UNIT – 1

INTRODUCTION TO MANAGEMENT

Managers are an indispensable part of every organization. They achieve desired

results through efficient and effective utilization of human and physical resources. Infact
successful managers do not wait for future; they make the future by anticipating and
adjusting to changing circumstances in an intelligent manner.

Organizations have a variety of goals. They usually direct their energies and
resources to achieve these goals. Organizations possess human as well as non-human
resources (plant, equipment, land, money, etc.) that are put to use in the service of
specific goals. Management is the force that unifies human as well as non-human
resources in the service of organizational goals. It is a process of getting results with and
through people.

Manpower

Money Materials

MANAGEMNT

Methods Machinery

Definitions of Management:-

Management: Management is a process of planning, organizing, staffing, directing and

controlling.

Management is the art of getting things done through and with the people in
formally organized groups.
- Harold Koontz

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 Management is a task of planning, coordinating, motivating and controlling the
efforts of others towards a specific objective.
-J.L. Lunday
Management is process of designing and maintaining and environment in which
individuals, working together in groups, accomplished their aims efficient and effectively.
- Henry Wehrich

Characteristics / Nature of Management:-

Management is an activity holds that human and physical resources are to be guided in
such a manner that organizational goals are achieved efficiently. The main characteristics
of management may be explained as follows:
1. Goal oriented:
Management is always aimed at achieving certain specified objective. It has no
justification to exist without objectives. Human and physical resources are directed
by the management to accomplish the predetermined goals.
2. Integrates human and physical resources :
The key for success lies in integrating human efforts with physical and financial
resources, such as machinery, building, financial assets etc. of an organization.
Management plays a crucial role in this regard.
3. Ongoing activity :
The need for management continues as long as an organization an organized
activity exists. Thus management is a continuous process without breaks and
gaps.

4. Group activity :
Management involves the use of group efforts in the pursuit or predetermined
objectives. It cannot be seen in an activity performed by a single person, though the
management skills are seen in the way the activity is undertaken.
5. Management is universal / pervasive :
The need for management exists for all types of organization, e.g., club, army,
universities, hospitals, government, business. Simply, it can be stated that
wherever more than one person engaged for accomplishing a common goal, the
need for management exits. Management is essential element of organized activity
irrespective of the type or size of an organization.
6. Management is dynamic :
Management is dynamic and growth-oriented function. It tries to visualize
problems before they turn into emergencies and takes suitable steps. It proposes to
take actions to make the desired results to come to pass. According to Drucker,
―managers do not wait for the future, they make the future‖.
7. Management is a science and an art :
Management has developed certain principles and laws which have wide
applications. So it is treated as a science. It is also an art, because it is concerned
with the application of knowledge for the solution of organizational problems.
8. Management is a social process :
According to Newman, management is a social process because it deals with
people. To make the best use of human efforts, managers have to create close
cooperation among employees in an organization. They have to use resources for
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 the benefits of society as whole. They have to look after the interests of employees,
shareholders, customers, investors and community.

Objectives of Management:
Management as a process, involving the activities of managers, is directed towards among
the following general objectives
1. Getting maximum results with minimum efforts :
The main objective of management is to secure maximum output with minimum
efforts and resources. Management is basically concerned with utilizing the human
and material resources available to an enterprise for deriving the best results. This
leads to the reduction in the cost of production.
2. Increasing efficiency of factors of production :
Through proper utilization of various factors of production like land, labour and
capital, management leads to avoidance of wastage of time, money and efforts. This
leads to increase in the productivity of all factors of production end. Thus
encourage the growth of an enterprise.
3. Maximum prosperity for employers and employees :
Management aims at securing maximum prosperity for the employers by generating
high profits at least cost. It is also aims at satisfying the employees by providing
adequate remuneration and other benefits for their services.
4. Human betterment and social justice :
Through increased productivity and employment management ensure a better life
in human beings. It raises the standard of living and provides more leisure and
amenities to people. Moreover, management provides justice to all through its
uniform policies.

Significance of Management:

Management is very essential for success running of an enterprise. It ensures proper of

physical and human resources by deriving the best results. It leads to efficient
performance and higher productivity. Arising out these benefits, the importance of
management may be outlined as follows:
1. Helps in achieving group goals :
Management assembles and organizes available sources for the accomplishment of
the goals of an enterprise. It adds effectiveness to the affords of a group persons
organized achieve given objectives.
2. Optimum utilization of resources :
Management utilizes available physical and human resources productively. It
eliminates wastage in all business operations. Thus, it results in effective running
of business activities.
3. Reduces cost :
To secure efficiency operations, management is concerned with reducing costs of
production and increasing the output. Through better planning, organizing and
control, and the use of various cost reduction techniques, efficient management
leads reduced costs and increased output.

