Total quality management (TQM): an overview

In the manufacturing industry, product quality has become a key factor in

determining a firm’s success or failure in the global marketplace. Advanced,
highly reliable manufacturing methods have made it possible to achieve very
high standards of product quality. As a result, more and more firms are
making product quality a keystone of their competitive strategy. The success
of many major Japanese companies is truly rooted in their long‐term
commitment to the improvement of quality. The improvement of production
quality is a long‐term commitment to continuous improvement in every
aspect of the production process. Today’s competitive market, in almost
every category of products and services, is characterized by accelerating
changes, innovation, and massive amounts of new information. Changing
customer needs fuels much of the rapid evolution in markets. Most
organizations that have been successful with their quality improvement effort
have adopted an integrated approach commonly referred to as total quality
management (TQM).

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journalCode=bl
 What Is Total Quality Management

Total quality management is a management system for a customer focused

organization that involves all employee in continual improvement of all
aspects of the organization. TQM uses strategy, data, and effective
communication to integrate the quality principles into the culture and
activities of the organization.

Principles Of TQM

1- Be Customer focused: Whatever you do for quality improvement,

remember that ONLY customers determine the level of quality. Whatever you
do to foster quality improvement, training employees, integrating quality into
processes management, ONLY customers determine whether your efforts
were worthwhile.

 2-Insure Total Employee Involvement: You must remove fear from work

place, then empower employee... you provide the proper environment.

3- Process Centered: Fundamental part of TQM is to focus on process

thinking.

4- Integrated system: All employee must know the business mission and

vision. An integrated business system may be modeled by MBNQA or  ISO
9000

5- Strategic and systematic approach: Strategic plan must integrate

quality as core component.

6- Continual Improvement: Using analytical, quality tools, and creative

thinking to become more efficient and effective.

7- Fact Based Decision Making: Decision making must be ONLY on data,

not personal or situational thinking.
8- Communication: Communication strategy, method and timeliness must
be well defined.

TQM Implementation Approaches

You can't implement just one effective solution for planning and
implementing TQM concepts in all situations. Below we list generic models for
implementing total quality management theory:  

1- Train top management on TQM principles.  

2- Assess the current: Culture, customer satisfaction, and quality

management system.

3- Top management determines the core values and principles and

communicates them.

4- Develop a TQM master plan based on steps 1,2,3.

5- Identify and prioritize customer needs and determine products or service

to meet those needs.

6- Determine the critical processes that produces those products or services.

7- Create process improvement teams.

8- Managers supports the efforts by planning, training, and providing

resources to the team.

9- Management integrates changes for improvement in daily process

management. After improvements standardization takes place.

10- Evaluate progress against plan and adjust as needed.

11- Provide constant employee awareness and feedback. Establish an

employee reward/ recognition process.

Strategies To develop TQM

1-TQM elements approach: Take key business process and use TQM Tools to
foster improvement. Use quality circles, statistical process control, taguchi
method, and quality function deployment.  

2 - The guru approach: Use the guides of one of the leading quality thinker. 

3- Organization model approach: The organization use bench marking or

MBNQA as model for excellence. 

4- Japanese total quality approach: Companies pursue the deeming prize use

deeming principles.
 https://www.quality-assurance-solutions.com/Total-quality-
management.html

Total Quality Management (TQM)

Quality Control processes in business are aimed at ensuring a good or

service is of the standard of quality that the manufacturer or supplier has
determined. Under the concept of  Total Quality Management
(TQM), quality control extends to every aspect of the way a business
operates. In the case of a manufactured good it means that during design,
production, and servicing the quality of work and materials must be up to the
standard laid down.

The emphasis put on quality control in many countries in recent years was
to a large extent a response to the competitive edge Japanese businesses
had achieved by paying attention to quality. However, it was an American
management consultant, W. Edwards Deming, who brought the message to
the Japanese that “the consumer is the most important part of the production
line”, and who taught them methods that would help them control quality. He
was the pioneer of total quality management theories and practices, used the
concept of quality as an instrument to increase the productivity and success
of organizations throughout Japan in the 1950’s. The varieties of methods in
which this quality concept can be implemented into an organization are solely
dependent on the organizational mind-state. According to Deming, as quality
is increased, costs decrease. This is fundamentally different than the typical
business concepts taught in many management majors, which insist that an
increase in quality comes at a cost to the company as a decrease in profits.
Deming’s philosophy of quality can be broken down into four axioms:

1. Quality and costs are not opposites, or trades-offs, with one being
improved at the expense of the other. Instead both can be constantly
improved.
2. The meaning of quality is different from conventional views that
mistake exotic materials and fail-safe designs for quality. Quality is best
understood from the point of view of the customer, but one important
component of quality is improvement of uniformity.
3. Variation is a naturally occurring phenomenon. It is not an exception or
fault. Variation is treated differently depending on whether we are dealing
with a stable or unstable system. A stable system creates both success and
failures. Lowering the number of defects in a stable system can only be
achieved by working on the system.
4. Cooperation is a fundamental ingredient that leads to improvement.
Competition is often at work and helps determine which products and
 which companies survive, but there are times when competition is
irrelevant and times when competition is inappropriate.

Another American, Joseph Juran, also played a key role in promoting the idea
that quality is all-important and in developing quality. Among the steps he
laid down for improving quality were:

 Build awareness of the need to maintain quality;

 Recognize the opportunities for improvement;
 Set goals and make changes that will help achieve those goals (set up
projects to solve specific problems, for example);
 Involve the workforce fully through training, communication, and
recognition;
 Review systems and processes regularly so as to maintain momentum.

The enthusiasm that emerged for total quality management in the 1980s

has had a far-reaching effect in putting quality high on the list of corporate
priorities and reducing or even eliminating the “quality lead” that Japanese
companies had enjoyed. It is perhaps because such strides have been made
that the Total Quality Management (TQM) concept has come into conflict with
other corporate aims, as companies balance the desirability of quality with,
say, the need to reduce costs.

The Japanese success story has, however urged some managers in western
and other countries to wake up to the quality issue. People have recognized
that Japanese success was not only due to national, cultural and social
differences but reflected strongly a new attitude and desire of Japanese
management to ensure that consumers receive what is promised. The 1980’s
therefore became an era of competitive challenge with increasing number of
companies adopting Quality Management System. The development
of International Quality Assurance Management system (ISO
9000) standards in the 1980’s -1990’s has also acted as a catalyst in many
countries. During 1990’s and beyond, the Quality Management has become
International Management Philosophy.
Total Quality Management (TQM) is a method for an organization to
effectively implement quality enhancing strategies into their functional
systems, as well as their managerial departments, in order to maintain
continuous improvements of quality for all products and services. This
implementation of quality improving initiatives can be facilitated not only by
mathematical processes and models, but organizational consistency and
excellence. Total Quality Management incorporates the features like:
products that meet customers’ needs, and control of processes to ensure
their ability to meet design requirements and quality improvements for the
continued enhancement of quality.

Customer is the driving force behind quality of design. Customer satisfaction

is based on the subjective comparison between the expectations and the
actual quality received. The sales of the product clearly generate the hard
currency; one must also recognize that customer satisfaction is derived from
ancillary services associated with product and the sensitivity and timeliness
with which the problems are handled. Quality system should possess a sound
behavioral as well as technical perspective. To develop such a quality system,
the management should research the customer preferences, train employees
to be sensitive to customer needs and reward employees for making
customer satisfaction a primary objective. 

Total Quality Management (TQM) is based on the premise that any production
and/or service can be improved and that successful organization must
consciously seek out and exploit improvement. The essence of TQM is
continuous improvement through collaborative efforts across functional
boundaries and between organizational levels with the ultimate goal of
providing customer satisfaction. Each work in TQM has a special significance.
Total means here comprehensive ways of dealing with complex sets of
interacting issues – involving everyone at all levels, addressing all major
issues. It is also referred to as performance encompassing both the
quantitative and qualitative aspects of product/service. “Quality” can be
defined in variety of ways. The following definition takes into account several
ideas expressed by quality Gurus. Quality means meeting customers (agreed)
requirements, formal and informal at lowest cost, first time and every time.

Total quality means that everyone should be involved in quality at all levels
and across all functions ensuring that quality is achieved according to the
requirements in everything they do. The word “Total” injects a systematic
meaning idealness into quality. “Management” in TQM denotes the system
supporting the achievement of quality and performance on a continuously
improving path. The management responsibility refers to the need for
everyone to be responsible for managing their own jobs, which incorporates
managers with workers and all others concerned. Thus, Total Quality
Management (TQM) portrays a whole system view for quality management.

An organization that endures itself to the ultimate customer also fulfills

commitments in terms of performance levels demanded by a number of
related sets of customers. Such customers could be shareholders who expect
a sizable return on their investment; employee’s serving such an institution.
Naturally respects it for providing a livelihood, the suppliers to the company
as well as the dealers who distribute products are very similar to employees
of the company, they enjoy considerable confidence in being associated with
its longterm planning. In turn, they are motivated to make the best use of
their services available. All these sets of people are referred to as
stakeholders, whether they are users of the product, employees,
shareholders, vendors or dealers. They all have the expectation of qualitative
and quantitative performance being fulfilled by the organization they
patronize and serve.

