versed into the problem .

(ill) Willingness to trust subordinates

Usually a superior has no way out except to trust his
subc rdln ates In de,legating decision making authority , If the
subordinate Is not
be tru sted becau se he Is not experienc ed .
unable fif Mild19peo j)l e-,-'a"Od uria618fo ke-souOd CJectsions
then It is' the duty of the
to-. traifl...... ...
. -'" ,- '
" -.'-

to

's....
upe,.;o;"....is ma him
_:: -- .

, ~

'

~ -.-, _

(Iv) WIllingness to let others make mistakes

Dele ga ti ng me ans th at the superior is w ill ing to lei h is
SUbordinates make mistake. But it never means jumping blindl y
Into the well. It do es mean to .CJPIID' co ntrol tec hnique and to

QUide and feedback hiS subordinate: 'As

'ccet

ceveepme nt.

a"truman-islo," :"s

musl~b6'-conskfer;d as investment in 11'19 . empl oyee

103

,.
(v) Willingness to establish and apply controls
The delega'e.t must estab lish and use controls to ensure thai
the objective of delegat ion Is

ecc-srcnsnec. F.~a ~ i_s.b1ne nt.l') f

conl.~ ~~ .d.e~ncI

on th'it eqeierce 0' theirplans as objectives,

pOlicies. procedures and programs.
-

Decentralization
Decentralization Is the tenden~y to d isperse declslcn - making::
authority In an organized structure, Harold Koontz sugge sts;
It Is inherent In tne delegation of authority. Dece ntralization

and delegation are compulsory 10 each other, and have direct

relationship. The grealer the decentralization. the arealer

d~atlon

wtll
pecentr~N-;aliOn""7e:q;;~~'~' su~~at&
~ ra i jng .cmrity..o' pl ans... J.LSfLQ.(Qjo~ive standards. effective

iiiUII.

_..-..- -

communlcatron techniques. and comp;;entrnanagers~~.- --.. -.-

.-._....

-- ~ _

.. ...- .

...-

",
/ / C. SPAN OF CONTROL OR MANAGEMENT
'" , f
Span of con!~~I .~~!e.~!DII'lE:J!!?"t)Qy( m'any person can be supervls
~_~ SY P~,rx.~s!=l.r -.,!i~~ .~!!!~!..a.~ G!~!9!l~JmY,~ des.!gned

d
It ha s been.,
.' iUerent theories explainIng
. spa,, n''- 9t
' -.CQAllgL
,
observed that the upper the ladder ot mana gement we go the
fewer is the number of personnel supervised by the sup erior.
~ ~ > " _' .n ~~ '

.~

SE~~_~.!:"..!~.~ ~~_e.n.! .mQ!ln.!i._~_. nu rnt>e.L9L~~~.~i'l? tes a

~up~r_~~';'~!Un3:n~9t~ IQ!!g!!!!.~t~"l lat io~i.~. u~~.!!t_!~'. !~
eight subordinates at the upper lev8i of organizaUon and eight

to-;li1een'o;'"'more'~al the, kuero..le.vits:"According 10 LYMan

OrWiCi<.a! lhe'iilQher and middle, wneresuperlors or managers

have to sup ervise othe rs , the ideal number of su bord inates is
four. And-at the lowest level where only responsibility is
delegated and nor authority the ideal number of subOrdinates
is twelv e. But In actual practice it has been obser ved lhrough
various surveys by Fisch and Whil e in 19 62 an d 1963

104

respectively IhaI'he number of SUborOinales at lOP level ranged

down from twelve to two. It was also established that as ,t~e
~.~ e . ~ ~ ~ !..~!!r...~ ~es !he nu~~!2' ~t)Ordinales 8..t
lhe lOp Jevel Increases and vice versa .
~''''----~~''~ '''''''' ..........", ",.
~" ", .. "'..__.... ,,-~ '. , -

..

Factors 01 Span
National Industrial Conference Board of the U.S. suggest the

'onawing 'actors of span.

The ability and skill of both the superior and the
subordinate.
Avanabnity ot standard controls and procedures wilhln
the orga~lzatlon.

The extent to which activities are phys ically

decentralized.
The likeness of the aclivilles being supervised.
The extent of interact ion of lhe subord inate s.
......' 6.

/7.

Tna amounl ot nonrncytagedal work which a superior

has 10 perform and the extent to which he has to
make contacts wilh hls:;.su'bordinates.
The occurrence of new'prcblem within the purview 01
the superior.

According

to Koontz . the ' factors

0'

span ar" as follows :

.,;. ..

<1-

The- Nature and extent of training of the subordinate .

,.- 2. The degree of delegation of .authority.

3:

The extent to 'Which plans , 'policies, Objectives, and

programs are determined.
The impetus
rate. 4f change In technolog y, policy ,
and envtronmente,..~., . "
Nature 01 commu,Q}c.atlon techniques established and
used.
'
6. Use or clearty defined and object ive standards .
. _ Extent and need of face -to -lace co nta c ts wi ll
subordinates.

0'

/
/

105

I:'O~ &~(j

1.

SUbordlnat~

t
,

',;

~,
' ;~', U " 'J.,W[
", -I /I.,]
<~
" IIp(j

Ira nlng:. s / n may

be .' ~re~teP it

suboralnates are welltralrKld. "

'-

02,. EXlltl/1.J)Lr!It~Jl!lllon of ButIJor(ty;

Delegatior of

authority increases the span.

3. Planning Bnd definition of Job: If Jobs are Planned

- and denned, s"'Pii1'Can be increased. -

4. RattL0f ChS.Eg9!

Increa se In the rate 01 change In

teChnology, mark&\s, government laws.lashions. and national

and international cond"rtions narrows,the span.

5. Use of obJecllvItJitl'1,dards:
----~ . ..

,'

. "

Objective standards

, -"- ,~ ,,,

Increases the span.

Communication
-6.-- -

techniques: Efl ef;1 ive and

.
--.:......--technological com munication techniques widen th e span .

7. Amoun! of pgrsonallnteractions Bnd contacts

_.

needed: The more the personal contacts needed the smaller

iheSp~~iU be.
The details 01 th e above teeters 01 spen 01 control are
gl'1,8n In the following lines .
F/ .CTORS DETERMINING FREOUENCY OR SEVERITY
OF SUPERIORSUBORDINATE RELATIONSHIPS
Not only personal qualities including getting alongwith people,

and

commanding loyall y
respect, gras~ng situalion, and
resourcefulness, but also managerial ability play an Important
role in detenninlng the number of subordinates that a manage:
can elf&Ctively supervise . ThIs ability varies from person 10
person, sitUatloo to situ ation, and job to job. /

106

fAG.10f(~ 19F s: PA"-

of f)VVN\C, f1~;C'i l

The following factors help determ ine the span 01

manag~ment or control.

1. Subordinate Training

The bettertho training ol.lhe

5u_ilg,("inill~Jb~ " ~l.l!mu,UlUl a,

Take of his superior to see~ 9uidAflGt.9[ leadback. lj,g...Jitl!-_

(!SUire cOil fewer conl ~91~,~lt'l"t.lIApgl.~.';}'Kl Jhy~1I1e.,.sp.a fl ...
will bEJ.sl:!.e.!t~WitflOUf disturbIng his other managerial tasks,
the manager can supervise a greater I)u ~rof s!Jbordinates

It!!!ti!tUJaped)l_tciiinaa; -tirit-rai~-S~bordiMtes:' -on' ihEi'"

other hand, narrowthe span because they need morefrequent

contacts with their superior. But there are managers who
usually ~nore the need tor the training of their subordina tes
making their lobs unnecessarily dIfficult .

2. Delegation 01 Authority '

The amount of authoritydelegated to l~e subordInate,manager
has an important bearing on the number of his contacts with

the superior. Oelegation affects lreqJency ,) r severitrof SuP9rior.

5~t:!\>rdin~!. r.~5~$:SUfflClenfafilliOriiYdO'legat.d-~ill brlrlg

. about a fewer contacts of the subordinate with his super ior.

Inversely, Insufflcfent delegation requires more contacts of
the subordlnale with the supertor. In Ihe lormer case a greater
span Is possible, and in the tatter. a smaller span will be
needed.
Inadequate or unclear delegation of author ity stems from
poor organIzatio nal structu re. Clear and right amount of
defegaUon will increase lhe span facilitating the subordinate
to work etticlently without disturbing the manager tor seeking
clariHcallon or permission.
'

107

3, Planning

.rLanun~.~.!fL.9.,ft.ti.nJit .J.I!!..,!l~!lJw~,~.~;~n.t~s.~~.~.,Ste:t-QL!.he
$ub o{qiJ'l~le's job" Planned and well-defi ned jobs make the

sp-~n

of cOntrol ' wielet Ihan the unplanned jobs. Since th e

subordinate 'undersl ands what to do or what nol to do, what
hts authOrity is, and what its limit is, he wiJI l;fo his task dfficlently
without the direct guidance of lhe superior"

4. Aat e of ch ange
The world is confronting fast changes in teChnology, economy,
business, geography. politics. medical science , and almost
all other fields. There are certain Industries which are greatly
attected by sucn changes and development. In these industries.
the rate of meeting between the manager and the subordinate
wJII be high. .The Subordinate will have to contact time and
again In the light of changer pol icie s, procedu res,
circumstances, or technology, In such a case , the span should
be small so that .tht. manager
-ioC~his-eve;Y
- . ......_c a n '_____._
. _0-.
.. "-

I U botdl ~a!~ $". ".VO ~ . __.

_. But in t~!!'P!l.DI.~~ .wbere. the',~,Ilar1Qe..J~v $.IQ1X.. tbe

epsn will b& greater because every SUbordinate can perform

hIli djjly"rriJePencieniiY Uiider~an unchanged Cir CUmstances.
operat ions, p~'IICfe s, .a~ procedures.
a. Use of ObjectIve Standards
Standards
Bre thOse..p,lans
Willch act as yardsticks to measure
-.~ .., ._-~
,
,." "~" ~"_4"''''~_~ ....._ :."..
. . ..'4 ."
the perfor~!.QS:!l~" The manager must know whether his
SUbordin"ates are worki ng according to pl ans, and their
performanc e is standardized . In the prese nce -of objective
standards tho performance can easily be checked and compared
wlth them, and therefore, the span will be wide.

108

6. Communication Techniques
The fa.~~h~!ogical.d~~.!2P..!Jte.!]t, in corrmunicati0fl,SYS!~.~

a.'taTechni,gues alsC! 1.n.!!~~~.-~,~_~!. ..s ~~~,",..0.!.. .~_~R~!!~1 ,'

Superiors must communica te policies, plans, Orders, feedback.
informatlon. --and guidance . II they are commu nicated with
effective and rnodern eleclro nic devices the superiors less
lime will be spent, and therefore, the span will increase. His
ability to communicate plans and orders clearly and conctsely
also improves the span .

II t he plan , Ins tru ction, or inl ormat lon has ito be

com mun lcaled In person, t he manager's l ime will be heavily
burdened l ,ecessital ing to re.Juce me span.
Computers, faxes. mobile telephones, pagers, and intercoms
have been successful in saving t he manager' s precious time
in comm unicating data, Information: plans. and policies to the
subordi nate. thereby. Widening the span.

7. Amounl or Persona l Conlact Needed

There are many situations when written reports, memos, letters,
and pol ley statements c annot ach ieve desired results .
consecuenny.tsucb situa tions call for personal contacts that
cons ume 'more time and per sonal attention . In such a slat e
o! affairs span will be narrowed:
When personal contact between th e supe rior and t he
subordinate Is not rrro ortant and w.m en communicatio n can
do better the manager s time 'will net be overburdened . and
con sequently . the span of control w ill be w idened.

109

V.A. Gralcunaswas a

Fr~nch management consultant. In 1933,

-~ PU~h!~~IYSls~~SUb~~i~~~!i~~ili'~!i~i!iial,li~~

and developed a matFiematical,formula'b~ongeometric

increaseas the nuffi6erof sUborcfuia~cr.ea;;S:'Allhough
tfilS forrrilila'rnaynot be appnc'a'@e~ina-''gi'Ve-n"'situation, It
proves to be a device determining a span of managem,e'iir
b9fter than any other.
. '*'~""--,~
-

....

According to the theaIY there are three types of superior-

.subor~ate_~!!~ionShips,:

'---"'''~''-' ~,,'

/ 1. Direct single relatlonehlpe

/,2. Direct group relationships
/,3'; , Cross relationships

1. The direct single re/etlOflshlp

It means that a superior deals with his subordinates directly
and Individua!!y~ In other wordS-~deafs-wiTh-'hls-only--ohe

SUbordi~-ai";"ilta.~iiilie-.-so"ifA-:tiaSthr;e-!;Ubordi~ate.87C~"

'a!!iP..Jbe"r.-;)YI.!! be threedirect,~!~9f~"T~!atiO~thlPS. e",g.

A with B " "

~"~--

A with C
A with D

2. Direct Group Relatlonshlp

11 means that a superior ~!!d.l0t d~al with his subordinates
!.oo~t in c~f!.l.Il!nation of sutxlr~I~:S:T~!.ti6!QiP
c~~" ~lJ_,~~p"r!~~~~~~~~,"L~IIOWs~J,!,,~,~.~u~ Jh,t6:IL ~u~9:[~irlates+ 1:lL~"~lh..10:
B with C
B with 0
Cwith B

110

C with
o with
o with
'9 with

0
B
C
C a'ld 0

C "tth B and 0
o with Band C
This relationship In nine ways can be put Into the following

formula,"
-

0'

x(2nI2-1) 01 n(2n -l 1)

3. Cross Relationship
When subOrdinates musl ma~lh one another. ClOSS
';ei ailons fiip comes Into existence. II A'h;,iimiii'&2rd!nates,
the folloWing relationships will resutt:
,w_

t1~r '-- "

..

><

,_.

"

~:D '
~

00('1 '8
1;)-10 C

In this case, mathematical formula will be n-1). From

the. ana yals of all the three relationships Graicunas developed
,

the loilowlng formula to give the number of all possible types

of subonflnates-superlor relationships requIring managerial

attention:
n(2n12+nl) a 12+01 (n111

'Sl r Ian Hamilton and Span

Sir HamDt2n was a military Sl!neral fin U.K. army. He suggests
1h_~~Y!!'..~ge hu'"!.!!JLa.n etf!a'Y.~p.!':'!l!~~
a number subordinates ranging from two to six. He asserts

that1fi6spaiiofcomrofafl~I8'WtTst;oum be narrower
Itla~~~!]!..aLU1JLiQ~,;-!evflJ.. -~._._.__.

.11

- - -"

\ I

i l yndall
__
F. Urwlck and Human Llmltat" ns

. Urwick's viewpoint of span of control is as follows : .

~'/1

A span should

be

limit'ed because a human has a

iiiTillf d"iftenlion span;;hk"h-iimits-the numb'af o'i -i1'&ms

-

that ca n be attended tc simultaneously.

Energy IImN.lion 01 humans caU tor limited control
,!?!n lor eHective S~.'=.!2!!..

3. Time limllaH.on of human demand a narrow 'span 01

>-

eO"ntro,'ln ord;r~i~~ ;u;clrvelY counsel. ~kle. le~

or

iind C(imfiijOlC8i ~=-~--- - "--- - - ~ - ~

. ~."

~ _-.

..---.-"

,---

Urw lck who also served a~ a military ofllce r and retired

as coroCI6L asserts.

'I)9_~perlor C!~~L,i.ReryJ!!JTr~ythe

- work or !I"PUI then ftve ~ sUbordinates'whOse

work"interku:ks .

..

D. ORGANIZATION STRUCTURE
Organlzalion st!.Uctu ro is the result 01 org:aniz~!,a!!..,~~

or.g~a\.iQll.9~.~n... s.!Uctur~~~J!)~i.s~~~_~_~e.~
activitle~
.. .~e_O_':9!J ~~
~

A- struciure 01_ .organizafion

giv.es
_. _
- _
_ rise
_ .. 10 the ...following:
_>_.. ,... -.. .
,- ,- - - ~

Departmentatlcu
0 /:'" ;~r ~'n ,.-.~ ;' '" h ,'.,.,':,
Organization levels l , ) f,...rl' 1" (" " -' _: ~ .'- ', U ,,/' ( f

,-ll. Job Analysis

........

'

Organization Chart

1. Departmentatlon
'1L,reters

todividing ue .t~.!~~~. .QQ.MJD~ntation..r:nay be ._'

~<:~'!..!~d.log, .,t9...!tut.JQ
,Ul:'!'!tr:19:

112

'

, '"I

flJ

(i) Department by PROCESS

weaving, dyeing,drying: pressing, -sanforlztng, marketing,

production andior'11nance- 'deparl~en-ls,'1ri'the''C8'se' 01 equipment
departmenlalion, electronic data processing may be created.

n._

__

._

_.~.

/ (ii) Department by function: An organiiatigo is dlyided

in.ll?_~~PY!.~~~s, prOJ!uction, stores, finance, ~.I'!!eloyee
relatio.~ departn:~~

12

, (iii) Departmentatlon by customers: ~.~~~'

ret~~I~:!~S~:_:~~~~",!~~,i;~~,[~~~~:.~~~~s~
" (Iv) Departmentatlon by area: East, west, south,

,___

.' .A_........... '

Europe, Japan, Middle East, Far East."

~~h~

/~\

,--,

rtv) Departmentstion by product: CJlJ~j!!t!.~,gfj.~!,

v~.~.Yl !~!1,,!.~l.n2'~~~~!~_~!-.!~I)
"',

(vi) Oepartmentatton by simple numbers:',lts

-i\f.."

example is military organization: Platoon, battalion, brigade.

~

(vii) Department by Time: ~..9X!1iD9_..~~.!~L,~f~~~~yo,~~.y

Shift, Night Shift.

". (viii) Dep~rtment by Protect: Project A, Project B,

Proj~.C.L~:

Thedetallsare givenin t~e next-""~

chapter

2. Organ.ization Levels
There are many levels of organization:

(I) Trustee level: T

il:Ur.Will.g~fdireclors.

They are

~~"~.P,~!~9~~-!?~~.<? QrJI:i:, ~_~~f!..~~_~'p.a!i:'_~~.~~~mAJ9~~ -

J?9J19;,~~.'-~e~~~!t~9P..Q.Hm!Lbl~ __~~_~toc,~
holders.
"'--." ..,-

113

General mMaggrnen! leyel: II is

..,.( (ii)

th l! _!~p.._e_)l ectJ

level resl?onslble for 'h e direction of Ihe- e

O( g a~iOn ",- -

-- -_._.

- "."

_ .~

..

-~- ._

-. .

./ (iii) Departmenllevel : II is the hlg heSl level 01ma nage

. respo nsIble I~r act ual busIness pertormalice:-s uc
Sales , prodJ etion , finance , py bliC (elalio~
me
__ (iv)) -A idd le leW J1. .inc I LJ d_e i..J!l~J1.Q~ r s __",!:o~k l n un
depart mental heads .
, (V) supe;Vi~2ry
firing-line managers
b
(he ultimate responsib ility to r lhe accomplishme nl
,h"li lo b. They superviS;"iiOfl:m:iilagerlaTslal . "

_.-- wno

ieieFTt-has

..

_ --_ .,

. -.-_.- ....

---------~ ..

3. Job Analysis
Job analysis Is the combinatio n of Job description and
specification. Job description describes the nature of j
~? rk~9.qD9!!19J]s..lli!1.i!!1.~~~~rY:ari~~nce$;toolsreq .
In the performance 01 the JObs , andjob tiiie.-...

. ',

, . _. - _ .

"

~'."'

'"

~ '

. _

..

_ ,

_ ~ .

Job specification specifies personal qualities neces

lor . the--IO IJ-~' ii ' jnclude s educaHon", Haloing, expe
IUdg~men!. i_~ii~live, physical and mental " s~'iII: imoii
cMiaClerisiics, u~usual sensory"requiremenlS, such s

as

sign1.'h~earing;- etc:'
,.
-,

"

4. Organization Chart
.tt is tbe...s.eJa.lOJt . ,oUh~ _ .oro-aniz.ation , It is

l he resu.\
organization design, An organizat io n chart snows the 10
relaticnsmps among functions aod people who perform t
functions . Us ing the chart exhib its rigidity 01 the struct
However, it has the following advantages .
1. It shows authcnty relatio nship facilitating 10 kno w
" perso n responsible lor a partkutar tun cucn
...-,,2; II can show the weak ness in an o rganization, if
3. It serves as a training device and as a guide in plah
lo r futu re.

114

Chairman

Director
Production

Director

Director
Marketing

Purchase

Director

Director
Finance

AccQunti'ng

Manager
Sales

Manager
Advertising

Manager

Markel!ng
Research

Manager
Product A

Manager

"~M'anager

Manager

Small loans

Product B

Credit
Investigation

Skeleton of the organization

(Organization Chart)

Size and Complexily

Size
OrganizatiClnsize. attects cooJC:t.il)qJipn~_ mcrare, abs~nl~eism,

"andcomp'ie xi iy~-Th~ -I'~ rge-;~the coO1PJlO y,,~tl1e., mo;'e dec istc n5

10 be ,made,the more place where they are made, and the
'gtheWoveiafi""efforC'c-"",
reater"authoriiy to be delegated,
the harder it is to coorermata"
"-",,.'h._ ..' ,
,"... __
- .. ' , '

,-

"

-', ' " .

,,,.,.~,,, -<

"

' . - .. '

~.

"'-',

.... > ,-,

."".'"._",.~

In his Parklnsons Law, C. Northcole Parkinson asserts

that administrative site grows at a fixed annual rate which is
totally unrelated to the actual work load. In large Ilrms executives
determine their status in terms of the n~;;b<erofs'ub~rdinaTe-s-'
", ~_. -._

they supervise.
j

I'i

..

"'~"-~

Complexity
Organization. complexity naa an Important bearing on the
effic iency ~nd coordination ,

According 10 Tom Burns and G.M. Stalker. industrial

-compli Xily can

be

v!!rtid i~ two ways.

- - - : --:-

c,:

~-CC~rC ?-~ '",l;;;;.; :.);0 fJ '; ~ t. ~f~l. ;a.?

? .1. MecJfs nil fJc systems co. 'i . , e:~?::.'" Jip '-" ' f l' . i
.Theee types of complex orgaNzations are

~eYelOped In

accorda nce with the IOllowing .

- _ (t) ( SPe:Clalizatlon, and division 01 labo rpcco rdlng to their

'. 'expertise. .."... ,.

. . .'

.: (II) Coordinatlon l hrOugh functio nal departments

.
. coordinatiOn)
.
.
...tlln Cla.My eeunee jobs.
_(.1v) Development 01 loyalty and confo rmity.

i~ate ra'

..-:tv) Vertical author ity relationship :m d cha in 01 command .

2. Organic Systems
Th ey have the following aUributes :
....(1) Organization goals are considered 8SIhe end,Junctional ,
goals as- the- meeee- to accomplish them.
0' , < (H) Coordinatio n Is' actne....ed by v erneat and ner co ntacts .
jlli) ,Guidelines, polici es. and work are ,Uexible.
.,,(ivl D irection Is as ccneuuatlon.mct ln the tcrm o t ccmmard.

.
.
, n~ep fQb l~ mS 01',size. and c o mplex;ity may be ov ercom e

.by ,,:Qrgal"!izalion,:de.. . elopme.nt w hiCh caltS lor ,Hex ibiJity ,

','"

'

"

:'

'.-

" ,'"

",

Orga~'ic :;'and 'rttEiehanis.fic eyslems can be ,differe ntiated "

as follows ;

"

i C''.-

"'.

, ",

"' ,:,'

1l6

, ' ,'
, ,, : ,

,"

",'

Mechanistic:
Organization OrganlzaUon

Organic

Characteri stics

.f'1 . s pan 01 contro l

: 2. o,g an! zati~ n . 1~l'lIel5

3. Time span of pert cr mance

~ 4 . Extent of centralization

,r 5. Pe r1~a1 so nt a~ $
Interactions
de
en1s

Wide

Narrow

Few

Many

l ong

Short

Low

High

Hig h

Low

Low

High

Low

High

n9

6. No. of rules and regulations

r
/ 7. Welldefined joti..s0als
.....' -6. Type of com mvnicali on

Advisory

/ ,.. 9. No. of pay scales

Narrow

""""'1 0. l evels of specialization

Narrow

.....

" 1 1 .~ Auttlori1y 'ba$ed on 8llportise High

fl ; \""", ." . , ~
" , . r_
, ~ ! ... ~ ' -.- '
12. Aulhori\y ba sed on position

low

Instruc tion a!
Wide

Wid e

Low
High

Worthy's St udy of Sear. Company

Jall1es C , Worthy co~uCled a study determining the morale

OiJ,~~:~io:i9. 96' .emeJox~:iiat ' S ears:'Ro~dZ'ancfcompany . '

.1hilij,,;>.'Y9'y.. Q.'.. ~,~.~.Y.!'.~_~,~ ~~!~_"!hi2h, ,cgn'.il"!, ~:'~"!_~ :.

was about ~he lollowing work environment:
" "A',"'"

117

12

ye,a r~
.-

' \ -.

--- 1. The company itse lf

r": 2. The orga nizat ion
,.,..,.~ 3. The management
.: 4 . . Immediate supervisor
.. .5. FellOw employees
~ '6 . . Wolklng co ndiUons

..,,,-..
'' i

The result s of the study were

as

rollows:

' ", . '.',

- -- 1. COl11'Iex organlzall on structu re 'l end s to discourage

go&O -manage me,nt-ernplcyee....iH..boss -su bo rdi naI I
relationships . .
:~ ~ i >t j' ~Ct ,
.,..:.... 2. Excess ive oepartmentattc n and brea king down of the
work into fewe r units will yield poor results and moral e.
....J 3. . Minutely deltned work calls for ctcse supervislcn which
adversely affect morale and prcductivftyot employees .
r -. 4. For high ly specialized wO,rk ette ctlve coordination is a
must. But due to CO lT1J l ex iti1~ s iz e of the crqan'za tlon
that close cc crdlnatlcn is, net poss ible in .i.t s'. riatural
way. .
;. ~ . : "
"
5 . Pressure tactics by Ihe supervisor are necessary in
the ccmprex and overorganizalion.
Wo r,thy also co nd ucted

a st udy comparing several "

organization struct u res and concluded:

1. Flat organizaJlon (lewer levels , wide r spans) is less
complex than the vertic al organ ization (more leve ls

and less spans).

2. Wide spans facililafe more de leg atio n,
3. Flat crqanlz at lcn enco urag e better and tr ain ed
managemont person nel .
4. Flat organizati on reduces communication networks .
5. It also red uces the administrative distance between
management levels.

1 18

Examination Questions
1. Def ine organizing and organization. Also dltte rentlate
betw een formal and info rmal /?rganizalion.
2. Descri be bureau crali c model of organization. Also explain
the viewpoints of Karl Marx and Mall Weber. Whose
viewpoi nt do you lavor, andwny?
3. Wh at are the baste element of organi zation ? Discuss each
of them briefly."
4. Wh al Is span of control? Explain the views of Graicunas ,
Ha milton. and u rwlck.
5. What are the factors 01 optimum spa n as suggested by
Nallo nal Industrial Board?
6. What is delegation 01 authortty? Why is It difl icutt? What
are its basic rules?