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 4. Establishes a sound organization :
Management lays down a pattern of authority, responsibility relationship. The
structure so formed shows the various inter-related positions for which the right
type of persons with right qualifications and training are selected.

5. Maintains equilibrium :
Management helps in organization to survive in its dynamic environment. Good
management enables an enterprise to adjust to the complex and ever-changing
external environment. Thus, management is responsible for survival and stable
growth of an organization.
6. Effective leadership and motivation :
Management makes group effort more effective. It enables employees to move
cooperatively and achieve goals in a coordinated manner. Management creates
teamwork and motivates employees to work harder and better by providing
necessary guidance, counseling and effective leadership.
7. Provides innovation :
Management infuses an enterprise with new ideals, imagination and vision.
8. Improves standard of living :
Management improves the standard of living of people by (a) using scarce resources
efficiently and turning out profits, (b) ensuring the survival of the firm in the face of
continued changes, (c) exploiting new ideas for the benefit of society as a whole,
and (d) developing employee talents and capabilities while at work and prompting
them to show peak performance.
9. Role in National Economic Development :
―Management is the crucial factor in economic and social development‖, says Peter
F. Drucker. The development of a nation depends on the quality of management of
its resources. It is all the more true in a developing country like India, where
productivity is low and the resources are limited.
10. Social benefits :
Management is beneficial to the society as well. It raises the standard of living of
the people by providing good quality products at the lowest prices. It also promotes
peace and prosperity in the society through optimum use of scarce resources.

Functions of Management:
Managers are known by the work they do, the functions they perform. According to
the functional approach, originated by Henry Fayol, in every organization managers
perform certain basic functions in order to achieve results. These functions may be
broadly classified into five categories i.e planning, organizing, staffing, directing and
controlling. A brief discussion of the five basic functions is presented here:
1. Planning :-
Planning is the process of making decisions about future. It is the process of
determining enterprise objectives and selecting future courses of actions necessary
for their accomplishment. It is the process of deciding in advance what is to be
done, when and where it is to be done, how it is to be done and by whom. Planning
provides direction to enterprise activities. It is a blue print of the organization
activities. Planning is a fundamental function of management and all other
functions of management are influenced by the planning process.
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2. Organizing :-
Organizing is concerned with the arrangement of an organization‘s resources
(people, materials, technology and finance) in order to achieve enterprise objectives.
It involves decisions about the division of work, allocation of authority and
responsibility and the coordination of tasks. The function increases in importance
as a firm grows. A structure is created to cope with problems created by growth.
Through this formal structure, the various work activities are defined, classified,
arranged and coordinated. Thus, organizing refers to certain dynamic aspects:
What tasks are to be done? Who is to do them? How the tasks are to be grouped?
Who is to report to whom? Where the decisions have to be made?
3. Staffing :-
Staffing is the function of employing suitable persons for the enterprise. It may be
defined as an activity where people are recruited, selected, trained, developed,
motivated and compensated for manning (man) various positions. Staffing involves
selection of the right person for the right job in right time. It has four important
elements:
a) Recruitment may be defined as the process of attracting the maximum
number of applications for a particular job.
b) Selection is the process of screening the candidates and choosing the best ones
out of them.
c) Training involves imparting the necessary knowledge and skills required for the
performance of a particular job.
d) Compensation is the price paid to the workers for the services rendered to the
organization.

4. Directing :-
The function of guiding and supervising the activities of the subordinates is known
as directing. In the words of George R. Terry, ―Directing means moving to action
and supplying stimulative power to the group‖. Thus directing involves issuing
instructions (or communication) to subordinates. This work involves four important
elements:
a) Leadership is the process of influencing the actions of a person or a group to
attain desired objectives. A manager has to get the work done with and through
people. The success of an organization depends upon the quality of leadership
shown by its managers.
b) Motivation is the work a manager performs to inspire, encourage and impel
people to take required action. In order to motivate employees, manager must
provide a congenial working atmosphere coupled with attractive incentives.
c) Communication is the transfer of information and understanding from one
person to another. It is a way of reaching others with ideas, facts and thoughts.
d) Supervision is seeing that subordinates do their work and do it as directed. It
involves overseeing employees at work.
5. Controlling :-
The objective of controlling is to ensure that actions contribute to goal
accomplishment. In controlling performances are observed, measured and
compared with what had been planned. If the measured performance is found
wanting, the manager must find reasons and take corrective actions. If the
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 performance is not found wanting, some planning decisions must be made, altering
the original plans. If the controlling function is to be effective, it must be preceded
by proper planning. Thus, controlling includes four things:
i. Setting the standards of performance
ii. Measuring actual performance
iii. Comparing actual performance against the standard and
iv. Taking corrective actions to ensure goal accomplishment.

