Management is essential for organized life and necessary to run all types of management.

Good management is
the backbone of successful organizations. Managing life means getting things done to achieve life’s objectives
and managing an organization means getting things done with and through other people to achieve its objectives.

Whether management is an art or science, will continue to be a subject of debate. However, most management
thinkers agree that some form of formal academic management background helps in managing successfully.
Practically, all CEO’s are university graduates. Hence, the reason for including business degree programs in all
academic institutions.

Definition of Management

Van Fleet and Peterson define management, ‘as a set of activities directed at the efficient and effective
utilization of resources in the pursuit of one or more goals.’

Megginson, Mosley and Pietri define management as ‘working with human, financial and physical resources to
achieve organizational objectives by performing the planning, organizing, leading and controlling functions‘.

Kreitner’s definition of management:‘Management is a problem solving process of effectively achieving

organizational objectives through the efficient use of scarce resources in a changing environment.’

According to F.W. Taylor, ‘Management is an art of knowing what to do, when to do and see that it is done in
the best and cheapest way‘.

According to Harold Koontz, ‘Management is an art of getting things done through and with the people in
formally organized groups. It is an art of creating an environment in which people can perform and
individuals and can co-operate towards attainment of group goals.‘

Importance of management:

1] Management is goal oriented:- Management is concern with achievement of specific goals. It is always
directed towards achievement of objectives. The success of management is measured by the extent to which
objectives are achieved.

2] Management is associated with group efforts:- The business comes into existence with certain objectives
which are to be achieved by a group and not by one person alone. Management gets things done by, with and
through the efforts of group members. It co-ordinates the activities and actions of its members towards a
common goal.

3] Management is intangible:- It is an unseen force, its presence can be evidence by the result of its efforts up
to date order but they generally remain unnoticed, Where as mismanagement is quickly noticed.
 4] Management is an activity and not a person or group of person:- Management is not people or not a
certain class but it is the activity, it is the process of planning, organizing, directing and controlling to achieve the
objectives of the organization.

5] Management is situational:- Management does not advice best way of doing things. Effective management
is always situational. A manager has to apply principles, approaches and techniques of management after taking
into consideration the existing situations.

6] Management is universal:- Most of the principles and techniques of management are universal in nature.
They can be applied to government organization, military, educational institutes, religious institutes etc. They
provide working guidelines which can be adopted according to situations.

7] Management is concern with people:- Since management involves getting things done through others only
human being performed this activity with the help of planning and control. The element man can not be
separated from the management.

8] Management is the combination of art, science and profession:- Management makes use of science as well
as art. It is science because it collects knowledge with the methods and data, analyzes and measures it and
decision is taken with the help of experiment. It is a systematic body of knowledge. Art means application of
knowledge for solving various problems. In modern times there is separation of ownership and management, so
professional experts are appointed.

Characteristics of management:

1. Management as a continuous process:

Management can be considered as a process because it consists of planning, organizing, activating and
controlling the resources (personnel and capital) of an organization. So they are used to the best advantage in
achieving the objectives of the organization.

None of the managerial functions would produce the ultimate results in the absence of all other basic functions.
Hence we can say that management is a continuous process.

2. Management as a discipline:

Since the boundaries of management are not exact as that of any other physical sciences, it may not fit in very
well for being addressed as discipline. However its status as a discipline increases because it continuously
discovers many aspects of business enterprises and also passes on the verified knowledge to the practitioners of
the managerial process.

3. Management as a career:

As a career or occupation, management is a broad concept- Management itself can be regarded as a career, but it
also presents a variety of interesting and challenging careers focused on specialized occupations in the fields
such as marketing, finance and personnel.
4. Management as an Applied Science:

Even though management is a science so far as it possesses a systematized body of knowledge and uses scientific
methods of research, it is not an exact science, like natural sciences which deal with living phenomena such as
botany and medicine.

5. Universal Application:

Management is a universal activity, applied to any form of activity, economic or otherwise.

6. Goal Oriented:

Management has the task of attaining certain objectives. The success or failure of the management depends on
how far it is able to attain the desired goals. It is judged by the extent to which it achieves its targets.

7. Guidance:

The main task of the management is guidance in the utilization of material and human resources in the best
possible way. Through optimum utilization of resources it has to ensure that the objectives are attained. The
essential element of management is that it gets the work done by coordinating the performance of those who
actually perform diverse and specific jobs.

8. Divorced from proprietorship:

Management does not signify proprietorship. In earlier days, management and enterprise were lumped into the
same factor. It now refers to a specialized group of people who have acquired the ability to carry out a project.

9. An activating factor:

Management is the factor which activates other factors of production. A manager's skill lies in motivating his
workers through guidance, training, incentives, rewards, status, security, control, etc. So a mangers' ability lies in
the fact that he is able to motivate others to apply their skill to the best advantage of the enterprise in the
accomplishment of its objectives.

10. Management is a human activity:

Management functions are discharged only by individuals. No corporate body or an artificial being can perform
the work of a management. Although it is an activity which may be performed by an individual it cannot be seen.
It can only be felt.

11. Management signifies authority:

Since the essence of management is to direct, guide and control, it has to have authority. Authority is the power
to compel others to work and behave in a particular manner. Management cannot discharge its function without
authority. It is the foundation of management. Since management has authority it stands at a higher pedestal.

12. Leadership:
The management has to lead a team of workers. It must be capable of inspiring, motivating and winning their
confidence.

Nature of Management

1. Universal process: Wherever there is human activity, there is management. Without efficient
management, objectives of the company can not be achieved.

2. Factor of production: Qualified and efficient managers are essential to utilization of labor and capital.

3. Goal oriented: The most important goal of all management activity is to accomplish the objectives of an
enterprise. The goals should be realistic and attainable.

4. Supreme in thought and action: Managers set realizable objectives and then mastermind action on all
fronts to accomplish them. For this, they require full support form middle and lower levels of
management.

5. Group activity: All human and physical resources should be efficiently coordinated to attain maximum
levels of combined productivity. Without coordination, no work would accomplish and there would be
chaos and retention.

6. Dynamic function: Management should be equipped to face the changes in business environment
brought about by economic, social, political, technological or human factors. They must be adequate
training so that can enable them to perform well even in critical situations.

7. Social science: All individuals that a manager deals with, have different levels of sensitivity,
understanding and dynamism.

8. Important organ of society: Society influences managerial action and managerial actions influence
society. Its manager’s responsibility that they should also contribute towards the society by organizing
charity functions, sports competition, donation to NGO’s etc.

9. System of authority: Well-defined lines of command, delegation of suitable authority and responsibility
at all levels of decision-making. This is necessary so that each individual should what is expected from
him and to whom he need to report to.

10. Profession: Managers need to possess managerial knowledge and training, and have to conform to a
recognized code of conduct and remain conscious of their social and human obligations.

11. Process: The management process comprises a series of actions or operations conducted towards an end.
 Roles of Manager:

A manager’s role is very crucial in an organization. The success of organization depends upon manager’s ability in
utilizing the resources for achieving the pre determined goals. Henry Mintzberg suggested three areas where a manger has
to work.
• Interpersonal Role
• Informational Role
• Decisional Role

Interpersonal Role:

Interpersonal roles of a manger are concerned with his interacting with people both inside the organization and
outsiders. There are three types of interpersonal roles.

1. Figure Head: In figure head role manager performs activities which are ceremonial and symbolic nature.
These include greeting the visitors attending the social functions involving employees, handing out merit
certificates and other awards to outstanding employees.
2. Leader: Manager’s leader role involves leading his subordinates and motivating them for willing
contributions. Manager is responsible for activities of his subordinates. He has to set example of hard
work and dedication so that subordinate follow his directions with respect.
3. Liaison Role: In liaison role manager serves as a connecting link between his and outsiders or between
his unit and other organizational units.

Informational Role:

Informational role involves receiving collecting of information and distributing them as required. It is of three
types

1. Monitor: In monitoring role manager collects the information which can affect the organizational
activities by reading magazines and periodicals, reports from the departments, talking with others to learn
changes in the public’s taste.
2. Disseminator: In disseminator role manger distribute the information to his subordinates and superiors
by sending circulars, holding meetings and making phone calls.
3. Spokesperson: In spokesperson role the manager represents his organization or unit with interacting with
outsiders. These may customer, financier, govt. suppliers or other agencies in society. It can be done by
attending press conferences, meetings and by issuing notices.

Decisional Role:

It is very important role. Manager has to take decisions daily. In decisional role he performs four roles.

1. Entrepreneur: As an entrepreneur the manger assumes certain risks which can affect the organization.
He has to take decisions like expansion or diversification, initiation of new projects, development of older
procedures etc.
2. As a Conflict Handler: As a conflict handler he has to take care of certain disturbance in organization
such as resolving employee disputes and strikes etc.
 3. Resource Allocator: As a resource allocator managers fulfill the demand of various units in terms of
human physical and financial. He tries to utilize these resources in such way that no department suffers
for their inadequacy.
4. Negotiator: As negotiator manager has to take decisions regarding prices with suppliers and customers.
He also deals with trade unions and negotiates with them regarding working conditions and wage
fixation.

Management and Administration

According to Theo Haimann, “Administration means overall determination of policies, setting of major
objectives, the identification of general purposes and laying down of broad programmes and projects”. It refers
to the activities of higher level. It lays down basic principles of the enterprise. According to Newman,
“Administration means guidance, leadership & control of the efforts of the groups towards some common goals”.