7. What are the advantages and dysfunctions 01 spectanzaton ?

How can the se dysfunction s be ov ercome ?
8. Defi ne. scalar and functional chain. Also discuss size and
complexity' ot the organiza lion. What is 1M impact 01 size

and complexity?
9. Explain the following :
n eperttnentauon
Organizational levels
Organi zation ch art
10. Write the notes on (he followi ng:
a. MechanIstic system
b. Organic system
c. Worthy's s~udy 01 Sears Company

11 9

-v
Chapter 7

DEPARTMENTAnON

Advantages and disadv'antages of

departmentation ,
BASES FOR DEPARTMENTATION
DEPARTMENTATION BY FUNCTIONS
DEPARTMENTATION BY PRODUCTS
DEPARTMENTATION BY TERRITORY
DEPARTMENTATION BY CUSTOMERS
DEPARTMENTATION BY 'PROCESS OR
EQUIPMENT
DrPARTMENTATION BY SIMPLE NUMBERS
DE PARTMENTATION BY TIME
I EPARTMENTATION BY PROJECTS
(MATRIX OFGRIO ORGANIZATION)
Advantages Advantages Advan tages

1 20

Definition
To perform on acU'lily e!l ecl ively it Is necessary that if shou ld
b e grouped in accoedarce with speci alization. This grouping
01 (he parts of on activity Is referred to d epartmentalion.
Departrnentation is the process bV which ' departm ent s come
into bei ng. The concept of d epartmenl alion can also be referr ed
10 as division 01 labor. Rathe' than one indi vidual several
Individuals perform different parts ot the total activity. Accord ing
to samuel C. ce ne, -a department is a unique group 01

resources established by management to perform some

org anization task". Dep artments show forma l relatio nshi p
between resources of on ento rprtse.
There are many tcrces which continueallecting the natur e
and size of departments .
1, For ces In the manager which include his background,
pe rception, kncwl edqe. experience, and values ,
2. Forc es in th e task being mtluenced by technotocy and

I'l l

size of business.
3. For.ces in the environment which are attected by
customers, suppliers, political conditions, population,
labor unions, and government laws.
4. Forces In the subordinates which include their skill,
initiative, ambitions, and desire for indendence .

.General Advantages ot Departmentatlon

Departmentation has the folloWing general advantages
1. By dividing the work (division 01 labor) specialization
is achieved. Specialization, in return, allows the manager
to go deep down the nature 01 work. Specialization
also facilitates Lnnovations and inv!W.~.

2. Organizational inherent complexities are simplified

because depart mentation achieves the following:
(i)~obs are c;:leflrly defined.
(ii) Authority can be dele,2ated clear.!..
(Iii) ~-~p-q~d of ~.2!.U~lnc~~.
(Iv) The ~3.!~l~E!P.fl.!dt.~Qi.',id.e.d.
(v) !1eSp~!!glli!Y-i~
(vi) JCibS are clearly defined.

3. Departmantattcn may improve ,oordination if

departmental heads have direct and conlinuous contact
with each others.
4.

Workers exactly know what they have to perform, and

e
_
hence the work
is efficiently
done.
~

5.

The principle of scalar chain is facilitated resulting in

the establishmen-tof clear superior-subordinate
reretllonshlp.
..--- --------:-- -~

--

6. The principle of unil.L9L9.ommand is also effectively

eXIHcisea:-

' - '~~-~

1 . Departmentation makes II easy to deckre on lIal or

vertical organiza tion. Flat organization has fewer levels.
wh ile vertical org an!zation great er.
.

Disadvantages
1. ((ost at the p arts of !he activity is Inc reaswL.

2. Coordinatio n is dilflcull to achieve..

3. f3igidity in the formal S1.WC1We...,comes in the way .
4. Individual work Ing In one departm ent is quite ignor ant
about t he wo rki ng of the other due to whic h
interdepartmenlal transfers and CJ2..Q.!wJlQo becpm e
,Siilficu1b
_ ...,

Bases 'or Oepartmentatlon

Departmentalization can be broughl about on the !OIlOwing
bases .
1. By functions (by lype of activity)
2. By produc1 (by good s manufactured)
3. By l err!19ry (by work or marke t locations)
4 . By custom ers (by types of bu yers)
5 . By manufactur ing process (by the seque nc e of,
production or by equipme nt)
6. By simple numbers
7. By lime
.
8. By matrix or grid organiZation (project departmentalio n)

1. DEPARTMENTATION BY FUNCTIONS
When activities are grouped by functlons" functional departments
come into existence. Functional departments become necessary
when the size and volume 01 the acuvales become large. II
has ! o llo~ i n g advantages and disadvantages.

1 23

. ....

~-_

Directcr

Sales

Director
Purchase

Oirlllcto r
Siore

Duectcr

Production

Advantages
1. Planning is l<h:j lit ated .
2. Fru il s 01 spectanaaticn are ripe .
3 . Tra ining of managers is eas ily devi sed and imparted
4. Manag erial co ntrol is effec tive .
5. Org anlza iional struc ture is clear -CUI .

Disadvantages

1. Here th e need for coordin ation Is very sev~re but thl

type of cepartmentauon makes it dillicult .10 acbtev

it.
2. Manag er ial d evel op ment is limit ed beca use hi
kno..... ledge, experience is limite d 10 his own oepartme r
on ly.
3. Ove rall objectives of Ihe company are ignored.
4. Env ironmenta l ch anqes are adopted ver y stc.....ly.
5. Overspecialization is fea red .
6. Profit respo nsibilify is shilled from departments to t
leve l man agement.

2. DEPARTMENTATION BY PRODUCT
This type 01 department Is needed when company manutactu!

a number of products in larg e qua ntities . Usually large SC,

companies adopl this basis lor ce partmemaucn. Under (
method the top manageme nt de legat es 10 each d epart ma
tunclional authority, powe r of sales. purcnase . productiO

service relating to relevant products . II has folkMing adva,ntsges

and dis advantages .

Prasident

Cotton Textil e
Division

Aug & Ca rpat

Division

..

Woollan Textilo
Division

Blenket
Division

SynU'I"t;c Rayon
Divis~n

Advantages
1. It facilit ates equa l concentration o n each produ ct.
2. It facilitates' managers 10 ha ve independence In making
. decisions on the purchases, sales, design 01 the product.
3 . It ~e lps In ach ieving functional coordination ,
4. Growth. diverslly, additio n Qr elimInation of the products
is com pa rative ly eas y.
5. Eltl ci ency 01 each department is exactly mea surable
In terms 01 expe nditure and profits.
6. It make s possibl e use of apectallzed knowledg e , sklll.
and facilities .

Disadvantages
Top level management ce ntro! over the cepanmems
is d ifUcul1.
, 2. Since' every ,dep artm ent ,,'ls perfo rming d ivers ified
, _. func1iof'!s, funclioni~ spectajtzatlcn and etllciency are

-, " 1.

adversely allected.
3. It re9Uires every J11anager to.have diversified managerial
abilities,
4. Every m'a.nager
rrustbe
'div:ersilledly
t raine d .
',
' ,' ,
. ,' ,
'

'

J25

..'.

.dIi

3. DEPARTMENTAT ION BY TERRITOR Y

Ac~rd i ng 10 Ihis depatmentall on activities are grouped 0
the bas is of matk etlocatlcns . This me thod sho uld be acccte
when activities are geographically dispersed or diversiii
Usually national and mult inational companies adopt this Iyp
of depanmentalizalion.

It has fanowing advantages and disadv antages .

'.

Manag ing

Dir"ctor

Europe
D epartme nt

Eas t Asia
Depart ment

Sou th Asia
Dep artme nt

II

1.

Japan
Depart men t

Middle East
Departm ent

I
,

Advantages
1. Economies 01 local facillUes are achieved. t oea

2.
3.
4.

5.
6.

econom ies may.lllClude tabor. raw material, lechnology

land and building, goods and services
C:-O ntrol over lower level managers is poss ible.
II focuses atterurcn on tM local markets and problems
It tacnnates com munica1ion with local customers
suppliers . and governments.
. Training is facilitated acco rding to loc al requirements
Every regional department has effective cco rcinanc
wilhin itself.

Disadvantages
1. tnter-reqlon al coordination is poor.
2. Control over geographic department is dill icull .

;> f .

3. II requires a greater number 01managers wllh general

managerial abilities .
4. Better managers may net be available locally.
5. Managers may fail 10 accustom and adapt 10 Jocal
cond it ions
environment,

and

4. DEPARTMENTATION BY CUSTOMERS
ThiS type 01 oepartmentatlcn focuses attention on serving
better the various classes of c ustomers. This approa ch 10
departmentalization lakes 'he form of wholesaling . retailing,
ladies, gents, and/or babies depart ments. tn Ihe eoucat jcnat
inslllutions it lak es the shape of group s of students according
to specialized courses oftered .

P'liISidenf

Manager
Students'
Unifo rm s
Department

Manager
Who[osalo
Department

Manager
Bab;es'
Prcducts

Dep artment

Advanlages

Manager
Ae!aU
Oepa rtme nt

Manager
Ladies'
Prod uc ts
Jepartmenl

'

1. Cuslomers can be served in a better way.

2. II facilitates better undorstanding between sellers and
buyers.
3. Specialized knowledge of customers is eoco oraeec.
4. Training is tacnitated.

Dlssllvsntsgss

"

1. Understanding 01 custome rs problems by the selling

_. stall may be lacking.
2. Grouping 01 cust omers may be dillicult.

3. Coordination is dilllcuit.

5. DEPARTMENTATION BV PROCESS
OR EQUIPMENT
\
Manufacturing campania's f ind it easy to group their activities
by process or a type of equipment. A textile mill may have
weaving , dyeing, drying, pressing , santortrinq, marketing ,
production and/or linance departments. In the case of equipment
departmemauon . electronic dat a proc essing may be created .

PRESIDENT

Advant ages
1. Specialized know-how and technology are encouraged .
2. Eco nom y 01 op eration is th e" fruil of t his type of
Depertmentatic n.

3. Training is recuueree..'

4. C<n:x-",--'",J.'9 F ~ h<.e...-..

<eeL-: ~1

Disadv8nl aQU
1. Equ ipment departmentaticn may require a heavy capita l

2.

investment which may .not"be lustified in small enterprises .

In case ot a breakdown in one p rocess . Ih ~ other precess
will be Slopped. c ausing an. increased dowplime.

12 8

6. DEPARTMENTATIONBY SIMPLE NUMBERS

~t} ~~m'_ 5\1 b B ~.'(\

Thi s kind 01' departmlinl aiizallol"f ,rs'qu-ii e: confffiotr'-lii artnta s.

'& It'ln tiuSlnesS:w-orlO it is''o n;i ts W8J'::OUl :1I 1S'use ful ~ Iy In

those 'organizations

whetl'Vsp~ j a li za 'i (1ri iS~.go od fa-t ;noth ing.

l iiJ'.:l:'I \;t ?~ nt;[ ;~I ": 'J'Il j::. :_tif~ ;:; !'\, i\li r;

'A!ivsritages . U "~ l ,:,:!t) !ri

;;:A,! . l ode! r :i ;L~

~ i f ,

1. Diversified knowledge

ir;iJ;~'

;.

concent rales::rN'an'lnchviduar.

_ '\

2 ; , _.,~UP,e,rfjc~!!!, k~0'N ledQ ~ .<?f 'y.ar1

pus .!~~ g e.s, ~~ e n~ u g h.
3'; ~ 'T ralh h"Ql' js:~ s (hlp I J~t"."H ! l\ , H ~~ ~1L ; d ! ~ " ; ; n i "b

4. { MOi'Jbl ()'nY ~ ~f .'toIo~ fm a'Y ; bKo \le rQ'o r'1i i{;; f\ f!J)

Dlssdvantllg8s1,; "{,>,c :-

.':i:; tA ':" , ~ I:;! ~: -'; i;Ll. Gl')'i _ :~:n

:' !'.,';-~ 1 ,F~ n '-1at'ks ' ln !sp eCi ~llz at lo n /'> :::111,. r;-'

,-,,-:<:!::, ~~dl . ;;~.r 1 1('>:

' '': : ' '; 2 ~ 'md\vldoals Ja~ hi "dePttf;ol 1i; noW1edge' in 'thetJi 'tiade .
" . ~, ! 3!: Overall 8ff ic i E! nCY ~ Of ! -tt1Et"~ '6 rga: ;';T zalioh is 'tkif"easlly
-,,:.;'< , i '-,.,.~ : :-

ach ieved,

"H ,-" ;i1~" OEP"'RTM ENTAtI ON' BY ''TIME ' o"

',' Y li F. t'~';.i -'>:..<; \,n,,: ,p.:W:'---: ;~ '".';:":; ,,1:(,;',,''-.'' ;:::y ' :y"'-'. "':',,1 ,', II>

~f!~!~.r!!.fJ~ ~-: : .1;, \,! " ..;~:r_-_: ~_

1.

cccu ~I1 . ,' ..jy ~-;<'i'd >! :.,, :

Each machine and capital eq u i~ lB?n~ . c,~ ':l ~e, , ~.e d ~Y
a greater numbe r of 'workers and for ronosr hours

2. Economy 01 op eration is facilitated .

3 .Work ca n continue wit hout lmarruptlon for .24 :hQUfS.
r. 4,.; Wo'rkers carr.reae -eut. ttme lot th eir . studies, ' and
. " : ea uoat iO ri ! l l ~.\ IPJ 'l-i' ' . ' ,::"" .
'.':",
' I ,'

1 29

Disadvantages

1, Coordination between the shifts is difficult.

2. Transfer of a worker from Dne shill to another is difficult:'
due to adjustment problems.
3. Night shift supervision is difficult.
4. Night shill labor rates are higher causing high cost of
production.

8. DEPARTMENTATION BY PROJECTS
(MATRIX OR GRID ORGANIZATION)

"
The word matrix refers to the cavity In which anything ls.
formed. Therefore, ~JLQ.JM.~orm~.dJ~L9PmpJ.!g,
~a paflicular.J2roi~.!.1!~1!-~~1J?~_.~,~~r!Nn_Q.r. lem.n Jl,Jrl' Matrix':
~!'I')!3.~.I~~_~~~r.eJ~1Q....!LgJjd",o.r .Ptoj.Q.QU
organization.
v..

. -"".,,"~

To complete a projector projects professional experts

are borrowed from various departments who work under their';
respective project managers appointed. In this kind of
~eparh~entationi p.r.g.le.sSiao.als and J~.niC~~p" work:
l2iet~2L-U._is the.. combln~ion of functjQMLllll.pi'Oaoc
~~me'J!s. within. the same organizallC?~.!!-l!9JYf~J2'
~accompJjsh a parti9~oject. After the projects are complete:
the organization chart reverts to its original position.
The following advantages and disadvantages may be cited;
in matrix organization.

Advantages
It-otters betler customer relations because of the:
combination ot functional and product departments.
2. It- claims better and ettlcfent control of a project.
3. Project is completed in shorter period.
4. It otters lower project costs.

1.

130

DIsadvantages
t . It complicates and confuses Internal operations.
2. It creates difficult situations to manage.
3. II encourages inconsistency in the company poliCy.

4. It is diflicull for managers 10 learn and execute

somewhat dl1 le ie nl organizational roles.
5. The principle
unity 01 co
...!!!ffiC!!l4j s yi_().lale:d creating
problems and compiicit"kms.

of

13 1

____..., ,4

(
c."':-i;'

,,~,';'J , i,:~;~\'I:;<

;\P'resident

Automobile

p,e,pa~m,~:ni
Functional Personnel for -Prelecte

PrO'duction
Facilities

Personnel

Accounts

Finance

Projects

Pro;eci

AlC
Group

/ B

Products
Group

Personnel

AIC

Group

,Group

Matrix Organlzat,ion
('Combination of Product and Functional Departmentation,
To Compl'ete 3 Projects)

1 ,?

\'1M

'CHAm R'&'(-(; ;;
I Ff ; ) :,h X;'::' AHfi'/ i

WORKING WJTII OTHER ,

GROUPS

DEFINITION

.JI..\1"}~(. \., ; \; f.~ ) - _.- ~h{)" ;~'~\'\ ~';\~f;ti

, ",. 'CHAW,CTbtisnc s
:;'\I_:'- t; ~ )?'"

WHY GROUPS FORM

-!.~Jf:'::;"" f ,,,,-d;.;.:_:'

.H

~ , ,~ . O~,gr'W~jc~~.~,~,~ Economic
'\\r to ~ );.t'ReamnS': %Ocldp 'Cb61ogical
.
. Reasons - secuM
VTieasons - Social
.
Reasons - Esteem needs

Selr.'\4IitiMiia\\di1 N~

. "" '''' ' :'' . 'HOW G ROuPS FORMJROLES

OF GROUP i \",,, ,, ,, ';

.,

Interest Grnup ~, fri endsh ip Group ',

,. now GROUPS GROWl

~~;;';<~ ~ ( \~f:fLPUR1S~IP,R,QG~:E

Mutual Acceptance - Decision Making

Privilege - Motivation - Control

now GROUPS RANK

The Leader - The Status Seekers The Followers
:,:.

133
.-".;, ~

_ __ _ _ _ ,ltiIIIlll4

 now GROUPS FWWI

WORK/SUCCEED

A. Communication
Wheel Network - Chain NetworkCircle Network - All Cannel
Network.
B. Cohesiveness
Characteristics of a Successful
Group

r,
II
:-;

,
i

Il
I

GROUP CONTROL

Group Pressure-Group Enforcement Personal Values

CO~I~IITTEE

Definition
Classes

,,

f
.'

"

EXAM INATION QUESTIONS

,
I

.~.

134

DEFINITION
U nderstanding natu re, class, process, for mat ion of gro up is
ess entia l (0 the study ofo rganizational behavior..Groups are .
defi ned differently in term of bow th ey form, why they fo rm ,
roles--:-charaeteristics , and how they &row 300 flow. ' .
One vie w sugges ts that a gr oup sho uld he o rganized and
co nd ucted through democratic leadership, member participatio n, and overall cooper atio n. Anotherview is th at it comes
into being with a 5tt of techn iques, as ro le playing ,
bralnstorming, buzz groups, leaderless group, learn building, transactional analysis, group ther apy, etc. Another
school of thought suggests that th e group s hould be vi ewed
in terms ofils nature , ho w it forms , its strud ure and process ,
and how it functio ns.
AboutIts form ation many theories have been devel-

oped:

!]5

. I'.:
"

.'

'

r,

,, ~

' .', I , .

'
,

Prcptnqulty thw ry : Itsuggests that it is the result of

geographical proximity. ~ :: ' . ' , ': i - ' \
.
"

.'

--_..

,-~.

_._..

,
(

'

"

,,/ .. ,

Hum an s Th eory: It decides that it is based on activities,

.
, iI

interactions,
and sentilnents.
- __
~

Batanee TIll.'tlry : II views the group as the result of

people's similar behavior and need for common goals.
t
, , ""'" , , :
,

, ' : . '"

" 2)..

.. ,',

'". Excha nge Theor y : It suggest... reward-cost results of

interactions. Rewards lnclude sattsfact lon ofneeds, and costs
are frustration, distress, stress, fatigue, embarrassment, or
disagreement. If rewards are greater than the costs, group
will survive.
'-. Organlzatlon 1111:ory According to it, groups are
formed for economic, securttyor soci.al factors.

The gro up g ives "the ' conceptof synergy' meaning the

whole is greater than th'e'"sum of its pafts .'~ynergy suggests ",',
that two is
powerful than one
one.
. _,'

more

1
l'"
,

pius

Characterlstlcs/Dlflnitionsr How y ou Spot One

The author, Fulmer has defined a group on the basis of irs characteristics.
an association 'o f two or more
According to him, a group
" '" .
"'."
individuals...

is

'

(I ) Interacting with the members on an individual or colleclive basis,

(2) Sharing one or more goals.

136

"

,."

(3) Having a behavio ra l system ,

'.:-'
_ I","

~-

,.

(5) Forming subgro ups with in the g roup tend to co me into , .'
exis tence.
The det ails ar e as follo w
'.<, 7" " " -

1. Int era ctions

'.

People interact with ,each other. Members of g roup per fo rm d iffe rent

things'ioge'itieL TIley'interact through'a system harmoniously; They

have

t:ffed,iv,e 'system of Corillliun ica'~ion .

.'." ' :"'." __'. . ',,,

2. Sha red Goals

,

!,

Members 'of a group hav ~''''ommo n objectives. A cd elcet team, a

company, or a production group work together to accomplish

common goals.

3. Behavioral System
A group has a fr amework. within wh ich it h as to ~ ~nfineJ . It has
"fo get'group
limited powers . Member s must yield to

membership.

rules'and' norms

" ,"

..

.
..,

. -.'

4. Subgroups

,,

.f
~,

D ue to natu ral tendenc y to differ from others , individual s te nd to

form subgroups in a group . Individual differences create politics '
wh ich in turn forms subgroups. Th e nature ofsuJ}grc.-itips isinfonnm
wliidifadlhares grape vine ,' -li: k1ikfo( qulc,,communiCation." .,"-'

S. Statble Role Relati onship

Wheth er th e group is organized forma lly or inform ally, its membe rs
must have certain roles to play. Role-playing galvanizes the grou p.
A person ceases to continue as a member of the group once his rotc
o r work. is no longer required . The members have to work within
the framework set by the group,

137

,
'';

'ci

WHY GROUPS FORM .. REASONS

Group_are success.tblif there are reasons for their existence. There

are physical, economic, sociopsychological, security and soctsf"

reasons tor group formation. All reasons are related to the group's
goal and enthusiasm.
.
Details are given below:

1. Geographic/Physical Reasons:

It is verycommon reason. Nearness to each otherestablishes group

relationship. People living and working together automatically form
a group. ~ut geographic requirement for group formation have
limitations for two reasons:
(a) Technological developments in the fields of transportation and
communication have weakened the location factor.

(b) Common interests and shared goals have brought people together
irrespective of their location.

2. Economic Reasons:
Economic factors gtve rfse to groups. Individuals have limited ability

hofu physical and mental or professional. They cannot do every thing

as an individual. An employer or capualisthas physical, professional,
amd time limits. Therefore, he hires employees in order to form a
group that performs economic activity.

3. Sociopsychological factors:
There are other reasons for group formation. Workers as members
of a group perform their duties to satisfy their various needs. Their
needs are physical, security, social, esteem, and self-actulaization.