Successful manager involves active participation by manager in the above basic

managerial functions. These functions are interrelated and most managers use a
combination of the four simultaneously to solve the problems facing their companies. All
management functions are related and interrelated to each other as shown below.

Each function blends into the other and each can be performed in any order or sequence,
not necessarily in the order shown above, but tend to performed(normally) in the
planning, organizing, leading and controlling sequence.

Principles of Management
Fayol made a distinction between "elements of management" and "general principles of
management". Besides a systematic analysis of the management process and management
functions, Fayol formulated a set of fourteen principles as guidelines for implementing the
process of management.
These principles may be listed as follows:

1. Division of Work
In any organized situation, work should be divided into compact jobs to be assigned to
individuals. This applies to managerial work and non-managerial work. Division of labour
facilities specialization and improves efficiency, if it is done within reasonable limits.

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2. Authorities and Responsibility
The authority is the official right to a manager to manage people and things. Authority of
a manager goes hand in hand with the responsibility for effective results. In other words,
there should be parity or balance between authority and responsibility vested in a
managerial position.

3. Discipline
Discipline is defined as observance of diligence and respect for seniors and rules and
regulations. Managers as leaders of their work groups should enforce discipline
throughout the organization. Fayol declares that discipline requires good superiors at all
levels. He emphasized the need of discipline among the personnel for the smooth running
of organization. He advocated penalties to prevent in violation.

4. Unity of Command
It means that a subordinate in an organization should be under direct supervision of a
single from whom he should get instructions and to whom be should be accountable. In
other words, every employee should have only one boss. If a subordinate has more than
one boss, to that case conflict and condition in authority and instructions of general
bosses would result.

5. Unity of Direction
Fayol advocates one head, one plan for a group of activities having same objective. In
other words, a set of activities having the same objective should be under the direction of
a single manager. Similarly, there should be one plan of action for such a set of activities
because the objective is the same. This principle promotes smooth coordination of
activities, efforts and resources.

6. Subordination of Individual Interest to Group Interest

The collective good and common interest of the organization should prevail over the
narrow, sectional and self-interest of its members of an organization for the welfare of
both the organization and the members.

7. Remuneration
Compensation for work done should be fair to both employees and
employers. Remuneration as well the methods of payment in an organization should be
fair so as to afford maximum satisfaction both to the organization and its employees.

8. Centralization
According to Fayol, everything which reduces the importance of subordinates role is
centralization and that which increases it, is decentralization. In his opinion, the question
of centralization and optimum degree in particular case. There should be a proper
combination and decentralization in an organization based on a consideration of several
internal and external factors.

9. Scalar Chain (The Hierarchy)

Fayol defines the scalar chain as the chain of superiors ranging from the ultimate
authority (i.e. top authority) to the lowest ranks. It is also known as hierarchy of

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management. Every communication should follow the prescribed route, i.e. the proper
channel. Authority relationships are said to be scalar when subordinates report to their
immediate superiors and when their superiors, in turn, directly report as subordinates, to
their superiors.

10. Order
Order relates to both persons and things. It means a systematic arrangement of materials
and systematic placement of people in the organization. In material order, everything
should be in its proper place and there should be a place for everything. For social
order there should be a place assigned to each employee, and each employee should be in
the place assigned. The right man in the right place is the ideal here.

11. Equity
Equity means combination of fairness, kindliness and justice. Equity motivates the
workers to perform their duties. Besides, it promotes a friendly atmosphere between
superiors and subordinates.

12. Stability of Tenure of Personnel

Management should strive to minimize employee turnover (i.e. changes in staff). In other
words efforts should be made to achieve relative stability and continuity of tenure of the
personnel. This could be achieved by attractive remuneration and honorable treatment of
personnel. Stability and continuity of personnel promote teamwork, loyalty and economy.

13. Initiative
It refers to the freedom to propose a plan and execute it. Management should encourage
subordinates to take desirable initiative in thinking out plans and executing them.
Extending opportunities and freedom to contribute their best could do this.

14. Esprit de corps

Esprit de corps means the spirit of loyalty and devotion, which unites the members of a
group or society. It is a sense of respect and belongingness to one's organization. This
principle stresses the need for team spirit, cordial relations, and co-operations among the
personnel.
It is to be noted that Fayol made is clear that he had no intention to close the list of
principles or make them inflexible.