Whereas, management involves conceiving, initiating and bringing together the various elements; coordinating,
actuating, integrating the diverse organizational components while sustaining the viability of the organization
towards some pre-determined goals. In other words, it is an art of getting things done through & with the people
in formally organized groups.

The difference between Management and Administration can be summarized under 2 categories: -

1. Functions
2. Usage / Applicability

On the Basis of Functions: -

Basis Management Administration

Meaning Management is an art of getting things done through It is concerned with formulation of broad
others by directing their efforts towards achievement of objectives, plans & policies.
pre-determined goals.

Nature Management is an executing function. Administration is a decision-making

function.

Process Management decides who should as it & how should he Administration decides what is to be
dot it. done & when it is to be done.

Function Management is a doing function because managers get Administration is a thinking function
work done under their supervision. because plans & policies are determined
under it.
Skills Technical and Human skills Conceptual and Human skills

Level Middle & lower level function Top level function

On the Basis of Usage: -

Basis Management Administration

Applicability It is applicable to business concerns i.e. It is applicable to non-business concerns i.e.

profit-making organization. clubs, schools, hospitals etc.

Influence The management decisions are influenced by The administration is influenced by public
the values, opinions, beliefs & decisions of opinion, govt. policies, religious organizations,
the managers. customs etc.

Status Management constitutes the employees of Administration represents owners of the

the organization who are paid remuneration enterprise who earn return on their capital
(in the form of salaries & wages). invested & profits in the form of dividend.

Practically, there is no difference between management & administration. Every manager is concerned with both
- administrative management function and operative management function as shown in the figure. However, the
managers who are higher up in the hierarchy denote more time on administrative function & the lower level
denote more time on directing and controlling worker’s performance i.e. management.
Functions of Management

Management has been described as a social process involving responsibility for economical and effective
planning & regulation of operation of an enterprise in the fulfillment of given purposes. It is a dynamic process
consisting of various elements and activities. These activities are different from operative functions like
marketing, finance, purchase etc. Rather these activities are common to each and every manger irrespective of
his level or status.

Different experts have classified functions of management. According to George & Jerry, “There are four
fundamental functions of management i.e. planning, organizing, actuating and controlling”.

According to Henry Fayol, “To manage is to forecast and plan, to organize, to command, & to control”. Whereas
Luther Gullick has given a keyword ’POSDCORB’ where P stands for Planning, O for Organizing, S for
Staffing, D for Directing, Co for Co-ordination, R for reporting & B for Budgeting. But the most widely
accepted are functions of management given by KOONTZ and O’DONNEL
i.e. Planning, Organizing, Staffing, Directing and Controlling.

For theoretical purposes, it may be convenient to separate the function of management but practically these
functions are overlapping in nature i.e. they are highly inseparable. Each function blends into the other & each
affects the performance of others.

1. Planning

It is the basic function of management. It deals with chalking out a future course of action & deciding in
advance the most appropriate course of actions for achievement of pre-determined goals. According to
KOONTZ, “Planning is deciding in advance - what to do, when to do & how to do. It bridges the gap
from where we are & where we want to be”. A plan is a future course of actions. It is an exercise in
problem solving & decision making. Planning is determination of courses of action to achieve desired
goals. Thus, planning is a systematic thinking about ways & means for accomplishment of pre-
determined goals. Planning is necessary to ensure proper utilization of human & non-human resources. It
 is all pervasive, it is an intellectual activity and it also helps in avoiding confusion, uncertainties, risks,
wastages etc.

2. Organizing

It is the process of bringing together physical, financial and human resources and developing productive
relationship amongst them for achievement of organizational goals. According to Henry Fayol, “To
organize a business is to provide it with everything useful or its functioning i.e. raw material, tools,
capital and personnel’s”. To organize a business involves determining & providing human and non-
human resources to the organizational structure. Organizing as a process involves:

 Identification of activities.
 Classification of grouping of activities.
 Assignment of duties.
 Delegation of authority and creation of responsibility.
 Coordinating authority and responsibility relationships.
3. Staffing

It is the function of manning the organization structure and keeping it manned. Staffing has assumed
greater importance in the recent years due to advancement of technology, increase in size of business,
complexity of human behavior etc. The main purpose o staffing is to put right man on right job i.e. square
pegs in square holes and round pegs in round holes. According to Kootz & O’Donell, “Managerial
function of staffing involves manning the organization structure through proper and effective selection,
appraisal & development of personnel to fill the roles designed un the structure”. Staffing involves:

 Manpower Planning (estimating man power in terms of searching, choose the person and giving
the right place).
 Recruitment, Selection & Placement.
 Training & Development.
 Remuneration.
 Performance Appraisal.
 Promotions & Transfer.
4. Directing

It is that part of managerial function which actuates the organizational methods to work efficiently for
achievement of organizational purposes. It is considered life-spark of the enterprise which sets it in
motion the action of people because planning, organizing and staffing are the mere preparations for doing
the work. Direction is that inert-personnel aspect of management which deals directly with influencing,
guiding, supervising, motivating sub-ordinate for the achievement of organizational goals. Direction has
following elements:

 Supervision
 Motivation
 Leadership
 Communication
 Supervision- implies overseeing the work of subordinates by their superiors. It is the act of watching &
directing work & workers.

Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to work. Positive,
negative, monetary, non-monetary incentives may be used for this purpose.

Leadership- may be defined as a process by which manager guides and influences the work of
subordinates in desired direction.

Communications- is the process of passing information, experience, opinion etc from one person to
another. It is a bridge of understanding.

5 Controlling

It implies measurement of accomplishment against the standards and correction of deviation if any to
ensure achievement of organizational goals. The purpose of controlling is to ensure that everything
occurs in conformities with the standards. An efficient system of control helps to predict deviations
before they actually occur. According to Theo Haimann, “Controlling is the process of checking whether
or not proper progress is being made towards the objectives and goals and acting if necessary, to correct
any deviation”. According to Koontz & O’Donell “Controlling is the measurement & correction of
performance activities of subordinates in order to make sure that the enterprise objectives and plans
desired to obtain them as being accomplished”. Therefore controlling has following steps:

b. Establishment of standard performance.

c. Measurement of actual performance.
d. Comparison of actual performance with the standards and finding out deviation if any.
e. Corrective action.

Levels of Management
The term “Levels of Management’ refers to a line of demarcation between various managerial positions in an
organization. The number of levels in management increases when the size of the business and work force
increases and vice versa. The level of management determines a chain of command, the amount of authority &
status enjoyed by any managerial position. The levels of management can be classified in three broad categories:

1. Top level / Administrative level

2. Middle level / Executory
3. Low level / Supervisory / Operative / First-line managers

Managers at all these levels perform different functions. The role of managers at all the three levels is discussed
below:
LEVELS OF MANAGEMENT

1. Top Level of Management

It consists of board of directors, chief executive or managing director. The top management is the
ultimate source of authority and it manages goals and policies for an enterprise. It devotes more time on
planning and coordinating functions.

The role of the top management can be summarized as follows -

a.Top management lays down the objectives and broad policies of the enterprise.
b.It issues necessary instructions for preparation of department budgets, procedures, schedules etc.
c.It prepares strategic plans & policies for the enterprise.
d.It appoints the executive for middle level i.e. departmental managers.
e.It controls & coordinates the activities of all the departments.
f.It is also responsible for maintaining a contact with the outside world.
g.It provides guidance and direction.
h.The top management is also responsible towards the shareholders for the performance of the
enterprise.
2. Middle Level of Management

The branch managers and departmental managers constitute middle level. They are responsible to the top
management for the functioning of their department. They devote more time to organizational and
directional functions. In small organization, there is only one layer of middle level of management but in
big enterprises, there may be senior and junior middle level management. Their role can be emphasized
as -

a. They execute the plans of the organization in accordance with the policies and directives of the
top management.
b. They make plans for the sub-units of the organization.
 c. They participate in employment & training of lower level management.
d. They interpret and explain policies from top level management to lower level.
e. They are responsible for coordinating the activities within the division or department.
f. It also sends important reports and other important data to top level management.
g. They evaluate performance of junior managers.
h. They are also responsible for inspiring lower level managers towards better performance.
3. Lower Level of Management

Lower level is also known as supervisory / operative level of management. It consists of supervisors,
foreman, section officers, superintendent etc. According to R.C. Davis, “Supervisory management refers
to those executives whose work has to be largely with personal oversight and direction of operative
employees”. In other words, they are concerned with direction and controlling function of management.
Their activities include -

a. Assigning of jobs and tasks to various workers.

b. They guide and instruct workers for day to day activities.
c. They are responsible for the quality as well as quantity of production.
d. They are also entrusted with the responsibility of maintaining good relation in the organization.
e. They communicate workers problems, suggestions, and recommendatory appeals etc to the higher
level and higher level goals and objectives to the workers.
f. They help to solve the grievances of the workers.
g. They supervise & guide the sub-ordinates.
h. They are responsible for providing training to the workers.
i. They arrange necessary materials, machines, tools etc for getting the things done.
j. They prepare periodical reports about the performance of the workers.
k. They ensure discipline in the enterprise.
l. They motivate workers.
m. They are the image builders of the enterprise because they are in direct contact with the workers.

Development of Management Thought

Development has emerged as a powerful & innovative force on which the today’s society depend for
material support from an unrecognized situations in the past one or two centuries.