At the product level, a customer may consider performance reflected in

material factors such as safety, reliability and value for money. In terms of
service, performance can mean the delivery of the product on time at
committed schedules without any hidden costs. However, a customer can
equally evaluate organizational performance from the standpoint of
qualitative measures e.g. prestige associated with use of the product and
pleasure or ease of use associated with the product and the quality of the
customer support. If the customer feels confident in dealing with the product,
it generates brand loyalty on an ongoing process. This in turn generates a
feeling where the customer confidently recommends the product and the
company to friends and associates.
The relevance of Total Quality Management (TQM) to business is world-class
productivity. Basically, the essence of TQM is value addition. A business unit
draws on its resources and adds value in order to create an output that
delivers customer delight. TQM perspective of productivity recognizes both
the qualitative and quantitative aspects of relationship between inputs and
outputs. It recognizes the qualitative aspects. of input other than considering
organization as a mechanical system transforming inputs into outputs. It
considers creative talent as well s the motivation with which people engage
themselves in the’ creation of the final output. Value addition is not merely
reflected in physical transformation in shape, size, structure but the
organizational learning that occurs in the process and the patented know
how. The output from the system does not confine itself only to physical
goods but includes the added dimensions of prestige, pride of ownership,
warmth and pleasure in long lasting relationships with customer.

https://www.mbaknol.com/operations-management/total-quality-
management-tqm/

Total Quality Management (TQM) Approach

Quality is a continuous process that can be broken anywhere in the system

of supply and customer service. By letting every person know how their
activities help fulfill customer’s requirements, the organization can motivate
their employees and supplies to provide quality consistently. They must also
realize that throughout the organization they will have both internal
customers and’ supplies to those outside the organization. In general, a
process helps to change a set of inputs into desired output in the form of
products or services. Proper investigation of the inputs and outputs of the
organization help to determine the action to be taken for the improvement of
the quality. The quest for continuous improvement of quality is a continuous
cycle. The process on which continuous improvement is based is generally
known as “Deming Wheel“. The wheel represented below shows a
continuous movement in a certain direction. The idea behind this that the
input, which generates activities with measurable output, is process and the
perfection of the process is the ultimate objective.
In a Deming’s wheel, the PLAN defines the process, which ensures
documentation and sets measurable objectives against it. The DO executes
the process and collects the information required. The CHECK analyses the
information in suitable format. The ACT obtains corrective action using Total
Quality Management (TQM) techniques and methods and assesses future
plans. At the end of each cycle the process is either standardized or targets
are adjusted based on the analysis and the cycle continuous.

Total Quality Management (TQM) approach is both a practical working

process and a quality philosophy for the organizations committed to growth
and survival. TQM approach starts with a vision that a concentrated
management action can improve the quality of service and products of the
organization at a very competitive cost satisfying customer’s need and
increasing the market share. This increased market share will be stable
because it has been earned with the help of solid customers’ goodwill and not
by gimmickry advertising.

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management-tqm-approach/

Summary of Total Quality Management Model

In the early 1990s, a philosophy of management called “total quality

management” gained popularity. Its origins are traced to the ideas of U.S.
quality experts

W. Edwards Deming and Joseph Duran and highlighted by such programs as

the Malcolm Baldrige National Quality Award.

Total quality management (TQM) is defined as “managing the entire

organization so that it excels in all dimensions of products and services that
are important to the customer.” As the definition states, this philosophy
concentrates on quality as a primary component of the organization’s drive
for competitive advantage. Marketing decision-making is directly effected by
such a system because quality is a component of product/service design and
can be an important decision-making criterion employed by potential buyers.

The TQM model goes beyond product and service quality, however, and
suggests that a highly structured system of management that emphasizes
mechanisms like control and punitive action which stifles people and
ultimately hinders an organization’s attempt to produce quality products and
services. Rather, the organization that views all its employees as critical,
creative resources will be much better able to pursue quality in every activity
and through every decision. Some of the key tenets of TQM are:

1. Every employee has creative skill and talent that can be beneficial to
the organization, and employees should be empowered with decision-
making responsibility and authority.
2. An organization must engage in parallel and simultaneous decision
making rather that hierarchical decision-making. Functions like
marketing and production must work together and simultaneously to
create solutions rather than waiting for another and engaging in
reactive decision-making.
3. An organization must replace a control mentality and structure with
one that nurtures creativity and cross-functional participation in
decision-making.
4. Speed and quality are the essential dimensions of competitive
advantage and should constitute the overriding objectives of the
organization.

The underlying premises of TQM are attractive. However, TQM can be a very
costly and time-consuming process. Speed and quality are essential to the
concept of TQM as they are to product development and the efforts by firms
like Honda to cut development time and use speed as a strategic tool. The
argument that rigid and hierarchical organizational structures suppress
creativity and limit an organization’s potential is a believable proposition. But,
organisations are discovering that the concept of TQM has some practical
hazards that make complete implementation difficult. Specifically, the
following can compromise TQM as a management approach:

1. Not all employees are capable of or desire to be empowered. Many

employees, even at middle-management levels are content to make
contributions to the organization by following rather than leading.
 2. It can be difficult to motivate employees to embrace corporate
objectives over their own personal or career objectives. Effective
implementation of TQM requires that corporate goals be placed ahead
of personal goals.
3. Effective implementation of TQM procedures presumes effective and
swift communication within an organization in order for functional
areas to operate simultaneously rather than hierarchically. Many
organizations are unable to establish effective and rapid
communications networks essential to the success of a TQM system.
4. Implementation of a total quality system requires its own sort of
bureaucracy, which itself can bog down the organization from the
standpoints of both cost and speed of decision making.

While TQM is an appealing philosophy, it remains to be seen whether it can

be effectively implemented across complex organizations. Some firms, like
Motorola, have had tremendous success with a TQM approach to
management. Many other firms, however, have experienced almost
insignificant quality increases when compared to the massive scale of the
firm’s quality effort.

Horizontal Management Structure

The horizontal corporation may be the most radical of the new management
systems being touted. A horizontal management structure is defined as
managing across an organization rather than in a top-down, hierarchical
fashion by identifying key processes and creating teams to manage them.
The main premise of horizontal management structure borrows a dimension
from TQM: the downward, hierarchical authority of an organization must be
dismantled to take advantage of all corporate resources. In place of vertical
authority, a new horizontal system is proposed that organizes a firm around
processes rather than tasks. Such a horizontal structure is said to eliminate a
task orientation and focus company resources on customers instead

The following are the seven key elements of a horizontal structure

management system:

1. A Process Organizational Structure. Create a structure around

processes rather than tasks. The entire company can be built around
three to five core processes. A process owner is assigned to each.
 2. Horizontal Structure. Levels of supervision should be kept to a
minimum by combining tasks within processes. The hierarchical nature
of the organization should be flattened to resemble the activities.
3. Team Management. Teams rather than managers will run processes.
Each team is held accountable for performance within processes.
4. Customer Satisfaction Drives Performance. Do away with old measures
of performance like stock appreciation or profitability and use customer
satisfaction instead: profits will follow if customers are satisfied?
5. Team Performance Rewards. The evaluation and pay system should
emphasize team not individual performance. Encourage the
development of multiple skills rather than specialization.
6. Maximum Supplier, Customer, Employee Contact. Employees must
have direct and frequent contact with suppliers and customers. Find in-
house teams where suppliers and customers can be participants.
7. Inform and Train All Employees. Employees must be trusted with
critical data and important decisions. Include all employees, not just
leaders.

The horizontal structure, like others, is intended to increase the speed and
efficiency of activities and decision-making. So far, it has met with
considerable success. AT&T Network Systems Division has reorganized all of
its 130 activities around 13 core processes and employee bonuses are based
on customer satisfaction evaluations. Kodak has eliminated several vice-
president level positions and uses self-directed teams to manage the areas
instead. Finally, Xerox now handles its new product development through
multi-disciplinary teams that work in a single process structure rather than
vertical or even simultaneous functions.

Re-engineering
Reengineering as a management imperative is similar to the horizontal
structure system with one major exception. Re-engineering focuses on the
redesign of processes within an organization just as the horizontal system
does. However, reengineering is not restricted to any particular redesign of
processes. Rather, the entire organization is scrutinized from top to bottom
to search for opportunities for improvement. Re-engineering is defined as
“the radical redesign of business processes to achieve major gains in cost,
service, or time.” Changing processes to achieve productivity or effectiveness
gains does not distinguish reengineering from either TQM or a horizontal
structure. There are, however, two distinctive aspects of reengineering. First,
re-engineering examines the organization from the outside in and designs it
around customers’ needs. The key question to be asked is, “If we could start
this company from scratch, how would it be designed?” Second,
reengineering promotes strong leadership from the top, the Managing
Director or Chief Executive Officer leads the organization. This is completely
different from either TQM or a horizontal structure.

Several firms have had tremendous success with reengineering. Union

Carbide has used reengineering to cut U.S.$400 million out of the fixed costs
of its operations over a three-year period. GTE reengineered its customer
service operations from the outside in and created “customer care centres.”
Before reengineering, customers had to deal with three different departments
for line problems, billing questions, and special services. After reengineering,
GTE has a single customer contact process where effectiveness is judged by
how many times a problem can be solved without passing the customer on to
another department. Reengineering is recommended for important, broad-
based corporate and marketing processes like new product development and
customer service rather than for specific strategic issues like cost or quality
problems.