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 Patterns of management

The study of theories is more important as they guide management decisions; they
shape our organization make us aware of the business environment and make a source of
new ideas. Now, we shall study these theories in order to know the management thought
is developed; principles of management are evolved and different approaches to
management are designed. The first among the management theories is scientific
management.

Scientific Management:-
Fredrick Winslow Taylor (March 20, 1856 - March 21, 1915) commonly known
as ’Father of Scientific Management’ started his career as an operator and rose
to the position of chief engineer. He conducted various experiments during this
process which forms the basis of scientific management. It implies application of
scientific principles for studying & identifying management problems.

According to Taylor, ―Scientific Management is an art of knowing exactly what you

want your men to do and seeing that they do it in the best and cheapest way‖. In
Taylors view, if a work is analyzed scientifically it will be possible to find one best
way to do it.
Hence scientific management is a thoughtful, organized, dual approach towards the
job of management against hit or miss or Rule of Thumb.
According to Drucker, ―The cost of scientific management is the organized study of work,
the analysis of work into simplest element & systematic management of worker‘s
performance of each element‖.

Principles of scientific management:-

1. Time Study
a. It is a technique which enables the manager to ascertain standard time
taken for performing a specified job.
b. Every job or every part of it is studied in detail.
c. This technique is based on the study of an average worker having reasonable
skill and ability.
d. Average worker is selected and assigned the job and then with the help of a
stop watch, time is ascertained for performing that particular job.
e. Taylor maintained that Fair day‘s work should be determined through
observations, experiment and analysis by keeping in view an average worker.

Standard Time × Working Hours = Fair Day‘s Work

2. Motion Study
a. In this study, movement of body and limbs required to perform a job are
closely observed.
b. In other words, it refers to the study of movement of an operator on machine
involved in a particular task.
c. The purpose of motion study is to eliminate useless motions and determine
the bet way of doing the job.

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 d. By undertaking motion study an attempt is made to know whether some
elements of a job can be eliminated combined or their sequence can be
changed to achieve necessary rhythm.
e. Motion study increases the efficiency and productivity of workers by cutting
down all wasteful motions.
3. Development of Science for each part of men’s job (replacement of rule of
thumb)
a. This principle suggests that work assigned to any employee should be
observed, analyzed with respect to each and every element and part and time
involved in it.
b. This means replacement of odd rule of thumb by the use of method of
enquiry, investigation, data collection, analysis and framing of rules.
c. Under scientific management, decisions are made on the basis of facts and
by the application of scientific decisions.
4. Differential Piece Wage Plan
a. This tech of wage payment is based on efficiency of worker.
b. The efficient workers are paid more wages than inefficient one.
c. On the other hand, those workers who produce less than standard no. of
pieces are paid wages at lower rate than prevailing rate i.e. worker is
penalized for his inefficiency.
d. This system is a source of incentive to workers who improving their
efficiency in order to get more wages.
e. It also encourages inefficient workers to improve their performance and
achieve their standards.
f. It leads to mass production which minimizes cost and maximizes profits.
5. Group Harmony
a. F. W. Taylor emphasized upon group harmony which can be achieved
through satisfying the needs of the group members.
b. Eliminating the dissatisfaction and frustration of group members.
c. Maintaining the sound interpersonal relations among the group members
and involving them in various group activities.
6. Cooperation between workers and management
He also advocated sound employee-employer relations which should result in
cooperation between workers and the management. Sound relations can be
achieved in the following ways:

a. Management should understand the workers needs and take steps to satisfy
them.
b. Workers should understand the organizational requirements like increasing
productivity, sales, profitability etc. and maximizing the contribution.

7. Scientific Selection, Training & Development of Workers

a. There should be scientifically designed procedure for the selection of
workers.
b. Physical, mental & other requirement should be specified for each and every
job.
c. Workers should be selected & trained to make them fit for the job.
d. The management has to provide opportunities for development of workers
having better capabilities.
e. According to Taylor efforts should be made to develop each employee to his
greatest level and efficiency & prosperity.

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8. Standardization
a. It implies the physical attitude of products should be such that it meets the
requirements & needs of customers.
b. Taylor advocated that tools & equipments as well as working conditions
should be standardized to achieve standard output from workers.
c. Standardization is a means of achieving economics of production.
d. It seems to ensure -
1. The line of product is restricted to predetermined type, form,
design, size, weight, quality. Etc
2. There is manufacture of identical parts and components.
3. Quality & standards have been maintained.
4. Standard of performance are established for workers at all levels.
9. Method study
F.W. Taylor believed that methodological and systematic movements of materials
ensure fast movement of materials in the factory, avoidance of unnecessary
transportation of material from one stage to another stage of production,
reduction of distance from one machine to another machine, reduction of the
transportation time etc.