This is the area of management which is responsible for undertaking activities such as industrial &
technical surveys, taking up research work, suggesting ways & means for innovations for reacting
the taken up for improving methods of production, finding out best ways of doing things, raising
productivity in the firm. The innovative methods of production & marketing will help the firm to
grow.

Seventeen and eighteen centuries had seen industrial revolution. Lots of inventions & new
technologies had emerged. The importance of management was focused division of lab our concept
 was evolved importance of planning was identified.But the management on a separate field of study

had emerged only durum’s early 20th century when new industrial era began.

Business organizations had a stage shift from ownership towards joint stock companies. As
an answer to the problems like insufficient system, inefficiency of lab our & discrepancy in
wage payment, management has been recognized as a separate & important fie d of study.

Subsequently, management has evolved as a specific discipline of study & practice.The evolution of
management can be divided in to two parts early management approach & modem
management approach.

Early Management approaches

History of management is as old as a man. Evidence of well organized principle of management can
be seen in ancient Greece & India. Those kings used the concepts of management like
planning, organizing, leading and controlling the various activities.

The process of early management approaches

are:

1. Physiological development.

2. Scientific, management

3. Administrative management

4. Human relations movement.

th
 Physiological development : (Before 17 century)

In olden days when there was no experience and knowledge of business, they had to depend upon
theca inborn abilities. This gave rise to management that was totally based on Physiological
process. People were having universal belief that massagers are born and cannot be made such as
artists, directors, kings etc

th
 Scientific management: (18th-19 century)

During this time the development was brought about by following two important factors.

1. The effort of scientists to demonstrate the application of science & scientific methods.
 2. The effort of establishing standard practices.

The work made use of scientific methods for achieving standard practice & higher efficiency. Thus
scientific management came into existence.

a) Work study

Work study includes time and motion study. Taylor observed that the workers were
not producing their full capacity for the fear that their piece rate would be cut with
rise in production. The best way of doing a particular job was arrived at with this the time
required to complete one job was calculated called stand and time

b) Differential payment

Motion and time study and establishment of standard time further helped in arriving at the
production rate of a particular piece or job. It was linked that incentives are introduced with
increase in production. It was thought that this would motivate workers to produce more.

c) Reorganization of supervision

The supervisions work was just to allocate the work to be done. The planning of work and
selection of tools & sequence of doing work are to be done by foreman and the worker had to
simply carry out the work without wasting his time as to how to do that.

d) Scientific requirement and training

Taylor suggested that need for scientific training and development of a worker to carry out a
specific task in a more productive way. He also believes that good cooperation between the
management and workers would had to the increased production and profits to both.

The objectives of scientific management are

1. To assures industrial and market tendencies and to regularize continuous operation.

2. To earn larger profit from a given expenditure on man and materials by minimizing
waste work and waste movements.

3. To provide healthy and safe working environment

4. To build character this proper work

5. To develop self realization and self satisfaction among workers there by improving their
morale.
 6. To give better opportunity for individual their scientific methods of working.

7. To ensure happier and social life to workers,

8. To promote justice among workers by eating them equal.

9. To perform planned and balanced operations.

 Administrative management:

Henri Fayol is considered as father of administrative management. The theory was developed to
make it applicable to middle and top level management. He suggested the activity of any business
organization could be divided in to six groups, financial, technical, accounting commercial,
managerial security. The focus was on managerial or administrative activity. Management
junction is divided in to functions such as planning, organizing, commanding, coordinating and
controlling.

 Human relation movement

The unpredictable and irritable pattern of behavior of worker made the task managers more
difficult. They are broadly classified in to

1. Illumination experiments

2. Relay assembly list room

3. Interviewing program me

4. Bank wiring test room.

The business organization is not merely technical and economical unit where only production and profits are
anticipated but it is also socialistic human system.

These are four important modern management approaches

1. Behavioral approach.

2. Systems approach

3. Quantitative approach

4. Contingency approach

Behavioral approach:
The behavioral approach management is concerned with the application of methods &
finding psychology and sociology for the purpose of understanding the organizational behavior.
This is an improved & extended version of human relations approach to management.
Motivation theory, leadership, communication and employee motivation & development are same

Behavioral scientists regarded the classical approach as highly mechanical & routine & resulting in
demoralizing human aspect.

Quantitative approach

Quantitative approach is also known as management science approach which was developed
during Second World War to find solutions to some complex new problems in warfare.

This deals with formulating a mathematical model to simulate a given problem that includes the
feasibilities, constraints, costs of events.etc. An optimum mix of these critical variables is arrives at,
either for minimizing time or cost or maximizing profit or minimizing time or cost or
maximizing profit or production or service enabling the management to take up logical decision.

System approach

The classical approach emphasizes in the structure & task, the behavioral approach emphasizes on
people & the quantitative approach on mathematical modeling & decision making based on
the model. But system approach provides the management the integrated approach of problem
solving.

A system is defined as a set of independent parts together form a unitary whole that performs
a defined task. Organization is a system that consists of people, task, structure & technology. Each
part of the system has an independent relation with other part. The systems approach tries
to emphasize to resend the organizations as a whole, rather than dealing the parts separately. A
system can be either an open system or closed system, A system that interacts with outside
environment is called open system & a system that works with the closed boundary is called closed
system

Contingency approach

The contingency approach is the most recent development in the field of management. This
attempts to integrate all the management approaches contingency approach suggests the task
 of managers to identify the correct techniques that will suit a particular situation & apply them to
solve a problem

This approach is very much applicable is preparing organizational structure in deciding degree of
decentralization, motivational & leadership approaches establishing communication
systems, resolving conflicts training the employees etc.

Planning:
Meaning:

Planning can be defined as “thinking in advance what is to be done, when it is to be done, how it is to be done
and by whom it should be done”. In simple words we can say, planning bridges the gap between where we are
standing today and where we want to reach.

Planning involves setting objectives and deciding in advance the appropriate course of action to achieve these
objectives so we can also define planning as setting up of objectives and targets and formulating an action plan to
achieve them.

Another important ingredient of planning is time. Plans are always developed for a fixed time period as no
business can go on planning endlessly.

Keeping in mind the time dimension we can define planning as “Setting objectives for a given time period,
formulating various courses of action to achieve them and then selecting the best possible alternative from the
different courses of actions”.

Planning: It is the scientific direction to managers to move is a direction by which objectives will be met with
ease.

Uses

1. Minimizes the risk, reduces uncertainties surrounding business conditions.

2. Increases the degree of success

3. It establishes Co-ordinate effort in the organization.

4. It helps managers to organize people & resources properly. While planning - managerial function should be
performed first.

How to plan:

1. Profit thinking & analysis of information.

2. Predetermined curse of action.

3. Objectives to be attained in the future.

4. Study of alternative courses.

5. Involves decision making.

6. Try to achieve better results.

7. Continuous process & integrated work.

Essentials of Good plan

1. Clearly defined objective.

2. Simple
3. Comprehensive
4. It should be rationale & appropriate.
5. It should provide proper analysis & classification
6. It must be flexible.
7. Balanced
8. It must use all available resources & opportunities to the utmost before creating new authorities
of new resources.
9. It should be flue from social & psychological biases of the planners as well as subordinates.
10. These should be proper co-ordination among short term & long term plans.

6 Ps in Planning

1. Purpose
2. Philosophy
3. Premise
4. Policies
5. Plans
6. Priorities
Features/Nature/Characteristic of Planning:
1. Planning contributes to Objectives: Planning starts with the determination of objectives. We cannot think of
planning in absence of objective. After setting up of the objectives, planning decides the methods, procedures
and steps to be taken for achievement of set objectives. Planners also help and bring changes in the plan if things
are not moving in the direction of objectives.

For example, if an organization has the objective of manufacturing 1500 washing machines and in one month
only 80 washing machines are manufactured, then changes are made in the plan to achieve the final objective.

2. Planning is Primary function of management:

Planning is the primary or first function to be performed by every manager. No other function can be executed
by the manager without performing planning function because objectives are set up in planning and other
functions depend on the objectives only.

For example, in organizing function, managers assign authority and responsibility to the employees and level of
authority and responsibility depends upon objectives of the company. Similarly, in staffing the employees are
appointed. The number and type of employees again depends on the objectives of the company. So planning
always proceeds and remains at no. 1 as compared to other functions.

3. Pervasive:

Planning is required at all levels of the management. It is not a function restricted to top level managers only but
planning is done by managers at every level. Formation of major plan and framing of overall policies is the task
of top level managers whereas departmental managers form plan for their respective departments. And lower
level managers make plans to support the overall objectives and to carry on day to day activities.

4. Planning is futuristic/Forward looking:

Planning always means looking ahead or planning is a futuristic function. Planning is never done for the past. All
the managers try to make predictions and assumptions for future and these predictions are made on the basis of
past experiences of the manager and with the regular and intelligent scanning of the general environment.

5. Planning is continuous:

Planning is a never ending or continuous process because after making plans also one has to be in touch with the
changes in changing environment and in the selection of one best way.

So, after making plans also planners keep making changes in the plans according to the requirement of the
company. For example, if the plan is made during the boom period and during its execution there is depression
period then planners have to make changes according to the conditions prevailing.
6. Planning involves decision making:

The planning function is needed only when different alternatives are available and we have to select most
suitable alternative. We cannot imagine planning in absence of choice because in planning function managers
evaluate various alternatives and select the most appropriate. But if there is one alternative available then there is
no requirement of planning.