138

t,,

4. Securily Needs
Individuals are less secured than a group. An .organization, or
institution is far much stronger than an individual. Unlons, manag~ments, aild governments are very strong_ Military is anot1U~f
example. Individuals gettheir strength, authority, or power f~~ ~e
group they belong to. A'whole is always greater than the sum of Its
parts. GroupsJ'!(Jvidesocial , final'lCial , ~~"rnic . life. a~ propeny
security " Th~Y. c,r,e~t~ syn~.rgy , which m~ans tW? is stronger thatnl~
"plusone."
~~~

5. Social Needs
Humans are soci al a n i m al s ~ They want to marry, ma~e friends, play
t(lg ~ther , . work tcgether.. For a person' solitary 'i mpr l so>n m~ nt ' is' :ih
eiireme punishment. 'He wantS'lo"bef(ing' (0 otfh~ri:" He want... tv':-
ogiiit"iOn'" He hi" instinct to move ebout in a society.

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6. The Esteem Needs

.
. "r.~

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.'

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>

If a person is socially and economically safe, then he has a desire

'-for'self-esleem. He becomes status-seeker. H wants 10 accomplish

social standing . He wants a title, cubicle~' a secretary. and the like,

,, ~

7. Self-Actualizatio n Needs

This need leads persons to professional paths. ~,~"\f ~lli!!U~~J!~~?,~S

g~ :e ffic !e~l~~~s~ ~,~ ~p in a g!'1?up. l]1:~r . ~u~. a.nd . ~ eni us _~[.e
~cd ltateJ. m a group. Personal growth aoo aceompTistimem will
emerge frOm-the rricmbcrship of a group", -- .. ,..' v'illE ROLES OF GRO UPS AND HOW TIl EY GROU P
According to roles, the the group rna)' he divided into the following categories, as suggested by l eonard Sayles,

I. Command Group
2. Task Group
3, Interest Group
4. Ftiendshi(l Group

139

, .;

1. Command Group (,A'; i 1,0'

,

!
.,.

r . ,.{
"....

or'
.... ....

f,_

.. ,'

'.

I!..~~.,th.E-~~tatiOri of f9i.'!1,~!JJIganiz.atj.Qil..Formal organization

is Iir~~\j2!!.Q.fmaniMtt)[I1.e,~t, !'1arag~me_~:tj~g!~~9id~~~;)~,~sig-tlUf!s:.
d9,1,~$#,~~!i"a,~Jhj)Ii!y~.!!pm.~~,<l;~tj_Y,i~f_~s,_,~n,~.c.2~!!:()I., ,t,~_e p~r,~on'pei':to
g~tth~ Ul,lpg:UJ9T!,e. C~L~.I,~~ll!.L:O()\.vit9~ ~!J_Y!~. The' compl lance ill
order is ,essenti,ll in-,a formal gro up. Thisgroo.p is managemeet-centered and work-oriented.
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2. Task Group
When a t~skor project is,to be completed a task group is.(QrmtXI.flS
agai'n;th<co~,rjlli~a'gr~ui'i:' 'fhe"tasI-group is lesS form:\'\ and
'York-Qrlented~ Oncea project,i~coInpleteme-01ller'one must -iiirierge,
or the groil~wiilco-me-tQ'an"eri(L ---""~'-'
-,

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It has efficientcommunication .and coordination,systems. The

group'Is more proo uCf:WiH ll'aii-thetradiHona:f commaiid group.

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--":,,,",,

3! Interest Grou p
TheEl~mQ%_~::.~,'tY!L~~_'g~j!!!~r.@~IJn}hegr:9~p, It,mayhaye . a sc~lar
! ciiain,.9f.,a.,hie,(8,I'i;Py, 9f ,po~i-tjol)S" . The group, rnAY;,h~,,~'~ljlp'o)::ary, 'Of
an ,,()pJ~~,ti,v~,-',to. .accomplish. The group may have permanent.
short-term or long term, formal or informal, or line 01' staff.
C-,Y ",,'ti'i' ;' ... ';."
,
;

..

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4. The Fr lendshlp Group

I',

'I.'

This is the~,ro\.lpoflikell)indedindivjduals. ~ernh~r~,usuaIIyhave

c?nlmon' ia.~t,e; sch99l" oftilq.\I,sb,~,habits andn;o6bre,~. A #le~~,qip
gr~i'ip-may"also'have,il1divjduals of dissimilar' naru're, such as, disctisi;lon'gfciup's:-anJ-'to-;~'~r .T,9~,~lla-~o\llmjttees.
'
"

..--.,--,,".-~ ',," ,.-''''-'''--~.' ,..,."-- " ...... ,.,

/
According to Fulmer, groups may be classified according to,
!their behavior and process , as follows:
(i) Th, degree of formality

}, l )

(ll) Intimacy of their emotional involvement

I

(iii)

Main goal

",

I
'I

,I

140

{lv] Size of lite group

'(v) Complexity
.r.

, ..'

..

;' .

(vi) Degree of voluntarism ) .

".

"

V HOW GROUPS GROW

In congenial atmosphere grou~ continue growing. People work .
effectively 800 efflclentlywlth other people for the following reasons: . ,','
.'. '
".
1. Mutual Acceptance
.2. Decision-making Privileges
3. Motivation
4. Control '

1. Mutual Acceptance
A groupc.annot formor continceto grow unless members have mutual
acceptance. The new comer also needs group <acceptance. SAARC,
ASEAN, and Common wealths are the result of mutual acceptance.
Mutual respect, trust , confldencce, <and Interactions are requtslres of
groups. Marriages are another example.

2. Decisioii-S1aking Pri"i1~ge .'

The group becomes stronger if the members have privilege for,,'
participation to make a decision. Groop participation tee the
gruup grow.
..;,',

3. Mcttvatlo n
A leader motivates, communicates, leads, counsels, advises, and
guides. A motive is a 'need, want. drive, desire. Motivation is a
restless ness or willingness to expend energy toaccomplish a goal or
a reward. Motivation' makes workers -.keep going. Motivated
members make the group stronger.
....

..,.

. :'

141

'."

"."
"

'

4. C on t r ol
If th e members of a group are matur e and realize their dut ic-s and
ob ligations they become self-directed and control led. Mot ivation
plays an impo rtant role in gettin g the members self- contr olled

HOW GROUP M EMBERS RAN K

An actlvhy must he c rgenlzed before it can be performed . Organi ~ i ll g

creates super-subordinate relalion:-hip, a.or.sign.<; tasks. ddegah:!'.

aulh orit y, and unifies the work of in dividuals and departments . In
oth er wor d , organizi ng cr eates ranking of group members accord ing
to their qualification, specialization, skills , eblllttes, and se niority .
In the absence of ranking nothing hut chaos and confusion w ill result .
Ranks. in the gro up is a natural pbeoom eeon,
Th e grou p members may be ranked accor ding to th e follow ing:
1. Th e leader

2. The status seekers

3. The followe rs
4. Group control

1. l11e leaders
A leader is the penon who stee rs the group to ward a goal. No group
ca n survive without a leader . A form al organization must have a
leader . TIle leader infl uences th e behavior of his follo wers . Managers
ar e leaders . People llke to be let! rather than managed . A good
managers his tea m buy leading. He m:IY Impel his. worke rs by several
devices such as persu aslon, influence, power, threat of for ce, and
appeal to Ic g it im at~ right . He talks th eir la ngu age.
A leader may he formal, inform al, elected, or appoi nt ed . Labor
\Jnin os, service cl ubs, professional soc iet ies , soc tat clubs, political
groups , and vete ran soctenes have elected leaders.
A supervis or , fo reman , plant manag er, or department head is .1
fo rmal and appo inted lead er. Such ptrsons are not elected oy the ir
followers (su bord tnates) . Here the leaders do nolg(,vcm w ith consent
l,f th e govern ed. Th ey enjoy a pos ition of forma l com mand .

14 2

,,

A manager may be task-oriented or group-oriented. Taskoriented leaders are likely to give less production than the
group-oriented managers in the long-run. A manager is the person
who is responsible for the work of others.

2. The status seekers

These are the leaders who don't lead but serve only their personal
ego. They want to become a leader just to enjoy a status. They are
neither group- oriented nor task-oriented. They are self-oriented.
They want just to establish themselves.

3. The followers
These are the persons who are led by others. They are not willing
to accept responsibility. They have no or little ability to plan,
communicate, and control. Some followers have initiative and
self-confidence. Others require close guidance and cannot work
independently. The followers have less knowledge, endurance,
resourcefulness, and helpfulness to others than their leaders. Average
person has the tendency to be led rather than managed.

vhow GROUPS FLOW/WORK/SUCCEED

o
The ultimate value of the group depends upon how the group works
or succeeds. The success of the group depends upon (1) Effective
communication and (2) Cohesiveness. The nature of the communication and cohesiveness depends upon the nature and type of the
group.

1,13

A~

COInnmnica lion

-- '

Communication is afunetion of leooership. Leaders must bave skill

in motivating. counselling, leading and communicating. The success
of business depends upon
. effective cornmunicatk mnetworks.

A network is a structure situation in which people transmit

information in a specific panemNetworks may be of the following
types.

\,

I. Wheel net -ork

Each of the four persons communicates with the person at the
nucleus. All the persons are subordinates 10 lbe person in the
centre.

2. Chain netw ork

Here are two sets of persons. each compris ing t\110 persons. The two
members of each set commc mcare wlrheach other and with the person
between them in the centre.. It reflects the chain of command princlple.
-

.',

3. Circle network
Each person can only communicate with two other above and below
him, It reflects highly decentralized pattern . It encourages grapevine.

4. 'AII-dla nnel network

People are ahh~ to communicate frecly with one another. Free flow
(If communication contributes to the solution of problems. It also
encourages creativity and innovationto solutions . It is decentralized.

u, Cobcslveness
It is the attraction of members to the group . The attraction depends
upon the quality of the product it delIvers. The existence and survival
of the group lies on the nature and extent of cohesiveness. It is a
govem tng factor of the unification of the individuals of the group .

14 4

'.

DIAGRAM OF TIl E CONCEPT OF TilE GROUP

Needs of Group
Basic

Safet y

Self
esteem

Self
llctualizatin

Fonnation

Mutual

Decision

aceept.ance

Making

Motivation Control

~'

Charaderi~tks of

Group

Sbble role I .Com municatio n Subg roups

2.Cohesinn
Interaction Shared Sl.1llus
relat ionsh ip 1.Task
networks
4.Maintenance

"'"

Goo"

Standard of Effectivene;s

Gro up size Dependence Personal

on group
q ual iti~

Succe ss Status
Matenal
of Group of GrOltp

()f me ~1'S

'""""""

Putentilll Res ults

Membership Satisfaction Accomplishment of Objectives

14 5

,
Group Control
All groups work under some controls which are as follows:
I. Group pressure

2. Group enforcement
3. Personal values

1. Group Pressure
Group pressure is oneofthe strongest motivators by which people
are compelled to adopt a particular behavior. You are inclined to
adopt that behavior, way of life, or deed which is socially
approved, and avoid those socially disapproved. People cannot
resist group pressure and tend to submit to it.

2. Group Enforcement
Under this type of group control, nonconformist is not tolerated
on the plea that he is violating discipline and generally accepted
group norms. To fix the nonconformist up two types of actions
may be taken.
(I)

Soft action such as rebuke, reprimand, or explusion form

the group.

(II)

Rigid actions which may lead to sabotage the performance

of the nonconformist or turncoat.

Group enforcement in the mind of individuals is also the

result of merely imagined and unreal fear.

3. Personal Values
People tend to follow the norms and principles established by the
society. GrOtH') pressures and enforcements overcome personal
principles and values. Individuals usually find themselves morally
and ethically bound to agree to and follow the opinions and
objectives set by the group. They have to harmonize their behavior
to that of the group.

146

Characteristi cs of a successful group

Douglas Mcgregor has suggested the fo llowing characteris tics
of a successful and creati ve group .
Successful groups tend to be infor mal and comfortabl e.
2 Probl ems are solved by the participat ion of all indi vidu als .

3 Ohj eclives are formulated unanimous ly. Gr oup members

unders tand and accept their duties, tasks , and goals .
4 Th ings are not imposed upo n. Everybody has a -sa y- in the
discussion: Everyone likes to listen and to be listened to,
Op inions of all indi viduals ar e given proper and due impo rtance.
5 Su ccessful groups do have disagreements. They are oot sup-pressed. Disagreements ar e care full y analyzed in orde r to
resolve them.
6

Due 10 everyone's participation, most decisions te nd to be

unani mous. Formal voti ng is rare.

7 There is cr iticism. But it is tolerable, ge nuine, and cand id. It

is not biased . Perso nal attacks and reservations are avo ided.

8 Members have leave (II express

ideas.
)

ig l

tll ,~ ; r

feet II,gS, oei nions, and

. ,,"

' k:

;Jl1,

-1)'

10 '[b e cha irman of the grour lines -_th r r upon or dicta te.
. Chairmanship may shif fru m o ne ;,crSOll to another,
11 The group is well awa re of its per formance.

147

COMMITIEES
People against committee obse rve that:
J. A camel is a horse put together by a committee.

2. A best committee is a five-member committee with four

members absent.
3. In a committee, minutes are taken and hours are wasted .

Those who favor commluee observe:

I . It facilitates reflection and judgment.
2. It provid es an opportunity to Interested groups to make their
representation.
.

3. A committee is a useful device 10 coordinate.

4. It may be used to exchange views, information, an experiences.
5 . Motivation is Iaclthated.

Definition
A committee Is an association of persons 10

w hom some matter

isjoinlly committed. A commiuee may ha vethe following forms:

task group. commissions, board, congress, conference,

cabinet , assembly, team, etc.

Class es
A committee may have the following kinds:

I. Managerial committee
It is a group of managers who collectively perform managerial
function. as planning, organizing, leading , controlling.

2. Decision eommiuee
It has the authority to collect, classify, and deliberate data and

mate decisio ns.

J . Recommendation committee
After nursing over the situation it can only forward irs reco mmendations . It has no authority to make decisio ns. Its
example is advisory committee, pay committee.

4. Striff commiuer
Like advisory committee it can only recommemd.

5. Line committee
It is composed of managers enjoying line authority. It '
makes decisions, and may accept or reject suggestion form
the staff.

6. Formal committee
When it is a part of organization structure 31x1 has been delegated authority and responslbiliry, it is referred to as formal
committee. A board of direct ors is a formal and permanent
committee.

7. Infonnal committee
It is not a part of organization struct ure. II is a group of
specialists to whom a particular problem is committed. Its
life is limited.

8. Permanent eommluee
-I

It is a permanent part ofthe organization, as boardof dlrecrors.

It is also known as a standing commirree. It is usually a furmul
committee.

149

'. Temporary committee

It comes into being to ponder over a certain prohlem or
problems and stands disbanded afterward, as pay committee
appoin ted by the government foren time to time.

DE
2 W

3 H,
4 W
~I

5 \\
6

I
t

;~

-"

,
'~

1 50

"

7 I,
b

,.

Examination Questions
Define groups. Explain their characteristics?
2 Why and how do groups form?
3 How would you rank groups? How do they succeed?
4 What is the importance of communication in making the
group succeed?
5 What is a committee? What are its classes?
6 What is a group control? What are its forms?

7 Identify four types of groups. Which type of group do you

belong 10?
8 What are the factors that lead to form groups?

151

CHAPTER

HUMAN RESOURSES
. (PERSONNEL MANAGEMET)

..,
~.

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,,

,.

,.,

I,

, .,.

DEFINITION

STAFFING ACTIVITIES/STEPS
I.
2.
3.
4.

Dtermination of Needs
Selection and Recru iting
Orientation and Training
Appraisal of Performance or

Personnel Audit, MBO

5: Compensation
6. Promotion
7. Separation
Resignation
Layoff
Retirement

Retrenchment
Termination
Death
. API'ROACIIES TO EVALUATE
JOBS

Jobs Description
Job Specification
Inventory Chart
Ranking Method
Job Factor Method
Time - Span of Discretion Method
Comparison Method
152

~,,
~

,,

FAVORITE CIiARACTt:RISTICS
OF TIlE CANDIDATE

NEGATIVE CIIARACTERISTICS
OF TilE CANDIDATE
TRAINING AND DEVELOPMID.7
Methods, Approach es to

Managerial Training

EXAMINATION QUESTIONS

I
~
;

I.

t,.

153

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DEFI NITION
"Otass A managers hire class A people. Class B managers
hire Class C people, so they won ', be threatened", says a
management expert :
Slalfing start s with hiring and ends up with firing. Hiring
involves deter minIng needs and inviting application s from
prospective can didates. Alter hiring selection Is made and
then the selected candidate Is placed on the job, But the
staffing activity will not end here. It will ccnueue throughol.:l
his career in the company in the form o( promotion . tran ster,
restructuring salary levels, develop ment. meeting grievances,
and separato n. Separation means reuremera. lay-oil. dismissal.
resignation.

or

STAFFING ACTIVITIES
The details 01 staffing achvities are as follows:
Determination of needs
Selection and recruitment
Orientation and training
Performance appraisal
Compensation
Prcmono n
7. Separation ....

1.
2.
3.
4.
5.
6.

154

1. Determination of Needs
Ettective management urst determines need lor personnel
before It makes decision 10 hire. There is a tendency Ihat
management value some positions more than others. The
management should avoid such a discrimination.
In the following are some approaches to evaluate jobs:

a. The comparison method: It, is based on guesswork.

In this method comparison is made between what the com a y
. !ying for a pa rticu~ poSt I n and what the J~
p~ lor the same posillons.

is.

b. The job/actor method: Thi s rnetnod is in itself

objective but subje ct 10 the SUbjec tive judg ement 01 the
evaluator. It del ermines the dilticulty in the evaluation 01each
job. This method is applied o nly in non-managerial jobs. and
there~ takes into accounl overtime. ~~.!!l.!>al~l~~d-dj:t
money (extra payment for odd tobS)~ - --

--

c. Time-spen of discretion method: II. according

to Elliott. Jagues, sugges'ts thai the job will be more lrnponant
if it takes longer tor a person'spoor~6s'fowup:----'

d. Ranking method: ,All Jobs are ranked in ascendino.....

order 01 importance of Job. Importance 01 job is based on
J(Oowledg9. skillL, scop e and impact;-re!at"ionshl Ps. and
s!JperviSjOn of others.
6.

---

Inventory chart method:

evaluation 01 the promola bilily of the

.-or at present._

It is a concrete

StaiTlOlhe

wri tten

near

lulure

t. Organizational chart method: Jt is the ornanjzallo~

sk eleton l hal determines
..,----- ---

--

authority relationships. lev els 01

155

organizalton, de~lion of aJ,.1 borily. and span of management.

IfSdarkaspect is the resultant inflexibility 01 the organiza tion
and t he complex 01 superiority of the upper-le ....el staff .

g. Job specfnc8tlon method: It stresses the cand idate's

and olher ..

education, ab "

u ..

an~.

'lualificaHonS..:-dut fes and re s po ns ib i lil i e ~

-r-"
In determining needs, it is also necessary to tix the number
of managers and the dates when they will be need ed. By
reviewing the current position of the available manpow er with
the organiZational chart, man agement Is in a position to dec ide
to reorg anize o r create new posilions.

2. Selection and Recruitment

Once Jhe need has been detenn ined, recru ~i ng starts.B.ecwiljrp_
refers 10 iO'{jUng app lications from p rospec tive cand idate s.

Acco rding 10 Fulmer, se lection prec ed es recruitment

because If selection methods are net p reset, the recruiting
proce ss will fail .

will be
Once the applications
have bee n received , ' they
.
.--~

". " "

_ . ~

~!!!.n,~~.~el ected accordi ng to the company's job d e sc r i p'~ 2.~ _

and specifica tion. Then lhe candida les will be interviewed,

tested. medically checked li p , and finally se leC1ed.

3. Orlentallon and Training

Orientatlcn is a period __o Un'n~ duc.tio n . Many cmenteeucns

PtovidE!~~n'official and formal session, Interviews, and sPeeciles.

'Gi oup --oonrerence s, leCt'ures, and movies are 'also used. 10-' o rie'rii il'tKlil-fo r'l owing- su bjed s are--covered> - ~ '--' - "
'". -- . '
'. ._-- ... _.- ,

1.

Comp~ny

histo ry and its major operations.

2. Company poucles. rul es, and regul ations.

156

3. Relations with immediate bo ss and sUbOfdinalet>.

4. Rules and regulahons about:
'-" " ' ~' a :" "'Wages and method .ot pay.o:.,nt.
b. , ) ".J0rking hours and ev ertfmc.
c. Safety ; health , accidents ,..

d. Holidays, hiiwes:' ~Od~~~~aHons.

if.---Reports about absenteelsffi anci tardiness.
I: '- DIsCipline

g.

and grili!viu~ce~. .

Unilorms ~

' h. Park ing1 acility.

5. Economic and recreal ional services.

..
a. Insurance .ptans
b~ . Pen sion plans .
.~.:. __Garnes and social program s
~

6. Opportunllies :
--" a~"...-_. . - ' -- --. transfer
- ..

Promotion,

,""

~.

Job security .
c. Suggestion system
-Rights'
powers

a.

and

Details 01 training are given in th e lollowing pag es in th is

chapter .

4. Appraisal of Perf orman r 9

It reters to measuring the performa nce 01 managers . Managerial
appraisal is req uired lor the followi ng reasons :

a. To allocate resources.
b. To reward employees.
c. To provide feedback lor emplOyees.
d. To create coop erative atmosphere .
e. To la cili tate communic ation.

157

Modern philosophy 01 appraisal has three viewpoints:

Performance orientation: To make workers realize their
faults.
2. Goal orlerxation: To make workers keep on the way
to oojecnvss.
3. f\;~ljO or mutual goal setting: To commit the worker to
the goals and make them feel personally responsible.
1.

Management by objective or MBO

By Mao we grade employees by the objectives they actually
accomplish rather than by seeing whether they are honest,
loyal and true.
MBO is based on the following principles:
1. Managers should be appraised by what they accomplish
rather than how they spend their time.
2. Managers should know what their objectives are.
3. Manager~ ctnd subordinates should have a say in selling
their own objectives.
, ,
I

5. Compensation
Compensation is the reward for the services one has perlormlt,d.
People should be paid according to their perlormance. Wages
are most important motivating factor. Wage 'incentive is7
way to release the potential ofaworker. Wage alterations
can be used to increase productivity. Compensation includes
wages, salariAs, bonuses, overtime p:lymenls, a-iiowanc_;~~;,.
incremel'IS-,-8'1f.1 other fringe benefits and liorli:S. Differ It
~ethods may be use'! in making cv",pensalion, t;~,-;:
straight salary, shift premium, piece-rate payment, time wages,
-,
~nus pay.!!!!illl, commission payment. Wages include all
payments made to workers for the service they render for
others. Wages are the reward paid to workers for their productive
work.

158

:[,

;:

~'


!i
~,

,:.

Compen sation may also use such terminology as 'tlU ,

interest, commission, b ribery, tuition. ransom , blackmail , tare .
toll , tax, dues, hono rarium, rent, kickback, commiss ion. and
discount.

6. Promotio n
f}Omo l;on is upward Iransler bringing higher sial us and salary.
It has great intangible impacts which are social, psychological,
and personal. II Is one of the methods 0 1 Iill ing an opening--:

l'il such a case it is referred 10 as promolion trom within .

Employees are prom oted 10 the htgher vacant po sition mstead
of hiring Irom outside . But this method prevents a C~.!!Y
10 have new technology. methods, and
f resh bloOd . 8ul on
theothe r handJLIalses the mora le 01 company employees.

7. Separ ation
Staffing cyc 6e COrfllk)le s ils revojuno n at separatio n. Separation

ffiCludes resignaliOn ,-lay.'Qjf,"OjSrrilssarreliliJ !iJenI~aisc~a.r~ and death which are discussed bek>w. Termination involves
penSKm, gratuily aod provident lund. ...;::T~$-.(.... .~~ - :

.,

Japanese managerial system has "fe-k>ng employment

sys tem , Employees reti re on their discretio n rather than at
the will 01 the employer or at the superannuation age. The
l ollowing are the forms of separatio n.

Resig nation
Employee s may leave the comp any 9 n their own disCrelion,
SUCh a voluntary le,fiingi"Siilerred to as resignation. Employees
may resign tor better future prospects. joIning some omer
company, or dillerence with the man agement ot th e comp any.

Lay 011
IU s that separation which is the rlWlb 01 economic and OO~~I)6$ s_
tj,ctQcs . Du..!!!.lO depreSSion or seasonal t1\Jctua lioRS e mp.!9yee~
are l emporadlyJillilQ.Q, This lay oft may last from some weeks

'~

159

,
10 morans or even years. Lay aU is very commo n among
seasonal food orocess'nc comp anies . After slack season Is
over, laid off workers are re-employed.

-r

':l

Reti rement

It is compulsory separation of the empklyee at his attai ~ng . {

certain level 01 age. In Pakista n retirement age lor men is 90' "
aAd-..fef W OI'AY R sa . 11 entails pension, gratuity. and provident
.
~. In Japan there Is no compulsory retirement.
.-..... _I

,10'

Retrenchment
I,!..ts !Jrlairing 1he number of employees in a company . It is the result 01 overempk)ymenl or POOf_ bu" ineslLQQoditiorJs.
I'lea'UCfnQIile excessive number of employees can only be
done under government's pre scribed laws.

Term ination
, or discharge ol tha empoy ee
!I.1tl5 nvo
ary- perm anent separation from the organization for any reason.
The employee so fired is entitled to severance pay .
Termination is dismissal, flrl

t1:y the company usuaUy on disciplinary grow

Death
It ils .mother reason tor separas cn . ccmponjes endeavor 10
pm', Je hospi1alizatk1n and medical benents, and maintain
proper workir
m{1iUcns 10 ensure the health and protecti on
or lives of it:
otoyees.

APP RG ACHES TO EVALUATE JOBS

For the evaluation or the nature 01 the job following methods
may be used.
1. Job doscript ion/Job analysis
2. Job specification

160

A
Tt

.r
.-.j
~'

~
i

3.
4.
5.
6.

Inventory chan method

Ranking method
Job-Iactor method
Time-span 01 discretion methOd
7_ Organization chart method
8 . Comparison method

./o b Descriptl on
It is a written descriplion of the ;ab to be done in a 'particular
post. II involves survey 01 all details of each pcsttfcn in the
company. It includes the locauo n 01 the [en, ils duties and
re sponsibiliti es, t he work environme nt , the sala ry and
auowance s. the promotion pcssibrnues. and the training_

Advantages
The advantages of the job desc ription are as lollows:
The new employee knows exactly who 10 do on the
job.
2. It sets standard 01 performance:
3. It acts as a legal document bOth tor the employer and
the employee lor fut ure referenc e.
4. II prot ects an employee hom performing unauthorized
or excessive ;ab.
1.

Job Specification
II Is me sumrrary of the Job description. It scecmes the fob
regarding its duties , responsibilities. pay, promotion. authorit y.
and candidate's qualif ications and qualities. Job descriplion
describes Ihe nature ol lhe job. while Job specincation specifies
what type of man is needed.

Inventory Chart
II is Ihe chart that shows the following del ails:
' -'

-.'

1 61

1.
2.
3.
4.

The persons
The persons
The persons
The person
promotable.
5. The persons

promotable immediately.
promotable in one year.
potential for further promotion.
with satisfactory performance, but not
to be terminated.

Inventory charts serve as a ready reference for the manager

about the employee's future prospects.

Ranking Method
The jobs are placed in ranking order by the management.
The ranking method takes into account knowledge, skill,
cooperation, performance, and other factors. It is concise and
objective method.

,
'
,':
:1

Job Factor Method

Although it is objective method in itself but depends upon 'i'

subjective judgment of the evaluator. This method takes into
account difficulties inherent to the job. For this dittlculty extra
pay such as overtime, combat pay, and dirty money (money
for doing odd 'H dirty jobs) is given.

Time Span of Discretion Method

This type of job evaluation method was developed by Elliot
Jagues. He asserts that the time span involved in the evaluation
of the performance determines the importance of the job. If
it takes more time to determine the efficiency, the job will be
more important than the other.

Organization Chart
It exhibits the relationship among the departments and
individuals along the lines of authority. Jt clearly indicates
various management levels and non-management cadre of
employees. Its limitations and dysfunctions include rigidity,

162

overlooking inlorma l relationships. overccnscious ness about

the position held by the employee, and contusion about authority
relationship .

Com parison Method

The company's pay structure is compared with that of the
industry to determine the current market-rate for every pcsmc n.

r
FA VORITE CHARA CTERISTICS
OF T HE CANDIDATE

_
Ii

J
1!
1 '.
I

.~ .

I :i

,.

The employer looks for th e lollowing characte ristics of

Ihe candidate.

Appearance:
2. InlelJigenc e:

Stature, health, grooming, dr ess, neatness

re asoni ng skill, sma rtn ess . keennes s,
maturfty.
3. Manner :
Poise , se u-conn dence , e xecunve -nke
etteuce . capacity for leadership, courtos y,
tact , diplomacy .
Enthus iasm, Initi ative, drive, ambit ion .
4. Inte rest :
5. ., Sensitivity :
Sociability, adaptability , abil ity 10 get along
wit h oth ers.
6. Inlegri1y :
Honesty in work ing hours, using compa ny
resourc es,
av oiding
wa stages ;
depend ability.
7. Experien ce: Accompli shments , skllts , ab il ity to