The Virtual Corporation

The virtual corporation is a management system in which several companies
form a temporary network of joint ventures and alliances that come together
quickly to exploit fast-changing opportunities. The virtual corporation is
conceived of as a grouping of independent organization, manufacturers,
service providers, suppliers, customers, and even competitors that are linked
with information technology to share knowledge and skills. There is no
central administration, no hierarchy, and no formal lines of authority. Rather,
the virtual corporation is a group of collaborators that will come together
temporarily to exploit market opportunities. Each partner in the alliance
contributes what it is best at doing. (This sort of arrangement with an
example of Toshiba Electronics global alliances).

The key features of a virtual corporation management arrangement are:

1. Excellence. Each partner in a virtual corporation alliance brings a core

competence to the collaboration. In this way, each function and
process can be world-class caliber.
 2. Technology. Global information networks will allow participants to
create electronic links for sharing expertise and knowledge.
Information superhighways could create electronic contracts without
legal ties.
3. Opportunism. The partnerships are temporary and created to exploit a
specific market opportunity. Once the opportunity disappears, the
alliance will likely disappear as well.
4. Trust. The fate of each partner is dependent on the other. Trust is a
key dimension in the successful performance of a virtual corporation.
5. No Borders. The collaboration among customers, suppliers, producers,
and competitors breaks down borders between organizations.

The virtual corporation concept has its critics, but it also has brought together
some of the most prominent names in the corporate world. AT&T used
Marubeni Trading Co. to establish a relationship with Matsushita Electric
Industrial Co. to expedite the production of notebook computers, which were
designed by a fourth partner, Henry Dreyfuss Associates. Corning, Inc., has
19 partnerships that account for nearly 13 percent of the firm’s earnings.
Former rivals IBM, Apple, and Motorola have created an alliance to develop
an operating system and microprocessor for a new generation of computers,
the Power PC.

Once again, this proposed corporate management system would have

pervasive effects across the marketing systems of the firms involved. Product
development speed and efficacy, customer service, sales effectiveness, and
price levels all can be directly affected. The future of the virtual corporation
vision is unknown. While it is conceptually intriguing, there are definite
obstacles. The information technology is not quite in place; firms have never
had to trust each other to the degree that this proposal calls for; and there
may need to be changes in regulations related to antitrust and intellectual
property before virtual corporations can actually be formed.

A Global Perspective
By now you have become accustomed to a discussion at this point of the
global issues associated with a topic area. Successful cultivation of worldwide
markets is by far the most formidable challenge faced by organizations. An
organization’s resources are pressed to their limits when foreign markets
become the focus of the marketing effort.
Case Study:

What short-term marketing strategies did Harley-Davidson

implement while it was developing the long-term strategy of
redesigned engines?

A Tale of Management Challenges

By the start of the 1980s, Harley-Davidson, the last U.S. motorcycle maker,
had seen its share of the super-heavyweight motorcycle market drop from 75
percent in 1973 to less than 25 percent. Quality in the production process
was so poor that more than half the cycles produced came off the assembly
line missing parts and were delivered to dealers inoperable. The big Harleys
leaked oil, vibrated excessively, and were hard to start. Performance couldn’t
touch the new “bullet bikes” arriving from Japan with their breath-taking
acceleration and silkysmooth transmissions. Harley loyalists were still willing
to get their hands greasy to fix the big bikes and to modify their
performance, but new buyers who were fueling the growth in the motorcycle
market had no intention of doing so. Needless to say, Harley-Davidson faced
a huge management challenge. As Vaugn Beals, chairman of Harley-
Davidson, put it, “We were being wiped out by the Japanese because they
were better managers. It wasn’t the robotics, or culture, or morning
calisthenics and company songs it was professional managers who
understood their business and paid attention to detail.”1

Beals devised a long-range plan to win customers and bring Harley-

Davidsons back to prominence in the motorcycle market. The important
change would be to upgrade performance with a new generation of engine
designs. This transition would take up to ten years. Harley needed solutions
much sooner to survive. Those solutions came in the form of marketing
management decisions to implement short- and intermediate-term
strategies:

 “Willie G.” Davidson created a series of cosmetic styling changes. In

the five years before Harley could bring the new engines on line, he
introduced a succession of new models -Super Glide, Low Rider, and
Wide Glide – that emulated the look of the choppers Harley fanatics
were putting together themselves. With a decal here and a paint strip
there the new models were a huge success.
  Beals and several managers toured a Honda assembly plant and came
away knowing their manufacturing techniques were woefully outdated
and costly. A manufacturing team introduced a just-in-time inventory
program in the firm’s Milwaukee engine plant. Huge inventories and
elaborate materials handling systems were eliminated with the
program. The result was an increase in quality and a reduction in
costs.
 In marketing, management shifted its focus away from trying to
compete with the Japanese across several product lines and
concentrated on developing the big-bike segment. In 1983, the
company formed the Harley Owners Group (HOG) to develop a closer
relationship with customers. Shortly afterward, a $3 million
demonstration campaign was initiated called Super Ride, which invited
bikers to visit any of the company’s 600 dealers for a ride on a new
Harley. The Role of Marketing Management

In 1984, Harley-Davidson sales were a mere U.S.$294 million, which

produced a profit of only U.S.$2.9 million. By 1993, sales had soared to over
U.S.$1.2 billion and profits approached U.S.$75 million. Harley-Davidson has
not only survived, but has prospered and grabbed nearly 50 percent market
share in the super-heavy weight market. The leaders of the firm managed
Harley-Davidson out of crisis: corporate resources were focused on an
identifiable target market segment, marketing and manufacturing were
integrated to contain costs, programs to attract customers and support
dealers were initiated, and strategies for the short- and long-term target
market development were conceived and implemented.

As this episode in the history of Harley-Davidson highlights, the role of

marketing management in an organization is to provide a mechanism for
guiding marketing strategy development and implementation. No firm can
compete effectively without performing basic tasks in the marketing mix:
product development, pricing, distribution, and promotion. But, the difference
between a firm that achieves mediocre results and a firm that prospers is
often based on how much emphasis is placed on the management of
marketing activities. Marketing management is critical to making the
marketing process prominent in a firm. As the marketing process is granted
unique status through focused management attention, the precision and
impact of marketing activities increases.
This demonstrates that managing marketing activities rather than simply
implementing marketing tasks has a tremendous impact on the competitive
strength and profitability of a firm. Marketing management involves
specialized management efforts. A highly useful and well-articulated
definition of marketing management is:

The analysis, planning, implementation, and control of programs designed to

create, build, and maintain mutually beneficial exchanges and relationships
with target markets for the purpose of achieving organizational objectives.

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 Total Quality Management (TQM)

TQM is a set of management practices throughout the organization, geared to

ensure the organization consistently meets or exceeds customer
requirements. TQM places strong focus on process measurement and controls
as means of continuous improvement.

Before reading more about TQM, it might be helpful to quickly review the
major forms of quality management in an organization. These are briefly
described at the top of the Quality Management topic.

7 Important Principles of Total Quality Management

Total Quality Management (TQM) is an approach that organizations use to

improve their internal processes and increase customer satisfaction. When it
is properly implemented, this style of management can lead to decreased
costs related to corrective or preventative maintenance, better overall
performance, and an increased number of happy and loyal customers.

However, TQM is not something that happens overnight. While there are a
number of software solutions that will help organizations quickly start to
implement a quality management system, there are some underlying
philosophies that the company must integrate throughout every department
of the company and at every level of management. Whatever other resources
you use, you should adopt these seven important principles of Total Quality
Management as a foundation for all your activities.

1. Quality can and must be managed

Many companies have wallowed in a repetitive cycle of chaos and customer

complaints. They believe that their operations are simply too large to
effectively manage the level of quality. The first step in the TQM process,
then, is to realize there is a problem and that it can be controlled.

2. Processes, not people, are the problem

If your process is causing problems, it won’t matter how many times you hire
new employees or how many training sessions you put them through. Correct
the process and then train your people on these new procedures.

3. Don’t treat symptoms, look for the cure

If you just patch over the underlying problems in the process, you will never
be able to fully reach your potential. If, for example, your shipping
department is falling behind, you may find that it is because of holdups in
manufacturing. Go for the source to correct the problem.
4. Every employee is responsible for quality

Everyone in the company, from the workers on the line to the upper
management, must realize that they have an important part to play in
ensuring high levels of quality in their products and services. Everyone has a
customer to delight, and they must all step up and take responsibility for
them.

5. Quality must be measurable

A quality management system is only effective when you can quantify the
results. You need to see how the process is implemented and if it is having
the desired effect. This will help you set your goals for the future and ensure
that every department is working toward the same result.

6. Quality improvements must be continuous

Total Quality Management is not something that can be done once and then
forgotten. It’s not a management “phase” that will end after a problem has
been corrected. Real improvements must occur frequently and continually in
order to increase customer satisfaction and loyalty.

7. Quality is a long-term investment

Quality management is not a quick fix. You can purchase QMS software that
will help you get things started, but you should understand that real results
won’t occur immediately. TQM is a long-term investment, and it is designed
to help you find long-term success.