10. Functional Foremanship

a. Taylor advocated functional foremanship for achieving ultimate specification.

b. This technique was developed to improve the quality of work as single
supervisor may not be an expert in all the aspects of the work.
c. Therefore workers are to be supervised by specialist foreman.
d. The scheme of functional foremanship is an extension of principle pf
specialization at the supervisory level.
e. Taylor advocated appointment of 8 foramen, 4 at the planning level & other 4
at implementation level.
11. Division of Responsibility
a. This principle determines the concrete nature of roles to be played by
different level of managers & workers.
b. The management should assume the responsibility of planning the work
whereas workers should be concerned with execution of task.
c. Thus planning is to be separated from execution.

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 12. Fatigue study
Workers are human beings prone (level) to fatigue on account of over work, stress
and strain, etc. Thus fatigue (weakness) of all kinds- physical or mental- has an
adverse effect on the workers health and efficiency. This study helps in diminishing
fatigue among the workers.

Criticism of scientific management

1. The concept of functional foremanship is not feasible in practice as it violates the
principle of unity of command.
2. Taylorism is confined mostly to production management and fully ignores the areas
of finance, marketing, accounting and personnel.
3. The use of the word ‗scientific‘ before ‗management‘ is objected to because what is
actually meant by scientific management is nothing but a scientific approach to
management.
4. Trade unionists object to it as the wages of the workers are not increased in direct
proportion to the increase in productivity.

Behavioral science approach:

As management research continued in the 20th century, questions began to come up

regarding the interactions and motivations of the individual within organizations.
Management principles developed during the classical period were simply not useful in
dealing with many management situations and could not explain the behavior of
individual employees. In short, classical theory ignored employee motivation and behavior.
As a result, the behavioral school was a natural outgrowth of this revolutionary
management experiment.

The behavioral management theory is often called the human relations movement
because it addresses the human dimension of work. Behavioral theorists believed that a
better understanding of human behavior at work, such as motivation, conflict,
expectations, and group dynamics, improved productivity.

The theorists who contributed to this school viewed employees as individuals, resources,
and assets to be developed and worked with — not as machines, as in the past. Several
individuals and experiments contributed to this theory.

Elton Mayo's contributions came as part of the Hawthorne studies, a series of

experiments that rigorously applied classical management theory only to reveal its
shortcomings. The Hawthorne experiments consisted of two studies conducted at the
Hawthorne Works of the Western Electric Company in Chicago from 1924 to 1932. The
first study was conducted by a group of engineers seeking to determine the relationship of
lighting levels to worker productivity. Surprisingly enough, they discovered that worker
productivity increased as the lighting levels decreased — that is, until the employees were
unable to see what they were doing, after which performance naturally declined.

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A few years later, a second group of experiments began. Harvard researchers Mayo and F.
J. Roethlisberger supervised a group of five women in a bank wiring room. They gave the
women special privileges, such as the right to leave their workstations without
permission, take rest periods, enjoy free lunches, and have variations in pay levels and
workdays. This experiment also resulted in significantly increased rates of productivity.

In this case, Mayo and Roethlisberger concluded that the increase in productivity resulted
from the supervisory arrangement rather than the changes in lighting or other associated
worker benefits. Because the experimenters became the primary supervisors of the
employees, the intense interest they displayed for the workers was the basis for the
increased motivation and resulting productivity. Essentially, the experimenters became a
part of the study and influenced its outcome. This is the origin of the term Hawthorne
effect, which describes the special attention researchers give to a study's subjects and the
impact that attention has on the study's findings.

The general conclusion from the Hawthorne studies was that human relations and the
social needs of workers are crucial aspects of business management. This principle of
human motivation helped revolutionize theories and practices of management.

System approach:

A system is a set of interrelated but separate parts working towards a common purpose.
The arrangement of elements must be orderly and there must be proper communication
facilitating interaction between the elements and finally this interaction should lead to
achieve a common goal.

System theory reveals to us that the activity of any segment of an organization, affects in
different degrees, the activity of every other segment.

Key concepts of systems approach

i. Subsystem
ii. Synergy
iii. Open System
iv. Closed System
v. System Boundary
vi. Flows
vii. Feedback
1. Subsystem: subsystems are those parts which make up the whole system. Each
system in turn may be a subsystem of a still larger system. Thus a department is a
subsystem of a factory, which is subsystem of a firm. This is a subsystem of an
industry which is a national economy, which is a subsystem of the world economic
system.