communicate _
8. Organizat ion ; Ability 10 think logically and g et to point
quick ly.
9. Voice and
Cla rity, gramma r, syntax . dictio n.
Accentu ation .
exp ression:
10. Mental :
Maturity, adaptability, good judgment, abilily
10 make oectsicn . and resourcefulness.
1.

l6 J

NEGATIVE QUALITIES OF THE CANDIDATE

The following are the qua lities thai tho employer does re t
wan! in the candidate to be selected.

1. Poor physical appearance

2. Lack 01 interest . enthusiasm , and ambition.
3. Overaggressive and overhea ring
4. lack of set objectives lor Iile.

5. Lack of conlldence.
6. Mone y -con scious.

7. Inability to qet to

pomt.

8. Inabilit y 10 co ntact the eye wi th thai al the in terviewer ,

9. Weak hand shake
10. Inability 10 make decisions
11. Lat e arrival l or the int erview
12. Lack of tact. maturity, adaptabuny, court esy and integrity.

TRAINING AND DEVELOPMENT

Althou gh training and de velopment are inter ch angeable terms.
they have diNerent meanings. Both the terms are discus sed
below .

Managerial Training
Man ageri al training reters to the program de vised by top
management to facilitate learning prog ress. II includes for mal
schooling or on Ihe job training . It may be given to Individuals
or groups wit hin or outsi de the comp any.

Management Devel opment

" is tne progress a manager makes in learning how tc manage .
II is 1he result of lime and experience of the manag er. A
trained manag er may not have experience but a developed
manaaer is t he exp erienced person . A trained manager has

164

.:

bee n taught but ma y no t have learn ed . A d eveloped manager

is the learned pers on .

METHODS OR APPROACHES TO
MANAGERIAL TRAINING
Managers may be train ed by the rallowing method s:

1. Planned Pro gr ession

This type 01 traini ng is not only a se ries of prom otion l or a
manager bul also exh ibits a furcnenat crqamzaucnat sirucmr e.
Alte r having wo rked on a posiuon, the manager becomes
trained for lh e next higher position. A sales repres entative
may be promoted g radually fa sales superv isor . sales execu tive,
sales manager , a nd g eneral man age r.

2. Job Rotation
By this method divers ified training is given 10 Ih e manag er.
Here a manag er is tra nsferred 10 var ious and di versilied
position s. The rctattcn m ay be in superv isory or nonsupe rvisory
position s or in observation assignments.

3. Creation of Ass istan t-to' Posi tions

Every managerial position may have assistants, deputies, or
vice. Assistant menaaer . deputy manager, and vice presid ent
are the example. Here the superior also acts as a teacher.

4. Psychological Tra ining

Under this method two ,j;flerent techniqu es are used .

(/) Role Playing

Trainee manag ers are g iven certain rcte s 10 play to hefp them
understand business problems. The observers and nalners
minutely notice and evaluate the performa nce and reactions
of the trainees 10 the prob lem.

165

(ii) Unstruc tured Discus s ion

It is useful in leadership and sen sitivity training. Trainees are
invit ed to participate in the ope n discussion which is nol with
a p articular topic or topics. It facilit ates self-knowledge and
insight into interp ersonal relationsh ips.

1).
Ihe

,I

!,

HI \1

son

"

(I)
Co:

5. Temporary Promotions

rna
an<

Managers are temporarily promoted to a higher place to gain

knowledge and experience 01 the job. It is only possible when
there is a vacancy or Ihe head 01 the department has gone
on leave. When he returns Ihe subo rdinate is senl back to his
po sition . Thi s type 01 .raining tacmtates to rill a vacant job
immediately by the per son so trained.

QU'
in 1

ac<
jot

6. Confere n ce Programs

(ii

These programs are held lor group Iraining which is economical

and inlo rmaliv e. People exch ange idea s. tntc rmatton .
knowl edge. and experience.

'0

n
Ie

s.
a'

7. Comm ittees and Boards

in

Boards or committees are set up 10 exchange inlormalion

and ideas and 10 consider various protsems facing the company.
Decision are made and referred 10 the tncbarqe, w ho after
ev aluation may rej ect. accept. wi thhold. or send them back 10
t he committee tor .reconskferatton. The bo ard or committee is
comp osed of a group 01 experienced and able mlddle-level
man agers .

(
11

r
I
I

8. University Management Program

In the universit y special courses on management are taught .
The un iversity imp arts DBA or MBA deQree or may issue
dipl oma or certificate In business administrat ion. Courses in
busin ess administration have gained word-sloe acce ptance.
The purpo se of th is program is to prepare sk illed manag ers
fo r industries and businesses.

166

.>

'I. Follow-up Training

Ihe touow-uo (raining is essential to keep the manager abreast
III the changes and recent developments. The foll owing are
nome types of follow -up training.

(I) Coaching
Coaching is given to a subordinate who is promoted to a
manageri al pcsn ton. This type of training is touowed by form al
and informal trailling. 11 is a tece .tc -tace counse lling Person..1
qua lities of the supe rior and the subordinate playa vnat role
in the succe ss 01 coa ching p rogram which must be de signed
acco rding to individu al needs, envtrc nment . and type 01 the
lob.

(If) Refresher Courses

The scope of retresbeecourses varie s from acvan ceo lr aining
10 group problem solving. Adva nced training as a form 01
refresher course is tong term , while group problem solving
sbc rt-term . These cour ses brush up manager's know ledge ,
and acquaint him with n ew change s and developments in the
industry and environment.

(III) The Vertical Slice

It is a group com prising rnanaj ers in the ven jcal chai n 01
co mma nd (all managerial levels) appointed 10 sol ve the
p roblems ac versufy attectinq operatlnq etnctencya. autevets
II provides managers at aU levels to see deEply into the probrem.
Proble ms undertake n by the vertical slic e may include lack 01
coope ration, poo r com munica tion, c etecuve centraliz ation or
decentralization, and many more.

167

.>

' Examinall on Question

Descri~e

j-i1-

aCHV!~~,1

1. Define human resources.

brie'.ly slal!i ng
2. What is separatio n ? What are its vanous for ms?

.~

3. Explain serection and recruiting 01 personnel.

,
4. As manager, how would YOu appraise the performan ce
your subord inates?
. ~.
5. What is job evaluation ? What approaches would you adop
_
in evaluating jobs?

01

6. What are the favorite and negali ve cnaracrenst tcs of

candidate?

the~~

I
)

7. Compare training and development. Explai n methods Of}

managerial training .

8. Discuss the following :

I) Job description
Ii)
iii)
iv}
v)

I'

Orie ntation
Appralsal of performance
Inventory chart
Organi zation chart memoo

.
.

"

"

"

1/ (!.._.. .

,,,
;

16 B

CHAPTER 10
CONTROL LING
DEFINITION
BASIC CONTRO L PROC ESS
v Establishing standards
Measuring Performance
1../ Correcting Deviations

!.-

PHASES

or CONTROL

Precontrol Phase
Concurrent Comrnl Phase
Post Control Phase
Cor rection Phase

TYPES OF CO:\'TROL

Production Control
Inventory Control
Quality Control

Financial Control

_MANAGEMENT CONTROL

Definition
Direct Control
Direct Control Through Key-areas
Direct Control Through Management Audit
16 ')

D ef inition of Managt'fflt'nf Audit

Nt'eJ
Purp ose

Indirect Con trol

Orgoniuulonal Coni#itlolling
ManogeriQl M olding

CHARACTERISTICS OF GOOD
CONTROL SYSTEM
.

n UDGETS
Definition
Types of Budgets
Revenue and Expenditure Budgets

Capira! Budgets
Cash Budgets
Time. Space, Material and Prod uct Budgets
Balance Shed Budgets
Master Budgets

Zero-base Budgeting (ZUB)

Milestone Budgeting

11 NON BUDGETARY CONTROL

DEVICr,s
EXAMINATION QUESTIONS

I/ O

,!
.,

DEFINITI ON
Cont rolling is the last function of the manager . first being
'planning. Th e contro l measures actual perform ance against

pr~:t~~i~~~ans ana stan:aar~ lren.~ureS-

to'iccomrllsh

plans : Controlling includes establishing standard, measuri ng

rerfo~nce. and co rrect ing devlati nns.
".
"
II acts as 31 yardslick againsl which actual performance b
mea...uted. Through controls weaknesses, deviations are set right.

CO NTROLLING PRO CESS

,.
r The basis control process has three steps:
1. Estab lishing standards
2 . Measuring performance
3. Co rrecting dev iations )

PI

I. Est ablish ing Sta ndards

Standards are yardst icks against which actua l results are measured
aJ'iirifflciei1.cY'ls 'd eh:rmined . Standards are plans which iCil'W
w!l~ie' we-shou ld ~ . '
,. .., . .. . , .. '.. . " -~-,
Stand ards may be physi cal, financial , qualitative, quant itative, or tang ibl ~': ' St and:i.rds are usually staled in spec ific teiiru;,
but they may . a.l sQ,, ~ ~ .J.~~,~ ~,~,i.~,l e. , ,I i ~ e the degree o f..l!l.~ ral e ,
goodwill , mark et image, and public opinion and attitu de. '

2. Measuring Permrmance
.~!"~llri!s~,~ r~ established to m e~su re actual performance. By

measuring actual performance againM standards we co me 10

know where we are as aga inst we were supposed 10 he .
If the standards are objective, measurement is obj ective. If
the standards are subjective, measurement is also subj ective. .!!..
the standards are appropriately dra wn, appraisal is fairly easy.

3. C or r ect ion of Dev iation

The negative difference between where we should have been and
where we actually are is controlled . D eviation is correc ted .
Controls should facilitate corrective actions.

The manager may be co mpelled to correct actions by

redrawing his plan.s or by modyfin g his goals . If co ntrols' are
forward loo king they may indicate weak areas in ti me stopp ing
further damag e.
'

TIlE PHASES OF COSTROL

( In the followi ng are given the phases of control:
, J. Precontrcl phase
2. Concurrent control phase
3. Post-control phase
4. Cor rect ion of deviation phase

1
I

172

"
f

I
I

I. Precontrol phase
It is a preventive phase. It keeps the problem from hap[tCuilll:
PreCQillroJI.irif iav.es- mo'~ey and time~ It is-far better to take

timi:1y' action befo re the actual p robl em "app~ai'S: - Preco nt rtl l l s

fantarnoulil io prevention is bet ter than th e cure ,

2. Concurrent control ph ase

It is lhe phase when prob lem has not app eare J and theactlvlty
is cOntinuing . It is malnteuance phase th at is usual and ro uti ne.
maint enanceproblem is prevented .

By'

3. Post-control phase
It is th e poo res t approach hut most co mmo n. [l ere the problem
has occurred . It is cos tly and wasteful to renovate, repair , or
rebUild . Th ere' ar e s ituat io ns wh ere no lither approach can be
used than posr-comrol approa ch. Accounting and auditing are

post ccntrcl devlces.

--0'

4. Correction

0/

deviation Phase

Once the problem has appeared and the damage has tak en
place. devi at ion must be corrected to avo id further damage.
Early corrective action will cause less damage and earlier
acc(lJnpiish~ent of goal s. A stitch in time saves mine is a
maxim that holds tr ue her e.
. ~e follow ing factors should be co nsid ered in any co ntrol
Situation.
I. Controls should hav e a bearing on the situation o r Ihe perso n involved .
2. ~e me~ur~ :"h? uld have logical processes and be objec-

uve.

3. Co ntrol should treat the cause or die problem.

173

4. It should be determined whether the problem lies in th.

-management system o r in the unavoidable conditio n;
h

___

T YPES O F CONTROL
Th e follo wing are the types of control.

,~

I. Production Co ntro l

2. Inve nto ry Co ntrol

3. Qual ity Control

4. Financial Control

S. Manage ment Co ntrol

1. Production Cont rol

f t,

me

For a manufactu ring co ncern product ion is

main an.... prime ':;
Iunctton. Much amount of capi tal is invested in it. Then:fuie, it I '
is necessary that excessive Or sho rt prod uction should be avoideJ: 'I'
To achi eve op timum level the follow ing fu nctions sho uld ~ \ '
followed in seq uence:

(i) Planning

Production planning Involves receiving order fro m a customer,

br eaking down into its component paris suc h a.~ ra w mate rial,
work-in-process , and finished part . Fhen it is decided what part s
to be purchased and what part~ to be fabr icated. .v .~;,... ~~;;:)
(ii) Routing

"~ dt::' , , " ""~ ,: ;.'

/.!

1.(...,,1.//,: . ~:..- i:

.It deter mines theopcration.(O be perfo rmed . II sets sequence

of p roduction . It also de term in es the flow of materials
through a series of operation. Ro uting involves the
aratlon o f route shee ts, route charts, "ar-d mu le fil es
facilitate s mooth operation in a sequence.
<if

-prep-to

,.. ...

(iii) Loading

' !' ,

t , s,

It assigns the work to a machine, J ellartm.ent or

pr (Jl,:,,~'"

(iv) Scheduling
It detennines time-tab le throug h. whi ch each operation will take
place. A master _schedule"is"
showTng'--the' number of
products to be ready each week 'or month . Sch edule for purchases
requisitions are also made.

prepared

(v) Estimating

,~'1.f. ~. / ~ ,-.:(i~ 5J~': : ' ; .

~t d~ide." in advance the eX(lCcted cost of a job or product.

6i) Dispalc1zing

ne .

h' l

.,

.ce
, Is

!P..-

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..

(Vii) Expediting
J

.;;:;

-: ,

)l) S Ihe actual ordering of work. to be performed leading to the

f.elease of the work order and to starr productlcn.

i,

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Z!:f~'i/;/';~"". /tj. ; 'I. j'L, I,

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rts

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,: ;, _" " "J

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! .'

lt is a follow-up set up. H ensures thai the plans are actually being
executed . Etobo rate controls mayalso be set up . Sciuxluloo
performance reports are made by the production control
department.

z. Inventory Contro l
Inventor y may be composed of three types of mat erial s:
I. Raw materials
2. Works in progress
3. fin ished produ cts

Th e purpose of inventory control is to trim the excessi ve an'"

to make up the shorta ge of inventory . Good inventory (.0 01((11is
responsi ble for:

1 7<

I. Optimum level of inventory.

" 2. Economics size of each order for material to be purchased.
,3'. A proper record system informing the present level of
inventory.
Inventory i~volvescapit_al expenditure. It requires special
atteiilloO:-scdhat excessive' or short stock of materials and merchandise can be avoided or controlled,

Disadvantages or Hazards of Excessive Inventory

1.. Capital is unnecessarily blocked with no return on it.
2. Company will lose if the prices of the purchased stock fall.
/

/3. Should the fashion change, the excessive stock will go out
of date and will have to be sold at slashed price or at a
loss.

1/

4. In the case of new inventions, new substitutes or competltion, the company with the excessive stock wil-l suffer the

most.
",/5. Carrying and malntalnance charges increase the cost of
business. Cost of storing materials include insurance, risk,
rent, hand ing, recording, and interest expenses.
Hazards Invotved in Short Inventory.

/ 1 The demand of custnme-s cannot be fulfilled.

2 If the prices rise the company will lose and will be compelled to repeat purchase at a higher rate.

, ) Continued shortage compels customers to abandon business

dealings with the firm.

4 Unexpected large orders cannot be mel.

5 Small sized purchases do not yield hig h commissions, dillcou nts and other economies.

Factors of Optimum Inventory

1. The volume o f safety stocks to be determined to avoid
sho rtages lhat interrupt prod uction.
2. Consideration

of economy in purchase.

3 . Expected price changes in futur e.

.4; The expected volume of production and sale.

j . . -Th e operating

cost of carrying invenlory.

6 . The cost and availability of cap ital .

3. Quality Control
Quality control ensu res the uniformity and standard o f qua lity.

Specific tests are"m:K1e"IO-d"etermine whether the product is lh~

correct size (variation not greater/smaJler than 1/1000of an inch),
or is strong, hard , or durable acco rding to requirement. Stat istical

methods a~ pr_ob~~i~ity theory are used. Samplesare r;:;quc'niiy

taken to determine tile quality.. Substandard products are-rejected.

4. Fln ancla! Control

Its purpos e is to ens ure the safety of capital. f inancial controls
include budgets. accou nting sta tements , ratkl'-anafys~_N'br'~k
even analysis and return on investment. Details of these type
control are jl;iven in the buds:et sectio n in this chaptet.fJ~anciai
control is a part of financial manageme nt that deter mines
and looks to usesof funds .

sourct'"

177

Management Control
Like other things are controlled .ll1ana~ement and. managerial
activities such as decisioo"makhlg, p'iii'ns"a"nd imttingthem into
effect. This tYP'l,'lQf control ensures the.quality of mafl~~m.mt In
terms of preparation of efficient and accompllshable plans, their
execution, and maximum output with a minimum input.

. (I) Direct control

(ii) Indirect Control

Direct Control
Direct control implies to develop better managers who will
skillfully apply principles and thus eJiminate undesirahle results
caused by poor management.
It involves the fixation of the responsibility on individual
managers for inefficiency, negative deviations, and poor performance. It ensures whether managers act in accordance with
the preset standards, plans, and principles and head their team
toward the accomplishment of goals.
'

Direct Control Principle is Based on Four Assumptions:

(I) Qualified and proficient managers do not make many
mistakes.
.

v-(2). The performance of managers is measurable.

. (3) Management principles can be applied in measuring the
performance of managers.
/(4) Application of management principles can be analyzed.

Direct Control Through Key-Areas

Ruality of management ~an be determined and evaluatedby..,
,Iookin'g up the key-areas of the company. These are' as follows:

178

,
/

I. Mark et image of th e co mpany.

2. Co mpany's productivity and overatl performance .

3. Fi xed and current assets of the firm.

--

Financi al resources.
5. :5 . Product innovation and de velo pment.

.'

6. Human resources and o rganizat io n.

7. Profit posit io n.

S. The extent to wh ich socia l j espo nslbillt y is met.

Direct Control Through Management Audit

Aud it is de fined as the sy stemat ic examinatio n and ver ification
'o r necessaryreco rds and acti vities , Th e periodi cal fina ncial audi t
by an impartial , o utside aud itor has beco me imperative and

"",glial in limited cootpanics. ~anagement audh involves

evaluation of the non nnancial atr<1irs of, . ~y and the
'systematic examinatio n and ve rification of necessary records and
actlvltles."
~ -

In management audit it has to be decid ed as to wh at and how

managerial chara cteristics to
suggest 'th at management aud it should also take into account,
mo rale , integrity. creativ ity, so cial values, and human empathy
Ofinanagement.
".~
---- , -~ .-- "... - , .... , .

measure:'SOme'management experts

Dru cker, a managem ent sci entist, sugges ts the follo wing in
man agement audit:

1. The man ager' s performance in using capital.

2 . Development and placement of subo rdinates.

179

3. Innovatio n demo nstration .

4. Plannin g ahility.

Self-Management Audit
In 1930 's. J ames Mckinsey suggested management self audit and
app raisal system . His aim was to di sco ver and co rrect erro rs of
management . Such selt-appralsals have now become rec ently
qu ite comm on. General and spec ialized jou rnals and magazines
oc casionally issue selentlflcally designed weigh ted and s imple
questionnaires to e valuate self. Self appraisal should include

company - policies. o r~anizat io nal . structure. personnel practice,

managerial practice , co ntro l style, physical assets, and human
rel ation str ateg y and philosophy. A s elf-audit is useful if condu cted regul ar ly and without any bias.
Th e Am er ican Man agement Inst itute has bun co nducti ng
ma nagement aud it. Its aud it co vers th e follo wing ten areas :

J. Eco nom ic Functions .

2. Co rpo rate Structure

3. Earn ing G rowth

4. Fairnes s to Sto ck holders

5. Research and Develop ment

6, Co mpositi on of Board of Directio ns

1 . Fiscal Poli cies

8. Productio n Qu ality
9. c ates
I 0 Executive Evaluation

t'.
"

J
"

I
I

.\
\,

Problems in Selr Audit

There ate problems in self-audit:

I. People a. e reluctant to appraise themselves-s-even thou gh

they will benef it in the long run by gaining more excellence.
Due to this reluctanc e there is a need for management audi t
by independe nt, outside expert .

2. Th ere ls a problem of quantifying talent and evaluatin g

intangibl es.

Need for Ma nagement Audit

During: the past three decades wor ld eco nomy has declined

\
!

consklerabl y. Along withother reasons poor, quality management

can be attr ibuted to this decline. This inefficiency has calletJ fur
effect ive management con tro l whic h thw ugh manage ment ilm.lit
ensures the qoal uy uf managers aed the qualit y II f total mOlnaging
system of a fi n n.

Purposes
Management a udit is profitably used for the followi ng purposes:
II ensures to utilize huma n, physical , and financial resou rces
ofthe firm most productively in order to g~ maximumoutput
with a minimum input.
2 Managem ent audit acts as an effe ctive mOl iv,;ttors.1t moli villcs
manage rs 10 increase the ir effi ciency and skill. Manag ers keep
developing themselves, and abreast of the modern changes in
different environments.
3 Management audit includes verlflcationof managers functio ns
of planning , organizi ng, Mailing, di recting , l cad i n~ , coordinatlng , and controlling .

181

INDIRECT MANAGEMENT CONTROL

1
Like direct control it motivatesthe manager to modlfyhls
action to achieve I:l~ii~r r~esult. It Involves tracing the causg_9f
an unsatisfactory result hack to the person responsible for it,
and get him to correct his behav ior and improve his J edsio'n
making quality,

Quantitative controls like sales, expenditure, cost can easi1y bedeveloped, applied, and rechecked. But qualitative controis like morale. ambition, producti vity, and loyalty cannofbe

easily developed and used. For this purpose two types of

indirect controls are applied:
,

1. Organizational Condit ioning

It is the process of uniting the whole team that stands for the
accomplishment of crganizatiou's goals and methodology.

2. Managerial Molding
It refers to developing and shaping managers creati ve and initiative skills and qualities. Managerial molding is
socialization o f managers.

CHARACTERISTICS OF A GOOD CONTROL SYSTEM

The following characteristics arc necessary for an effective
control system:

1. Controls must reflect the nature and needs ofthe activily

All controls should reflect the job. to be done. There will be
different controls for different activities. Cont rols of the sales
department will differ from those of purchase depar tment.

182

2. Controls should report deviations promptly

La te reporting will increase damage and cost. The ideal controIs detect possi ble devi ations In good times. ACC<lunting is at
a Ion that does not furn ish early control inform atio n.

,"
r:

J. Controls should he f orward looking

Controls should be able to forecast devia tions so tha t s uch
devia tions may be sto pped well in time. Some of the electronic
co ntrols are forw a rd loo king . In add ition , budgets, break even
analyses , special repo rts, and personal observations can be cited
as forward looking controls .

4. Controls should point up exception s a1 critical points

Controls shou ld not only point up deviat ions but should pinpoint
the m where the y are impo rtant or cr itical. Deviations may be
importa nt or un impor tant. Important deviations should be d is-

d osed quickly.

. 5. Controls sh ou ld he objective
Objective controls measure performance correctly and
honestly. They are definite and deeermtnable. They prov ide an
exact yardstick aga inst which deviation from sta ndard can easBy he detected. Out se tting objective controls for mana gel"ia.l
appra isal and manag ement audit is not that easy job.

6. Coturals shou ld be flesible

Th ings are always ch anging; new technology and methods ace
coming up. and so controls should be adopt ed accordi ngly .
Controls must al so remai n workabl e in th e changed cir cumstances. The dement of tlexihility in control can ~ provid ed by
hl1ving alternative plans fur different s ituatio ns and environment" .

183

7. Con/rols should reflect the organization pattern

Orga nization is in itself a means for maintai ning cootrol . The
manager is the focal polntofcont rcl . To accomplish thls objecnve
control data must be specifi c about amounts and sou rces of
diffi cult ies.

8. Controls should be economical

Controls must be worth their cost. A small company cannot afford
to adopt a control systero of a large company . If tailored to the
jo b and size of the enterprise. control may become econo mical.
Econom y is relative, since the benefits vary with the natur e of
the activity. the s tee of'the business . and the pre vailing condalons.

9. Controls should hi! understandable

Some controls are complex and cannot be understood unless
trained in them , Mathematically formulas, 3\X',(lUJl{in :; data , break
even analysis, statistical approach, ratio analysis and other
technical and mathematical contro ls are not unders tandable tu all
managers. They fail to commenlcate the coatrcl information to
the non -quantltat tve manager who wants to use them.

10. Omlrols sh()u1d ;tulicate correaive acl;oll

Con trols should not only detect deviations but also suggest correct ive measu res. A guod cont rol system should disclose where
failures and deviatio ns are occurring , who is responsible , and
what to do about them,

11. Controls sboukl seek employee commitment and

cooperaJion
Co ntrols should be estecl tshed " her allowipJ:O employee participation, and deve lopi ng a support ive employee attitude.

12. Dmtrols should seek: mpid feedback

Information should be pmvi(lcd in lime to avokl dev iation .

184

~~

T imely feedback will save cost, tabo r , and time, and call win
the ('Onfidenc~ of management, employees, and .;uswmers.
D es igned informatio n or actions arc usuall y ..... onnlcss.

13. Controls should amid obsolescence

Control s should not he ohsctete. They should he chimgeu,
imp rov ed ax th e expediency demands, They will get ohso!ete if
they are not tured to changes, technology, competition. gnv
emment and company plans. new productdevel, ~)m<.:'nt, aru' otber

marketing comlitions.

BUD GETS

Definition

Budgeting is "he formulation of plans for a given l)l~'~od in

mancrtcat teems . it acts as (;ontrol device Tqll. Koontz calls

budgeting as profit phw.ni (~ g , all!.l the budget i' ~; *.hc pro :1, plan
Budgdsar~ &tatemenl!,ofer:pected result", in m.llw!.D;'Y or r,~\yskal
terms. Budgets act not o nly as a control dev ice but also 3<; 1\ pial),
They act as standards agaInst which actu;\! perf\!I"l'(lam:e is
f

I
j

measured .

Budget as a plan
r\. budget is a single-use financial plan covering 3. spedl1eJ per iod
of time. It wor ks out how much money will go to labor, raw
materials, assets , and paying {Iff lia hilit ies . H1Jdgc~s <1130 determine the sources form where funds will be- raised to meet v<.\110US

financial expenditu res. A budget is a plan tn U;!H it to-esecs

expected cash in-and outflow, use of labor and m;H:h:m~~ ad
sources of funds. It is concerned with future r allgin,g n'um hours
to years.

Budget as a control
A budget is <I. plan which is not only COllCCr~;I:'/{ with the future
but .also with the past and the refore it, acts a-so as a corarollh.g
device, Plans after tilt: speci fied t ime is lapsed become cont rols.

:r
Budgets are controls in that they provide an objective yardstick
against which a compa ny's performance can be measured.
Anything that measures {he performance is a control device.
BuJgel~, measure the performance in the field of sales. pur chases.
cash Jotlow and outflow, labour and machine hours utilized.
Budgets tell us what was to be done anti what hils actually been
done.

TYPES OF ilUDGlnS
Companies use the following types of budgets.

1. Revenue and Expense n!l dgd

II is the most common type of hudgds expressed in f inancial
terms. i1,f; main component is the sales. Other reven ue sources
Include rentals . commissions, Interests. royalties. The other side
(If hl.ldl;-et spells 'lUI' operating expenses , d irect material, direct
labor. dmlnisrrarive and oftlce expenses.

2. Capuet Budgets
Capital budgets are prepared showing capital expenditure. They

spell out expeered or proposed expenditures on plant, machinery,

equipment. These budgets show long-range planning.

3. Cash Budgets
They state expected cash receipts and d isbursements. They act as
<HI effective cash control device. They tell the sources and uses
of casb during a given future period of time.

4. Time, Space, Material, and Product Budgets

These are the budgets exp ressed in physical terms. They express
direct-k-bcr hours, machine hours, amount of materlals, and
number of units of production.

186

or

5. Balance Sheet Ih ltJgci.:;

Tbey show the fcrun..-e xpccted p' lsilinn of current and theJ
a.....sets, current and lo ng-term Iiahil itics. and capital . Th is t)~ of
budget proves th e accur acy of other budg ets.

6. Mast er

IhH;~(- B

Th ey gather IdJrether all (lthcr PUo:.lj; et~ orepared by various

departments of it company.. 11 1.11..\,:;, : ~~ ': ' :!" C\ -unt expected Income

st atement and bala nce sheet informatlon .