For example, to import the technology if the licence is only with STC (State Trading Co-operation) then
companies have no choice but to import the technology through STC only. But if there is 4-5 import agencies
included in this task then the planners have to evaluate terms and conditions of all the agencies and select the
most suitable from the company’s point of view.

7. Planning is a mental exercise:

It is mental exercise. Planning is a mental process which requires higher thinking that is why it is kept separate
from operational activities by Taylor. In planning assumptions and predictions regarding future are made by
scanning the environment properly. This activity requires higher level of intelligence. Secondly, in planning
various alternatives are evaluated and the most suitable is selected which again requires higher level of
intelligence. So, it is right to call planning an intellectual process.

Importance/Significance of Planning:
1. Planning provides Direction:

Planning is concerned with predetermined course of action. It provides the directions to the efforts of employees.
Planning makes clear what employees have to do, how to do, etc. By stating in advance how work has to be
done, planning provides direction for action. Employees know in advance in which direction they have to work.
This leads to Unity of Direction also. If there were no planning, employees would be working in different
directions and organisation would not be able to achieve its desired goal.

2. Planning Reduces the risk of uncertainties:

Organisations have to face many uncertainties and unexpected situations every day. Planning helps the manager
to face the uncertainty because planners try to foresee the future by making some assumptions regarding future
keeping in mind their past experiences and scanning of business environments. The plans are made to overcome
such uncertainties. The plans also include unexpected risks such as fire or some other calamities in the
organisation. The resources are kept aside in the plan to meet such uncertainties.

3. Planning reduces over lapping and wasteful activities:

The organisational plans are made keeping in mind the requirements of all the departments. The departmental
plans are derived from main organisational plan. As a result there will be co-ordination in different departments.
On the other hand, if the managers, non-managers and all the employees are following course of action according
to plan then there will be integration in the activities. Plans ensure clarity of thoughts and action and work can be
carried out smoothly.
4. Planning Promotes innovative ideas:

Planning requires high thinking and it is an intellectual process. So, there is a great scope of finding better ideas,
better methods and procedures to perform a particular job. Planning process forces managers to think differently
and assume the future conditions. So, it makes the managers innovative and creative.

5. Planning Facilitates Decision Making:

Planning helps the managers to take various decisions. As in planning goals are set in advance and predictions
are made for future. These predictions and goals help the manager to take fast decisions.

6. Planning establishes standard for controlling:

Controlling means comparison between planned and actual output and if there is variation between both then
find out the reasons for such deviations and taking measures to match the actual output with the planned. But in
case there is no planned output then controlling manager will have no base to compare whether the actual output
is adequate or not.

For example, if the planned output for a week is 100 units and actual output produced by employee is 80 units
then the controlling manager must take measures to bring the 80 unit production upto 100 units but if the planned
output, i.e., 100 units is not given by the planners then finding out whether 80 unit production is sufficient or not
will be difficult to know. So, the base for comparison in controlling is given by planning function only.

7. Focuses attention on objectives of the company:

Planning function begins with the setting up of the objectives, policies, procedures, methods and rules, etc. which
are made in planning to achieve these objectives only. When employees follow the plan they are leading towards
the achievement of objectives. Through planning, efforts of all the employees are directed towards the
achievement of organisational goals and objectives.

Limitations of Planning:
1. Planning leads to rigidity:

Once plans are made to decide the future course of action the manager may not be in a position to change them.
Following predefined plan when circumstances are changed may not bring positive results for organisation. This
kind of rigidity in plan may create difficulty.

2. Planning may not work in dynamic environment:

Business environment is very dynamic as there are continuously changes taking place in economic, political and
legal environment. It becomes very difficult to forecast these future changes. Plans may fail if the changes are
very frequent.

The environment consists of number of segments and it becomes very difficult for a manager to assess future
changes in the environment. For example there may be change in economic policy, change in fashion and trend
or change in competitor’s policy. A manager cannot foresee these changes accurately and plan may fail if many
such changes take place in environment.

3. It reduces creativity:

With the planning the managers of the organisation start working rigidly and they become the blind followers of
the plan only. The managers do not take any initiative to make changes in the plan according to the changes
prevailing in the business environment. They stop giving suggestions and new ideas to bring improvement in
working because the guidelines for working are given in planning only.

4. Planning involves huge Cost:

Planning process involves lot of cost because it is an intellectual process and companies need to hire the
professional experts to carry on this process. Along with the salary of these experts the company has to spend lot
of time and money to collect accurate facts and figures. So, it is a cost-consuming process. If the benefits of
planning are not more than its cost then it should not be carried on.

5. It is a time consuming process:

Planning process is a time-consuming process because it takes long time to evaluate the alternatives and select
the best one. Lot of time is needed in developing planning premises. So, because of this, the action gets delayed.
And whenever there is a need for prompt and immediate decision then we have to avoid planning.

6. Planning does not guarantee success:

Sometimes managers have false sense of security that plans have worked successfully in past so these will be
working in future also. There is a tendency in managers to rely on pretested plans.

It is not true that if a plan has worked successfully in past, it will bring success in future also as there are so many
unknown factors which may lead to failure of plan in future. Planning only provides a base for analysing future.
It is not a solution for future course of action.

7. Lack of accuracy:

In planning we are always thinking in advance and planning is concerned with future only and future is always
uncertain. In planning many assumptions are made to decide about future course of action. But these
assumptions are not 100% accurate and if these assumptions do not hold true in present situation or in future
condition then whole planning will fail.

For example, if in the plan it is assumed that there will be 5% inflation rate and in future condition the inflation
rate becomes 10% then the whole plan will fail and many adjustments will be required to be made.

External Limitations of Planning:

Sometimes planning fails due to following limitations on which managers have no control.
(i) Natural calamity:

Natural calamities such as flood, earthquake, famine etc. may result in failure of plan.

(ii) Change in competitors’ policies:

Sometimes plan may fail due to better policies, product and strategy of competitor which was not expected by
manager.

(iii) Change in taste/fashion and trend in the market:

Sometimes plans may fail when the taste/fashion or trend in market goes against the expectation of planners.

(iv) Change in technologies:

The introduction of new technologies may also lead to failure of plans for products using old technology.

(v) Change in government/economic policy:

Managers have no control over government decisions. If government economic or industrial policies are not
framed as expected by manager then also plans may fail.

Types of Plans

Long-term and Short-term Plans

When you decided to attend college, you had a long-term plan in mind. You would spend the next four or five
years preparing to become a teacher, a businessperson, or perhaps an ecologist. Or, you may have committed two
or three years to become a nurse, a medical technician, or an electrician. Your long-term goal was necessary to
make sure that your daily activities would help you achieve your desired outcome. You could have just enrolled
in a school and taken classes that looked interesting, but then where would you be in four years? You most likely
would not have taken the courses required to qualify you for the job you want. An organization, especially a
business, is not so different. It also needs a long-term plan to make sure that the daily activities of its employees
are contributing to the mission and value statements of the organization.

Long-term plan is crucial to the ultimate success of the organization. A long-term plan for many businesses,
such as construction, hospitality, or manufacturing, generally extends four to five years into the future. For other
faster-changing industries, especially technology companies, a long-term plan may only look two or three years
into the future. After that, it becomes too difficult to predict the future with any degree of certainty.

Top management is responsible for the development of the long-term plan. It is up to the CEO to make sure that
changing conditions (both external and internal) are reflected in the organization’s long-term plan. The larger
and more complex the organization, the larger and more complex the long-term plan will be to include all of the
individual departments and functions.

Short-term plans generally allocate resources for a year or less. They may also be referred to as operational
plans because they are concerned with daily activities and standard business operations. Like long-term plans,
short-term plans must be monitored and updated, and this is the role of middle- and first-level management.
Different managerial levels have responsibility for implementing different types of short-term plans. For
example, a department manager may be comfortable implementing an operational plan for the entire year for her
department. A marketing manager may direct a three- to four-month plan that involves the introduction of a new
product line. A team leader may only be comfortable planning and implementing very specific activities over the
period of a month.

Organizational Plan Hierarchy: The figure above summarizes the relationship between these types of
management planning

Operational Plans: Standing Plans and Single-Use Plans

An operational plan describes the specific goals and objectives and milestones set by an organization during a
specific period. (Objectives are specific tasks undertaken to meet broader goals. A goal may be to increase
product sales by 3 percent; an objective may be to hire two additional sales agents.) It will allocate the tangible
resources (labor, equipment, space) and authorize the financing necessary to meet the objectives of the plan.

There are two types of operational plans: standing plans and single-use plans.

 Standing plans are plans designed to be used again and again. Examples include policies, procedures, and
regulations. The advantage of standing plans is that they foster unity and fairness within an organization
and help to support stated organizational values. Managers don’t have to make unique decisions already
addressed by various organizational policies. Standing plans also save time because managers know in
advance how to address common situations. Finally, standing plans aid in the delegation of work, because
employees are already familiar with the procedures and regulations followed by the organization.
 Single-use plans refer to plans that address a one-time project or event. The length of the plans varies, but
the most common types are budgets and project schedules. The obvious advantage of a single-use plan is
that it can be very specific in how it addresses the needs of a particular situation.
Policies, Procedures, and Regulations
As stated above, the most common examples of standing use plans are policies, procedures, and regulations.
These plans are usually published and handed out to new hires or posted on the organization’s employee website
for easy reference.