2. Synergy: Synergy is the situation in which the whole is greater than the sum of its
parts. In organization terms synergy means those departments that interact co-
operatively are more productive than they would be, if they operated in isolation.

3. Open System: It is a system that interacts with its environment. All organization
interacts with their environment, but they extent to which they do so varies.
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 4. Closed System: It is system that does not interact with its environment.

5. System Boundary: It is the boundary that separates each system from its
environment. It is rigid in a closed system from the environment. It is rigid in a
closed system while flexible in an open system.

6. Flows: A system has flows of information, materials and energy. These enter the
system from the environment as inputs (like raw materials), undergo
transformation process within the system (like production services) and exist in the
system as outputs (like products services). (Fig .2.2shows the flows and feedback in
an open system).

7. Feedback: It is the part of system control in which the results of actions are
returned to the individual, allowing work procedures to be analyzed and corrected.

System approach helps the dynamic and interrelated nature of organizations

to plan for actions and anticipate consequence and mutual effects. It helps the
general managers to maintain balance among various subsystems and the
organization. Thus a major contribution of the systems approach results from its
strong emphasis on the interrelatedness or mutuality of various subsystems of the
organization. Treatment of the organization as an open system is another
contribution of system of systems approach.

Contingency approach:

This approach is also called situational approach. This approach was developed by
managers, consultants and researchers who tried to apply the concept of the major
schools to real life situations. Contingency approach is usually be called Situational
Approach, where there is no body universally applicable set of management principles
(rules) by which to manage organizations. It depends on the situation and condition of the
organization and workers.
Organizations are individually different, face different situations and require different
ways of managing. For practicing managers, we can make them benefit by using the
Contingency Approach.
As practicing managers, they will face many differences in organizations. From the
organization size, routines of task technology, environmental uncertainty and individual
differences. By contingency approach, we can make some ways in order to increase the
performance of the practicing managers. For the organization size, we can encourage
them with some approaches that support them in working although there are so many
problems of coordination.
Routine of task technologies that require organizational structures, leadership styles and
control systems can be a motivation for them, because when they are practicing
managers, they will try to find ways to encounter and minimize the problems they will
face. Besides, there are environmental uncertainty and individual differences that
practicing managers will face.
By these happen, they will be motivated and they will do their best in order to keep them
away from those things, they will optimize their tasks and jump into a competition among
them that point to the results of their work so that their output will be good and admitted
by the organizations.

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So, by doing contingency approach, giving motivation and some approaches in order to
encourage the practicing managers, they will benefit. The output will be as long as we
desire and the morale of the managers will be increased and triggered to do and give their
best in working. Contingency approach is needed and it make practicing managers can
benefit. It is also helping us in understanding management.
Management by objectives (MBO):

Management by objectives (MBO) is a systematic and organized approach that allows

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

Management by Objectives (MBO) was first outlined by Peter Drucker in 1954 in his book
'The Practice of Management'. In the 90s, Peter Drucker himself decreased the
significance of this organization management method, when he said: "It's just another
tool. It is not the great cure for management inefficiency.

Management by objectives is defined by ―A comprehensive managerial system that

integrates many key managerial activities in a systematic manner i.e consciously directed
towards the effective an efficient achievement of organizational & individual objectives.‖

Features of MBO:
1. Management by Objectives is a philosophy or a system, and not merely technique.
2. It emphasizes participative goal setting.
3. It clearly defines each individual responsibility in terms of results.
4. If focuses attention on what must be accomplished (goals0 rather than on how it is to
be accomplished.
5. It converts objective needs into personal goals at every level in the organization.
6. It establishes standards or yardsticks (goals) as operation guides and also as basis of
performance evaluation.
7. It is a system intentionally directed toward effective and efficient attainment of
organizational and personal goals.
8. MBO process (or management by Objective cycle or key elements of management by
Objectives or minimum requirements of management by objectives.

Steps in MBO /Process of MBO:

There are four important and essential steps or elements in the management by
Objectives process as follows:
Setting Objectives:

Goal-setting or objective setting is a multistage process. It starts with the examining of the
current stat3e of affaires, level of efficiency, threats, and opportunities. Then the key
result areas are identified, such as product markets, improved services, lowered costs,
work simplification, employee motivation, profitability innovation and social responsibility.
The performance of these areas is critical for organization in the sense that failure in

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these areas may result in failure of the organization. And this is why they are known as
―key‖ result areas. Peter says, objectives are important in every area where performance
and results directly affect the survival and prosperity of business.