7. Zero-base Budgeting (7.Um

It ls a device for cont rolling discret io nary expenses. TIllS tech nique was developed by the T exas Instruments Inc. US. in 1970 .

The ZDHcalIs for rejustificat icIn ofexpenses every tlme Ihe blldget
is formul ated . According to koon rz, "Compao y programs are
divided into packages comprising goals, activit ies, lind needed
resources, and co sts are calculated for each package from the
ground up ."

8. Milest one Budgetin g

'This type of controlling device is USl'!{! to control engineer ing and
development. It Is prepared by breaking a project do wn into
controllabl e pieces &lnll then they are carefully f' IU(1Wed ,

NON BUD GETARY CONTROL D EVI C ES/T YP ES

OF NON BUDG ETARY CONTItoLS
In addition to bud!;........ t. ere are other control devices
are as follows:

L Stati stical data

2. Analysis o f break-even points

3. Special reports and analyses

l e7

tHO.

which

,
I

4 . Int ernal audit

S. Perso nal observation

"

6. Rate ot Return

BE

I . Statlstlcal Data
Sta tist ical analyses of vari ous bu siness aspects and data are useful
as a control device or as a forecast. Some managers prefer and '. '
readily analyse stat istical oat il in tabular form while other s prefer
data on (harts . Data prese nted whet her in tabu lar or chart form
requires imagination ami intellig ence.

2. Ana lysls of Break-even Points

Break-even po int analyses are e xpressed t'ly means of charts or
algebrai c formu la. Th e chart merely deposits the relationsbip of
sates and expenses in such a wa y as to show at what vol ume
revenues exactly cover expenses. The chart further explains that
if the reve nues arc below costli ne there wilt he a los." . and if the
revenues lin e is abo ve the cost line ther e will he protu .
The brea k-even chart predicts the pro fit pos ition of a busi ness.
It is ordinari Iy used 10determine the prcfl tablfh y of a gi ven course
of action as compared with alternatives.
Break-even analysis i!O especially useful in plan ning and
control, because it emphasizes the marginal concept. Acco unting
ratios such 3..' pro fit to sales rat io tend s even to overtoo k the impact
of costs, while break-even analysis explains the effects of additional sales or emits on pro fit. Th e Break-even analysis lakes into
acco unt the imflat.:l of costs ilOO the marginally o f the d~ i s i()n .
Brea k-even analys is can be expressed in Ihe full owing two
ways.

188

WI

Aigebric Break-Even AnalysIs

Algebric break-even method is used when a Quick but accurate
determination of a break-even point is needed. It uses tne
following formula:

liE

FC
pVC

Where:

BE

" The level of productio n at wh ich lh e

Fe ..

company breaks even.

Total fixed cosl of production

P
.. Selli ng price
VC :: Total vartable cos t of produ ction and sale

Revenues

30

e
~

"0

-o

0 _

-- ~

251--j- --t- -j-- -t--V'-,b-'+

20

g
~

15
10

Fixed
U petlSe5

10

15

20

25

30

$all!S volume in milli ons 01 dollars

Brea.....- ffi chart

Too brueeeven POlot .... reactec
when revenues equal 6 xper1di >

om

35

(imp,',;, B,.eak -E'l n ..1nalj'sis

(j rOlllhic break -even anaJ"sis is prepared in the for m of a t rapb
pinpointing all cri tical points such ;u vari able cost, fixed COli,
total revenue. breaking eve n point, loss area, and pro fit area . 11\.
graph sho ws that below the break even point there is a loss , and
above is a pro fit. Th e gfaph sho ws thai hy cha:lc i11g variable azul l
fixed costs, and lhe selling pr tce the company can incrcaat
profitabil ity. The gr aphic break-even method is usefu l when it It
necessary to comprehend a more complete and detailed p{)~ it io~
of the cumul at ive relationships among variable cost, fi xed cost,
and brea k-even po int.

J. Special Reports a nd Ana l)'sis

Such repo rts and analyses hell' In particuldf ,)wt"!!em areal,
So metimes routine accounting and statistical infor mation do not
furnish necessary and pr actical infor mation, the refore , special
repo rts for that specific problem are prepared . Good ma:"'.Jge mem
requires co nstant searching ou t o f excep tion, critical po ints , aDd
limiting factors.

4. Internal Audit
Internal audi t is an effective and widely used tool of manage rial
control. It is regular and independent appraisal of the accounting,
financi al, and other operat ions of bus iness . Interna l auditors not
on ly appraise the account s but also appraise polici es , procedures,

useofauthority, qualityof management, effectivenessof method.

and other phases of operation . Th ey not only determ ine thl
integr ity o f accounts but also that of managers.

5. Personal Observation
Going th rough statistical data , special reports and analyses,
break -even po int analyses, and internal audit repo rts , s itt ing In
air conditioned and sound proof cubicles, managers cannot' ~
successful in achieving good and effective controls. Personal
supervision, watch obs ervation of the subordinates ' work are
equally important and essential. Managers must visit about the
places where subord inates are worki ng and observe and check
their per formance. Physical presence of the superio rs will
enhance the efficiency of the workers .
'

190

~-


Return on Investment I Ratio Analyses
It is a not her nonbudgetary control de vice . Re turn o n iOVCslllll;nt is
the ratio of net pr ofi t to investm ent. T he ratio lakes into account ill!
inputs such as time, moncy, end labor costs. Gross or net pro fit will
00( showa true sta le of atteirs unless it is related 10 or compa red with
the investment .
If Company A earns a profit o f Rs.l0,ooo. and Co mpany 2
Rs.20,OOOin a year, who ts be tterol'! Wecannol decide until we come
10 know th e amount oflnvesucent by each. Comp any A willdefinitely
be in a be tter positio n if us invest ment is R~.50,OOO an d Company B's
Rs. 200,OJO, becauscA 's rete of return o n investment is20percent and
B's merely 10 percent.
Ratio ana lysis used In dete rml cc the liquidity and pro fitab ility
ofthe business may be divided into t he following types.
1.
Uquldity Ratios: T hey calc ulate th e ability of business to fulfil
its obligations when they (all due.
2.
Leverage Ratios: They ar e the ratios th at measure sou ndn ess
of and relationship be twee n financing by equ ity and debts.
Activity Ratios: T he y determin e as tcwhetbcr resources of the
3.
firm have be e n properly utilized.
Ratio an alyses arc diffr cn t cquat ioe a which ar e used 10 de termin e the profitability,liquidity,and oth er a spects.of financ ia l soun d cess of the businees. Ra tio a na lyses use variou s ite ms o f income
statement and balance sheet.

.,,

!91

EXAMINATION QUESTIONS
Define co ntrol. Compare controlling with pla nning. Also

discuss basic control processes.

2

What are the types of control? Wha t are its phases?

What do you understand by management contro l? Differe ntiate between direct and indi rect co ntrol.

Wha t is managem en t aud it? Explain direct control through

key areas.

What are the characteristics of good contro l sys tem?

What is budgd. '1 What are its kinds ? Explain budget as a

pl:lnning and co nrrolltng device .

Wba( is inventory control '1 What are the hazanb involved in

excess ive ;\I\(I short inventories ., What are the factors of
optimum inventory?

w hat is productio n management I cont rol '1 What are its

routes 1
What are quality and financ ial controls '1 Also d iscuss mileSINll~ and ze ro base budget ing .
10 Wri te short notes o n the following :

(a)

zan

(b) Milesto ne blJJ gct ing

(c)

M~~r

l udget

Cd) Break -s ven - even analysis

11 Describe non ~ budgetary control devices.

I
I

192

Chapter 11

MOTIVATION
(Human Dimension of Management)

MOTIVE

MOTIVATION
Human characteristics

Fatalism .. Rallonallsm ..

Egotism Artrufsm .. HedonIsm

UUUtarfanism Different
,

vJews on Motivation Sociological view, Biological

vrew- Psychoanalytical view, Behaviorist view

HUMANISTIC APPROACH
MaslOw's Theory 01 Needs [Psychological needs, salety

needs, love and belongingness needs. self esteem needs,

self actualization needs! .. Self Actualizing Persons ..
Maslow's self actualizIng persons .. Roger's self
actuallzlng persons .. Fromm's self actualizing persons

SELF ACCEPTANCE/SELF
IMAGE/SELF CONCEPT
Definition McClelland's view of self concept

HUMAN THEORISTS
Hippocrates. Juno. sbeldo n

EXAMII~ATION QUESTIONS
193

Motive

Motive relers to action to satisfy a need. Need, want , aim" .

stlrrnrhrs. goal, drive. and desire are also used to mean motive, \.

The mainspring of people actio n is a motiv e. 11 is a .-

restlessnes s to g et over the pack and satisfy a yen. II explaln '

lhe 'whys ' of behavior. Motive is an inner state th at energizes;"

activates, or moves, and that directs behavior toward the..

accomplishment of goals . It makes us work to satisfy wanls:Needs (deprivations) lead to drives (directions), and drives
lead to goal s (satisfaction) .

Motiv es may be (I) prfrn.a.ry, and (2) secondary . Primary

moUves are unle arned and physklloglcally based. Seco ndary

motives are closely allied to the learning concepts.

Motivation
Motives explain the 'why' ot behavior. whereas motivation. iexplains Ihe 'how la' aspect 01 behavior. Motivatkm ts wiIJingnessl
to expend energy to achieve a goa' or a reward. It is stimulus.
A stimulus is an action, influenc e, or agency that produces a
response in a living organizm. It Is anything that rouses to
actlon or increased action.
According to early religious and philosophical find ings the
human natur e reflects the following characteristics :

Fatalism
The doctrine that all events are subject 10 fate, and happen
by unavoidable .oecessfty,

Rationalism
A system of belie fs regulated

194

.. .
by r~aS9n,

not authorIty.

-to'

Egotism
The theory of seu-tn terest as t ne
selfishness.

Altr uism
The principle
others .

and' b~lief 01 IIvin9 and

pnncspte 01 momllly,

acting -jor

the interest ~,

Hedonism
The doctrine lha l th a pl easure is. the high,? st 'good. .

Utilitlf rlanlsm

,,

The theory that find s the fttness of utility to produce happ iness.

Differ ent vi ews on motivation

{Basie Mot ives o f Peopl e }

Why people behave the way they do is ofscu ssed be loy.' lrom
dill erent viewpoints.
.

'1 . Sociological vie w

The be hav fcr of people is molded by th e social enviro nment.
Society dete rmlnes the values and norms of the beha vio r of
tts pecpte. The soceiy dislikes. 'rejects.icr condemns 'hose
who do not fo llow thes e values and norms.

2. BiologIcal view
The behavior ot people depends upon 'their physical and
biolOgical needs . Che mical or n ~ : d e nt balance afleCthuman
beh avior . According to thi s view , 'p eop le are what th ey ea..

3. .Psychoanalytic view

. ..

Sigm und Freud suggesled that our moti v,8S ar~ determin ed
bV our subconscious. Acco rding to som e.other psycho logists,
peo p le are w hat th ey thi nk. The p ersonality bu ild -up Is
dependent upon their level ~of thinking.

195

, .

4. Behaviorist view
This is mode rn view on mot ivati on. Behaviorist s are not
concerned with the 'wh ys' of the behavior. The empnasts is
on what's happening . J.B. warson . a behavioral scientist.
declares that the human behavior is l he resull of input Ulrough

live se nses .
In short , management should understand mot ivation to
decide the actio n that sho uld be taken. Having the knowledge
01 the subordinate s motiv ation will tacuuate the manager's
right action .

HUMANISTIC APPROACH
Maslow, a p sychologist, has evcfveu a theory of hierarchy of
needs. His aUitude and philosophy about human needs are
quue positive. According to him. eve ry human has a natural
drive tow ard health. pleasure. and achievement. Maslow
discovered five baslc human needs arranged in a natural
order. According to him, once the lower needs are satisfied,
the higher needs are sought for their satisfaction .
Maslow describes the 'ollowing hiera rc."ly 01 needs :
1. Physioklgical needs
2. Safety and security needs

3 . Love and beklnging ness needs

4 . Self esteem needs
5. Selt-ac tuansatic n needs

1, Physiologi cal needs

Human physiologic al needs are food. air, shelter, medicine,
clothing, water. At the stage of basic needs humans ale not
desirous of luxuries, security , or respect. They may do every
thing in the pursuit o f food, shelter, and wate r. They can
endanger Iheir live s to gel food .

..

2. Safety and Security needs

Once the needs for load, water, and shelter are satrsued. a
human starts pursuing the satisfaction 0 1 higher level 0 1 needs
which are safety and secur ity needs, It is tragic that in some
societies in the third world people are under continual political,
geographical , or weather hazard s. They don', have job and
life security. Job insecurity brings down prOduC1ivily and morale
01 the employees. Providing social security has become the
responsibility of governme nts.

3. Love and Belongingness

Human nature is lu ll of love and anectic n. He has love lor
children, brothers, sisters, parents, friends, elders , and youngers.
He also wants to be 'c ved. He wants to belong to a group.
The group rna, be lam ily, friends, or company. He wants
acceptance and recognition 01 his existence, role, and work.
But the creation of l hese needs are based on the satisfaction
of the first two needs. A mother may sell her baby 10 purchase
load for her survival.

4. Self-esteem needs
This Is harder 10 satisfy. In th e present society self-esteem
can be ecccrrousrec by having a bungatow, car, well-furnished
home, status, a position of responsibility in a prestigious
company or possession of riches. A name plate outside his
ollice, a secretary. or a sep arate cubicle at his ollice will add
to the sen-esteem of a manager.

5. Sell-actualization
There are the persons who have specific goals and aims to
accorrousn in their lives. Such people are at the lop of the
hierarchy of needs, sen-acnrauzaucn takes place when people
are willing to fulfil the needs 0 1 others. Such persons have
e ve for beauty and art. They have aestnenc taste. These are
I ne peopl e whO tru ly kn ow th emselves. They know the

-os
. 197

weaknesses and strength s of their own . The kno wieoge 01

the sell makes a human great Thes e are the pec pie w ho are
de stined to perf orm a teat.

SelfActu aliz
atic n Need s

Esteem Needs
Belonqinqness Need s
Safety Need s

- - -- -

Basic Needs

Hierarchy 01 Need s by MASLOW

MASLOW' S SELF-ACTUA LISING PERS ONS

Maslow inv estiga ted th e cnarectensucs 0 1 seft-actuansec
pe rsons. He studied Einstein, tfncotn, Roosevelt . Beethoven.
and Thoreau. He decl ared s ett-actuaus ed persons ulfm talJy
he althy. His iind ing s are as t ottc ws.

1. Self-actualised person s ca n acc op t t he way

th ings are.
Such people adapt rhemselves to the living environment They
don't bother about 'what should he' and are wi lling to recconlze
and acc ept 'wh at is'. They hav e a great degree 01 adaptab ility
and therefore are not cynic or hypochondriac. They accept
th eir pitfalls and weaknesses , and are able to turn th ese
weaknesses into strengths. They accept not only tnernselv es
but also otnere the WilY they are. Th ey are not selt -sattsftoc
with 1he status -quo . They are actio n people and wa nt to
con tinuously grow.

198

-,

2. They are not afraid to get close to otners.

, r hey l end 10 come closer 10 other s be cause the y are social.

,

They are net complacent . They don't teet threat s Irom o ther s.
Bec ause they are bo ld 10 express their inner feel ing s and
believe In openness and cando r they are nol afraid of the
qu alities , abil ities, and genius of o thers .

3. They a re elf/cient JUdges of others and

situations.
Acco rding to Maslow, "SeU-actualizing persons have an urarsuat
ability to d etect the spurious, the la ke, and the dishonest in
personality". They ca n judge people correctly and wit h precisio n.
They have the ability 10 sowe Ihe problem as the expediency
demands. They can dttferenttate betw een a hypocrite and a
true and hones t pe rson,

4. Th ey are creative and appreciative.

Creative
Selt acluatising persons are cre ative peopl e who resp ond to
exIsting situatio n, while ordin ary people react acco rding to
their own desjre. SeU-actualized perso ns donl lry 10 be c reative
bu t crea tivily is inhe rent in Ihem.

Appreciative
They app recia te, p raise. and recogn iz e the efforts 01 others .
Th ey app recia te the bas ic goods 01 lif e with pleasur e, awe,
wonder , and ec stas y. Daily life and allairs can be thrilling ,
exiling . and ecstatic for Ihem.

5. The y march to a different drummer.

Thev are dilleren t from others. They 000" Ioucw oth ers blindly,
Such persons have third car which means the abil it y to read
in b etwe en the lines . They have the ir independe nt viewpo int
They make their own jUdg ement and am independe nt and
confid ent in tnoup ht and act. Self-actualized man aqere have

199

their own standa rdS and no rms of beaavcr an d values. TlI'~

independ ence 0 1 environmental sltuatlo n rel ers to composurt
and pea ce in the face 01 ha rd knocks, blows, deprivat ionll
frustratio ns, and straits. They are able to keep themselv'l
comp osed in the situations that would drive oth er people to
'commit suicide. They are sen-contain ed.

6. They are willing /0 learn from a/hers.

sen-actuausinc persons are aware 01 their streng ths and
weakne sses. They are not afraid 01 revealing of their ignorance, \
They' beueve il is benet to blunder uc ~ a rning than 10 learn
nothing gracefully. They are ready to learn from Ihei r juniors,
subordinates, students, or any other persons. They have lhe
ccuraqe to cut-oil a lecture and ask me quesncn thai c tnera 11
would be unable to ask.

ROGERS' SELF-ACTUALl5ED PERSONS

Car1 R. Rogers wa s a c nnlcet psycho logist. He ha s de terrnlned

lhe characte ristics 01a setl-actu alising person . In dete rmini ng
these qualities t m adopted non -directive approach in studying
people. Accordin g to him, such a person has exceptional
emotional maturity.

Rogers describes the qualllles as under:

1. He Is willing 10 pass th rough a course 01 events lor what
he is. He de velop s wisdom de ri ved from the ch anges and
trials of life.
2 . He ha s trust and confidence in his own abil ity and judg ment.
3. He relie s more on sea tha n on others or society.
4. He w ants a conti nuous grow th and development .

FROMM'S SELF-ACTUALISED PERSONS

According to Eric Fromm, seft-actuallsed per sons are like a

200

I,
I
I

seed . A seeo has a tremenooua potential lor orow11l I h nt III

this potential tt terns into a solid and tan tree. A scco 1I 111V1111
odd shape, or too small 10 be seen by nakod CyuD , Vl'l 11Il.
remarkable potenti al 10 grow provided it has CO ll t lt U.l VIl
environment . O n the other hand, there arc plant s whoso UlOwlh
is stunted . Ins ects cal away at them.

So is the case with a human . Som e people are abte 10

utilize their potenti als to a maximum . wh ile othe rs fail.
I.

SELF-CONCEPT AtlD ITS IMPORTA NCE

I,
I

Self con cept, sen idt> ntil y, ego , sen-accepta nce, and sell ccnttoence are synonymous terms . Why a person behaves
the way he ooes depends upon his sett-cc ncept . In other
words. you are what you do .

To understand another person. we must be aware 01 how

he lhinks and Iee ts about himsell. A sell-i mage may not be
a true and accurate represent ation. but one l ends 10 behave
in accorda nce with his own sell image. His actions are lunclion
01 how he feels or views hims elf. A person's knowledge about
himsetf may be QUite inaccurate or vague . Likewise, our opinion
about tho other person may be Quite inacccre'e . To understand
ano the r p erson we must b e la ss jud gmental and mort)
perceptive.

d
g
g

.,
I

t
Childhood at nome is most d et ~ rm i nj ng Of inll uenli al l aclor
of his formation 01 personal concept and personality. Tho
strongesl influence 01 his self -concept is his p erson al worth
duril ,g Childhood at home by parent s, brothe rs. sisters, anti
by outsjders like frie nds. te ach er s. and aseoct ate s. Illla'
accomplishment s also ce termlne his wort h in his eyes.
Self -co ncept determines what we are, wha t W f,; fUIII, Uf
what we Ihink. Jobs . tanstles. and I rlenc s also doli llu olm 'l!

101

,
,

'~

sett-ldentlty. Humans depend on others to deter mine their

perso nality and actions.

In addition to self concept everyone also acquires a personal

view 01 his world. His personal frame of reference is' an amalgam
01 his sett-lrnaqe. his behavior, and his perception of th e

I
I

world 01 himselt. His percepti ons and preco nceived thoughts

01 his enviro nment help det ermine whethe r he will be bold or
t'mld, opnrrssuc or peselrntattc, trusting or suspicious. He always
be haves in such a way as 10 protect and improve his world
as be sees.
..

lIIoCLELI.AN O AND SEI.F CONCEPT

David McClelland et at sugges ts thai the motlvaticnal factors
tnat drive peopl e are as follows.

1. The Need tor Achi evement.

Peopta cete nntne the nature and extent o! succes s In
accordance wil h tb elr perception and person a! value. Dttterent
individuals evaluat e their success dltte rentty. Their desire to
succe ed comes from within, and. II cannot be imposed, upon
trcm outsld e.

2. Tho Need fo r AUHI<tH !on

Humans are social ani mals; tney want to live in groups, as
friends, family, com pany.

3. ThiJ Need fo r Power

Everyone wa nts to nave powe r In order to bring a change
according to his concept, desire. He may want to exercise it
direcliy or lnolroctly. His desired power may be mental. physical
or financial.

lIuman Th eori sts

Seve ral th eorists and p'ulc sop he ts ha ve given their
cla ssiuceticne 01 humans :

Hi pp oc rates (460-3n B .C.)

Hippo crates. born in ancien t Greec e in, 46 0 B.C. was the

physician and tounder of the Hippocratic school 01 medictne.
whi ch greatly bore a great impact on medical scie nce u ntil
the 16th century . His school of medic ine is still practised in
Pakistan in the namo ct 'Ttbb-e-Dnanl" and "tsl arnl Tibb," He
and his lollowers believed that health was governed by the
balance 01 four bOdy ll u!ds , or humors: Phlegm . blood. bl ack
bile . and yeucw bil e. He Is also understcod to be tho author
of t i ippocratic Oath . taken by meojcal students and physicians,
binding them to observe medical ethics.
Hippo crates suggests thai peop le are lou r types:

1 . Sanguine
Such people are optimistic, cheerful, hope ful, conndent. and
ambit ious.

2. Phle gmatic
They are slu ggiSh, dull, and lacking in Interest. They avoid
respon sibilities, an d am uni nterested in the attae s. They are
coot-minded, and cannot be inciled 10 anger in a normal course.

3. Melancholic
They are the people who live down in the mouth n1 e y arc
hypochondriac, .Jermtah. d epressed, n nd dished . UII} y arc
pes simists . Their Chemistry is com po sed of hlack nne.

4. Choleric
They are gro uch y, p eevish, angry , and bao-t empe reo . Their
chemistry makes them emotional.TtHJY nave 'Yellow bile"
characteristic.
L 03

JUNG (1875-1961)
Carl Gustav Jung was the Swiss psychologist 01 the modern
lime. He was lhe student of pioneer psychologist, Sigmund
Freud. He discarded the views on human advanced by his
teacher. He suggested the following types of human behavior,

Willi
Phy:
trorr
that

1. Extrovert:

type

This type of behavior facilitates thinking, altitude, actions,

and decisions by objective rather than opinion. It is reality
anc' environment oriented.

1.
Ene

sol1

2. Introvert :
This behavior is inward and thoughtful. It is guided by personal
opinion.

2.
M.

He
According 10 Jung extrovert and introvert types of people
can be described by four factors which are the inputs that
determine the behavior. These factors are as follows:

em

3.

Ec

1. Thinking ;
It Is based on factual, logical, and rational reasoning.

'e

ar

2. Feeling;
It is based on personal and subjective interpretation of the

situation.

Ii

3. Sensalion

(i

II is how a human perceives things, persons, and situations

without making evaluation or analysis.

(i

4. Intuition:
II is based on "sixth" sense which is unconscious inner
perception 01 things.

204

SHELDON
WilUam H. Sheldon is the modern lheorlsl 01 ph ysiognomy .
Phy siognomy is lhe art 01 jud ging personality and character
from appea rance , especially from the lace, on the ground
,lhal the face is Ihe index 01the mind. He explains the f ol ~in g
lypes of persons:

1. Endomorph
Endomorphic perso n is 01 rounded bu ild . H e is bUlky. sluggish,
scn-tempereo. clam. dependent, sociable, and loves to eat.

2. Mesomorph
Mesomorphic person is silong, heallhy, lough. and athleti c.
He is cheerful . confidenl , dominant. enthusiastic , talkative ,
enterprising, and hot-tempered .

3. Ectomorph
EclomorphiC person is thin, slender but share-m inded. Hp. is
tense. sell-conscious . meticulous, musing , shy. cool, tacttut.
and sensitive.
Acc ord:flg to Sheldon :

(i) An endomorphic person is viscerotonic meaning extrovert,

sociable , and fond of bodi ly comtons .
(Ii) A mesomorphic pe rson is somat otonic meaning alert and
aggressive.
(iii) Th e ect om orph ic Is cereb ro tonjc meani ng introve rt .
hypersensitive. and bra iny.

205

Exarnination Questions
1. Define motive and motl .... atio n, Also discus s human
characteristics.
2. Explain dillerent views on motivation.
3. Explain humanistic approach. What Is Maslow' s th eory of i
needs?
4, Who are selt-actuafislnq persons? Support your answer
from the viewpoints of :
~
Maslow

1\.

Rogers
Fromm
5. What is self acceptance or self concept? Exp lain

McClelland's view of self-concept.

6. Explain various types of hu mans as sugg est ed by
Hippocrates, Jung, and Sheldon .

206

Chapter 12
MOTIVATION TH EORIES
(THE MYSTIQU E OF MOTIVATION)

Personality, Behavior, and Motiva tion

Components of Personality
Theories of Moti va tion
The Co nt ent Th eori es
1. Classical Theory (Fr ed erick Taylor)

2. Need or Humanisti c Theory (Abraham Maslo w)

3. Need Theory (O.T. Hall & K. E. No ugalm)
4. 'two-tee ter Theory (Fred eric k Herzberg)
5. Huma n Reialion s The ory (R ensls L1kem

The Process Theorie s

1. Classic al Co nd itioning (lven PavlOv)

2. Operant Con dltlonlng (e .F. Sk inn er )

3. Preterence-Bxpectatlon (Victor Vroom)
4. Expanded Conti ngenc y Model (Porter and l aw le r)
or Th eory 01 Equ it y

Theory X an d Theory Y (McGregor)

Theory Z (Dr. William Ouchl)
Theory Z and Moti vati on
Money and Mollvatlon
Morale and Productivity
Examination Questions

207

,,

Personality, behavior, and motivation

The word personality has been derived from the Latin words
Per sona meanlnc. 'to sneak through'. The common use of
the word is to emphasize the role or behavior which a person
displays to others. The personality is a very diverse and complex
psychological phenomenon. It embodies external appearance,
behavior, self, traits, and environmental interactions. It is the
composite of a cerscn, behavior, and internal forces. It embodies
physical appearance (height, weight, stature, facial teatures.
color, dress, hair), nenovtcr (curt, friendly, courteous,
discourteous, rude), and self concept. In addition 10 the above
definitions, personality has also been defined as follows:

0'

Ihe physical. menial, emcttcnar, social

"The sum total
characte ristics of a person".
"It is the integrating process by which all the physiological
and psychological components of the man are combined into
the whole".

208

Accord ing to KlUCKHOHN and MURRA Y, -ro some extent.

a person 's personality is like all other peopl e's , like some
other people's. and like no omer people 's".
When a human being Is intern ally consist ent within nlrnsen
he has a well-adju sted pe rsonality. When he is externauy
adapted to his environments, he is well adapted. When he is
both adjusted and adapt ed, he has an integrated personality,
The sell and personality are one and lhe same.

Components 01 Personality
In the earlie r part 01 life personality is dynamk:. II ca n change.
adapt, and Is influenced by external en vlrc nments . Humans
te nd to change and adapt th eir b ehavior to the need of time
and occasjcn. A person behaves dillerentty at home . at parties.
al the olfice and with parents . guests , men . wo me n, ch ildren.

and friends. He also adjusts his behavior to a sad or a happy

occasion.

The personalit y Is th e compo siti on of th o follow ing

components :
1. Extornal appearance, behavior, and social stimulu s value:
height, weighl , stature, color, hair , Iectal features , address,

dress .
2

Sen-concept which Is a permanent organ izing terce.

3. Inner and outer torcee that orga ni2e a person's trans.

4. Sum total of physical, mental, psychological, emotional
and social ch aracte ristics 01 a' pe rson .
. 5. Motivation which is a ke y 10 one's behavior.

THEORIES OF MOTIVATION
Difl erent psych otoqis ts and management experts have evolved
several mcnvancn theories. These can be listed in the following
categories :

.J

20 9

I.

The centem Theories

1. Classical Theory (FrederiCk Taylor)
2. Need or Humanistic Theory (Abraham Mfts lOw )
3. Need Theory (D.T. Hall & K.E. Nougaim)
4. 'two-teeter Theory (Frederick Herzberg)
5. Human Relation Theory (Rensls likert )

' II. The srccese Theories

1. Classical Conditioning (Ivan Pavlov)
2. Operant Conditioning (B.F. Skinner)
3. Preference- Expectation (Victo r Vroom)
4. Expanded Contingency Model (Porter & Lawler)

III . TMOry X and Theory Y

IV TheOry Z
All the above theories try to li nd some con nection between
the stimulus ana response . Now we discuss above tneo rtes