 Policies provide broad guidelines for the smooth operation of the organization. They cover things like
hiring and firing, performance appraisals, promotions, and discipline. For example, a company may have a
policy to encourage recycling in the workplace or a policy that prohibits personal cell phone use in
manufacturing areas.
 Procedures are steps to be followed in established and repeated operations. Procedures should reflect the
policies of the company and support the organization’s long-term goals. Procedures may also detail steps
that should be followed to ensure employees are disciplined in a fair and unbiased manner. For example, if
employees feel that other employees interacted with them in an inappropriate manner, then they should
follow the procedure for bringing this to management’s attention. Or, the organization may establish
procedures for what to do in cases of emergencies, such as a fire or toxic spill.
 Regulations refer to what is allowable and what is strictly prohibited in an organization. In other words, a
regulation is a kind of rule that addresses general situations. In many hospitals and laboratories, for
example, there are safety regulations against wearing open-toed shoes or shoes with slippery soles. State
and federal governments frequently issue regulations for industries that impact public safety.

The Role of Budgets in the Planning Process

Refer to the “Organizational Plan Hierarchy” figure earlier and locate the box labeled “Budgets.” Notice that
budgets are examples of single-use, short-term plans. An organization’s budget is a document that details the
financial and physical resources allocated to a project or department. They are single-use plans because they are
specific to a particular period or event. For example, departments may have a hiring budget that allocates a
certain number of positions and a total salary value for a calendar year. Next year, that budget may be the same
or it may change, depending upon conditions in the organization. But it cannot be assumed that the budget will
stay the same. Zero-based budgets look at each budget as if it were brand new and require managers to justify
each of the budgeted items. This process ensures that budgets are closely tied to the latest organizational goals.

Managers deal with a variety of budget types:

 Financial budgets include balance sheets, income/expense statements, and statements of cash flow.
 Operating budgets project revenue against expenditures.
 Nonmonetary budgets allocate resources such as labor, workspace, and equipment use.
 Fixed budgets are budgets that do not change with increased or decreased activities, such as sales revenue.
They are also called static budgets.
 Flexible budgets will vary with the level of activity (grow or be reduced according to changing
conditions).

Budgets are a very important planning tool, and organizations take their budgeting process very seriously. Some
managers spend most of their time making sure that the expenses and projects they control do not exceed
authorized spending limits. To routinely “go over budget” is a sign of a poor planning—and planning is one of
the basic management functions. In some cases, to routinely come in under budget is also viewed negatively,
because with more accurate budgeting those committed resources could have been allocated to other projects.
Often, projects compete for limited resources so the best budget is the one that most closely projects actual
expenses and revenue.

Steps Involved in Planning Process

Step 1. Perception of Opportunities: Perception of opportunities is not strictly a part of the planning process.
But this awareness of opportunities in the external environment as well as within the organization is the real
starting point for planning. It is important to take a preliminary look at possible future opportunities and see them
clearly and completely.
All managers should know where they stand in the light of their strengths and weaknesses, understand the
problems they wish to solve and know what they gain. Setting objectives depends on the awareness. Planning
requires realistic diagnosis of the opportunity situation.

Step 2. Establishing Objectives: This is the second step in the planning process. The major organizational and
unit objectives are set in this stage. This is to be done for the long term as well as for the short range. Objective
specify the expected results and indicate the end points of what is to be done, where the primary emphasis is to
be placed and what is to be accomplished by the various types of plans.
Organizational objectives give direction to the major plans, which by reflecting these objectives define the
objective of every major department. Major objectives, in turn, control the objectives of subordinate departments
and so on down the line. In other words, objectives from a hierarchy.
Step 3. Planning Premises: After determination of organizational objectives, the next step is establishing
planning premises that is the conditions under which planning activities will be undertaken. Planning premises
are planning assumptions the expected environmental and internal conditions.
Thus planning premises are external and internal. External premises include total factors in task
environment like political, social, technological, competitors, plans and actions, government policies. Internal
factors include organization’s policies, resources of various types, and the ability of the organization to withstand
the environmental pressure. The plans are formulated in the light of both external and internal factors.

Step 4. Identification of Alternatives: The fourth step in planning is to identify the alternatives. Various
alternatives can be identified based on the organizational objectives and planning premises. The concept of
various alternatives suggests that a particular objective can be achieved through various actions.
For example, if an organization has set its objectives to grow further, it can be achieved in several ways like
expanding in the same Field of business or product line diversifying in other areas, joining hands with other
organizations, or taking over another organization and so on. Within each category, there may be several
alternatives.

The most common problem is not finding alternatives but reducing the number of alternatives so that the most
promising may be analyzed.

Step 5. Evaluation of Alternatives: The various alternative course of action should be analyzed in the light of
premises and goals. There are various techniques available to evaluate alternatives. The evaluation is to be done
in the light of various factors. Example, cash inflow and outflow, risks, limited resources, expected pay back etc.,
the alternatives should give us the best chance of meeting our goals at the lowest cost and highest profit.

Step 6. Choice of Alternative Plans: This is the real point of decision-making. An analysis and evaluation of
alternative courses will disclose that two or more .ire advisable and beneficial. The fit one is selected.

Step 7. Formulation of Supporting Plan: After formulating the basic plan, various plan are derived so as to
support the main plan. In an organization there can be various derivative plans like planning for buying
equipment, buying raw materials, recruiting and training personal, developing new product etc. These derivative
plans are formulated out of the basic or main plan and almost invariably required to support the basic plan.

Step 8. Establishing Sequence of Activities: After formulating basic and derivative plans, the sequence of
activities is determined so those plans are put into action. After decisions are made and plans are set, budgets for
various periods and divisions can be prepared to give plans more concrete meaning for implementation.
The overall budgets of an enterprise represent the sum total of income and expenses, with resultant profit or
surplus, and budgets of major balance sheet items such as cash and capital expenditures. Each department or
programme of a business or other enterprise can have its own budgets, usually of expenses and capital
expenditures, which tie into the overall budget.

If done well, budgets become a means of adding together the various plans and also set important standards
against which planning progress can be measured.
Organizing: It’s Process, Structure, Importance and Other Details:
The organizing process, thus, establishes working relationship among employees by assigning those tasks and
giving them enough rights (i.e. authority) to perform those tasks.

It is because when employees accept assigned work, they become responsible for performing it, and for
discharging responsibility they are given requisite authority. The person who gives authority is called ‘superior’
and the person to whom authority is given are known as ‘subordinate’.

Thus, the process of organizing gives rise to a network of authority-responsibility relationships among members
of the organization. This network of authority-responsibility relationships is called ‘organization structure’.
These various aspects of the organizing function of management are discussed here under the following two
broad heads:

I. Organizing as a process; and

II. Organizing as a structure.

Organizing as a Process:
Concept of Organizing:
The term ‘organizing” refers to the process of identifying and grouping of activities to be performed and dividing
them among the individuals and creating authority and responsibility relationship among them for the
accomplishment of organizational objectives.

Characteristics of Organizing:
Nature of the organising function can be understood in reference to the following aspects:

1. Organising is a basic function and a sub-process of management:

Organising constitutes an essential element in the main process of management. Organising is done in relation to
all other functions of management. The organising function follows the function of planning and the other
functions of management follow organising. Thus, organising is a sub-process of management.

2. Organising is a continuous process:

An organisation is a continuing entity. The need for organising function is felt whenever new activities or
functions are introduced, or existing functions and activities are re-shuffled in the organisation.

3. Organising is a function of all managers:

The management function of organising is practised by all the managers in the organisation. The nature and
importance of the organising function, however, may vary with different managers. Middle-level managers are
significantly involved in organising their departmental activities as a large number of members are involved in
the performance of departmental activities.
4. Organising involves coordination:
In order to create a balance and structure in the organisation, the activities of members need to be well-
coordinated.

5. Goal-oriented:
Organising is designed on the basis of objectives and it aims at achieving them smoothly.

6. Group effort:
Organising deals with group efforts that are made for attaining common goals.

7. Establishes authority-responsibility relationship:

Organising establishes authority- responsibility relationship among the organisational members.

Process of Organising – The steps:

The process of organising involves the following steps:

1. Identification and enumeration of activities:

At the first stage of organising process, a manager identity and determines those activities that are to be
performed for achieving common goals. Those activities are determined on the basis of common goals.

For example, an organisation producing and distributing washing machines has to perform large number of
activities that may be related to production, distribution, finance, purchase and personnel, etc.

2. Division of activities:
After determining and enumerating activities, these are to be divided and sub-divided into small components
known as jobs and tasks.

3. Grouping-up of activities:
Once the activities have been broken into small elements, these can be easily put into various groups on the basis
of their relationship and similarities. For example, each job and task related to production is to be grouped up
into production group, and elements that are related to marketing, finance and purchase are to be grouped-up in
the respective groups.

4. Assignment of group of activities:

After putting various activities into several groups, these are to be assigned or allotted to the various departments
created for this purpose, or to the employees if the activities are limited. At the time of making such assignment,
it is ensured that the department has required competence and resources for performing that group of activities.

5. Granting necessary rights:

Assignment of group of activities among various departments is followed by giving them adequate rights so that
they can perform assigned work in a satisfactory manner.

The rights are granted through the process of delegation. In this process higher level manager gives away some
of his right in favour of other who becomes his subordinate and it continues till the last level of management.

6. Coordinating the functioning of various departments:

In the process of organising, attempts are also made for coordinating working of individual with respective
department, and finally to coordinate functioning of various departments towards the achievement of common
goals.