Before you start looking for any kind of quality management software, it is
important to make sure you are capable of implementing these fundamental
principles throughout the company. This kind of management style can be a
huge culture change in some companies, and sometimes the shift can come
with some growing pains, but if you build on a foundation of quality
principles, you will be equipped to make this change and start working
toward real long-term success.

https://managementhelp.org/quality/total-quality-management.htm
 Introduction and Implementation of Total Quality Management
(TQM)

Total Quality Management is a management approach that originated in the

1950s and has steadily become more popular since the early 1980s. Total
Quality is a description of the culture, attitude and organization of a company
that strives to provide customers with products and services that satisfy their
needs. The culture requires quality in all aspects of the company’s
operations, with processes being done right the first time and defects and
waste eradicated from operations.

Total Quality Management, TQM, is a method by which management and

employees can become involved in the continuous improvement of the
production of goods and services. It is a combination of quality and
management tools aimed at increasing business and reducing losses due to
wasteful practices.

Some of the companies who have implemented TQM include Ford Motor
Company, Phillips Semiconductor, SGL Carbon, Motorola and Toyota Motor
Company.1

TQM Defined

TQM is a management philosophy that seeks to integrate all organizational

functions (marketing, finance, design, engineering, and production, customer
service, etc.) to focus on meeting customer needs and organizational
objectives.

TQM views an organization as a collection of processes. It maintains that

organizations must strive to continuously improve these processes by
incorporating the knowledge and experiences of workers. The simple
objective of TQM is “Do the right things, right the first time, every time.” TQM
is infinitely variable and adaptable. Although originally applied to
manufacturing operations, and for a number of years only used in that area,
TQM is now becoming recognized as a generic management tool, just as
applicable in service and public sector organizations. There are a number of
evolutionary strands, with different sectors creating their own versions from
the common ancestor. TQM is the foundation for activities, which include:

 Commitment by senior management and all employees

 Meeting customer requirements
 Reducing development cycle times
 Just in time/demand flow manufacturing
 Improvement teams
 Reducing product and service costs
 Systems to facilitate improvement
 Line management ownership
 Employee involvement and empowerment
 Recognition and celebration
 Challenging quantified goals and benchmarking
 Focus on processes / improvement plans
 Specific incorporation in strategic planning
This shows that TQM must be practiced in all activities, by all personnel, in
manufacturing, marketing, engineering, R&D, sales, purchasing, HR, etc. 2

Principles of TQM

The key principles of TQM are as following:3

Management Commitment
 Plan (drive, direct)
 Do (deploy, support, participate)
 Check (review)
 Act (recognize, communicate, revise)
Employee Empowerment
 Training
 Suggestion scheme
 Measurement and recognition
 Excellence teams
Fact Based Decision Making
 SPC (statistical process control)
 DOE, FMEA
 The 7 statistical tools
 TOPS (Ford 8D – team-oriented problem solving)
Continuous Improvement
 Systematic measurement and focus on CONQ
 Excellence teams
 Cross-functional process management
 Attain, maintain, improve standards
Customer Focus
 Supplier partnership
 Service relationship with internal customers
 Never compromise quality
 Customer driven standards

The Concept of Continuous Improvement by TQM

TQM is mainly concerned with continuous improvement in all work, from high
level strategic planning and decision-making, to detailed execution of work
elements on the shop floor. It stems from the belief that mistakes can be
avoided and defects can be prevented. It leads to continuously improving
results, in all aspects of work, as a result of continuously improving
capabilities, people, processes, technology and machine capabilities.
 Continuous improvement must deal not only with improving results, but more
importantly with improving capabilities to produce better results in the future.
The five major areas of focus for capability improvement are demand
generation, supply generation, technology, operations and people capability.

A central principle of TQM is that mistakes may be made by people, but most
of them are caused, or at least permitted, by faulty systems and processes.
This means that the root cause of such mistakes can be identified and
eliminated, and repetition can be prevented by changing the process. 1
There are three major mechanisms of prevention:

1. Preventing mistakes (defects) from occurring (mistake-proofing or

poka-yoke).
2. Where mistakes can’t be absolutely prevented, detecting them early to
prevent them being passed down the value-added chain (inspection at
source or by the next operation).
3. Where mistakes recur, stopping production until the process can be
corrected, to prevent the production of more defects. (stop in time).

Implementation Principles and Processes

A preliminary step in TQM implementation is to assess the organization’s

current reality. Relevant preconditions have to do with the organization’s
history, its current needs, precipitating events leading to TQM, and the
existing employee quality of working life. If the current reality does not
include important preconditions, TQM implementation should be delayed until
the organization is in a state in which TQM is likely to succeed.

If an organization has a track record of effective responsiveness to the

environment, and if it has been able to successfully change the way it
operates when needed, TQM will be easier to implement. If an organization
has been historically reactive and has no skill at improving its operating
systems, there will be both employee skepticism and a lack of skilled change
agents. If this condition prevails, a comprehensive program of management
and leadership development may be instituted. A management audit is a
good assessment tool to identify current levels of organizational functioning
and areas in need of change. An organization should be basically healthy
before beginning TQM. If it has significant problems such as a very unstable
funding base, weak administrative systems, lack of managerial skill, or poor
employee morale, TQM would not be appropriate.5
However, a certain level of stress is probably desirable to initiate TQM. People
need to feel a need for a change. Kanter (1983) addresses this phenomenon
be describing building blocks which are present in effective organizational
change. These forces include departures from tradition, a crisis or galvanizing
event, strategic decisions, individual “prime movers,” and action vehicles.
Departures from tradition are activities, usually at lower levels of the
organization, which occur when entrepreneurs move outside the normal ways
of operating to solve a problem. A crisis, if it is not too disabling, can also
help create a sense of urgency which can mobilize people to act. In the case
of TQM, this may be a funding cut or threat, or demands from consumers or
other stakeholders for improved quality of service. After a crisis, a leader
may intervene strategically by articulating a new vision of the future to help
the organization deal with it. A plan to implement TQM may be such a
strategic decision. Such a leader may then become a prime mover, who takes
charge in championing the new idea and showing others how it will help them
get where they want to go. Finally, action vehicles are needed and
mechanisms or structures to enable the change to occur and become
institutionalized.8

Steps in Managing the Transition

Beckhard and Pritchard (1992) have outlined the basic steps in managing a
transition to a new system such as TQM: identifying tasks to be done,
creating necessary management structures, developing strategies for building
commitment, designing mechanisms to communicate the change, and
assigning resources.

Task identification would include a study of present conditions (assessing

current reality, as described above); assessing readiness, such as through a
force field analysis; creating a model of the desired state, in this case,
implementation of TQM; announcing the change goals to the organization;
and assigning responsibilities and resources. This final step would include
securing outside consultation and training and assigning someone within the
organization to oversee the effort. This should be a responsibility of top
management. In fact, the next step, designing transition management
structures, is also a responsibility of top management. In fact, Cohen and
Brand (1993) and Hyde (1992) assert that management must be heavily
involved as leaders rather than relying on a separate staff person or function
to shepherd the effort. An organization wide steering committee to oversee
the effort may be appropriate. Developing commitment strategies was
discussed above in the sections on resistance and on visionary leadership. 6
To communicate the change, mechanisms beyond existing processes will
need to be developed. Special all-staff meetings attended by executives,
sometimes designed as input or dialog sessions, may be used to kick off the
process, and TQM newsletters may be an effective ongoing communication
tool to keep employees aware of activities and accomplishments.

Management of resources for the change effort is important with TQM

because outside consultants will

Total Quality Management (TQM) and Quality Improvement

Total Quality Management (TQM) is an approach that seeks to improve
quality and performance which will meet or exceed customer expectations.

This can be achieved by integrating all quality-related functions and

processes throughout the company. TQM looks at the overall quality
measures used by a company including managing quality design and
development, quality control and maintenance, quality improvement, and
quality assurance.

TQM takes into account all quality measures taken at all levels and involving
all company employees.

Origins Of TQM

Total quality management has evolved from the quality assurance methods
that were first developed around the time of the World War I. The war effort
led to large-scale manufacturing efforts that often produced poor quality
products. To help correct this, quality inspectors were introduced on the
production line to ensure that the level of failures due to quality was
minimized.

After the World War I, quality inspection became more commonplace in

manufacturing environments and this led to the introduction of Statistical
Quality Control (SQC), a theory developed by Dr. W. Edwards Deming.

This quality method provided a statistical method of quality based on

sampling. Where it was not possible to inspect every item, a sample was
tested for quality. The theory of SQC was based on the notion that a variation
in the production process leads to variation in the end product.

If the variation in the process could be removed this would lead to a higher
level of quality in the end product.
Post-World War II

After World War II, the industrial manufacturers in Japan produced poor
quality items. In a response to this, the Japanese Union of Scientists and
Engineers invited Dr. Deming to train engineers in quality processes.

By the 1950’s quality control was an integral part of Japanese manufacturing

and was adopted by all levels of workers within an organization.

By the 1970’s the notion of total quality was being discussed. This was seen
as a company-wide quality control that involved all employees from top
management to the workers, in quality control. In the next decade, more
non-Japanese companies were introducing quality management procedures
that based on the results seen in Japan.

The new wave of quality control became known as Total Quality Management,
which was used to describe the many quality-focused strategies and
techniques that became the center of focus for the quality movement.