In detail .

I. THE CONTENT THEORIES

1. Classical Theory (Frederi ck Taylor)

Frederick Taylor. an Amerjcan, is popu larly known as tamer
01 sclemlnc management He star ted his career as a machine
operator. and graduall y succeeded to the highest position 01
the chiel executive oi the same company. During his tenure
of service in tne company he learned the weaknesses 01
workers and management He observed Ihat the management
and the workers have fumed into rival groups adversely allecli ng
tne productivity. Experienced by such conditions he developed
the theory 01 scientific management by which he meant mental
revolution on the part of management. and work ers. Both the
groups should cease to be rival and should turn Into fr iendly
groups thereby increasing the productivity.

210

According to Taylor mon ey Is the strcnqest mottvatcr .

People tr y 10 g et that job which oile rs more money (salary
and allowance s). But many 01the ps ych ol ogists , sociolog ists ,
and managemen t scient ists do not agree with Tay lor. TI'1 ('y
say that money is not every thing While other theorists agreeing

with Taylor say l hat every person has its price and vajue.
Although there are people wh o find themselve s above
mon ey powe r, money is the mai n moti vator for lew income
g roups. For hig h income groups money is less important tha n
status , self respect, and facilities like car , luxury hou se,
telep hone, p rivate secretary. separate cubicle. and a name
plate outside. their ctnce .
Tay lor decided that a cle ar cts ttncfo n should be drawn
between hard workers and d... :: workers. The hard worker
should be paid more than others or he wilt get discou raged
and jose his ettlclency . By time and motion s1udy he developed
sta ndard time and work . Those who accomplish ttu s standard
work in standard time should be pa id bonus. Those who fai l
In it, should be paid at a lower rate. For (hiS purpo se he
developed "Wag e l?ilf erenllal Plan". But the class ic al theory
tans to specify other motivating Iactors .

2. Need or Humanistic Theory (Maslow)

r

"

e
"

"

Abraham Maslow became pUblicly known when his article

lirst published In a monthly magazine Psycho logy Review In
July 1943 . His article was on the theory of huma n moti vation .
He described fi ve huma n needs which a human wants sattsued
in order c t importan ce. Acco rdin g to him sattst act fc n 01 one
need leads to the sattstactfo n at the oth er more sop histicated
need. He describes the hierarch y 01 the needs as follow s.

"

e
y

t , Basic needs
These include food , sheller, water, cloth ing, medicine. air,
etc.

211

11i
2. Safety needs
Security 01 life . property . and job . l ow income groups busy
the mselves in satisfy ing these f irst two ne eds thr ough their
lives.
3. SocIal needs
Love, association , belonging ness. This need arises subsequent
to the satisfact ion 01 the firs t tw o.

4. Self-esteem needs
This is the need lor self-respect. II is accomplished by owning
a car, jewels. big house, big tiUe of the job. This h igher level
of need is harder 10 salisly, and only a lew persons are able
10 satisf y t his need.

."

Bett-ectuettsetton

II lies at the highe st rung of the ladd er 01 needs. It is most

dillicull to satisfy. Her e the person i s mo re conce rned with
the weuare 01o thers rather than nuneen. He wants 10 perform
some feal.

Detailed expla nallon of the abov e hierarc hy of needs Is

given In humani stic approach In th e prev ious c h apte r 11.
This theory gu ides managers in deali ng with their subordmates.

3. Need Th eory (D.T. Hall & K.E. No ugaim)

In 1957, D.T. Hall and K. E. Nouqa fm started a liv e ye ar stud y
01 young managers 0 1 Amer ican Telephon e and T ~ l eg rap h
and made the lollowing sugg estions lor those man agers whose
subordinates are manage rs :
1. Being in a co mpa ny all manag ers' need l or ach ievement
and esteem increase s with th e passage of l ime.
2. Efficient and succ essful man agers will get the rewa rd in
the form of promotion, pay increase. and other benefits
and pe rks .
3 . Efficient managers succeed in g elling increased managerial

21 2

.J

l[
respc nstbulty.. As such in l ive years their achievement
and esteem satisfacti on is greater than mo se managers
and compeers who are lett behind .
4. As a result of great satisfaction of achievement and est eem
needs such managers beco me more Involved in their jobs .
5. Their greater job invci vement bring s tnem turther growlh.
promotion. 300 more important responsibi lities in an upward
series.

4. Two-Iacto r Th eory (F. Herzb erg)

Frederick Herzbe rg was professor of psych ology at Ca se
Western Reserve Uni versity, USA. He co nducted a series 01
expe riments w ith two hundred engineers and acco untants to
revea l the mystery 01 motiv ation. He asked them to de scribe
those moments that especially we re either happy or unhappy
ones. He inferred 1'1.',) lollowing imp ortant fact ors whi ch he
cha racterizes as :

1. Maintenance Fact or s
2. rAotlvsllonal Factors

Mai ntenance Factors

Herzberq 's study discovered the fo llowing mainten ance factors
whi c h are minimum requiremen t s of a job . Wilhou l th e
satistactron 01 Ihese Iactors no employe e w ill be willing to
work .
1,
2.
3.
4.

5,
6.
7.
8,
9.
10.
,

Company man aqement and policy.

Technical supe rvision
Interpe rsc nat retatons with supe rvisor
Interpe rsona l retatjons w ith co mpee rs
Interp ersonal relatio ns wit h su bonnnatcs
Salary
Job sec urity
Personal b ett erment
Working con dili ons
Status

213

,
Motivational Factors
Herzberg discovered six motivational factors. Incidentally, these
factors match the highest-level need as described by Maslow

1.
2.
3.
4.
5.
6.

Achievement
Recognition
Advancement
The" job itself

The possibility of promotion

Responsibility

Herzberg emphasizes independence and decentralization

of authority to properly and efficiently pertcrrn the job. According
10 him independence and authority to make decisions is a
good motivator.
Herzberg's theory is much like Maslow's in that the former's
maintenance factors lie in the first rungs of the Maslow's
ladder of needs, and the motivational factors fit into the top
level of needs.
On the pattern of Herzberg, M. Scott Myers also conducted
a study and summarized three questions that every manager
should use to motivate his subo rdinates.
1. What motivates employees 10work effectively? This question
refers to a challenging job which entails a sense of
accomplishment, responsibility, growth, advancement,
enjoyment, and recognition.
2. What dissatisfies workers? Dlssatlsuers may be work, rules
and regulations, working conditions, titles, seniority rights,
wages, fringe benefits.
3. When do the workers become dissatisfied? It is the
occasions when advantageous conditions for growth,
achievement, and recognition no longer prevail.

214

r,
5. Human Relali on Theory (Rensls Likert)
Rensis Liken is one 01 tne modern ma nagem ent experts . He
advoca tes human-cent ered manage m ent. He goe s that far
th at the managem ent should not cu rtail manpower during
recession no matter even if it has 10 reduce jnventory and
other produ ction f acilil y.

Rensls Likert discards first two levels of needs of the

need theory namely (i) physio logica l needs and, (2) Safety
needs. He focuses his attention on t he top three needs . namely.
social needs. ego needs, and sell-f ulfill ment needs. He says
that money and security are not rrcttvatcrs In tnemsejves
rattler they are too ls 01the motiVator. Likert's theory put s its

emphasis on managers rather than employees. Managers

shOuki use such motivators as economic welfare , security
Ia ctor s. ego motives. and desire to be innovative . creanve.
and desire to u se initi ative.

~-

Likert contends that htgh le vel produ cti vity Is Ihe result 01
mutual cocpe rat jcn of every member 01the orga nization. Good
relation s among subordinat es. compe ers, and superiors should
be established and nou rished . Subordin a tes sho uld have a
sense of participation , a say In decisi on- making , and should
feel tnemse fves as a pa rt 01 the co mpany.
Hum an re tatson theory is exacuy oppo site of Tay lo r'S
c1assicat theory. Taylor says thai nothing important. especially
work 01 respcnsjbmty ehcu'd be lett. to th e workers. On the
other hand, human retatlcn theory suggeSIS Ihat worker s should
be g iv en proper Impo rta nc e , th ey shou ld have wo rk 01
respo nsibility, and as a member 01 the team they shouSd be
participant in the decision makIng. Mo reover. Taylor underlinf$
the importance of work , and ignores human psychological
aspects. Bot l iken puts qreater impot1ance on the work er
tha n the work.

215

II. THE PROCESS THEORIES

.-

1110 process theories 01 mot ivation have been discUSSed by

11 10 foHowing theo rists. These theories t ry to establish thai
overy respons e is Ihe outc om e or a stimulu s.

1. Theory 01 cla ss Ical conditionIng (Pavlov)

13010re we discuss tt us theory, it is necess<:lry that some related
terms are defined first:

Mol/val/on
It is d rive and euc rt to satis fy a want

{lOa!' It is willingness
to spend ene rgy 10 achie ve a OM lor a reward . II exptalns
'how-Io' aspect 01 behavior.
OJ

Motive
It rel ers to desire, drive, aim, need, wish, yen, want. goal,
aspirat ion. It Is an Inner st ate thai c nerques. activates , or
moves. 11 dir ect s or cha nnels behavi or tcwarcs goals. A mot ive
Is a restlessness 10 remedy tno 1<'I(;k, 10 aljevtate 1M yen, a
terce .

Conditioning
II is a way of learn ing by which a new -espo nse to e particular
stimulus is developed.

Satis faction
Contentment

ex pe rie n o'~'~ I'/ h 'l ~ "I

wan! is sat tsned.

Stimul us
n is drive, incitement, or need. II is Ro,.lie,", inuuence, or agency
that produc es a re sponse ill a livln'J r" ganism. ;'l,1l;,1hlng tnat
rouses 10 action or increased action . Sor, lething thaI ~t in'll i l at es

behavior.

Stimuli
Plural Iorm 01 stimulus

2 16

Clsssical conditioning :
It Is Pavlov 's app roac h wh ich sta wrs for en uncoroholl:lh h,
stimulus used betcre natura l stil:it..ius . It is marupurau o III
stlmull!S.

Instrumental conditioning:
Semi-eonj rolla ble reward or punis hment .

Refnfc r cement
Any thing th e person Iinds rew<.trd i'lg ,\nytt ,irtg thai Ilolh
mcreases lilt: strepglh ')1respon se and tone s to h duco repc tstcn
of 1M behavior l hal preceded the retnrorcem cr.t. J strenqtbens

tne response and ncreases tne probability 01 repetition.

Exp la n ati o n
Cond it ioni ng

0 1 th e

T heory

01 ct ass te e t

Pavlov was U p:W';hOlogist of t be nin p.!ci'I,)It\ ce ntu ey.. He

conducted m any experi ments to detennlne relationship betw een
the modified am.i sL.'bslituled sl:rnulllS and resulted response.
He wa nted to ream Whdl w (,ukt haj)jAm to mcuvauon It ' he
stimuriJ~ is changed or maniputaterl . He conducted expe riments
on his dogs and c arne 10 know tnat on t;l':1 slg:-ll of ' oolJ the
dogs woukl salivate . Pavlov sta ne o ringing C\ bell when the

do gs caugll t sigt.t of toed. He repeal ed this act ion many tunes.

Then he experienced thai the dogs saliva ted just bf he~(inQ
the sound of the bell even wlttout toed. II p ro...e::f mat subStilU~tld
sti mulus would contin ue to mcttvate or 10 brrng the san-e
respo nse

These experime nts revealed nen' dimensiu.lS at

motl v '~' l " ...

T his disc overy w as named claselcat cond itionin g wh ich Is, III
tact. a manipul ati on or playing treks 10 bring th e dll ~ im41
respons e . But on the other hand. it has ccen i,'s!<'l.bli;;h l' (1 Ih; lt
emp k)~" H: S wa nt 10 be motiva ted rd lh ~ ( than rc bo choillOl I.
trickfd. man ipu latedly rnoU...ated.

,
!

217

Managers are now in a better position 10 get to know that

workers' lack 01 interest in the work is not due to their (workers')
sluggishness or shirking. Its reason lies in the weakness 01
motivation.

Instrumenlal CondlUenlng
During the ctaeeicat conditioning research, another new concept
emerged which was known as Instrumental conditioning. The
theory of classical conditioning was dlsca roed on the plea
that it could not justify human motivation. And if it is applied
on human it could not produce better results. Opposite of this
is the theory of Instrumental conomontne which fits much the
human nature. II focuses its attention on a change in mottvaticn
Which is either reward or punishment, and this reward or
punishment is under the control of the subject.

2. Theory o f Operant Conditioning (Skinner)

By this theory Skinner, a Harvard psychologist, discovers a
world of behavior modtners. He explains how you make a
subject (your subordinate) 10 behave or act lhe way you like
in return Ior u certain reward. Skinner is of the opinion that
a human is what his external eovrronment makes him. A person
Is tho renecucn of external teeters. conditions, and environments;
his internal drives, aspiratlons. needs, desires, emotions do
not play any important role in making hla outer pe rsonality.
His behavio r can be observed, analyzed, and manipulated
taki ng into account his external environment. In plain terms
he 15 conditioned by his external conditions. Skinner seems
to agree to the famous saying that a pe rson is known by the
company he keeps or the society he moves about.

Operant conditioning theory is referred to as theory 01

rein forcement. Refntcrcements play an important role in
cFlanging the be havior of a human. He divides rein forcers
into the following kinds:

218

1. Posl1lve rein forcer

II is a reward paid to encourage the rep eutson of a desired
action. Food is a positive reinforcer to salis fy hunger.

2. Negel/ve reinforcer
It strenqtnens and increases behavior by the termlnauon or
wilhdrawal of an unde sirable action . Negative reinforcement
is dille renl than puniShment in 1M l the termer increases a
certain behavior wh ereas Ihe laUer decr eases iL Taking aspirin

to kill pain is negative reinforcer .

3. Neutral reinforcer
It neuher encourages nor discourages a certain behavjc r.

4. Contin uous reinfo r cer

II is repetition 01 an action when correct response is given.

5. Partial re inforcer
11 happens only occasionally. li s objective Is to ke ep the po sitive

reinforcer altho c westrevernecessary to maintainperformance.

6. Ratio

or Interval reinforcement

The reward Is given at regular interval, say every 3rd, 7th. or

9th lime the desired action is performed. It is given repeatedl y
to encourage a desired action. II is of two kinds:

(I) Fixed rallo relntorcem ent . It is used to speed up

pertorma nce as one dozen tooth pastes tree 01 cost at
every one gross 01 tooth pastes ordered will resuh in
increased sale. Another example is the payment of armuat
bonus to employees.
(II) v artabt e rallo rei nforcement : II is us ed 10 mcnv ate
continuo usly. Payment of the salary cernes tlllder this
category.

2 19

I
-oJ

"
Step hen Joblonsky and David De Vries have det ermined
the foll owi ng rules for achi eving maximum moti vation through
operant con ditioning ;
1. Pun ishm ent device Is not good for molivating .

2. Encou rage desir ed be havio r and tgnore u ndesir abl e

behavior.

3. Time gap between operant response and reinfor cement

should be minimum.
4. Usc retntorcement frequcnUy when using available ralk>
progr am ,
5. Study tne respo nsive behavior of th e subc rcm ate and
then accor dingly mold or shape his benavtor in a d esired
manner [e.q. training)
6. Determine envnonmentaric rces lila! are good or adverse
loan individual.

7. Determine the d esired be havior In operational ter ms.

3. Preference Ex pectatio n Theory (Vro om)

Victor H . Vroom evolved this theory In 1964 ell.plaining how
two variables. preference and expectation. Interact wit h each
otter in the p recess 01 motivation . Thi s theory can be explained
in two pa rts :

Preference
II is a variety 01 possible results for an activity or wo lk by an
Individual. The result s may be promotion, praise, prize, trop hy.
jealousy. Or nothing may result, or even somelhing unexpected
may happen . Each individual has tus own references; not all
wish the same outcome or t ruu. He will preter thai outco me
which overcomes h is lacking or deprivatio n.

2 20

Expectation
Expectation of the outcome will determine the qual ity of wor k
by the subo rdi nate. If he expects lhal his hard wor king w ill
produce no bett er resun he is unlikely to do hard working.
Expectation t empt s entnustasrn and motivates th e worker .
Preference - expect ation retatcnst sp expl ains ho w to rrctlvate
individual workers acco rding 10 l helr nature and desir es. To
apply th is Ih eory 10 motivate employees it is necessary to
have a deep understanding and kno wledge 01 the preferences
and expectations of Individual cases.

4. Theory of Equity or Expanded Contingency

Model by Porter and Lawlar
Lawler and Porte r expanded Ihe version of the Vroom' s s- neer
o f thou ght. Th ey a sse rt t hai conti nuity 01 beh avio r or
performance depends upon Individual's saustacton. lt the reward
for th e per forma nce of Ihe work equals or exceeds what he
feels he d eserves, he will continue -repeating bts p ertormance.
But If the rewards are less than what he teets he de serves,
he will get dissalisfied resunino In abandoning his performance.
The re are many theorists who do not agree with Lawler
and Porter. Th ey l ind no link betw een perfor mance and
saustacucn or morale. Vroom himself could determine on ly
weak relation between them. But Porter and Lawle r discovered
perceiv ed reward as mIssing link between pe rformance and
sanstecti on.
Th ey dlvtde rewa rds into two cate gories
(1) Intrinsic rewards: These lnclu d~ satisfying high-Iev el needs
such as recog nition , actrteve rrent. advancement. growlh,
self respect . hav ing a secretary. etc.

(2) Extrinsic rewards: Th ese are rnatntenance (basic) rewards

as salary, job security, safely, tee d, etc.
~~ l

The theory enables the manager 10 understand the workers'

approa ch tow ard U18 measurement of reward in relation to
their pe rforman ce. When the the ory e stablishes connecncns
among performance, reward, and saustactlcn. i1 actuall y tocuses
its attentio n on the extrinsic (rnatnten ance or basic) needs of
the worker. Therefor e, by tne knowledge of this theo ry the
manager c an devise an errecuve sal ary structure of the firm
in order to maximize the efforts of the workers.

III . THEORY X AND

TH~ORY

Y (McGREGOR)

McGregor is one of th e mod ern ma nag ement sc ientis ts. He

developed two contrasting motivation theories wh ich he named
them Theory X and Theory Y. Doug las McGregor's Theory X
is explained be low :

Theory X
A manaqer who is autocratic. cent ral izes power and authority ,
and believes in close conl rol and Shotgun management can
be explained by t heory X. He has tradit ional authoritarian
style of leadership.
The theory has following as sumptions:

1. An average persons dislikes work and will avoid it whenever

possible .
2. To gel lhe work accomplished most people have 10 be
coe rced, forced, or thre atened by punlshme nt.
3. An average person is b asically pas sive and wants to be
direct ed and led. He doe s not like to assume any
responsibthty.
Koeping In vlew this human psychology and social behavior
of most worke rs, th e manager has 10 resort 10 shOtgun
management whiCh is the refl ect ion of theory X.

222

Theory Y
Theory Y is Just opposite tc Theory X. Here the manager
adopts humanis tic approach tow ard his subo rdina tes. He does
nol bel ieve in ccercen. autocracy . and centrauzanon 01pow er
and authority. The theory has the following assumptions.
1, Work is as natural to humans as play or rest and tn eretor e.
the worker w ill not avoK:1 it.

2. Coercion is unnecessary 10 get the work done. When

work ers are commill ed 10 work th ey will be sell-motivate d
and derive saustactlcn from the work.
. 3. Commitment is a crucial tactc r In motivation. and it is a
func1ion 01 reward coming f rom it.
4. An average per son accepts and eve n seeks responsibility
under proper environmen t.
5. As against popular belief, most people are crea tive and

innovative.
6. In modern busines s and organizations human potent ialities
are Iittlo utilized.
Both the theori es represent ext reme vlew point s. Bul both
are workable in different times and snuations. and Iherelore,
any of them cann,ot be complete ly disca rded.
The critics of the theories have the opinion 1hat the solution
01 the problem {human nannej ues somewhere between theory
X and theo ry Y. To them theory Z ts the modera te one and
It presents optimum solu lion 10 the problem.

IV. THEORY Z
The theory Z, adv anced by Jap anese - America n, Or. William
G . Ouchi explains the art 01 Jap anese manageme nt and show s
how it can be adapted 10 American and ethe rs companies.
William Ouchi who coined the term "theory Z manaqement"

223

Is a professor In the Graduate School of California at Los

Angeles. He is a regular consultant to as many as 500
companies. He earned his MBA from Stanford University and
Ph. D. in Business Administration from the University of Chicago.
Professor Willia.m Ouctu makes a comparison of Japanese
and American management practices in the following.

Japan

America
Planning

1. Focus on long-term

Focus on short term

policies.

policies.

2. Group decision making.

Decision making by
individuals.

3.

Planning In the hands of

groups.

Planing by individuals.

Slow decision making

and fast lmptementatlon

Fast decision making and

slow Implementattcn.

Organizing
1,. Cclte ctlve responsibilit y.

Individual responsibility.

2. Informal organization
preferred.

Formal and inflexible

organization rigidly followed.

3. No fixed working hours.

Rigidly followed working

hours. You must be present
in the office during these
hours.

You can do office work

at home.

224

Stalling
1. Workers are not spec iallzed in a part icular fi eld.

Specialization is emphasized.

2. Frequ ent shifting of

Frequent shil ti ng is not

possib le due to spectauza

work ers and managers

l rom o ne d epartm ent to
another.

3. Selection of rookies
(young fr esh, inexperienced graduates).

uon.
Selection of expe rienced
and older candidates.

4 . Slo w Pro motio n.

Rapid Promotion.

5.

Employees must retire at 60 .

Li fetime e mplo yment.

6. High morale and loyalty

loyal with the profes sion.

01 the employees fo r
th e compa ny.

7. Job turnover is ve ry
small,

High job turnover.

Leading
1.

l eader is

merely
group member.

2. Collective responsibility
and la ce sav ing of
individuals.

Leader is the nead ottne

group.
Individual's responsibi lity
and dressing down .

22 5
.~ .

--;

.
3. Decisions flow bottom-up

Decisions flow topdown.

Controll ing
1. Control by the co mpany
as a :-vho 1e. or by the

Control by the bo ss.

-' , '

system.
2. Control over group per-

formance

Contro l ove r individual :

pertcr mance.

Theory Z and Motlvallon

Or. Ouch! suggests that the secret of Japanese growth "'and
de velopment is not the tec hno lo gy but it s motivating
management system. En;p:C; il ~t; are effectively motivated by
participation, group decision making, face sa ving, life-time
employ ment, non -specializatio n (killing mcnotonyj . leaderless
control, and trust - - resulting in high morale. producti vity,
and loy alty. Wh y Ouchi has named his findings 'Theory Z', he
hlms eJl expla ins In his book theory Z. "Ifus choice of lab EtI is
an intentional relere nce to the distinction made earlier between
"Theory X" and "Theory Y" mana gement by Douglas McGregor,
and my argument is related 10 his. Jus t as most manag ers
are not purely described by assumptions X and Y, organizations
are rarely pu rely 01 the lorm A or Z~.

Money and Motivation

, Money is not an end, rather it is a means to an end. Stud ies
nave shown tha t money Is not a good motivator except for
some pers ons who are at the lowest level 01 Maslow's hierarchy
-- of needs , the phys iological or basic needs. c'lhose who find
themselv es runn ing afte r money are actually in th e pursuit of
stat us . achieve ment, or ind epe ndence . Accordi ng 10
psycho logi sts and manag ement experts there are stronger
.not tvatora tha n money, such as promot ion, CUbicle, name
plate at office door, secreta ry. praise , good relations wi lh lhe
boss. Such motivators improve morale and productivity. Money

2 26
I
~

has to a greal extent IoSI its position as a motivating teeter

ow ing to fring e benefits , statu s. pro v tsfcn at job and eocta!
security, tree medical, and _ ~ o s pi~ a l i z a l i o n services.

Moral and Productivity

Napoleon once said. "In wa r. morale conditions make up three
quart ers 01 the game: The relative balance of manpower
accounts for th e remaining Quart er." The importance of mo rale
, cannot be overemphasized whet her it Is war or man aging the
company. Mor ale has olrect relationship wit h producuvny .

Definitions of More'e
Mo ra~ has been delined diHerenlfy and variousl y: '11 is prevailing
mood and spi ril co nducive to wi lli ng and dependable

pertormance ."
"II Is whole-hearted cooperation in a common ettcrt ."
According to Mooney, "The sum of several psych;c ouannes

that include courage, Iortaude, resolution, and above aU,

confidence.
Beishline defines morale as, -cocraqe. confide nce, and
enthu siasm in th e performance 01 duty."
According to Urwick, morale can be judged trom slimlnallon
of sloppiness, the acnrevemeru of maximum performance and
tenacity.
Robert M. Guion delines morale as, "tne extent to wh ich
an indiv idual's needs are eatlstted and the exlent 10 which
lhe incUvtdual perceives that sausraction as stemming from
his tote! job snuauon."
Morale is developed and increased by total job satlstacttcn.
accordin g to Robert Guion . He says, ttrat totat job satisfa ction

227

..-.'

includes (1) inherent job satista cllon, (2) satrstacncn with the
company , (3) satisfaction with the supervision, and (4)
satisfaction with rewards and prospects for prom otion and
growth.
Morale and productivity have direct relalionship. High morale
results in high productivity and vice versa. Every company
shOuld concentrate on the development 01 high morale of its
employees. Low morale is lhe result 01 lrustration and
deprivation . ccouoence. zea l, training, participa tion , and
reratcnetan with the boss, communicalion, leader ship, and
all such other tactors have an important bearing on prcductlvlty.

228

Examination Questions

1. Deline personality, behavior, and motivation, What are

the compo nents of personality?
2. Name the theories on motivation. Explain any three 0'
them.
3. Describe Theo ries X. Y. and Z.
4. What Is Proces s Theory of motiva tion? Explain In detail
any two of them.
5. What is Content Theory? Expla in classical and human
relations th eories.

6. Define Preference Expectation and Expanded Contingency

theor ies of motivation . Also explain their weakn esses .

.
,~

7. What is t he relatio n between "money and motivalion", and

"morale and productivity"?
6 . Explain Operant Condi tion ing Th eory , and 'rw o-tact c r

Theory,

9. Write notes on t he following

(a)
(b)
(e)
(d)
(e)

Morale
Morale and producll vity
Money and motivation
Two-teeter theory
Bensls Likert

229
i

(I)
(g)
(h)
(i)

Abraham Maslow
Need th eory
Dr. Will iam OUChi
Theory Y

- Chapter 13
Communication

.. '.'

'

,. '"

Definition _

.'.Process of Communication

"

I
I

'it ,
!

Communication Pitfalls and Barriers

- Modes or Media Of Commun ication '

,
1

Up and Down Commun ication

Philosophies of Communication
. Development Commul1lcatlon
. COntrolling Coriuriunlcatlon
Relinquishing Communicator

, Withdrawn Communicator

,Nine C's of

, Communic~tl on

Communica tion systems

Wheel Network
Chain Network

AlI.Channel Network
Circle network

Transactional Analysis (TA)

The Child

The Parent
The Adult
Motivating with TA

\:

life Positions
I am not O.K. you are O.K.
I am O.K., you are not O.K.
t am not O.K., you are not O.K.
I am O.K., you are O.K.

Ten Commandments lor Good listening

Examination Questions

"

". -

' -, '

.'.' .

.' , "

23 1

Definition 01 Communicallon
According to Fred Lut nans Communication is, "The flow at
malarial, inloimalion. perceptio n, and understanding between
various p arts and members of an orqanizatlcn." According 10
him co mmunication inclu d es
(1) "all th e methods , mod es, and media 01 co mm c nicaton",
(2) "all the channels, networks. and systems of commmcator r;
(3)_"all the perso ns to pers ons interchang e (imerperscnar
communications",
(4) "all aspects 01 communication up , down, lateral, spe aking,
writing listening , reading, verbal, nonverbal . mettccs, media,
modes. channe ls , networks, flow, ime rpersonat, inte rorg anizatio nal, and body language:
Dr. John son says tnat language is the dress of thought.
It will be noted with intere st thai successive transm ission s
01 the sam e message are d ecreasingly accurate :
( 1) In oral communication around 30
is lost in ea ch tra nsm ission .

percent ct tne information

(2) Even written communication Is subject to some loss 01

mean ing in tr ansmisslon.
(3) Equally serious is poor retentlon of information . Studies

show that empJoY1. 6S re tain only 50 per cent of

co mmun ic at ed i nfor mation. and sup ervisors only sixt)'

pe rcent.

232

Anothe r stud y show s that there is trem endou s loss 01

inlormation - 3 7 percent betwee n the board of directors and

.: ;

the vice presiden t level. General supervisors got 56 pe rcent

01 the informatio n, plant manage rs 40 pe rcent . and general

foreman receIved only 30 percent 01 what had been transmitted