Developing Action Plans:

Set objectives must be translated into action plans. It requires assignment of specific
responsibilities to different departments, division, and individuals. It also requires
allocation of necessary resources needed to perform the assigned responsibilities. Time
dimensions are also to be decided in order that targets are reached without any
unwarranted delays.

Periodic Review or Monitoring The Progress:

After setting objectives and developing action plans, it is necessary to establish a proper
monitoring system with a view to regularly keeping the activities. He progress is monitored
without day path leading to the ultimate objective. It is ensured that the deviations found,
if any, are thoroughly discussed and immediate corrective actions are taken to set them
right on the course. Such a regular monitoring and periodic review not only provide
feedback which is essential for completion of work in time. But also motivates the
managers accountable for performance. Periodic review and monitoring are done at
departmental level generally.

Performance appraisal:

This is the last phase of MBO program that evaluates performance annually. The annual
review or appraisal is comprehensive and is done at the organization level. The actual
annual results are evaluated against the set objectives. Such assessment is also used for
determining targets for next year, for modification in standards (goals0 if needed, and for
taking corrective actions in order to avoid deviations from predetermined objectives.

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Advantages of MBO:
• MBO programs continually emphasize what should be done in an organization to
achieve organizational goals.
• MBO process secures employee commitment to attaining organizational goals.
Disadvantages of MBO:
• It over-emphasizes the setting of goals over the working of a plan as a driver of
outcomes.
• It did not address the importance of successfully responding to obstacles and
constraints as essential to reaching a goal.

SWOT Analysis

In order to analyze and understand the external and internal business environments,
organizations turn to SWOT analysis – an acronym for strengths, weaknesses, opportunities,
and threats. The idea is simple, the strengths and weaknesses of an organization are
matched with the threats and opportunities of the environment to formulate an
effective strategy. In this article, we will look at SWOT analysis along with some examples.

In order to create an effective strategy, it is important that the organization capitalizes on the
opportunities by using its strengths. Also, it must avoid the threats by reducing the impact
of the weaknesses.

Elements of SWOT Analysis

 Strengths – are the aspects of an organization that make it better than its
competitors. For example, the strength of a company can be having one of the best
technological tools in the market. A thorough analysis can help the company use it to
improve its business.

 Weaknesses – areas where the organization needs to improve to remain competitive in

the industry. Some examples of weaknesses are high debts, lack of capital, inadequate
supply chain, etc.

 Opportunities – are external factors that can help an organization in gaining

competitive advantage. For example, if a country changes its import laws, then a car
exporter can increase his sales by taking advantage of this opportunity.

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 Threats – are factors which have the potential to cause harm to an organization. For
example, a drought is a threat to a crop-producing company as it can destroy the crop.
A SWOT Analysis helps an organization identify its core strengths and weaknesses as well as
opportunities and threats and create a strategy to achieve success. It can be used for specific
segments like production, marketing, and sales.

Planning
Planning is the primary function of management. It is the important process of deciding
business objectives and charting out the method to accomplish these goals. This includes
decision of what type of activity is to be done, where to be done and how the results to be
analyzed.
Definition: "Planning is the fundamental management function, which involves deciding
beforehand, what is to be done, when is it to be done, how it is to be done and who is
going to do it".

"It is an intellectual process which lays down an organisation’s objectives and

develops various courses of action, by which the organisation can achieve those
objectives. It chalks out exactly, how to attain a specific goal".

Planning Process

The planning function of management is one of the most crucial ones. It involves setting the
goals of the company and then managing the resources to achieve such goals. As you can
imagine it is a systematic process involving eight well thought out steps. Let us take a look
at the planning process.

1] Recognizing Need for Action

An important part of the planning process is to be aware of the business opportunities in the
firm‘s external environment as well as within the firm. Once such opportunities get
recognized the managers can recognize the actions that need to be taken to realize them. A

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realistic look must be taken at the prospect of these new opportunities and SWOT
analysis should be done.

Say for example the government plans on promoting cottage industries in semi-urban areas.
A firm can look to explore this opportunity.

2] Setting Objectives
This is the second and perhaps the most important step of the planning process. Here we
establish the objectives for the whole organization and also individual departments.
Organizational objectives provide a general direction, objectives of departments will be more
planned and detailed.

Objectives can be long term and short term as well. They indicate the end result the
company wishes to achieve. So objectives will percolate down from the managers and will
also guide and push the employees in the correct direction.3] Developing Premises

Planning is always done keeping the future in mind, however, the future is always uncertain.
So in the function of management certain assumptions will have to be made.
These assumptions are the premises. Such assumptions are made in the form of forecasts,
existing plans, past policies, etc.