Principles of TQM

TQM can be defined as the management of initiatives and procedures that are
aimed at achieving the delivery of quality products and services. A number of
key principles can be identified in defining TQM, including:

 Executive Management – Top management should act as the main

driver for TQM and create an environment that ensures its success.
 Training – Employees should receive regular training on the methods
and concepts of quality.
 Customer Focus – Improvements in quality should improve customer
satisfaction.
 Decision Making – Quality decisions should be made based on
measurements.
 Methodology and Tools – Use of appropriate methodology and tools
ensures that non-conformance incidents are identified, measured and
responded to consistently.
  Continuous Improvement – Companies should continuously work
towardsimproving manufacturing and quality procedures.
 Company Culture – The culture of the company should aim
at developing employees ability to work together to improve quality.
 Employee Involvement – Employees should be encouraged to be pro-
active in identifying and addressing quality related problems.

The Cost Of TQM

Many companies believe that the costs of the introduction of TQM are far
greater than the benefits it will produce. However research across a number
of industries has costs involved in doing nothing, i.e. the direct and indirect
costs of quality problems, are far greater than the costs of implementing
TQM.

The American quality expert, Phil Crosby, wrote that many companies chose
to pay for the poor quality in what he referred to as the “Price of
Nonconformance.” The costs are identified in the Prevention, Appraisal,
Failure (PAF) Model.

Prevention costs are associated with the design, implementation, and

maintenance of the TQM system. They are planned and incurred before actual
operation, and can include:

 Product Requirements – The setting specifications for incoming

materials, processes, finished products/services
 Quality Planning – Creation of plans for quality, reliability, operational,
production and inspections
 Quality Assurance – The creation and maintenance of the quality
system
 Training – The development, preparation, and maintenance of
processes

Appraisal costs are associated with the vendors and customers evaluation of

purchased materials and services to ensure they are within specification.
They can include:
  Verification – Inspection of incoming material against agreed upon
specifications
 Quality Audits – Check that the quality system is functioning correctly
 Vendor Evaluation – Assessment and approval of vendors

Failure costs can be split into those resulting from the internal and external
failure. Internal failure costs occur when results fail to reach quality
standards and are detected before they are shipped to the customer. These
can include:

 Waste – Unnecessary work or holding stocks as a result of errors, poor

organization or communication.
 Scrap – Defective product or material that cannot be repaired, used or
sold.
 Rework – Correction of defective material or errors.
 Failure Analysis – This is required to establish the causes of internal
product failure.

External failure costs occur when the products or services fail to reach quality
standards but are not detected until after the customer receives the item.
These can include:

 Repairs – Servicing of returned products or at the customer site

 Warranty Claims – Items are replaced or services re-performed
under warranty
 Complaints – All work and costs associated with dealing with
customer’s complaints
 Returns – Transportation, investigation, and handling of returned items

Your optimized supply chain should be delivering on-time quality products to

your customers while costing as little money as possible. TQM will help you
achieve that goal. 

https://www.thebalancesmb.com/total-quality-management-tqm-2221200
In today’s volatile economies, every organization needs strong managers to
lead its people towards achieving the business objectives. A manager’s
primary challenge is to solve problems creatively and plan effectively.
Managers thus fulfill many roles and have different responsibilities within the
various levels of an organization.

Management began to materialize as a practice during the Industrial

Revolution, as large corporations began to emerge in the late 19th century
and developed and expanded into the early 20th century. Management is
regarded as the most important of all human activities. It may be called the
practice of consciously and continually shaping organizations.

Management Principles - Overview

In today’s volatile economies, every organization needs strong managers to
lead its people towards achieving the business objectives. A manager’s
primary challenge is to solve problems creatively and plan effectively.
Managers thus fulfill many roles and have different responsibilities within the
various levels of an organization.

Management began to materialize as a practice during the Industrial

Revolution, as large corporations began to emerge in the late 19th century
and developed and expanded into the early 20th century. Management is
regarded as the most important of all human activities. It may be called the
practice of consciously and continually shaping organizations.
What is Management?
Management is a universal phenomenon. Every individual or entity requires
setting objectives, making plans, handling people, coordinating and
controlling activities, achieving goals and evaluating performance directed
towards organizational goals. These activities relate to the utilization of
variables or resources from the environment − human, monetary, physical,
and informational.

Human resources refer to managerial talent, labor (managerial talent, labor,

and services provided by them), monetary resources (the monetary
investment the organization uses to finance its current and long-term
operations), physical resources (raw materials, physical and production
facilities and equipment) and information resources (data and other kinds of
information).

Management is essentially the bringing together these resources within an

organization towards reaching objectives of an organization.

Management Defined
Management has been defined by various authors/authorities in various
ways. Following are few often-quoted definitions −

Management guru, Peter Drucker, says the basic task of management

includes both marketing and innovation. According to him, Management is a
multipurpose organ that manages a business and manages managers, and
manages workers and work.

Harold Koontz defined management as the art of getting things done

through and with people in formally organized groups.

All these definitions place an emphasis on the attainment of organizational

goals/objectives through deployment of the management process (planning,
organizing, directing, etc.) for the best use of organization’s resources.
Management makes human effort more fruitful thus effecting enhancements
and development.

Management is the process of planning, organizing, leading, and controlling

an organization’s human, financial, physical, and information resources to
achieve organizational goals in an efficient and effective manner.

The principles of management are the means by which a manager actually

manages, that is, get things done through others − individually, in groups,
or in organizations.

Formally defined, the principles of management are the activities that plan,

organize, and control the operations of the basic elements of [people],
materials, machines, methods, money and markets, providing direction and
coordination, and giving leadership to human efforts, so as to achieve the
sought objectives of the enterprise.

Is Management an Art or a Science?

Like any other discipline such as law, medicine or engineering, managing is
an art – at least that is what most people assume. Management concepts
need to be artistically approached and practiced for its success. It is
understood that managing is doing things artistically in the light of the
realities of a situation.

If we take a closer look at it, Management, when practiced, is definitely an

art but its underlying applications, methods and principles are a science. It is
also opined that management is an art struggling to become a science.

Management as an Art
The personal ingenious and imaginative power of the manager lends
management the approach of an art. This creative power of the manager
enriches his performance skill. In fact, the art of managing involves the
conception of a vision of an orderly whole, created from chaotic parts and
the communication and achievement of this vision. Managing can be
called art of arts because it organizes and uses human talent, which is the
basis of every artistic activity.

Management as a Science
Management is a body of systematized knowledge accumulated and
established with reference to the practice and understanding of general truth
concerning management. It is true that the science underlying managing is
not as accurate or comprehensive as physical sciences (such as chemistry or
biology) which deal with non-human entities.

The involvement of the human angle makes management not only complex
but also controversial as pure science. Nevertheless, the study of the
scientific elements in management methodologies can certainly improve the
practice of management.

Management as a Science and Art

Science urges us to observe and experiment a phenomenon, while art
teaches us the application of human skill and imagination to the same. In
order to be successful, every manager needs do things effectively and
efficiently. This requires a unique combination of both science and art. We
can say that the art of managing begins where the science of managing
stops. As the science of managing is imperfect, the manager must turn to
artistic managerial ability to perform a job satisfactorily.

Management Principles - Role of Managers

Every organization has ‘Managers’ who are entrusted with the responsibility
of guiding and directing the organization to achieve its goals.
Managers administer and coordinate resources effectively and efficiently to
channelize their energy towards successful accomplishment of the goals of
the organization. Managers are required in all the activities of organizations.
Their expertise is vital across departments throughout the organization.

Role of Managers
Managers are the primary force in an organization's growth and expansion.
Larger organizations are particularly complex due to their size, process,
people and nature of business. However, organizations need to be a
cohesive whole encompassing every employee and their talent, directing
them towards achieving the set business goals. This is an extremely
challenging endeavor, and requires highly effective managers having
evolved people management and communication skills.

The Top Management

The top-level executives direct the organization to achieve its objectives and
are instrumental in creating the vision and mission of the organization. They
are the strategic think-tank of the organization.

Senior Management
The General Manager is responsible for all aspects of a company. He is
accountable for managing the P&L (Profit & Loss) statement of the company.
General managers usually report to the company board or top executives
and take directions from them to direct the business.

The Functional Manager is responsible for a single organizational unit or

department within a company or organization. He in turn is assisted by a
Supervisor or groups of managers within his unit/department. He is
responsible for the department’s profitability and success.

Line and Staff Managers

Line Managers are directly responsible for managing a single employee or a
group of employees. They are also directly accountable for the service or
product line of the company. For example, a line manager at Toyota is
responsible for the manufacturing, stocking, marketing, and profitability of
the Corolla product line.

Staff Managers often oversee other employees or subordinates in an

organization and generally head revenue consuming or support departments
to provide the line managers with information and advice.

Project Managers
Every organization has multiple projects running simultaneously through its
life cycle. A project manager is primarily accountable for leading a project
from its inception to completion. He plans and organizes the resources
required to complete the project. He will also define the project goals and
objectives and decide how and at what intervals the project deliverables will
be completed.

The Changing Roles of Management and Managers

Every organization has three primary interpersonal roles that are concerned
with interpersonal relationships. The manager in the figurehead role
represents the organization in all matters of formality. The top-level
manager represents the company legally and socially to the outside world
that the organization interacts with.