dow nward to the m.
An average 01 only 20 percent 01 the communication sent
downw ard thr ou gh the five levels 01 man agement finally gets
10 the worker level.

Communication is a key to mana gement euecnveness .

Oral and written communications, tormal and lnto rmat, go
through many cha nne ls and in various directions.
f.!<inagernent needs 10 communica te policies. in structions,
~~jecl ives. and goals so thai all ernptoyees
u nder.sia nd

wiU

and accept

the~.

The final test o f all communiCation Is whether it produc es

d esired results quickly and correctly . Communication is an
Idea transplant.
Communicat ion activiti es till the business day . An analys is

01 time speniTncommu ;i~~tion-sh(;;"';s apProximately 10 percent

in wriling, 15 p erce nt reading , 25 pe rcent speaki ng, and 40
perce nt liste ning.

Ther e i s peop le-to-people com munication . ~ ',j t also, we

are co ntinua lly send ing and receivi ng within ourse lv es. An
artist communicates with himself (and with others) as ho pours
his inner lee lings into som e tangibl e form.
The purpose 01 communicalion is to bring abo ut J change .
It is said tnat no person can effectively communicato lor another
person.

233

The Process of Communication, the Elements

of Communication, or the Factors 01'
Communication
'f
The factors of com murtlcatlon have tne.rcnowmc elements.

P!
8

Sender
2. Message
3. Medium
4. Receiver

-"., 1.

"""
/

wI
;n

Before we explain the above tacrors it will be better to

explain the communication process in the following diagram:
Idea originated
barriers --. Receiver

Encoding ~ Transmiller - ~ Noise and

Decoding -vtdea received.

-,~

1. Sender
S.~D9,~r.is theperson who communtcates the idea, information,
material, etc. He acts in the capacity of speaker, writer, or
encoder:lhefoilo\~'-Ing piiiai'ls are inherent with the sender:

(a)
(b)
(c)
(d)
(e)

The message he intends to send.

The message he actually sends.
The message the other person' receives or Understands.
The other person's interpretation of the message.
The other person's response.
(f) The difference between the message sent and received;
arid between the response expected and response received.

2. Message
The message may

be in the form 01 order, opinion, advice,

sLi,ggestion, Instruction, question,~nswer, or material ..J Lis
nece~sary.and important'that.'idea '1)( messaqe received be
"message sent." a "is 'POS~ible only
iaentldil--to'-the idea

or

234

'I

when both communicato rs (sender and receiver) are skifttul

in commu n;calion and lis l a~u ag e':~ " - ,"" ,
".

there

In the' case 01 wrnten '~O mrTiuniCalion

should be
prQPer WOrd's.'synlax~' ~n~tu'ation,
paragraphing.
Bu t remember co ~m.unicalion-- 's:-ne've~, per1ect~" " - -'
'.

grammar.and

,." -., ,,

3. Mediu m
Medium

o lcommu nlcal io nincl ~ d e s

letters, reports. tele9 rarry~ r

fax': mriilOrams."cab:es. tetex:' p-ostais: ,'ie-Iephon~'s: ' ch'arts ,

pjclu i~'s~~~_r jmi'olher' m
ecnarllCaTdevlce: M~~i~m'rrlay-i:ie-a

~~!.son. as apostman. II may be a device, as a te[ephone~ It

may also be an organization. as a post office or news agency .
Med ium is the way through which communication flows
Irom s eOd~~' to the receiiter:--'-" '.- , "' " ..'

4. Receiver
Th~.!.~c~~y~!, I~ ~tte de.code~:..H~ , when receives, decodes or

i!1terprelS th,fl mess age. Slncc perfect commu mcancn Is not

possible. there is devia tion be-tween the Idea sent and the
id ea received or interpreted. II th e receiver is skillful in
communication then the deviatio n will be small.

Commun ica llon Pitfalls and Barr iers

Communication ts never perfect. since every person has different
perception 01 a thing or a sltuatton . Some pitfalls are nalural
ane'- others are 'due to lack 01 knowledge of cornmunicallon
princip tes."Bias of the sender or receive r is another reason
for the noise. The communication dis tort ion may result Irom
the fOllowing.
1. ,
2.
; ,3.

The mes sage you think 10 send.

The message you actu ally send .
The message Ihe ctner person actu ally rec eives.

2 35

---~~ -- -- - --

-------

7.

The rec eiver 's decodin g and Interpret atton of the

messag o received.
The oth er pe rson's reply or reaction .
The respo nse the oth er person intends 10 send.
The response the other pe rson actually sends .

6.

I be resp onse you actually receive .

4.

/ 5.
6.

9.

v cv r tnterpretatlon 01 th e message,
Thu
r tevlanon and gap between the respo nse expect ed
10.
and the resp onse actually received and interpreted .
The resultant g3p causes ccnnicts. disputes, batues. wars,
divorces , deve lopment 01 different schools o f thoughlS

Some Specific Bs.rriers

1. Wron g assumption
Alief om: has sent tne rnessaqe he assumes that it would
reach the d estiny. He may be wrong,

2. Lack of planning
Hapnazard CO~IT'u n i9 a tio.n will brit1g no better resu lts . You
must plan be rore you .ccmmunlcate.

. :. ,
'

3. Poor planning of communication

Poor ptannmq and de sign o f commu nicati on qiSjort s the
message. Cliches. jargon, trite ami poorly chosen words ,
improper punctuation. poorly organ iZed ideas, wr~og qrammar.
and fncc rrect sent enc e ;1'ru6tU<r; c'rnake the message vague
and incoillprehensible. Unplanned message may mis s some
i~lt.Mtl. in1otmaliMl-.
's hould be we ll-plan ned and
organized.

t:1essages

4.

Los s in ea ch successtve transmission

Ac curacy and re te nt ion dec rea se s at every suc c essiv e

transrnisao n. Findings show that employee retai n o<lly . 50
percent and supervisors 60 percent c t tne information received.

2 36

Another study shows Ihat only 20 percent ot the orallnformutton

reaches thEf -1illh ' successive lever.' ," '., ,<,'.""

5. Poor listening
Talkers are more than nst cners. People like to ta lk m o!e:~ than
Ilste n:') ;;ey'-lfnd i! dilficull to, ccreentrate. 'When' the'y listen
they tend to judge, approve, er disapp rove. what the .other
persori":sa~ , !.a lher than trying, to unde r~ta~.~~ !!~e_~~':.wpo int
of the sPtiake". r.,. The principles of good listen ing ha ve" be en
, ,' ,

given at t he end of th is chapte r.

6. Distrust and fear

Anolher lmw rtant area 01 mettectlve communi cation is distrust,
lear, th~~at : and I~ck of cc nndence.
...' .
MEDIA OR MODES OF COMMUNICATION
The mec c m is a message in ilsell . n auecte the quality and
toice of tne me?s8g~. Eachmedlu m or mode of cc mmuntcatlon
entails some quality or quantity deviation. II has been observed
Ihat we usten only 10 every filth word we near .

According fa Robert M. Fulmer the following are Ine media

lhrough which communication travels .

1. Thinking
Communication starts wil:h lhe idea originated. Thinking creates
th e .messag e we , ~ant to ,co!:"ve y. Organized thinking and
medil ati on m ake a person un iqu e. differe nt. and even
charismatic. Thinking is the foundation of every comrTlmlcallon.
The main dil'i ~ren~e between
san e and insari'e perso n is
that the form er enjo)'s l he power 01 lhi nking wh ile the tatter

oces not.

237

_
.
r
An actio n is in its eK 'a language. 'Action spe aks lou der lhan ::.
.
2. Action

.- .....

the wo rds. Someti mes body la ngu age and facia l express ions
are stronger than the spoke n or writt en words . Actions a're---

th e expressions of feelings. The rnessaqe and feeling trav; l

throu gh bOdy actions . Act ing in the stag e drama or film is an
example.

3. Observation
Carefully a nd thoughlful1y seeing is ob servtnq. It is systematic ,
watchi ng . It Is directing watc htul and crluc at attenttcn with a
servation
forms p ercepti on.,
view 10 asc ertain a tact . Ob
........
.-. .
"
~

Wrong observation is possible. Things m ay happen so

quickty or con lusingly IMl what one sees may not be tact .
The commun icator should not allow po ssible distort ion in his
message caused by his bias arid impression .

4. Speaking
Some people are loquacious ano some are reli cent. You ain 't
learning' nothin' when you're lalk~'. ~iS9 bUSinessme';"deveIOp
a talent fo r ke eping other pe rso ns talking to elic.it maximum
infor matio n or secr et from th em. Sp eakers g ai n les s Ulan
'~hi~h' requ~e
listeners . How eve r, t here a re many
mo re soeak foc . such as tE-aChi ng. selling, and commen tary. "
The doctors , 0 I t he othe r hand, shou ld spend a g reat deal 01
time in ltste nin J to the patient s. Tal kative pe rsons l eOd 10 lei
on secrets uncons ciously.

professions

5. Listen ing
When you are liste ning you are lea rning, 'r nc se peop te are
wise who have developed , t he habit 01 IiSle ning th at tmprcves
concentralion. lisl enlng is also used as a medica l therap y,
T his type ottherapy is known as 'um-hmm psychology" because.'
the counse lor occasionally repeals only um-hmm throughout

2 38

T1
...

Ihe enure therapy intervi ew . We should also leam to 1161011

wilh the third year which means to hear the message tnatues
in between the lines. ' -.

6. Wr iting
According loa stud y, during bus iness hours a manager spends

te;;-p~rce~1 ~l-his 'lime' i~ w(lting~- wiii i~9:- is'-i;ne'01 the most

irripo'rtahfiTrO'd'es 'of'communicaiion' b~cause 'Ii co'nstjluie~~ a.
perman:enfreCOrd.-Writing 'calis"for correct gra~ar, syntax,dictio n proper puncfuatlon, simple words and
proper organIzation 01 the idea.

sentences. and
'.' .

7. Reading
Reading' is leaming, "AccOfding to a research a manager spends
a hall hou rs read ing report , memorandums,
and "other materia ls per d ay. Students are_t~ught to develop
reading skills . A person with a ~eading habit has always great er
'r~
,,,, ._ . ,, ~ , ~~
knowledge tha n the person without .
.' , --'

abOui<'tout and

......

... . " ' ......... _ , _ ._..-_ .

...

.... ' . _

...

Dev ices which fac i litat e topdown an d

bottom-up communication between a super and
a subordinate.
The lollowing up and down communication devices improve
working of the organ;zali on.

1. Chain of command
Chain 01 command provides a clea r channe l for the eff ective
and efficient 1I0w ot inform ation up the organizatio n ladder .
Ch ain of command is the establishmen t of supe r-subordinate
relationship s 'In a verucat order.

2. Grievance procedure
T~ro~ghthi_~ p rocedure employees ~re heard and thelr problems
are solved. Employed should be allowed to submit
withOut any fear.
. .

239

crrevences

3. Com plaint system

Question or sugge slion boxe s are provided . Ideas. opinions,
and complaints so received are acted upon. This system should
be u sed in its true spirit.

4. Counseling service
To help the m ove rcome their pe rsonal and otnce problems
counseling se rvice has prov ed very useful for empl oyee s. It
Increas es thei r mor ale.

5. Open -d oo r poli cy
II it is trul y tonowed. the supervisor wins the confid ence of
his subordinates. This is an e ffective device 01communication.
This policy allows employees 10 pre sent their problems h eely
and without any fear of their superiors .

6 . Que s tio nn ai re
A questionnaire is a form alized sche dule lor collecting data
from respon dents . The lunclion 01 the ques tionnaire is 10
measure past behavior, altitudes , and the cna ractertsttcs of
respo ndents .

7. Exit Interview
Emplo yees leaving th e co mpany ar e u nder no pressure. and
therefore. Iheir unbiased and fearless views and valuable
opinions should be recorde d.

8. Grapev ine
It is informal communication medium which is qu iCk . efficient.
and slrong provided it is sep arated Irom rumors and gossips .
Grapevine is an Informal co mmu nica tion avo iding formal
channels, and moving through op inions, doubts , and rumors .
Information relatin g to the organization may be as accurate
as 75 per cent by grap evine communication mode.

240

,J

9. labor representation
Although labor unions are biased. the ir suggestions, crutcfsm
and ideas may be valuable and should be laken into account .

10. Inlormer
Informers are looked down upon . But they can be used to
collect impo rtant inlo rmation lor management . But thi s system
sho uld not cre ate u nrest amongst subo rdinates.

11. Special Meetings

Special meetings with the persons are helpful and constructive
and may bring the problem 10 me surfa ce .

12. Ombudsman
He is a grie van ce man . He is an ofliclal who is appo int ed 10
investigate co mplaints against th e administration. Sweden
pioneered Ihe conc ept 01 ombuds man in 1809.

Philosophies of Communication
There are four typ es of commun ication philosophies that
determine Ihe cnaractensucs at communicators. A communicator
do es not apply only one p hilo sophy. He uses dinerent
philosophies on ottterent occasions.
1.
2.
3.
4.

The
The
The
The

c evejopme ntet comrnunlca tcr

conl rolJing communicator
relinquishing cc nenunicetcr
withd rawn co mrrc mcatc r

1. The Development Communicator

Such a communicator believes in the eloboration 01 a meme
in collaboration with his compeers and subordina les. He Id es
10 bring out what is latent or potential. He believes to two way communication and participation . He e'Tlphasizes on joint
understanding 01 problems. According to him , Iwo heads are

"' 1
better than one . Such commu nicalo r enjoys expenmentatto n
and explorat ion to 'discover new methods and app roac hes,
He is employee-centered.

2. The Controlling Communica tor

His approach is dic1atorial. He believes that there is no other
solulion except one given by him. He does not listen to others.
His approach Is management-centered. These autncnt arious
do not believe In two-way commu nication. To th em one-way
communication is safe to a ccompfis f their goals.
However, controlling approach is suitable in tne lollowing
situations:
1. When the manager has complete know ledge and
experience in tne l iald.
2. When speedy and ellici ent actions are needed.
3. In cris es and emergencies . like a l ire, accident.
4. When joint commitmen t, motlvali on, or part icipat ion is
not appropriate .

3. The RelinqUishing Communicator

Relinquishing communicators are reluctant to assume any
responsibility. They try to shiflthe burden to other. They are
willing 10 pond er over alternative courses of acuons bul only
cursoril y. They think that the 1hings will make their own way.
They do not take lnitlative. They are not sett-statt ers or highachievers. RelinquiS hing app roach is desirable in th e 'ollowing
situations.
(i) When subordinates have command over a sftuation and
have necessary informa tion , expe rtise , tac ts. and
experience,
(ii) When th e other person is specialized in his field and his
skill has proved its wo rth.

242

 I,

4. The Withdrawn Communicator

Such co mmunicators are uncommunicative and tntrovernut .
They belie....e in status quo . He is a man wno feels bad wlwlI
he feels good tor fear he 'll teet worse when he teets b ettor .
He lakes everybody as nasty as himself and hales them lor
it. He is cyn ic in thai he is dis inclined to recognize or beli eve
In goodness . Competent manage rs do not wilhdraw lrom
challenging or ditllcull sit uations .
Th e with drawn approa ch is acceptable or de sirable wh en
there is legal . mora l, or ertucar problem. Gelling involved in
such a snuatlc n may brtng nothing but problems. Moreover ,
he has no competent authority to deal with il .

BUSINESS WRITING PRINCIPLES

(9 CS OF COMMUNICATION)
Aller planni ng steps in commvn'cannq the messag e have been
complet e we have 10 con sider speciuc writin g pri nciples to
h~lp us choose right words and syntax and sentences lor our
leite rs, reports , memorandums, ere.
These p-lnclples are as follows :

1. Correctness
3 . Cla rity

2.

Conc iseness

4.

cerroreteness

S. Concreteness

7. Courtes y

6.

ConslderaUon
Conlidenc e

9 _ Conversational lone

1. Correctness
To be correct /" communicatio n the following p rinciplos should
be borne In mind.

1. Use the correct le vel of language.

2 43

2. Includ e on ly accurate facts, words, and ligur es.

3. Maintain acceptabl e wri ting mechani cs.

4 . App ly the following qualitie s.

a. Avoid switch ing f rom third pers on 10 2nd or t st pers on.

II you are writing in tne third person don 't use I. me. we, us,
you .
b) Vary your sentence struc ture.
C) There should be proper grammar, ponctcaton . spelling .
and paragraphing.

2. Concisenes s
Bu siness execu tives are dea d-busy, They do n't have l ime to
go t hrough unnecessarily lengthy messa ges The wnter is
also a loser if he writes wordy message s, beca use II invol ves
more,,,tlme and mo ney to type and read. Concis eness makes
ttie .mess ac e more uod ersta ndabte and comprehensible , To
achi eve concisene ss the lollowing should be ob serv ed .
1. Omit tnt e and u nnecessary expressio ns.
2. Avoid unnece ssary repetltton and wo rdy expressions,
3. Include only relevant facts with cou rtesy,
The message snou kt be laconic but conciseness should
not be accomplished artne cost 01 complete ness or courtesy.
In bus iness writing less is more, spa re is ' l air, lean is keen ,

3. C la rity
Clarity demands that the business message should be correct.
conc ise, complet e, con crete and with co nside ration.
The following ways lead to cl arity
1. Cho ose words that are short, fa miliar. co nversatio nal.

24 4

2, Constr uct ett ectiva sentences and paragraph s.

3. Proper punctua lions make the writing clear .
4. Achi eve appropriat e readability (easy words and sholl
sentences) .
5. Incl ude examples, illu stratio ns , and other vi sual aids if

des irable .

4. Completeness
TM messag e should be complete to bring desirab le results .
11 sn cutc include everything the reader needs lor th e reaction
you desire , You must know what mtcrmanc n our rea d er wants
or needs . You should be able 10 k now the reader 's background,
viewpoints , needs, auncce s. and emotions 10 determ ine th e
extent of mtcrmanon 10 be includ ed in the messaqe.
Following are the guidelines fo r compteteness.
1. Answer all qu estions asked.
2. Give some exira or addilKm al information , when de sirable.
3. Ch eck lor the 5 Ws and any other essenti als. Five Ws
are as foll ow s : (Five questions)
Who
What
Where
Whe n
Why

5. Concreten ess
The business wr iting should be spec ific, definite , u namblc uoun.
and vivid rather than vague and gen er al. Th e l ol1ow fnn
gUidelines lead 10 conc reteness .

1. Use specmc facts and li gures.

2. Put action in your ve rbs. (You should preler ncuvo votcc
and use verb s rather than nouns) .

245

'_ .

3 . Choo se vi vid , image building wo rds .

6. Con sidera t ion

Co nsideration retors 10 you attitud e. sympa thy , Ih e human
lauch and underSlan<l,i ng 01human naiure. Conaderaton means
the message wl tn the receiv er in mind . You shoukt try 10
vi sualize you r readers, theil desires, p robl ems, emotions ,
circumstances, and po ssible react ion to you r request .
Co nside rat ion can be achieved thr ough the l ollowing

1. focus on you instead 0 1 - I- &

" We ~. Don 't be

eccus t .

2. Sho w reader benem or Inte rest in re ade r.

3 . Apply integrity in the message .
4. Emphas ize the posrtfve. pteasnnt tacrs .

7. Cou rte s y
"Everyo ne gains where courtesy re ig n!>- is a good slog an l or
writt en and or a l cc mrncrucauon.
Courtesy is more important and advanlageous in business
wri ling tnan it is in tace-to-tace communication or conversation.
Courteous messag es strengthen present rel ations and mak e
new trtends . It is a goodwill builde r.
Co urtesy may be achieved b y the l o tlowing

1. Be sincerely tacttut. thoughllul, and app reciative .

2. Omlt expressio n that irritate , hurt , or be littl e .
3 . Answ er yo ur mai l pro mptl y.
4. G rant and apcloqize good- naturedly.
Any refusal should be tactful rather than blunt. GrUdging
shou ld be avcio ec .

"No news is c oc o news" Is a myth . Bad news, how ever,

246

oce st turn up . Never sugar coat it. Neve r suppress it, A good
rule is: -Myou musl present bad news, do so, But do it honesl ly,
and reansncany". Some time s we can u se negative 10 denat e
swo llen ego or to reduce unr ealistic expectatons about pa y,
perf ormance , or promotion, as suggested by Charles v ervalm.

8. Confidence
Your lett er will be more succ essful when you show confid ence
in ycurseu . conf idence in your reader, and confidence in your
mes sage . Letters with ccurrusuc tone fake into account neglect
and negati ve issues . Con fidence in com munication creates
pos luv e tone . Conlide nce in yourse lf is produced when you
believe in the fairn ess of you r d ecisions and actio ns. You
need nol be def ensive or apologetic . Show your reader that
you are decisive, positive, confident. and straightforwa rd rather
than diffident , dubious , indecisive, and neqattve.
To have confidence in your reader means lha t you are
sure the reader will do wh at is right until oth erwise it is proved .
You should give your reader th e be nefit of doubt .
You lo se confidence in your me ssage when you writ e -I
hope, I trust , if and why not", Such phrases should be avoided .
Spend the time necessary in designing a tetter so that the
me ssage acco mplishes t he business obj ectives.

9. Conversational Tone
Your lette r should read the sa me way as you would talk to
the re ader , The l on e shou ld be co mtc rtabt e, natu ral,
ccn versatcnat. uepret ennous and Inconspicuous . Bustness
teuers are not scholarly dissertations. Conversational roue
makes the writer emph atic. You should avoid teqatese and
bu siness jargon such as beg 10 ad vise, please fin d enclo!'od
herewith , or Ihanking you in anti cipation . To n" f:ornp li!:h
ccnvera atfonat ton e. va ry your wor ds, use proper : ;Y ll l :l ~. Ill l
st raighHorward, keep the paragraph s mall, and ayt>~l '1 ; 1~ l lI H
writing.

247

Communication Systems
Communication is a function of leadership. Leaders must have skill
in motivating, counselling, leading and coramunicaung, The success
of business depends upon effective communication networks.

A network is a structure situation in which people transmit

information in a specific pattern. Networks may be of the following

types.

1. Wheel network
Each of the four persons communicates with the perso n at the
nucleus. All the persons are subordinates to the person in the

e-ntre.
2. Chain network
Here are two sets of persons, each comprising two persons. The tW{J
members of each set communicatewitheachotherand withthe perso/l
between them in the centre. It reflects the chain of command principle.

3. Circle network
Each person can only communicate with two other above and below
him. It reflects highly decentralized p..stern. it encourages grapevine.

4. AII-channel network
People are able to communicate freely with OIW another. Free flow
of communication coutnbmes rc Jp' solution of problems. It abo
encourages creativity and innovation to solutions. it is decentralized.

248

Whet-l u r .ti'l

n~lw"fk

. . --::a..:
.-.._. -- - --..
-

n
"'-._-- ._
--.

IWo.rdi

J
I
I

249

- - - - _ .-

TRANSACTIONAL ANALYSIS (TAl

The succ ess of cc mnw rucatlon depe nds also upo n the fact
tbat how the communi cators valu e and think about tnemse fves

and wnat is their seu-imac o or sen-concept. And how t hey

value and think 01 others. To unde rstand the self concept and
sell perceptio n 01 the human an anaiyticat theory has been
developed whiCh is known as Transact ional Analy sis ITA).
This tnec ry has bee n advance d by Eric Bern and rel ined by
Tom Harrts. II expla ins -vhat hdppens when tw o persons transact
or lnterect. The TA theory is th e human behavior analys is.
The theory scccesrs Ih al the loundation 01 human behavior
is laid in rus childhcod . Ever)' petsc n'r behavior can be divined
tmo nv ee kinds :
1. The Child

2. The Pa re nt
3.

The Adult

1. Th e Child
The Child l ype 01 be havior is lh e result 01 e xperiences ,
irustraucns. helplcr.sness, weakness. tov, curiosily, imagination,
and success or failu re in the pe riod 01 childhood. The Child
behavior is tne 't en concept 01 lif e'.
Th e Child 01 a pe rson can be divided into two kind s
(I) Free Child : He is ind ependent, sell-origi nated . impulsive,
and free from anxiety . His behav ior is mature .
(II) Hurt Child : He Is melanc hol ic, depres sed, and frustrated .
His behavi or is Immature with a sense of tnsecunty.

2. The Patent
"the Pa rent type 0 1 behavior is the reflectio n 01 that of a
per son 's father, mother , orders. and elders toward himself in

25 0

his childhood. In his earl y part or ltte. the child learns ma t the
elders and big peo ple are always right be cause th ey are
pow erful . The parent aspect ot behavior is known as , aughl
con cept of lif e."
The parent type peop le may be of two kinds :

,I). Critical parent : The manager 01 this nature is d ictating.

rig id, and man agement or iented.
(1I).Nurturlng paren t: This type of manag er is cooperative ,
considerate, encouraging, flexible, and inviting participation.

3. The Adult
This behavior is refle cted by one's confidence and mature
outlook . It is me "thoughl conce pt of Iile". Such people deteu d
lheir a cuons by reasons rather Ihan emot ions .
TA also suggests some other ch ar ecter tsu cs of the human
in addition to th e above three:
1. Stroke:
These are lhe rew ards everybody is running aller, as praise,
compliments, or smile s which are positiv e strokes. Neg ative
strokes include evasion. cr iticism, taunt, or reprimand.

2. Games :
These are littl e tricks mat are used to gel strokes. We mold
our beh avior and act in such ways as to get certain stro kes.
Games reinforc e the psychological pcsitlons, a .J help avoid
or maintain friend ship Or relation. Peopl e pl ay g a~e s wh en
they feel bored and want to tttt up li me.

3 . Scripts :
These are Ih e rol es we adopt . They encourage games we
want to p lay. During the childhood childr en play the roles of

251

the persons tha t they want to be in the future . Some play the
king, tho brave , or me good, while others play Ihe vnnan. or
the bad.

Motivating with TA
TA can be u sed to motivate others in tne followi ng ways:
1. Select , tea ch. and use a monv atmq term when speaking
to your subordinates. You can use me term T A.
2. Adopt a particu lar leade rship style and pra cti se it when
dealing with your subcrdtnetes The aouu type 01 beh avior
will bring bett er result s.
3 . r.ct as a teacner-menaqer i.e., a supporti ve parent
4. Show a growth and chan ge alt itude to you r stall .
5. Adopt Parent , Adul t, or Child beh avior accor di ng 10 the
need of l ime .
6. Don't gel rash, remer enjoy the child behavior 01 cu e-s.
7, Use positiv e and avoid neqeuve strokes whenever possibte.
6. Ado ~ Adult be havior in most busines s eltuattons.
9. Do not overa ct as Adult in dealing with ma nageme nt
p roblems.

Lile posi tions

Our beha vior with oth ers depends upon our assumpt ions that
we make for ourselves and others. These assumptions are
known as Iile positions. They can be classified into tne fOllOWing
tour categorie s:

1. I am nol O.K ., you are O.K .

This type 01 person teets himse ll untit, incap able . ene we ak
and regards o thers as lit. capable . and slrong enough 10
mee t the situat ion. His feeling about himsell is established in
his childhood. He is relinquishing rather than contributing to
the probtem-sctvlnq sit uation.

25 2

2. I am O.K. you are not O.K .

HE! Is a dist rusttut per son. He thinks he is always rlgM. wntte
othe rs wr ong. He wa nts to hold and exerctse authority and
control over others, He does not allow participation in dects'onmaking process .

3. I am not O.K ., you are not O.K.

Il ls a Iruslrat ing and cess unreuc concept 01 HIe , He holds the
belief of cynici sm. He is kind 01 withd rawn commu nic ator.

4. I am O.K., yo u are O.K.

This is ratic nat view ot rite pos ltion . He has Adu lt be havior.
He is a devel opmental communicator and may b e regard ed
as sell-actual ized person ,

LI STENING
Ten comm an dment s for go od liste ni ng
Li stening is an art . People lend 10 spea k more than li sten
Li stening can be imp roved by obse rvin g I he 100 10w ing 10
principles :

1. Stop talking
You ain' t learnin' nothtn' when you'r taud n'.

2. Put the t alker at eas e :

Make him al home so that he is free to talk .

3. Show him that you want to IIslen

Lo ok and act tr eeres tec . 00 not read newspaper or ma il while
he talks .

25 3

4. Rgroove d istractions :
Oon 'l sera..... l, tap, OJ shuffle pap ers, It would be better it you
shu l the doo r.

5. Empathize wi th the telker

Try to put yourse lf in his place so thai you can see his point
of view,

6. Be patient
Do not lnt enupt him . Allow plenty 0'

time . Don', sta rt for the

doo r or walk away. Don't cut in.

7. Hol d your temper :

II you lose your temper, you may gel wro ng me aning frolil
th e word s.

8. Take It easy on ar gu m ent and cri ticism :

H e may calm up or get angry . In bOth cases he will iose.
Don't argue or you ..... iII lose.

9. Ask questions :
It encourages the talXf;l r and srcwe you are l aki ng inter est.

10. Stop talking:

.t st and last princ iple for good lisl ening . You learn o nly wh en
you are not talk ing .
( Robert M. Fulmer)

254

Examination Questio ns
t . Define commu nication. What are the commandments 01
good listening?
2. Ellcidale Tran sactional Analy sis.
3. What do you mean by Child, Parent . and Adult aspects 01
a person ? Is it possible to motivate with TA ?
4 .. What are the philosophies 01 communication ?
5. Explain in detai l 9 Cs 01 commu nicat ion. Also disc uss
modes 01 communication.
6. What is up and down communicalio n ? Also explain teeters
or procedu res to make u p and down communica ti on
succes sful.
7. What are th e devices to facilitate ettkient communication