Need and Importance of Organising:

The organising process creates a network of roles and relationships and provides a framework within which
each employee performs the activities that have been assigned to him.
His role becomes more meaningful and he contributes effectively for achieving predetermined objectives.
Therefore, organising is regarded as a mechanism or means to achieve planned objectives. Its importance can be
outlined as under:

1. Provides framework to perform management functions:

Organisational structure provides a framework within which various management functions can be performed by
the managers more efficiently. It is only through relationship of superior and subordinate, which is created by
organising process that the manager plans, directs and controls activities of his subordinates.

2. Facilitates coordination:
Organising process may also be used as a device of maintaining and achieving coordination. In organising, the
activities performed by an individual employee are related to the functioning of his department, and then
functioning of various departments is harmonised for seeking common goals.

3. Leads to specialization:
Organising is based on the concept of division of work that ultimately leads to specialization. Through it,
activities are divided, grouped-up and assigned to the concerned department having requisite competence, and
resources, and the department develops as a specialised centre for those activities.

4. Helps in achieving efficiency:

Organising process aims at achieving higher efficiency because it helps in making efficient utilization of both
human as well as physical resources.

5. Promotes Employee development:

In a highly decentralized organizational structure, each position is strengthened by delegating required authority.
As a result of it, each manager makes decisions, solves problems and tackles the situation that ultimately leads to
overall development in his personality.

6. Increases clarity of authority and responsibility:

Division of work and delegation of authority among employees, through the process of organising, gives them a
precise idea of what they are expected to perform and within what limits of authority they have to perform. It
helps in boosting an employee’s morale and he feels comfortable in the work- setting.

7. Facilitates adaptation:
Organisational structure also provides a useful means to cope with changing environment. In the event of
change, necessary modification may be made in the organising process, organisational structure and
organizational goals, so as to bring them in conformity with the change. It may be done by maintaining
flexibility in the structure and making it adaptive to changes.

Organising as a Structure:
Concept of Organisation Structure:
The organising process ultimately results in the creation of an organisation structure. An organisation structure is
the structural framework of all positions in a set-up.

Each position has a set of tasks, responsibilities, and authority. Each task is inter-related, and the collective
performance of all tasks by different position holders enables the achievement of organisational goals.

Thus, an organisation structure refers to a network of authority and responsibility relationships by

showing who reports to whom and for what in a set-up to facilitate realisation of common goals.
An organisation structure is a mix of vertical and horizontal positions. Horizontal positions arise on account of
assignment of activities among various departments.

Vertical positions arise on account of delegation of authority among employees, from higher levels to lower
levels. Generally, an organisation structure has a pyramid shape, with less position on the upper side and more
positions on the lower side. The appearance of a typical organisation structure is shown in Figure 9.1.
Characteristics of Organisation Structure:
An organisation structure exhibits the following features:

1. Network of activities:
The first and foremost feature of an organisation structure is that it is a network of well-defined activities. These
activities are arranged in a logical manner so that the performance of one activity facilitates the performance of
other activities. This network of activities creates responsibility centers in an organisation.

2. Authority-responsibility Relationships:
Authority is a core constituent of organisation. Authority brings in responsibility with its self. Thus, creation of
authority – responsibility relationships among various positions is a must.

3. Differentiation and Integration:

Differentiation is the extent to which tasks are divided into sub-tasks and performed by individuals with
specialised skills. Integration is the extent to which various parts of the organisation cooperate and interact with
each other because of interdependence of the tasks. Interdependence may be pooled, sequential and reciprocal.

4. Formalism:
To balance between differentiation and integration of people and activities, formal and defined structure in
relation to decision making, communication and control is a must. Formalization is introduced through line of
authority, unity of command, span of control, etc.
Elements of Organisation Structure:
While designing an organisation structure, the managers must keep six elements in consideration.

1. Work specialization:
It is there since Adam Smith published Wealth of Nations. In work specialisation, a job is broken down into
different steps and each step is completed by a separate individual. While preparing Chocolate Candies, one only
hots up the raw Chocolate, the next’s man puts hot stuff n dyes, the third person puts into fridge, the fourth
person brings it out from the fridge and the dyes, the fifth person starts wrapping, and the next person puts then
into boxes.

However, of late the trend is towards broadening the scope of robs and reduced work specialisation. Examples
include Hallmark and Ford Australia. As an alternative to job design, managers have five alternative approaches
– job rotation, (moving employees from one job to another), job enlargement (giving employees more tasks to
perform), job enrichment (increasing the number of activities and also control over the job), job characteristics
approach (jobs diagnosed and improved along skill variety, task identity, task significance, autonomy and
feedback), and work-teams (to design the work systems).

2. Departmentation:
Departmentation refers to grouping the jobs on some logical arrangements. Each organisation shall have its own
specific way of classifying and grouping work activities. We shall discuss about departmentation in greater detail
in the chapter titled – Departmentation and span of Management.

3. Establishing Reporting Relationships:

Who to report whom is an important question and it involves deciding about chain of command and the span of
management. The chain of command is the continuous line of authority from the top level to the lowest levels in
the organisation.

Chain of command involves two principles of management, i.e., unity of command (each person having one boss
only) and the scalar principle (someone to be finally responsible as clear line of authority is drawn).

Equally important is to decide how many people will report to one manager. It may be narrow or wide. We shall
discuss it in greater detail in the next chapter.

4. Distributing Authority:
Authority is the right to do something due to formal position. Distribution of authority involves addressing two
issues – delegation of authority and centralisation-decentralisation.

Delegation involves assigning a part of managerial job by a manager to his subordinate(s), and the requisite
authority and the delegate becomes accountable to the delegator.
The second issue is centralisation (retaining power and authority in the hands of top-level managers) and
decentralisation (distribution of authority to middle and lower-level mangers). Again, we shall discuss about the
two concepts in detail later on.

5. Coordinating Mechanisms:
The process of linking up the activities of the various departments of the organisation is a must to achieve
organisational objectives. Coordination is essential because every department is dependent on the others for
information resources.

Interdependence may be pooled (the lowest level of interdependence – their output is simply pooled), sequential
(out put of one department becomes the input for another in a sequence), and reciprocal (when activities flow
both ways).

Coordination can be achieved through managerial hierarchy, rules and procedures liaison roles and integrating
departments of late electronic coordination has become important.

6. Differentiating between positions:

The last element is distinguishing between line and staff positions. A line position means one who is in direct
chain of command and is responsible for achievement of organisational goals, whereas a staff position is meant
to provide guidance, expert advice, and support to line officials.

Factors Affecting Organisation Structure:

Organisation structure is created as a means to achieve goals and objectives of an enterprise. Since objectives of
different enterprises tend to be different, they cannot afford to adopt just one topical organisation structure, and
yet work efficiently.

Thus, structure of an organisation needs to be tailor-made than merely adopting the so-called ‘typical structure’.
What kind of organisation structure is best suited to an enterprise depends upon a number of considerations; the
more important ones are given below:

1. Strategy:
Organisation structure to be used for an enterprise is the direct result of objectives to be achieved which are
derived from strategy. Organization structure of a manufacturing concern with assured market will be different
from that of another concern operating under highly competitive situation.

In the later case, organization structure will be market-oriented whereas organization structure in the former case
will basically be production-oriented.
Structure follows strategy:
If the growth strategy is followed, it will need flexible, fluid and instantly adaptable organisation. An
organisation following differentiation strategy must innovate and add R&D to its organisation structure. To
follow cost- leadership strategy the structure has to be stable and cost efficient.

2. Nature of activities:
Organization structure of a trading concern is different from that of an educational institution for the simple
reason that activities of the two organizations are different.

3. Size and Life cycle:

Larger the organisation it tends to have more work specialisation, horizontal and vertical differentiation, and
rules and regulations. Organisation structure would be different at birth, youth, and midlife and maturity stages.

4. Culture:
Culture refers to a system of shared beliefs and values. A strong organisation culture means rules and regulations
can be substituted by organisation culture. Stronger the culture, the structure can be predictable, orderly and
consistent with no written documentation.

5. Technology:
Organisation structure of an enterprise using sophisticated capital- intensive mass-production technology will be
different from the enterprise using labour- intensive small-scale production technology.

More routine the technology, the structure will be more standardised and mechanistic. The structures will be
organic if the organisation follows non-routine technology.

6. Environment:
Organisation structure of an enterprise operating in the midst of a highly dynamic environment organic will be
different from the enterprise operating in a stable environment mechanistic. Organisations operating in stable
environment can gainfully employ a highly formalised structure.

7. People:
People-structure relationship is important. A good organisation structure provides people with the supportive
structures to attain organisational and individual objectives.
Importance of Organisation Structure:
Organisation structure is the backbone of management. Its importance lies in serving the following
purposes:

1. Removes doubts in authority relationships:

Organisation structure allocates authority and responsibility, and thereby, enables people to know who is
responsible for what and to whom in the organisation. People know who is to direct whom for what results. This
removes confusion, friction and conflict among people.

2. Stimulates creativity and initiative:

Organisation structure stimulates creative thinking and initiative among organisational members by providing
them requisite authority to perform their assigned tasks. Authority provides right to decision-making to its holder
who feels motivated to take initiative in increasing and improving his work performance.

3. Ensures optimum utilisation of resources:

Allocation of resources is the core activity of organisation structure. Proper allocation of resources helps in
proper utilisation also. Division of work and specialisation are the tools used by organisation to attain the
objective of optimum utilisation of human efforts and physical resources.