In the supervisory role, the manager represents his team to the higher
management. He acts as a liaison between the higher management and his
team. He also maintains contact with his peers outside the organization.
Mintzberg's Set of Ten Roles
Professor Henry Mintzberg, a great management researcher, after studying
managers for several weeks concluded that, to meet the many demands of
performing their functions, managers assume multiple roles.

He propounded that the role is an organized set of behaviors. He identified

the following ten roles common to the work of all managers. These roles
have been split into three groups as illustrated in the following figure.
Interpersonal Role
 Figurehead − Has social, ceremonial and legal responsibilities.
 Leader − Provides leadership and direction.
 Liaison − Networks and communicates with internal and external
contacts.

Informational Role
 Monitor − Seeks out information related to your organization and
industry, and monitors internal teams in terms of both their
productivity and well-being.
 Disseminator − Communicates potentially useful information
internally.
 Spokesperson − Represents and speaks for the organization and
transmits information about the organization and its goals to the
people outside it.

Decisional Role
 Entrepreneur − Creates and controls change within the organization
- solving problems, generating new ideas, and implementing them.
  Disturbance Handler − Resolves and manages unexpected
roadblocks.
 Resource Allocator − Allocates funds, assigning staff and other
organizational resources.
 Negotiator − Involved in direct important negotiations within the
team, department, or organization.

Managerial Skills
Henri Fayol, a famous management theorist also called as the Father of
Modern Management, identified three basic managerial skills - technical skill,
human skill and conceptual skill.

Technical Skill
 Knowledge and skills used to perform specific tasks. Accountants,
engineers, surgeons all have their specialized technical skills
necessary for their respective professions. Managers, especially at the
lower and middle levels, need technical skills for effective task
performance.
 Technical skills are important especially for first line managers, who
spend much of their time training subordinates and supervising their
work-related problems.

Human Skill
 Ability to work with, understand, and motivate other people as
individuals or in groups. According to Management theorist Mintzberg,
the top (and middle) managers spend their time: 59 percent in
meetings, 6 percent on the phone, and 3 percent on tours.
 Ability to work with others and get co-operation from people in the
work group. For example, knowing what to do and being able to
communicate ideas and beliefs to others and understanding what
thoughts others are trying to convey to the manager.

Conceptual Skill
 Ability to visualize the enterprise as a whole, to envision all the
functions involved in a given situation or circumstance, to understand
how its parts depend on one another, and anticipate how a change in
any of its parts will affect the whole.
 Creativity, broad knowledge and ability to conceive abstract ideas. For
example, the managing director of a telecom company visualizes the
importance of better service for its clients which ultimately helps
 attract a vast number of clients and an unexpected increase in its
subscriber base and profits.

Other Managerial Skills

Besides the skills discussed above, there are two other skills that a manager
should possess, namely diagnostic skill and analytical skill.

Diagnostic Skill − Diagnose a problem in the organization by studying its

symptoms. For example, a particular division may be suffering from high
turnover. With the help of diagnostic skill, the manager may find out that
the division’s supervisor has poor human skill in dealing with employees.
This problem might then be solved by transferring or training the supervisor.

Analytical Skill − Ability to identify the vital or basic elements in a given

situation, evaluate their interdependence, and decide which ones should
receive the most attention. This skill enables the manager to determine
possible strategies and to select the most appropriate one for the situation.

For example, when adding a new product to the existing product line, a
manager may analyze the advantages and risks in doing so and make a
recommendation to the board of directors, who make the final decision.

Diagnostic skill enables managers to understand a situation, whereas

analytical skill helps determine what to do in a given situation.

The P-O-L-C Framework

The primary challenge faced by organizations and managers today is to
creatively solve business problems. The principles of management are
guidelines using which managers can tackle business challenges.

The principles of management have been categorized into the four major
functions of planning, organizing, leading, and controlling popularly known
as the P-O-L-C framework.

The P-O-L-C Framework

 Defining Organization Vision & Mission

Planning  Setting Goals & Objectives

 Strategizing
 Plan of Action to Achieve Goals

Organizing  Formulate Organizational Structure

  Resource Allocation
 Job Design

 Leadership & Direction

Leading  Motivation
 Coordination & Communication

 Process & Standards

Controlling  Review & Evaluation
 Corrective Action

Planning
Planning is the first and the most important function of management that
involves setting objectives and determining a course of action for achieving
those objectives. Planners are essentially the managers who are best aware
of environmental conditions facing their organization and are able to
effectively analyze and predict future conditions. It also requires that
managers should be good decision makers.

Planning involves selecting missions and objectives and the actions to

achieve them, it requires decision making, i.e. choosing future courses of
action from among alternatives.

Planning means determining what the organization’s position and situation

should be at some time in the future and deciding how best to bring about
that situation. It helps maintain managerial effectiveness by guiding future
activities.

Planning as a process typically involves the following steps −

 Selection of goals for the organization.

 Establishment of goals for each of the organization’s sub-units.
 Establishment of programs for achieving goals in a systematic manner.
Types of Planning
 Strategic planning involves analyzing competitive opportunities and
threats, as well as the strengths and weaknesses of the organization.
It also involves determining how to position the organization to
compete effectively in their environment.
  Tactical planning is creating the blueprint for the lager strategic plan.
These plans are often short term and are carried out by middle-level
managers.
 Operational planning generally covers the entire organization’s goals
and objectives and put into practice the ways and action steps to
achieve the strategic plans. They are very short terms usually less
than a year.

Organizing
Once a manager has created a work plan, the next phase in management
cycle is to organize the people and other resources necessary to carry out
the plan. Organizing should also consider the resources and physical
facilities available, in order to maximize returns with minimum expenditure.

Organizing may be referred to as the process of arranging and distributing

the planned work, authority and resources among an organization’s
members, so they can achieve the organization’s goals.

Organizing involves the following steps −

 Creating the organizational structure − The framework of the

organization is created within which effort is coordinated allocating
human resources to ensure the accomplishment of objectives. This
structure is usually represented by an organizational chart, which is a
graphic representation of the chain of command within an
organization.
 Making organizational design decisions − Decisions are made
about the structure of an organization.
 Making job design decisions − Roles and responsibilities of
individual jobs, and the process of carrying out the duties is defined.

Organizing at the level of a particular job involves how best to design

individual jobs so as to most effectively utilize human resources.
Traditionally, job design was based on principles of division of labor and
specialization, which assumed that the more narrow the job content, the
more proficient the individual performing the job could become.

Leading
Organizations as they grow, develop complex structures with an increasing
need for co-ordination and control. To cope and manage such situations,
leadership is necessary to influence people to cooperate towards a common
goal and create a situation for collective response.
Leading entails directing, influencing, and motivating employees to perform
essential tasks. It also involves the social and informal sources of influence to
inspire others. Effective managers lead subordinates through motivation to
progressively attain organizational objectives.

Personality research and study of job attitudes in Behavioral Science

provides important insight on the need for coordination and control. Thus it
becomes important for leadership to create harmony among individual
efforts to collectively work towards organizational goals.

Controlling
Managers at all levels engage in the managerial function of controlling to
some degree. Two traditional control techniques are budget and
performance audits. An audit involves a physical examination and
verification of the organization’s records and supporting documents. A
budget audit provides information about where the organization is with
respect to procedures followed for financial planning and control, whereas a
performance audit might try to determine whether the figures reported are a
reflection of actual performance.

Controlling involves measuring performance against goals and plans, and

helping correct deviations from standards. As a matter of fact, controlling
facilitates the accomplishment of plans by ensuring that performance does
not deviate from standards.

Controlling is not just limited to organization’s financial state, but also spans
across areas like operations, compliance with company policies and other
regulatory policies, including many other activities within the organization.

The management functions thus most effectively cover the broad scope of a
manager’s duties and responsibilities. Though the nature and complexities
faced by businesses have undergone a vast change over the years, the
functions of management remain the same.

Classical Schools Of Thought

Management as a practice gained ground when the concept of working
together in groups to achieve common objectives was realized by men. But
the study of management as a systematic field of knowledge began at the
advent of the Industrial Revolution, which ushered in a new era of serious
thinking and theorizing on management.

To begin with, there is no single universally accepted theory of

management. The wild array of management theories could even look like a
jungle says Harold Koontz. However, to help put the different theories in
perspective, we shall discuss them as representing different schools of
thought.

Classical School of Management Thought

Scientific Management and F. W. Taylor
Scientific management, according to an early definition, refers to that kind
of management which conducts a business or affairs by standards
established by facts or truths gained through systematic observation,
experiment, or reasoning. Advocators of this school of thought attempted to
raise labor efficiency primarily by managing the work of employees on the
shop floor.

Frederick Winslow Taylor, who is generally acknowledged as the father of

scientific management believed that organizations should study tasks and
prepare precise procedures. His varied experience gave him ample
opportunity to have firsthand knowledge and intimate insight into the
problems and attitude of workers, and to explore great possibilities for
improving the quality of management in the workplace.

Formulating his theory based on firsthand experience, Taylor’s theory

focused on ways to increase the efficiency of employees by molding their
thought and scientific management.