beth up and down the organization hierarchy.
8. Expla in ba rriers tha i come In Ihe wa y 01 commemcannq
your messag e to your subordinate.
9. Deline communication proc ess.
10. Exp lain lif e p os it ion s 01 a p erson . Al so disc uss
comm unic at ion systems .
11 . Write short notes

a.
b.
c.
d.
e.
I.

The Ch ild
I am O.K. , You are nol O.K.
Rules fo r good listening.
Media 01 communicalion.
Ocrtmuntcatlon.
TA

2 55

Chapter 14

BUSINESS ETHICS

DEFINITION
257
SOCIAL RESPONSIBILITY OF BUSINESS 258
FACTORS OF SOCIAL RESPONSIBILITY 258
1. Models of Social Responsibility
Tradltfonal Corporation Theory
Metro Corporatron Theory
2. Evolution of Emphasis
3. The levels of Social ResponslblJit y

4. Social Audit

ETHICAL PROBL EMS BY SHAPIRO

BENEFITS OF ETHICAL CODE 264

263

Internal Benefits , Employe e Benefits, Customer

Benefits , Industry Benefits

GUIDELI NES IN DEVELOPI NG CODE OF

ETHICS 265
MUSLIM ETHICS . NON-MUSLIM ETHICS
UNSEt IEII ERS' ETHICS. QUESTIONS
2 f...7 ...:... 2 71

2 56

BUSINESS ETHICS

Definition

The word ettncs bas ~ee_~ derived frcmtne Greek_.'cOrd"elhos

meaning charact er. custom. Chambers DiCtionary deune s emcs
as "the _ s~ i enc e of morals . thai branch 6f philosophy which
i~ cOneer~ed - ;ith _ human character and condUct":
webster Dictionary delines ethics as ' 00 discipline dealing
with lhal which is good and bad and with moral duty and
obl lgaUon."

Ethics may be termed as moral phil osophy . It delines

varleus paris Ofl~'e- society... j~ a sySlem
01 morals. rules of behavtor. II is a treatis e on mora ls.

'!,

respO~s ibiii'tre s- of

25 7

Soci al Respo nsibility of BusIness

George Bern ard once declared that every profession is a
conspi racy against th e public.
Napol eon re mark ed thai the Engli sh are a nati on 01
snc pkeepers.

Ij)C

/)
Tl

In 1776 , Adam Smith, a great economist, wrote in his

book that "business man of identlcat ttelds seldom mee t, but
whenever they meet they l inlsh up with the conspiracy aga inst
public .

Aristotle sugg ested that -buyIng and' selling are unnatu ral
money making acnvmes."

.-

Plato also hated me conc ept c t business and retn er

e mpt\~ish ed on education and philosophy .
~ .-

AlI lh ese uve person s have an important ptace in h istory.

They have the same tone 01 voice againsl busi~~";s. The
reason lor th eir pre a was that a business lnstuutlo n tri es to
extract every thing tro m the people and society bul doe s not
give anything in return . U~ly.rn enauemen t tails to se!'Ye .
t~e, society . T o the busjne ss. proftt making is a p rimary goal,
and service 10 the soc tety is secondary in nature .

10

e,
. 0<

/I
M

TO accompli sh social respons ibnily the following factors

should be co nsidered .

. 1. Models at soc ial responsloulty.

2. Evolution of empha sis.
3 . The levels 01 soci al responsibility .
-4 . Social audi t.

Mod els 01 soclelal or so cial respons ibility

Two theories of sccletat responsibility have bee n d eveloped

25 8

"01

fixing the responsibil ity of corporatio ns .

~il Traditiona l corpo ration theo ry
",Hi) Mel ro-corpo rati on theo ry

i) Traditional corporation Iheory

This theory has following assumptions ;
Shareholders are the kings.
The objectives of corporations are maximi zation 01
pro fits.
c . The only responsibility and dUly 01 a manager is 10
lead (he company toward maxlnwm prouts
d . The corpcrancns have no socia l responsibility. Their
/
onty respo nsib ilit y is 10 discharge legal dutie s.
Unions rather than manageme nt will be respo nsible
for the wella re of taborers .
I. Corporalions have nothing 10 giV6 away. They ha ve

-:

10 gain o nly .
In short, the th eory suggests that co rporatio ns have nothing
to do except to maximize profits. Ther e are many mana gement

experts who cont end th at the theory still holds good . In our
. country this theory is in common practice.
"

'-- '

ii) Metro-corporation theory

M ~I .ro is a Greek word referring to mother. Metro-corpcrauon
refers to a corporation acting as a mother. This theo ry is jus t
oppos ite to the Itrst one. It has following assumpt ions :

A corporal ion is a social Institu tio n and hence is

responsible to serve lhe society.
b. A corporatio n should not be absorbed in and confined
to only money making.
c. It has cultu ral, welfare, socia l, and ben ev olent
responsibilities.
d . II has the same rights and dulle s as a citizen .
3.

2 59

II
But the two extrente tneones are nol acceptable . The
solution lies somewhere in between the two extreme s.

2. The Levels of Social Responsibility

o
a

Society has tixec some minimum responsibilities on corpcraton s

a. Employees must be paid a minimum wage.

b . Pollution should be coni roll ed.
c. Dtscnmmeuon should be abaurJoned.

s
t
I

American Chamber 01 Commerce has developed a mode t

of hierarchy 01 social responsibility for corporations :

,,

1
4

3
2

Hierarchy 01 scctat responsibility

1. Obey the law

2. Meeting Public Expectations

3 . Anticipating new demands
4 . Leading

The model suggests that prOfit oriented companies stick

10 lhe 1sl level. They try tc maximize profit wilhin the leg al
boundaries. They just discharge their lega l ob ligations and
go on making prouts. ' ..
A manager who Is more spirlle d alms at greater tarqets
than Just fulfilling legal responsibllity. He goes to the second
stago and struggles to meet public expectations by giving

261>

them better goods and se rvice s.

Higher spi rited managers try to accomplish _~~ iI1 hig her
ob jective. They wanl to ..reach a stage where they want 10
antic ipate new demands. They ~jsco v e r "new "h i dde ri public
de mands and so serve better than "others.
The models suggests the hi_ghe~tl evel 01 social responsibility
is..I~ adi ng. The manage rs who take the co mpany to tnat high est
standa rd 01 social respon sibility willing ly set in standard s 01
business p erforma nce. T~ e y shape the pUblic opinion and

teste,
". ~ -

3. Evoluti on 01 Emphasis
The emphasis o n social responsibility slowly accele rated with
th e gradual develo p ment 01 industri es and bus iness. Robert
Hay and Ed Gray have di vided evolution at emphas}s and
necessity 01 social respo namtttty in staqes

I) - :'Maxlmum pr ofit Siage )

Adam Smith was at the opi nion m at existe nce 01fr ee econo mic
sys tem and contro lled competitio n are necessary to maxmuze
prof it lead ing to inc re ase the nattonet revenue . Increase d
naucnal revenue will in turn improve the welfare ott ne soci ety.
This theory was adoptoo by Americans in the early 20lh cenlury .

iI) 'TrusteoslJlp stage )

In l hi!: stage tim nature and degree of socia l fespon sibilily
ch anged. Between 1920 a nd 1930 t he concept 01 co rpo ration
sys tem came Into bein g. The con cept 01co llecti ve ownership
emerged Sole proprietorships and partne rstups wer e convened
inl o corpo rations. The top ma naoement level comprising boar d
(If director s acted as me trustees of stockholders. Here the
board was responsible and nccountable of its social obligations
to ttie stocahcld ers . In t hi ~ stage the co ncept of rflet:li nrj PU1)!iC

261

expectations emerged.

/II) QU8111y of life st ag e i

Th is is mod ern concept. M ,m agers reali zed respo nsibili l y to
improve the q uality ol lile 01their workers, They acc epted the
high er level of social respon sibility. Th ey recognized e o tatent
strengths and benefits in fulfilling social obiioalions . In devctc ped
coun tri es . the cc rporauons are now lighting agains t pcuuuon.
Th ey are strugg ling lor bette r products, uanspcrtauon system,
and service rath er lhan creatin9 snc neae ct goods .

4. Social Audit
I! ! ~ ~ ~dern concept. ~ud i1 may be denoeo as the systemauc
examlnatton 01accounts by an auuo nzec l'!nd Q'lali fir d person
or person s. Soc~~1 aUd:t _is. to m~ n: and de liumil1lJ 10 ~'~~l
degree a manager pertorm s his social c bliqatio n. It measures
the gap of ";;'hat WAS his soc ial reSPQniibilily 3r\d whal ne
actua lly accomplished.

There are three aporoacn es IQ conduct a socta t audit

(I) A corpo ration evaiuares and revie ws the eo vtronme nt in
ordei: tci set its ob'ecuves acco rdin gly _ rne comcrauoo
comma nds its acuoos adapted to enviro nment.
(;I) A detailed lisl of scctat re, pon sibi" ly is prep ared, 't he
company compares tts perfo rma nce w illl H'lls c neckns t.
(iii) Annual company report s. are anatyzeu 10 mea su re Iht'
alla inmelll of sccf.., 9031;;0 : Aflf:Usl audit reccrt IS a sort of
soc ial audit repcn.
To cond uct this lin0.ncial wx i i! dllf (,fcn\ spectaltaed courses
have be en d eveloped . One Hie co. epl enon 01 tnese cou rses
tne candidates are t<v r~ rC!~ with negree of r. PA or CA
,~

..

::

, ...
-.,-

262

Jim Higgins asserts that tne soctat auce has been quantified
into linancial audit.

Et h ical Problems
Shapi ro 01 DuPont Company has suggested the following etr scat
probl ems :
1, Whal is the lim it 01 nur job respo nsibtutv ?
2. Do we mak e the de cisions. o r mUS1 we involve ou r cnems
or customers in the decision s ?
3 Shall we mamputate the peo ple to! thei r ow n goOd ?
.. Which is mo re lrrport ant -- the system o r indivIdu al '}

1) What is th e lim it o f ou r job responsibility?

Ti le manag er face s the problem 01' what degree of qu ality
should be achievecr. Peopl e are una w are of wh at i f; goo d
qua lit y. They don 't know the exte nt 01 perfection. So w lil it be
un ethi cal to produce less than p en cct qooos?

2) Sh all we man ipulate the people lor their own

g o od
Are the managers allowed 10 manipulat e me thinking of peop le?
Benev olent autocracy ref ers 10 uste n to every one bu t make
your own deci sions Shou ld a ma nag er be a be nevolen t
autocr at?

3) Do we make decis ions, or must we in volve

our clien ts '}
Manag ers have bet ter understanding and kno wledge of th e
situ ati o n . Tnereto re . the y m ake decisions wuhou t the
participat ion of customer s and ctte rus. It is sure that au the
c us tomers with di versif ied int erest can not be all ow ed to
participate in a compan y's decision

26 3

4) Which Is more Impo rtant the In dividual ?

the sy stem or

Should the business provide lib6rali ng oppor1unily l or workers?

Will it be useless for the individual 10 struggle and agitate
against all power ful org anization? Is indi vidual resistance
essentia l fo r organization 's progre ss?

B ENEF ITS OF CR EATING ON ETHICA L C ODE

Corporations adopt a code of ethics to improve business euacs .
Codes 01 ethi c act as standa rds against whi ch res pons ibility
is measured. Codes act in the form of arbitrary rules, regulations.
They may be cle ar-cut or vague . Observance of codes reduces
contltct s. griev ances, and di ffi dence or do uut c. Codes cr eate
harm ony be twe en parties of extreme points lik e emplo yer and
employee . Some 01 the advantage s are d escribed be low .

1. Internal Be nefits
American Management As soci ation opi nes . "the process c f
formul ating the cr se d is o ften more valuable tna n th e finish ed
product." Cymes who have test lheir bene t in human goodness
now should chanq e the'r altitude because peo pl e a re inc line d
to live and to let live . Codes once formul ated should not be
shelved . They shou ld be ob served by the parties involved .
Effective sell regulation calls for no exte rnal controls. Those
who enjoy freed om within tne limits set by law are law- allid ing
citi zens. Firm s , companies , and tnstmrttons wo rking within
cod es 01 etrucs ha ve g ood puouc image and suppo rt. and are
tree trom anention of law-enforc ing agencies and legi sfalors .

2. Employees Bene t/Is

Th e co mpany for mulating and truly observing codes is able
to att ract rig ht man lor Ihe right job . Morale 01 employees is
rai sed . Their product ivity increases .

264

,
!

Ethical company ca n have ethtcat empic yc vu. MlIlu,,1

ccop eratton and confi dence are enhanced. w nnen t:l l hll : ~ ; a' "
esp ecially uset ur for new employees . They dispe l conruoou
01 the lob and tacnltate training On the stre ngth of cocas. an
ernpcyee can reter on unelhical and illegitima te requests. (II
orders. Emp loy ees are more d evoted to the Job. bos ses ,
sunoromates. and toe comp any.

3. Cus tomers Benefits

Codes and the ir obs ervance create a sense of co nndence in
the custome rs. Wi nning the confidenc e 01custom ers and gor,m al

public cannel be overemphas ized. Customers snow mat Ihey

can depend on price, qU<ility , and te rms 01sales 01 the com pany.
lhe ir ccnttd ence about unilOflllit)' 01 policy and eouatt reatmeru
of custo mers brin g more busi ness 10 the compa ny.

4. Ad van tag es fo r the i n dus tr y

Almos t all the major industries h ave lh eir codes . Machia velli
once sa id that the goo d or ethical man was etten an easy
prey lor the uoscropuious. Therefore. the weak or ethical
persons 01 an induslr, may urute themselves 10 beh ave in a
required euucat fashion. Thus u nethic al precnces may be
overcome.
No l only industries bu t professions also neve codes 01
ethic s. Doctors, engineer, accou ntants. and advocates have
10 work wit hin th e codes . Cod es have raised rt.e imnge of
their prctesslons .
Codes tend to make it muc h easier to identi fy v jotanon
and punish tnose who behave in an undesirable tastuon . Even
if codes ale n01 strictly totlowec . their mere cronnon <lml
existence at least r etard the deg ree 01 unethica l action.

Guide lines' in Devel op ing Code of Ethics

Each code should be adapted and trimmed 10 me rl :'1t1lf ()fl\ cn ls

2 65

of individual group. The la llowing p rinciples shoul d or may b e

observed in ' ormulating codes :

1. Study wh at others neve done

Omers' expe rienc e may be useful. Ideas may be borrowed
Irom ethers in the identical fields .

2. Don't do it y ourself
A manager usua lly has limited knowledge and expe rience in
tb u usual fermat and contents 01 codes. Spec ia lized outside
expert advice should be utili zed in tneu tormuranon.

3. Par ticipation brings support

Tho se involved in the preparation 01 code s are like ly to be
com rruued 10 the ir observance. In the torrnutenc n 01 various
pol ic ies respecti ve re preseruauvee should be allowed to
panlcipate to ensu re higher ccmmnment

4. Provide tor en fo rc em ent

Codes once tormc lareo must be entcrcco . Like rules. codes
must bo tcuoweo by every member at an organiza tion no
matter how high positio n he hOlds. There should be no dev iation
and viola tion by anyone. Codes shou ld be applied equally to
everyone. Compensation. promotion, transfer. tob maintenance .
and sepa ration should be jus1 and acco rdi ng to policy.
Unwarranted pr ivile ges, benef its , and pres tige damage the
true spirit of codes.

5, Keep rhe co de up to date

Code s should oe trimmed to t ho need of time. Periodic revision
is n ecessary in view 01 eve r ch anging environment. nal ional
and intem at o na! cu atre, eco nomy. and techno logy. Empiric al
. we akne sses in tt te c ode have damaged the reputation of these
instru ments to a great degree. So th ey should be upda ted as
th e exped iency d emands.

26 6

MUSLIM ETHI CS

Above 1400 yea rs ago Islam gave the ethics It) Ih..':

IIl IIll: \II.',

These ethics are stillpracticableanti invogue. '111 .' SUIl l l1j;t/ V

,~f soc ial

and bu siness c{hi;;s flxed )q h hlm ar e

;1.', ~ d l u \'. : ,

I , Defect (If goods should be d isclose! betore the)' are

sold ,
2. Laborer should be paid right in ti me (before his
dries).

:<: Wl',;J!

3, Labor charges shouh t be determiocd Iv;fore

hire

yU l.l

the laborer.
4. Inte rest on .:apit..al is unf air

mul T:.: r,l" L

5. The- business in any form <i nd f" i: il' (.; 1)1' pork are
:..a lfajrful and haram .
6 . All business deal ing.s should be based on truth .

7. Extravagance is prohibited.

s.

Concentration of wealth is discouraged.

9. Farce and empty shows are discouraged.

10 Specul ation,
banned.

IOl h~I Y ,

sana, addicuce. 11031'(1111:::

11 Nudity and sensualism are not allowed.

12 Eco no mic equity has been emphasized .

267

"f "

III

i3 The righls . duties, and e bhgat ions of parents and offspr ings, teachers and students, hu...bands and wives, and
state and people have been elabo rately defined .
14 The lights and duties of e.Ylploy.:rs,
and seller have also heea div1WJ.

eR1~loyb, buyers ,

15 Halal income ;l,I'J food have been made compulsory .

16 Lie. hypocrisy, fl'a~'d .d js j ljl ~g ri I Y . and d ishonesty are
co mpletely ban ned
NON...lISl. IM e'r HICS

;; Hmanil anani5m i ~ tne basts Md l: hic l c lem ent of all religions.

"T hey ent'q hten uno pre acn the mankin d not 10 exploit one

ancmer.
B~I l: ttm duterence between isl am and oth er retlotcns lies
In the f"IC-1 lhat the termer covers atl spirituJI and secular
Wi W.'C1S 01 tne human hie but the taue r are limited 10 on ly a

I ew er d:!'!"""';flsion s

weste rn ue....eicped neto ns tnat are rominaled by Chrislia ns

and Far ::: ~ ::;I ~ B.. d~;t)i!:..ts have H.-giSI(!wd It1' lollowing pracucat
etbtc al actrte....ement s.
t . They have successtunv uprooted acunerauc n 01 ev&ry
kind . They cat pur e food . drink unco ntaminated water. and
fake genuine meojctnes.

2, Bus iness is ca rri~d om onthe principles of truth and tonesty.

TheIl supply cooc s in accordance with samples.

3. Anti-corruption and all oth er law s are truly ob served . AllY

person violati ng them is punished acco rdingly erespecuvc 01
his status in the SOCiety. There are exarroles when p resldcnt s.
ministers, and other VIPs in me US, UK, Japa n. and 011'101
countr ies had to rosign on various charge s of corrupti on and
adultery . In ol her words. lh ere is a rule at taw in these oountrios,
and all are equally tre ated befo re law. But in the Thi rd Wo rld
countries the upper class including bur eaucrats, rulers. milil ary
and police ofllcers, and other powerfu l persons are insuperable
to the law. .

4. Devek>ped Non -Muslim nations have est ab lished public

welfa re institutions and organ izatio ns Irom wh ich persons
belonging 10 any relig io n can ben efit. The se in stitu tion s and
organization s a te operated Iro m li be ral contributio ns 01
indu stria lists a nd other rich corpo rauo ns . Ex amples are Red
Cross , schools. colleges , untv ersttles , general ho spitals, deal
and dumb. leprosy. and othe r apeciauzed hospi tals, AID S
and cancer research lnsthutea. Amnesty International, etc.
5. They have determin ed the rights and du ties of e mployers
and empl oye es , buyers and sellers. publisher s and autho rs.
etc . Th ese righl s and duties have been so de vise d l hal no
pany can be a ggrieved .

6. Existing phen omen on of the employ ee's fringe be netns.

perks, allowances , holidays , olf days . ovemrne. bonus, leaves.
gratuity , pro vid enl lund, nseo WOrking hours all hav e been
tntrococ ed by the we stern world.
7. Cred it goes to Ihem lor cO11llelely abol ishing s;lave ry from
the world .
B. Hoarding and dearness have been co mplete ly chocked .
On their Ie stlvals supply is rather increased and pr ices are
lowered .

269

9, Businessmen and trade rs take every care and are fair in

weighino and measurlnq.
10, Their' business world has a proven record of honoring
their promises and commitments. Examples can be cited from
010 western sty led stock, cotton, and other exchanges where
billions 01 dollars transactions are made just orally, and are
honestly honored,
11. Their governments are true and sincere to their people.

They believe in 'for the people', 'of the people', and 'by the

people'.
From Islamic vtewpolntthe following are t he dark aspects
ot the Western society. However, they view them necessary
lor Individual freedom.
1. Their economy is Interest-based.
2. Extravagance, worldly vanity, and pomp are common.
3. Satta, lottery, gambling are all allowed.
4, Nudlty, sensuality, and lasciviousness are free and
unchecked,
5. Eating pork ( !k~f.h of pig) is quite common. (Like Muslims.
Jews too d,n'l eat pork). They are addicted to alcoholic
drinks.

UNBELIEVERS' ETHICS

Unbelievers are mostly inhabitant in the Oomrnunlst countries

like China. North Korea, Vietnam, and East European countries
(the last group has now abandoned communism an? godless
belief).
The unbelievers who are popularly known as atheist have a
good record of following worldly ethics as do the Western
countries. Their additional achievements are as follows:

270

1. Their economy Is tnterest-rree.

2. They don't live a ue of pom p, vanny. sensuanry. anti
extravagance.
3. General price level is within the reach 01 every citizen .
4. There are no nighl clubs, casinos, and brothels. Nudity is
well -checked.
5. Salt a, tOll ery, gambling in any lorm are nol allowed.

271

Chapter 15

THE CHANGING ENVIRONMENTS OF

MANAGE MENT

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TWENTIETH CENTURY 213

FUTU RE

CHAN GING ENVIRONME NTS

PAST AND

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Demographic or population Trends, Education, City

Problems, Changing Labor Force, Changing Attitude
Toward Business

CHALLENGES OF THE NEXT DECAD E T/6

High Political Turbulence and Uncertainty
Slow Economic Growth
Expensive ca pital and Credit
Weakening Industrial Disciplin e
Public Demand and Government Regulations
A ChaUenge to Prtva te Enterprise System

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QUESTIONS

272

TWENTIETH CENTURY -

PAST AND FUtURI!

Herman Kahn , one 01leading IUlutl stl(JD, till" dlllldncllwCll llt_lh

century In four par te:

1. La PremIer Epoque 1006 -

1813 (. Flr.'.r.)

This is the era marked with a groDt ou" be twuen Illn 11llvtUw:ud
capitalist ccunrnee and the rest 01 the world. In this pe riod
the average econo mic growth rat e 01advanced capitalist nal ion
was 3.3 %.

2. La Mauvalso Epoquo 1913 (= Bad ora)

1947

This era saw two world wars. II also experienced great

depression. lI aly had the rise and laU of tasolsm . Two great
cc mmunlst rcvonruo ns. Russian aod Chinese, emerged . Thl s

273

era created two world power s, USA and USSR. Here the
growth rate was law at 1.6 % .

3, La Deuxieme Bella Epoque 1947 (=Tha era 01 second prosperity)

1973

The era is marked with cold war, decoJonizallon, emergence

01 middle income nations, emergence 01 Japan as one of the
great est economic powers. and emergen ce 01 oil producing
rich natons. This era erso experienced excessive military ru'es
in developing nation s.. The growth rate was highest 4.9 %.

4. L'Epoque de Malaise 1973 (Unrest era)

2000

Unrest, violence , massacres. calamities. and disorder in third

wor1d countries have tilled lhis age. Growth rate Is 3.5 percent.
Struggle against imperialism intensified. (U.S .S.R. and European
Commu nism also dissolved in this era)

CHANGING ENVIRONMENTS
En\li r(m menl --refer s ~ I O ext ernat conditions inlluenclng
development or growth 01 people , animals, or plants. II is
li\l.ing or working conditions. Environments are incessanlly.
changing . A bus ine ss has to wor k under such dy namic
conditions. Ever Changing environmenls are a challenge to
business, A success lul manager keeps a constant watch on
environmental.changes and p_
/ans accordingly. These changes
are uncontrollable. The lollowing changes should be take n

lnto account:
1. Demographic trends

2. Education and Individual .

3. City problems
.
4 . Changing nature 01 the work force
5. Changing atutuoes toward business

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1. Demographic or Population Trends

The world popu latio n is fast growing . II has exceeded six

bill ions. Incr ease In populalion has not only caused social
cmd economic prob lems but it also has expand ed markets.

'. Pakistan is .atsc facing l ~is acute problem, due 10. whic h
developmental programs have been ac versely .atrected . Our
popu lalio n has much grealer number 01 children and youths
lhan the !'liddle-aged anc tne .old. The death rate 01 men is
greate r th an women In Pakistan.

2. Education
Education has brought a menial revolution. II has cre ated
self conce pt and sell respect . Pecpte as consumer, cu sto mer,
emoovee . or studenl are now well aware of tbeu rights. ounes ,
and obncauo ns. Edu catio n has created bette r economic
opportu nities. By acquiri ng manage rial, professional. or tecbrsca t
abilities, a young man has laced him in a t etter statu s In
society. II is' th e era of professional management system as
compare 10 pr evious family management system,

Business and r-cteestcnat educat fcn has far exce eded

the traditional education 01 art s or humanities. The ,u tilil y of
it is now being que stioned. On the other hand, educallon in
business administ ration, me~ical, ~r engine ering is a~e I~
bring ;, bout a matertat and sub stantial change In the society
by lm.... )ving method s. systems. and lechnology.

3. City Problems

Not only Pakistan bu t the rest of the worl d Including western

de veloped nations are lacing the elly problems. Tremendous
shift from village s to the cit ies has created transport, housing,
water, and slum problems. Pollution and energy crisis have
aug men ted the difHcult ies ot the cit ies . These Pfoblems have
caused mental. psy chological. and etnruc complicaUons.

4. Changing labor lorce and unamployment

labor torce comprises Skilled. semi skilled. and unskHled
persons . As a result of unchecked increase in population the
atreet or unemploymenl has trembled the third would .
Unemployment has created poverty. unrest , and subversion ,
Pakistan's labor terce comprises the persons mostly aging
between 16 and 44 . EmpJoyers preler 10 hire young labor
lorce because 01 jts high productivity.

5. Changing altitude toward business and frtnge

banellls
Now the manager cannot perform his duties silting close in a
cubicle. He has to keep a conslant watch on the prevailing

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and changing conditions. For a businessmen technological,

eccoome. legal, ccmpetnjve. and pcnucat envlrcnmer us are
vital aUeeting t rls decis Ions. A manager Is expected not only
10 solve business problems but also cullural and community
issues . A corporauon is expected to Improve lhe standard 01
living of masses. It is understood to be responsible for the
wetlare 01 Its employees , and to Improve the standard of
products . Minimum level of wages are expected from It.
Increasing education. automaUon. and desU'e 10f better future
have tcrced the businessmen nol to expk>it their employees.
AIongwlth their salaries and wages laborers demand bonus,
anowances, pensjcn, Increment. job security , housinQ and
'ranspon facilities. and other frlngebenefils.

THE CHALLENGES OF THE NEXT DECADE

The coming decade is expected to be registered with dlUculUes,
problems. aOO challenges . It ls Ukel)10 have unrest, disturbanCe,
violence, low groW1h rata. and Increase In cost.

1. High Political Turbulence and Uncertainty

The coming decade, Ihe last one 01 the twentie th century, is

276

likely 10 bring with it more uncertainty and political unrest.

Such ominous and Inauspicious changes have dreaded me
capitalists and businessmen. Mobilization 01 capital has sjcwed
down . Now the surviv al 01 business and c apital ha s become
the on ly objectiv e of the businessmen.
Infl ation, unemployme nt, ene rgy cr isis. pollu tion. and
environmenl:s, will be the vilal and main problems 01 the coming
decade. To mee t t his challenge minority and hum an rights
will have to be released. A harmony will have to be brought
about between employee and employe r, buyer and seller,
management and shareholder, go vernment and pe ople. and
manufac ture r and shop-keeper.

2. Slow Economics Growth

The decade is likel y to con trcnt slow economics growth ,
therefore, the mana gers will be co mpelled to keep their desire
lor growth at a lower leve l. Increase in popula tion and low
produclivity will keep the econom ic growth at a low lev el.
come down. New lechnology anti establi shmen l
Productio n
of new Industries will be timiled.

wi.

3. Expen sive Capital and Credit

Starting and establishing a new business will be costly in the
decade to come . Not only the price of product will rise but the
co st of land. machinery , ccn strucucn . and interest rate will
be htgh. Now a medium-sized business ca n be estab lished if
millions 01 rupee s are available.

4. Weaken ing Industria l Discipline

In the thl,d world coun trie s the poor are becoming poorer and
the rich richer. This alonqwith other teeters will weaken industrial
disc ip line. The pres su re of wor ker s will in cr e ase on
manage ment. Managers will have less amount of authority .
The employees w ill have to be convinced that their cooperatio n
with the mana gement w ill be In th eir own interest.

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5. Public Demand s and Government Regulation

. Acc elerat ing publi c pressu re will bring more governm ent
regulation s In favor 01 work ers. Thus govemm ent preS$UTO.
emphasi s on human rig hlS. and increasing criticism 01 experts
of envir, oments wilt complicate the work 01 management.
Unorga nind group s and silenl majority will be well-organized
and have a voice in the probl ems. Gove rnmem intrusion in
t he business will grow restricting the freedom 01 manag ers.

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6. A Challeng e to the Private Enterprise System

Private enle rprlse system has already weake ned in the third
world countries. Now this hazard has extended to tne rich
capitalist countries. The youths and

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