4. Reaping benefits of technology improvements:

A sound organisation structure is flexible enough to accommodate changes in the work technology. Improved
work technology modifies pattern of authority-responsibility relationships and helps in improving work
performance of employees.

5. Encourages growth of the enterprise:

Organisation structure provides the framework within which an enterprise functions. A sound organisation
structure has the capacity to handle increased level of activity. This helps in the expansion and growth of an
enterprise.

6. Facilitates management process:

Organisation structure is a mechanism through which manager’s plan, allocates, direct, coordinate and control
the activities of people. No activity remains unattended and work is assigned to people in accordance with their
skills, aptitude, level of commitment, etc. This facilitates smooth operation of the management process which
results in attaining enterprise goals.

Formal and Informal Organisation:

Performance of the organising function provides a compact framework to an enterprise. This compact framework
is called formal organisation structure, or simply, formal organisation.
The existence and operation of formal organisation permits people to interact with each other at a personal and
social level. This personal and social interaction is called informal organisation. The nature and character of
formal and information organisation is briefly discussed below:

Formal Organisation:
A formal organisation, is a consciously planned a deliberately designed entity. It is based on superior-subordinate
relationships which are created by assignment of work and delegation of authority.

It is through this formal relationship that members communicate with each other and perform their assigned
duties. Thus, a formal organisation functions within set boundaries and is capable of being disciplined and
controlled.

Informal Organisation:
When people work together in a formal relationship of superior and subordinate, they come in contact with each
other. This interaction provides them an opportunity to know each other and develop personal and social
relations.

These social groups and their associated behaviour in called the informal organisation. These personal and social
relations become the basis of informal organisation.

Thus, informal organisation may be defined as a network of personal and social relations, arising out of
communication and behavioural tendencies in the course of functioning of a formal structure of organisation.

Principles of organization:

1. Principle of objective: The enterprise should set up certain aims for the achievement of which
various departments should work. A common goal so devised for the business as a whole & the
organization is set up achieves that goal.

2. Principles specialization: The organization should be set up in such a way that every individual
should be assigned a duty according to his skill and qualification.

3. Principles of Co-ordination: The Co-ordination of different activities is an important principles

of the organization there should be same agency to Co-ordinate the activates of various departments.

4. Principles of authority & responsibility: The authority flows download in the line. Every individual is
given authority to get the work done. Though authority can be delegated but responsibility lies with the man
Coho has been given the work.
5. Principle of definition: The scope of authority & responsibility should be clearly defined. Every person
should know his work with definiteness. If the duties are not clearly assigned, then it will not be possible to
fix responsibility.

6. Span of control: Span of control means how many subordinates can be supervised by a
supervisor. The number of subordinates should be such that supervisor should be able to control their
work effectively.

7. Principle of balance: The principle means assignment of work should be perform well. such that
every person should be given only that much work which he can

8. Principle of continuity: The organization should be amenidable according to the changing situations,
everyday there are changes in methods of production and marketing systems. The organization should be
dynamic and not static.

9. Principle of uniformity: The organization should provide for the distribution of work in such a
manner that the uniformity is maintained.

10. Principle of unity of command: There should be a unity of command is the organization. A person
should be answerable to one boss only. If a person is under the control of more than one person then there is
like hood of confusion & conflict.

11. Principle of exception: This principle states that top management should interfere only when
something goes wrong. It the things are done as per planes then there is no need for the interference of top
management.

12. Principle of simplicity: The organizational structure should be simple so that it us easily
understood by each & every person. The authority, responsibility & position of every person should be made
clear so that there is no confusion about these things.

13.Principle of efficiency: the organization should be able to achieve enterprise objectives at a

minimum cost. The standard costs & revenue are pre-determined & performance should be according
to these goals.

14. Scalar principle: this principle refers to the nautical placement of supervisors’ stultify from top & going
to lower level. The scalar chain is a pre-requisite for effective & efficient organization.

Types of Organizational Structures

An organizational structure defines how jobs and tasks are formally divided, grouped and coordinated. The type
of organizational structure would depend upon the type of organization itself and its philosophy of operations.
Basically the structure can be mechanistic or organic in nature or a combination of thereof. However, most
organizational structures are still designed along mechanistic or classical lines.

Key Elements for Proper Organizational Structure:

 Work Specialization: To what degree are articles subdivided into separate jobs?
 Departmentalization: On what basis jobs will be grouped?
 Chain of Command: To whom will individuals and groups report?
 Span of Control: Up to how many individuals can a manager efficiently direct?
 Centralization vs Decentralization: Who will be the sole maker of decisions?
 Formalization: To what degree will there be rules and regulations to direct employees and managers?

Some of the most common organization structures are:

1. Line Organization

Line organization is the simplest form of organization and is most common among small companies. The
authority is embedded in the hierarchical structure and it flows in a direct line from the top of the managerial
hierarchy down to different levels of managers and subordinates and further down to the operative levels of
workers. It clearly identifies authority, responsibility and accountability at each level

These relationships in the hierarchy connect the position and tasks of each level with those above and below it.
There is clear unity of command so that the person at each level is reasonably independent of any other person at
the same level and is responsible only to the person above him. The line personnel are directly involved in
achieving the objectives of the company.

Because of the small size of the company, the line structure is simple and the authority and responsibility are
clear-cut, easily assignable and traceable. It is easy to develop a sense of belonging to the
organization, communication is fast and easy and feedback from the employees can be acted upon faster.

The discipline among employees can be maintained easily and effective control can be easily exercised. If the
president and other superiors are benevolent in nature, then the employees tend to consider the organization as a
family and tend to be closer to each other that is highly beneficial to the organization.

On the other hand, it is a rigid form of organization and there is a tendency for line authority to become
dictatorial that may be resented by the employees. Also, there is no provision for specialists and specialization
that is essential for growth and optimization and hence for growing companies, pure line type of structure
becomes ineffective.

The line organization can be a pure line type or departmental line type. In the pure line type set-up, all similar
activities are performed at any one level. Each group of activities is self contained and is independent of other
units and is able to perform the assigned duties without the assistance of others. In a departmental line type of
organization, also known as functional structure, the respective workers and supervisors are grouped on a
functional basis such as finance, production and marketing, and so on.
 2. Line and Staff Organization

In this type of organization, the functional specialists are added to the line, thus giving the line the advantages of
specialists. This type of organization is most common in our business economy and especially among large
enterprises. Staff is basically advisory in nature and usually does not possess and command authority over line
mangers. The staff consists of two types:

General Staff: This group has a general background that is usually similar to executives and serves as assistants
to top management. They are not specialists and generally have no authority or responsibility of their own. They
may be known as special assistants, assistant managers or in a college setting as deputy chairpersons.

Specialized Staff: Unlike the general staff who generally assist only one line executive, the specialized staff
provides expert staff advice and service to all employees on a company wide basis. This group has a specialized
background in some functional area and it could serve in any of the following capacities:

(a) Advisory Capacity: The primary purpose of this group is to render specialized advice and assistance to
management when needed. Some typical areas covered by advisory staff are legal, public relations and economic
development.

(b) Service Capacity: This group provides a service that is useful to the organization as a whole and not just to
any specific division or function. An example would be the personnel department serving the enterprise by
procuring the needed personnel for all departments. Other areas of service include research and development,
purchasing, statistical analysis, insurance problems and so on.

(c) Control Capacity: This group includes quality control staff who may have the authority to control the
quality and enforce standards.

The line and staff type of organization uses the expertise of specialists without diluting the unity of command.
With the advice of these specialists, the line managers also become more scientific and tend to develop a sense of
objective analysis of business problems. According to Soltonstoff, a staff member may serve as a coach,
diagnostician, policy planner, coordinator, trainer, strategist, and so on.

The line and staff type of organization is widely used and is advantageous to the extent that the specialized
advice improves the quality of decisions resulting in operational economics. Also, since line managers are
generally occupied with their day-to-day current operations, they do not have the time or the background for
future planning and policy formulation. Staff specialists are conceptually oriented towards looking ahead and
have the time to do strategic planning and analyze the possible effects of expected future events.

Its main disadvantages are the confusion and conflict that arises between line and staff, the high cost that is
associated with hiring specialists and the tendency of staff personnel to build their own image and worth, that is
sometimes at the cost of undermining the authority and responsibility of line executives.

3. Functional Organization

One of the disadvantages of the line organization is that the line executives lack specialization. Additionally, a
line manager cannot be a specialist in all areas. In the line and staff type of organization, the staff specialist does
not have the authority to enforce his recommendations. The functional organizational concept, originated
with Fredrick W. Taylor and it permits a specialist in a given area to enforce his directive within the clearly
defined scope of his authority.

A functional manager can make decisions and issue orders to the persons in divisions other than his own, with a
right to enforce his advice. Some good examples of specialists who have been given functional authority in some
organizations are in the areas of quality control, safety and labor relations.

The functional organization features separate hierarchies for each function creating a larger scale version of
functional departments. Functional departmentalization is the basis for grouping together jobs that relate to a
single organizational function or specialized skill such as marketing, finance, production, and so on. The chain of
command in each function leads to a functional head who in turn reports to the top manager.

The functional design enhances operational efficiency as well as improvement in the quality of the product
because of specialists being involved in each functional area and also because resources are allocated by function
rather than being duplicated or diffused throughout the organization .

One of the main disadvantages of the functional design is that it encourages narrow specialization rather than
general management skills so that the functional managers are not well prepared for top executive positions.
Also, functional units may be so concerned with their own areas that they may be less responsive to overall
organizational needs.