These planning premises are also of two types – internal and external. External assumptions
deal with factors such as political environment, social environment, the advancement of
technology, competition, government policies, etc. Internal assumptions deal with policies,
availability of resources, quality of management, etc.

These assumptions being made should be uniform across the organization. All managers
should be aware of these premises and should agree with them.

4] Identifying Alternatives
The fourth step of the planning process is to identify the alternatives available to the
managers. There is no one way to achieve the objectives of the firm, there is a multitude of
choices. All of these alternative courses should be identified. There must be options
available to the manager.

Maybe he chooses an innovative alternative hoping for more efficient results. If he does not
want to experiment he will stick to the more routine course of action. The problem with this
step is not finding the alternatives but narrowing them down to a reasonable amount of
choices so all of them can be thoroughly evaluated.

5] Examining Alternate Course of Action

The next step of the planning process is to evaluate and closely examine each of the
alternative plans. Every option will go through an examination where all there pros and cons
will be weighed. The alternative plans need to be evaluated in light of the organizational
objectives.

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For example, if it is a financial plan. Then it that case its risk-return evaluation will be done.
Detailed calculation and analysis are done to ensure that the plan is capable of achieving the
objectives in the best and most efficient manner possible.

6] Selecting the Alternative

Finally, we reach the decision making stage of the planning process. Now the best and most
feasible plan will be chosen to be implemented. The ideal plan is the most profitable one with
the least amount of negative consequences and is also adaptable to dynamic situations.

The choice is obviously based on scientific analysis and mathematical equations. But a
managers intuition and experience should also play a big part in this decision. Sometimes a
few different aspects of different plans are combined to come up with the one ideal plan.

7] Formulating Supporting Plan

Once you have chosen the plan to be implemented, managers will have to come up with one
or more supporting plans. These secondary plans help with the implementation of the main
plan. For example plans to hire more people, train personnel, expand the office etc are
supporting plans for the main plan of launching a new product. So all these secondary plans
are in fact part of the main plan.

8] Implementation of the Plan

And finally, we come to the last step of the planning process, implementation of the plan.
This is when all the other functions of management come into play and the plan is put into
action to achieve the objectives of the organization. The tools required for such
implementation involve the types of plans- procedures, policies, budgets, rules, standards
etc.

Decision Making:

"The process of deciding about something important, especially in a group of people or in

an organization".

―Decision-making involves the selection of a course of action from among two or more
possible alternatives in order to arrive at a solution for a given problem‖.

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Decision making is the process of making choices by identifying a decision, gathering
information, and assessing alternative resolutions.
Using a step-by-step decision-making process can help you make more deliberate,
thoughtful decisions by organizing relevant information and defining alternatives. This
approach increases the chances that you will choose the most satisfying alternative
possible.

Step 1: Identify the decision

You realize that you need to make a decision. Try to clearly define the nature of the
decision you must make. This first step is very important.
Step 2: Gather relevant information
Collect some pertinent information before you make your decision: what information is
needed, the best sources of information, and how to get it. This step involves both
internal and external ―work.‖ Some information is internal: you‘ll seek it through a
process of self-assessment. Other information is external: you‘ll find it online, in
books, from other people, and from other sources.
Step 3: Identify the alternatives
As you collect information, you will probably identify several possible paths of action,
or alternatives. You can also use your imagination and additional information to
construct new alternatives. In this step, you will list all possible and desirable
alternatives.
Step 4: Weigh the evidence
Draw on your information and emotions to imagine what it would be like if you carried
out each of the alternatives to the end. Evaluate whether the need identified in S tep 1
would be met or resolved through the use of each alternative. As you go through this
difficult internal process, you‘ll begin to favor certain alternatives: those that seem to
have a higher potential for reaching your goal. Finally, place the alternatives in a
priority order, based upon your own value system.
Step 5: Choose among alternatives
Once you have weighed all the evidence, you are ready to select the alternative that
seems to be best one for you. You may even choose a combination of alternatives. Your
choice in Step 5 may very likely be the same or similar to the alternative you placed at
the top of your list at the end of Step 4.
Step 6: Take action
You‘re now ready to take some positive action by beginning to implement the
alternative you chose in Step 5.
Step 7: Review your decision & its consequences
In this final step, consider the results of your decision and evaluate whether or not it
has resolved the need you identified in Step 1. If the decision has not met the identified
need, you may want to repeat certain steps of the process to make a new decision. For
example, you might want to gather more detailed or somewhat different information or
explore additional alternatives.

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