Henry Gnatt, an associate of Taylor, developed the Gnatt Chart, a bar

graph that measures planned and completed work along with each stage of
production. This visual display chart has been a widely used control and
planning tool since its development in 1910. Following is a sample of Gnatt
Chart.
Frank Gilbreth and his wife, Lillian Moller Gilbreth further improvised on
Taylor’s time studies, devising motion studies by photographing the
individual movements of each worker. They carefully analyzed the motions
and eliminated unnecessary ones. These motion studies were preceded by
timing each task, so the studies were called time and motion studies.

Applying time and motion studies to bricklaying, the Gilbreths devised a way
for workers to lay bricks that eliminated wasted motion and raised their
productivity from 1,000 bricks per day to 2,700 bricks per day.

The Basic Principles of Scientific Management

 Developing new standard method of doing each job.

 Selecting training and developing workers instead of allowing them to
self-train and choose their own tasks.
 Develop cooperation between workers and management.
 Division of work on the basis of the group that is best fitted to do the
job.

Henry Fayol’s Universal Process theory

One of the oldest and most popular approaches, Henry Fayol’s theory holds
that administration of all organizations – whether public or private, large or
small – requires the same rational process or functions.

This school of thought is based on two assumptions −

 Although the objective of an organization may differ (for example,

business, government, education, or religion), yet there is a core
management process that remains the same for all institutions.
 Successful managers, therefore, are interchangeable among
organizations of differing purposes. The universal management
process can be reduced to a set of separate functions and related
principles.

Fayol identifies fourteen universal principles of management, which are

aimed at showing managers how to carry out their functional duties.

Synod Universal Managers Functional Duties

 principles of
management

1 Specialization of This improves the efficiency of labor through

labor specialization, reducing labor time and
increasing skill development.

2 Authority This is the right to give orders which always

carry responsibility commensurate with its
privileges.

3 Discipline It relies on respect for the rules, policies, and

agreements that govern an organization. Fayol
ordains that discipline requires good superiors
at all levels.

4 Unity of command This means that subordinates should receive

orders from one superior only, thus avoiding
confusion and conflict.

5 Unity of direction This means that there should be unity in the

directions given by a boss to his subordinates.
There should not be any conflict in the
directions given by a boss.

6 Subordination of According to this principle, the needs of

individual interest individuals and groups within an organization
to common good should not take precedence over the needs of
the organization as a whole.

7 Remuneration Wages should be equitable and satisfactory to

employees and superiors.

8 Centralization Levels at which decisions are to be made

should depend on the specific situation, no
level of centralization or decentralization is
ideal for all situations.

9 Scale of chain The relationship among all levels in the

 organizational hierarchy and exact lines of
authority should be unmistakably clear and
usually followed at all times, excepting special
circumstances when some departure might be
necessary.

10 Order There should be a place for everything, and

everything should be in its place. This is
essentially a principle of organization in the
arrangement of things and people.

11 Equity Employees should be treated equitably in order

to elicit loyalty and devotion from personnel.

12 Personal tenure Views unnecessary turnover to be both the

cause and the effect of bad management; Fayol
points out its danger and costs.

13 Initiative Subordinates should be encouraged to conceive

and carryout ideas.

14 Esprit de corps Team work, a sense of unity and togetherness,

should be fostered and maintained.

Behavioral and Human Relations Approach

The criticism of scientific and administrative management approach as
advocated by Taylor and Fayol, respectively gave birth to the behavioral
approach to management. One of the main criticisms leveled against them
are their indifference to and neglect of the human side of the enterprise in
management dealings.

A good number of sociologists and psychologists like Abraham Maslow, Hugo

Munsterberg, Rensis Likert, Douglas McGregor, Frederick Herzberg, Mary
Parker Follet, and Chester Barnard are the major contributors to this school
of thought, which is further subdivided by some writers into the Human
Relations approach and the Human Behavioral approach.

Elton Mayo and Hawthorne Studies

Elton Mayo and Hugo Munsterberg are considered pioneers of this school.
The most important contribution to this school of thought was made by Elton
Mayo and his associates through Hawthorne plant of the Western Electric
Company between 1927 and 1932.

Following are the findings of Mayo and his colleagues from Hawthorne
studies −

 Human/social element operated in the workplace and productivity

increases were as much an outgrowth of group dynamics as of
managerial demands and physical factors.
 Social factors might be as powerful a determinant of worker-
productivity as were financial motives.
 Management with an understanding of human behavior, particularly
group behavior serves an enterprise through interpersonal skills such
as motivating, counseling, leading and communicating − known as
Hawthorne effect.
 Employees or workers are social beings, so it is very important to fit
them into a social system, resulting in a complete socio-technical
system in an organization.

Criticism
Following are the criticisms of Hawthorne studies −

 Unreasonably high emphasis on the social or human side as against

organizational needs.
 The approach facilitates exploitation of employees by keeping them
satisfied and happy, manipulating their emotions which in fact, serves
the management goal of increasing productivity.

Modern Schools of Thought

This school of thought primarily focuses on the development of each factor
of both workers and the organization. It analyzes the interrelationship of
workers and management in all aspects.

System Approach and Contingency Approach are the two approaches by this
school of thought.

Chester Barnard and Social Systems Theory

One of the most important contributions to this school has been made by
Chester I. Barnard. His classic treatise entitled The Functions of the
Executive, published in 1938, is considered by some management scholars
as one of the most influential books published in the entire field of
management. Like Fayol, Barnard based his theories and approach to
management on the basis of his first-hand experience as a top-level
executive.

Fundamentals of System Approach −

 All organizations are a co-operative system.
 As co-operative systems, organizations are a combination of complex
physical, biological, personal and social components, which are in a
specific systematic relationship by reason of the co-operation of two
or more persons for at least one definite end.
 An employee’s role and his co-operation are a strategic factor in
achieving organizational objectives.

Criticism
Following are the criticisms that this theory received.

 Long on intellectual appeal and catchy terminology and short on

verifiable facts and practical advice.
 Complex in nature, particularly when it comes to the study of large
and complex organizations.

However, we can conclude that the system approach is an instructive

approach and way of thinking rather than a systematic model of solution to
explain the complexities of managing modern organizations.

Contingency Approach and Recent Contributions

The Contingency Management theory evolved out of the System Approach to
managing organizations. According to the Contingency approach,
management is situational; hence there exists no single best approach to
management, as situations that a manager faces is always changing.

However, situations are often similar to the extent that some principles of
management can be effectively applied by identifying the relevant
contingency variables in the situation and then evaluating them.

Peter F. Drucker, W. Edwards Deming, Laurence Peter, William Ouchi,

Thomas Peters, Robert Waterman, and Nancy Austin are some of the most
important contributors to management thought in recent times. This has
emerged perhaps as the best approach as it encourages management to
search for the correct situational factors for applying appropriate
management principles effectively.

On the basis of the Tom Peters and Robert Waterman’s research focusing on
43 of America’s most successful companies in six major industries, the
following 9 principles of management are embodied in excellent
organizations −

 Managing Ambiguity and Paradox − The ability of managers to

hold two opposing ideas in mind and at the same time able to function
effectively.
 A Bias for Action − A culture of impatience with lethargy and inertia
that otherwise leaves organizations unresponsive.
 Close to the Customer − Staying close to the customer to
understand and anticipate customer needs and wants.
 Autonomy and Entrepreneurship − Actions that foster innovation
and nurture customer and product champions.
 Productivity through People − Treating rank-and-file employees as
a source of quality.
 Hands-On, Value-Driven − Management philosophy that guides
everyday practice and shows the management’s commitment.
 Stick to the Knitting − Stay with what you do well and the
businesses you know best.
 Simple Form, Lean Staff − The best companies have very minimal,
lean headquarters staff.
 Simultaneous Loose-Tight Properties − Autonomy in shop-floor
activities and centralized values.

Quality School of Management

The Quality School of Management (also known as Total Quality
Management, TQM) is a fairly recent and comprehensive model for leading
and operating an organization. The prime focus is on continually improving
performance by focusing on customers while addressing the needs of all
stakeholders. In other words, this concept focuses on managing the entire
organization to deliver high quality to customers.
The quality school of management considers the following in its theory −

 Quality of the Company’s Output − Focus on providing goods and

services that satisfy the customer requirements, which is presumed to
be a key to organizational survival and growth.
 Organizational Structure − Every organization is made up of
complex systems of customers and suppliers and every individual will
need to function as both a supplier and a customer.
 Group Dynamics − Organization should foster an environment of
working in groups. Management should recognize and nurture
harmony and efficiency in these groups, which are the catalysts for
planning and problem solving.
 Continuous Improvement − Constantly review the company’s
policies and processes. This will lead to specialization and ultimately
better outcomes
 Transparency and Trust − Connect with employees at all levels and
create a culture of trust and stability.
Kaizen Approach
Kaizen means that everyone is involved in making improvements. Kaizen
(pronounced ky-zen) is based on the Japanese management concept for
incremental change and improvement.

The idea of continuous improvement suggests that managers, teams, and

individuals learn from both their accomplishments and their mistakes. It is a
long-term approach to work that systematically seeks to achieve small,
incremental changes in processes in order to improve efficiency and quality.

While the majority of changes may be small, the greatest impact may be
improvements or changes that are led by senior management as
transformational projects, or by cross-functional teams as Kaizen events.

Kaizen Process
Following are the steps involved in Kaizen Process.