4. Divisional Organization

The divisional or departmental organization involves grouping of people or activities with similar characteristics
into a single department or unit. Also known as self-contained structures, these departments operate as if these
were small organizations under a large organizational umbrella, meeting divisional goals as prescribed by
organizational policies and plans.

The decisions are generally decentralized so that the departments guide their own activities. This
facilitates communication, coordination and control, thus contributing to the organizational success. Also,
because the units are independent and semi-autonomous, it provides satisfaction to the managers that in turn
improves efficiency and effectiveness.

This division and concentration of related activities into integrated units is categorized on the following basis:
Departmentalization by Product. In this case, the units are formed according to the type of product and it is
more useful in multi-line corporations where product expansion and diversification, and manufacturing and
marketing characteristics of the product are of primary concern. The general policies are decided upon by the top
management within the philosophical guidelines of the organization.

Departmentalization by Customers. This type of departmentalization is used by those organizations that deal
differently with different types of customers. Thus, the customers are the key to the way the activities are
grouped. Many banks have priority services for customers who deposit a given amount of money with the bank
for a given period of time. Similarly, business customers get better attention in the banks than other individuals.

Departmentalization by Area. If an organization serves different geographical areas, the division may be based
upon geographical basis. Such divisions are specially useful for large scale enterprises that are geographically
spread out such as banking, insurance, chain department stores or a product that is nationally distributed.

Departmentalization by Time. Hospitals and other public utility companies such as telephone company that
work around the clock are generally departmentalized on the basis of time shifts. For example, the telephone
company may have a day shift, on evening shift and a night shift, and for each shift a different department may
exist, even though they are all alike in terms of objectives.

5. Project Organization

These are temporary organizational structures formed for specific projects for a specific period of time and once
the goal is achieved, these are dismantled. For example, the goal of an organization may be to develop a new
automobile. For this project, the specialists from different functional departments will be drawn to work together.

These functional departments are production, engineering, quality control marketing research, etc. When the
project is completed, these specialists go back to their respective duties. These specialists are basically selected
on the basis of task related skills and technical expertise rather than decision-making experience or planning
ability.

These structures are very useful when:

1. The project is clearly defined in terms of objectives to be achieved and the target date for the completion of
the project is set. An example would be the project of building a new airport.

2. The project is separate and unique and not a part of the daily work routine of the organization.

3. There must be different types of activities that require skills and specialization and these must be coordinated
to achieve the desired goal.

4. The project must be temporary in nature and not extend into other related projects.

6. Matrix Organization

A matrix structure is, in a sense, a combination and interaction of project and functional structures and is
suggested to overcome the problems associated with project and functional structures individually. The key
features of a matrix structure are that the functional and project lines of authority are super-imposed with each
other and are shared by both functional and project managers.

The project managers are generally responsible for overall direction and integration of activities and resources
related to the project. They are responsible for accomplishing work on schedule and within the prescribed
budget. They are also responsible for integrating the efforts of all functional managers to accomplish the project
and directing and evaluating project activity. The functional managers are concerned with the operational aspects
of the project. The functional structure is primarily responsible for:

1. Providing technical guidance for the project.

2. Providing functional staff that is highly skilled and specialized.

3. Completing the project within prescribed technical specifications.

Greiner sees matrix organization, in which cross-functional teams are used, as a response to growing complexity
associated with the organizational growth. These complexities, both internal(size, technology) as well as external
(markets, competitors), create problems of information processing and communication that are best dealt by
matrix type of organization.

Matrix organizational design is most useful when there is pressure for shared resources. For example, a company
may need eight product groups, yet have the resources only to hire four marketing specialists. The matrix
provides a convenient way for the eight groups to share the skills of the four specialists .

Each matrix contains three unique sets of role relationships: (1) the top manager or Chief Executive Officer who
is the head and balances the dual chains of command; (2) the managers of functional and project (or product)
departments who share subordinates; and (3) the specialists who report to both the respective functional manager
and project manager.
An important aspect of the matrix structure is that each person working on the project has two supervisors – the
project manager and the functional manager.

Staffing: It is human resource management. This includes the requirement of work force by taking
inventory people available reconciling selecting placing promoting appraising planning the employee’s
covers training them to suit the job developing the staff to carry out the defined job effectively.

Nature of staffing

1. It is basic function of management

2. Staffing is important to increase in production

3. It maintains healthy atmosphere in any organization

4. It creates optimum utilization of human resources

5. Staffing is basic function of management

Definition of Recruitment

Recruitment is a process of finding out the prospective applicants and stimulating them to apply for the
vacancy. It is a long process which involves a series of activities that starts with analysing the job
requirements and ends on the appointment of the employee. The activities involved in the recruitment of
employees are as under:

 Analysing job requirement

 Advertising the vacancy
 Attracting candidates to apply for the job
 Managing response
 Scrutiny of applications
 Shortlisting candidates

The recruitment is done by the Human Resource managers either internally or externally. The sources of
internal recruitment are promotion, transfers, retrenched employees, contact or references, ex-
employees, retired employees, etc. On the other hand, sources of external recruitment are recruitment
through advertisement, campus recruitment, recruitment by employment exchanges, recruitment by third
parties (recruitment agencies), internet recruiting, unsolicited applicants, etc.

Definition of Selection

Selection is an activity in which the organisation selects a fixed number of candidates from a large
number of applicants. It involves the actual appointment of the employee for filling up the vacancies of
the enterprise. The term selection means the placement of the right man at the right job. We all know
that a lot of people apply for a single job at the time of recruitment, in which the recruiters have to
decide which candidate fits the best for the job.

The selection also involves a set of activities which are given as under:

 Screening
 Eliminating unsuitable candidates
 Conducting the examination like aptitude test, intelligence test, performance test, personality test,
etc.
 Interview
 Checking References
 Medical Test

The process of selection is a time-consuming one because the HR managers have to identify the
eligibility of every candidate for the post. Besides this, the educational qualification, background, age,
etc. are also some of the most important factors in which they have to pay more attention. After this, the
written examination and interview is also a very tough task.

ASIS FOR
RECRUITMENT SELECTION
COMPARISON

Meaning Recruitment is an activity of Selection refers to the process of selecting

searching candidates and the best candidates and offering them
encouraging them apply for it. job.

Approach Positive Negative

Objective Inviting more and more Picking up the most suitable candidate
candidates to apply for the and rejecting the rest.
vacant post.

Key Factor Advertising the job Appointment of the candidate

Sequence First Second

Process Vacancies are notified by the The firm makes applicant pass through
firm through various sources various levels like submitting form,
and application form is made written test, interview, medical test and
 ASIS FOR
RECRUITMENT SELECTION
COMPARISON

available to the candidate. so on.

Contractual As recruitment only implies Selection involves the creation of

Relation the communication of contractual relation between the
vacancies, no contractual employer and employee.
relation is established.

Method Economical Expensive

Steps Involved in Selection Procedure:

A scientific and logical selection procedure leads to scientific selection of candidates. The criterion finalized for
selecting a candidate for a particular job varies from company to company.

Therefore, the selection procedure followed by different organizations, many times, becomes lengthy as it is a
question of getting the most suitable candidates for which various tests are to be done and interviews to be taken.
The procedure for selection should be systematic so that it does not leave any scope for confusions and doubts
about the choice of the selected candidate
Brief details of the various steps in selection procedure are given as follows:

1. Inviting applications:
The prospective candidates from within the organization or outside the organization are called for applying for
the post. Detailed job description and job specification are provided in the advertisement for the job. It attracts a
large number of candidates from various areas.

2. Receiving applications:
Detailed applications are collected from the candidates which provide the necessary information about personal
and professional details of a person. These applications facilitate analysis and comparison of the candidates.

3. Scrutiny of applications:
As the limit of the period within which the company is supposed to receive applications ends, the applications
are sorted out. Incomplete applications get rejected; applicants with un-matching job specifications are also
rejected.

4. Written tests:
As the final list of candidates becomes ready after the scrutiny of applications, the written test is conducted. This
test is conducted for understanding the technical knowledge, attitude and interest of the candidates. This process
is useful when the number of applicants is large.

Many times, a second chance is given to candidates to prove themselves by conducting another written test.

5. Psychological tests:
These tests are conducted individually and they help for finding out the individual quality and skill of a person.
The types of psychological tests are aptitude test, intelligence test, synthetic test and personality test

6. Personal interview:
Candidates proving themselves successful through tests are interviewed personally. The interviewers may be
individual or a panel. It generally involves officers from the top management.

The candidates are asked several questions about their experience on another job, their family background, their
interests, etc. They are supposed to describe their expectations from the said job. Their strengths and weaknesses
are identified and noted by the interviewers which help them to take the final decision of selection.

7. Reference check:
Generally, at least two references are asked for by the company from the candidate. Reference check is a type of
crosscheck for the information provided by the candidate through their application form and during the
interviews.

8. Medical examination:
Physical strength and fitness of a candidate is must before they takes up the job. In-spite of good performance in
tests and interviews, candidates can be rejected on the basis of their ill health.

9. Final selection:
At this step, the candidate is given the appointment letter to join the organization on a particular date. The
appointment letter specifies the post, title, salary and terms of employment. Generally, initial appointment is on
probation and after specific time period it becomes permanent.
10. Placement:
This is a final step. A suitable job is allocated to the appointed candidate so that they can get the whole idea
about the nature of the job. They can get adjusted to the job and perform well in future with all capacities and
strengths.