 Identifying opportunities for improvement

 Testing new approaches
 Recording the results
 Recommending changes
Reengineering Approach
Reengineering Approach sometimes called Business Process
Reengineering(BPR), involves a complete rethinking and transformation of
key business processes, leading to strong horizontal coordination and
greater flexibility in responding to changes in the environment. The
reengineering approach focuses on sensing the need to change, anticipating
changes, and reacting effectively when it happens.

Reengineering Process
Following are the steps involved in reengineering process.

 Develop business vision and process objectives

 Identify business processes
 Scope and measure existing processes
 Design and build new process prototypes
 Implement and manage changes
Future of Management
Modern management approaches respect the classical, human resource, and
quantitative approaches to management. However, successful managers
recognize that although each theoretical school has limitations in its
applications, each approach also offers valuable insights that can broaden a
manager's options in solving problems and achieving organizational goals.
Successful managers work to extend these approaches to meet the demands
of a dynamic environment.

Just as organizations evolve and grow, employee needs also change over
time; people possess a range of talents and capabilities that can be
developed. In order to optimize outcomes, organizations and managers,
should respond to individuals with a wide variety of managerial strategies
and job opportunities.

Important aspects to be considered, as the 21st century progresses, include

the following −

 Organizations need to commit to not just meeting customer needs but

exceeding customer expectations through quality management and
continuous improvement of operations.
  Reinvent new methods of process improvements and constantly learn
new ways and best practices from practices in other organizations and
environments.
 Organizations must reinvest in their most important asset, their
human capital. They need commit to effectively and positively use
human resources by reducing attrition rates.
 Managers must excel in their leadership responsibilities to perform
numerous different roles.

Management Principles - Environment

In this chapter, we will discuss the environment of management and the
factors that affect the environment.

The terms organization, administration and management are often used

interchangeably. Sometimes they are used to mean one and the same thing.

Organization is −

 The collection, preservation and co-ordination of the elements of an

enterprise in an integrated manner.
 It brings together various resources of an enterprise into a single
harmonious whole.
 It warrants the utilization of resources for the accomplishment of its
objectives.

Administration is −

 The efficient organization or utilization of the resources of an

organization to achieve the goals.
 It determines the principles for ensuring the effective performance of
the activities of different divisions and branches of the enterprise.
 Administration is above management, and exercises control over the
finance and licensing of an organization.

Management is −

 An executive function that makes the decisions within the confines of

the framework, which is set up by the administration.
 Management consists of a group of managerial persons, who leverage
their specialist skills to fulfill the objectives of an organization.
 The success of an enterprise/institution is dependent on how efficiently
the management can execute plans and policies set by the
administration.
The Management & Administration Inter-Relationship
Management is the act or function of putting into practice the policies and
plans decided upon by the administration. Administration cannot be
successful without the co-operation of management. The job of each
manager is, therefore, to win the co-operation of all those who work under
him so that they work for enterprise goals set by administration.

Administrators are mainly found in the government, military, religious and

educational organizations. Management, on the other hand, is used by
business enterprises. The role of a manager is to monitor and shape the
environment, to anticipate changes, and react quickly to them.

Management Principles- Factors Affecting

There are numerous factors that affect an organization or the management.
Managers can monitor these factors/environments through boundary
spanning — a process of gathering information about developments that
could impact the future of the organization.
Following types of factor/environment affect management −

 Microeconomic factors
 Macroeconomic factors
To lead an organization efficiently, every organization must know where it is
situated, what are its external and internal influences.

Microeconomic Factors Macroeconomic Factors

Company-specific influences that Broad economic forces and global

have a direct impact on its business events are out of control of any
operations and success. business or company.

Components within the control of an Forces indirectly affect company

organization can be managed and objectives.
altered.
Volatile and risky, and a savvy
manager must be agile to sidestep a
cascading macroeconomic crisis to
keep the company intact.

For example, a company’s revenue, For example, the country’s economic

earnings and margin. output, inflation, its political
environment, unemployment, etc.
The employees, Stakeholders, the
production volume of the products
and the advertising campaigns can
also be called microfactors.

Macro (Outer Environment)

Factors that indirectly impact the organization, its operation and working
condition is known as the outer environment or macro environment. These
external factors cannot be controlled by the organization.
Following are some of the macro environment factors −

The country’s unique political and legal

landscape within which organizations
function.
Political-legal environment
The effects of this are quite visible. For e.g.:
the effect of changing taxes or raising
interest rates.

Companies have to carefully evaluate the

technological developments that it wishes to
Technology embrace as it is a cost intensive factor and
provide millions in return to one company
and take millions from another.
 The means of communication, the country’s
infrastructure, its education system, the
Socio-cultural environment
purchasing power of the citizens, family
values, work ethics and preferences, etc.

Micro (Inner Environment)

These are the factors within an organization that can be controlled and affect
the immediate area of an organization’s operations.

Though not all factors can be effectively controlled, but relative to the macro
environment factors, a visible control can be exercised in this case.

Following are some of the micro environment factors −

Employees exert great influence on the

organization. It is imperative to find the
Employees right people for each job.

Organizations need to motivate employees

positively and retain specialized talent.

Owners and the Management Investors are major influencers on a

company’s revenue and operations.
 It is important that the owners are satisfied
with the company. It is the manager's job
to balance the aims of the company and
the owners.

Competition and consumerism has

rendered multiple alternatives for the same
Consumers product in different brands. Organizations
recognize that it is in their own interest to
keep consumers happy.

The suppliers or contractors manage the

inputs of organizations and provide
products or services that a company needs
Suppliers directly or need it to add value to the
company’s own products or services.

It is important to keep suppliers happy to

ensure a smooth input supply system.

Competitors affect profits by trying to

divert business. A capable manager will
Competition need to constantly study and analyze its
competition if the company wants to
maintain its position in the market.

Management Principles - Organization

A management environment within an organization is composed of the
elements like its current employees, management, and especially corporate
culture, which defines employee behavior. Although some elements affect
the organization as a whole, others singularly affect the manager.

A manager's philosophical or leadership style directly impacts the

employees. Traditional managers give explicit instructions to employees,
while progressive managers empower employees to make most of their own
decisions. Changes in philosophy and/or leadership style are under the
control of the manager. Let us look at some of the important components of
a management environment.
Mission and Vision
Mission and vision are both foundations of an organization’s purpose.
These are the objectives of the organization that are communicated in
written. Mission and vision are statements from the organization that bring
out what an organization is set for, what is its purpose, its value and its
future. A popular study by a consulting firm reports that 90% of
the Fortune 500 firms surveyed issue some form of mission and vision.

A Mission Statement defines the company's goals, ethics, culture, and norms
for decision-making. They are often longer than vision statements.
Sometimes mission statements also include a summation of the firm’s
values. Values are the beliefs of an individual or group, and in this case the
organization, in which they are emotionally invested.

Company Policies
Company policies are formal guidelines and procedures that direct how
certain organizational situations are addressed. Companies establish policies
to provide guidance to employees so that they act in accordance to certain
circumstances that occur frequently within their organization. Company
policies are an indication of an organization's personality and should coincide
with its mission statement.

Organizational Culture
Organizational culture is an organization believes and values that
represent its personality. Just as each person has a distinct personality, so
does each organization. The culture of an organization distinguishes it from
others and shapes the actions of its members.

Values
Values are the basic beliefs that define employees' successes in an
organization. A hero is an exemplary person who reflects the image,
attitudes, or values of the organization and serves as a role model to other
employees. A hero is sometimes the founder of the organization (think Bill
Gates of Microsoft).

Rites and Rituals

Rites and rituals are routines or ceremonies that the company uses to
recognize high‐performing employees. Awards banquets, company
gatherings, and quarterly meetings can acknowledge distinguished
employees for outstanding service. The honorees are meant to exemplify
and inspire all employees of the company during the rest of the year.
Resources
Resources are the people, information, facilities, infrastructure, machinery,
equipment, supplies, and finances at the organization's disposal. People are
the most important resource of an organization. Information, facilities,
machinery equipment, materials, supplies, and finances are supporting,
nonhuman resources that complement workers in their quest to accomplish
the organization's mission statement. The availability of resources and the
way that managers value the human and nonhuman resources impact the
organization's environment.

Management Principles - Leadership Styles

Management philosophy is the manager's set of personal beliefs and values
about people and work. It is something that the manager can control.
Eminent social psychologist and management researcher, Douglas
McGregor, emphasized that a manager's philosophy creates a self-fulfilling
prophecy. Theory X managers treat employees almost as children who need
constant direction, while Theory Y managers treat employees as competent
adults capable of participating in work-related decisions.

These managerial philosophies then have a subsequent effect on employee

behavior, leading to the self‐fulfilling prophecy. As a result, organizational
and managerial philosophies need to be in harmony.

The Many Aspects of Leadership

 The character of top executives and their philosophy have an
important influence on the extent to which authority is decentralized.
 Sometimes top managers are dictatorial, tolerating no interference
with authority and information they hoard. Conversely, some
managers find decentralization a means to make large business work
successfully.
 The number of coworkers involved within a problem‐solving or
decision‐making process reflects the manager's leadership style.
 Empowerment means sharing information, rewards and power with
employees so that they are equal contributors to the organizations
outcomes.
 An empowered and well-guided workforce may lead to heightened
productivity and quality, reduced costs, more innovation, improved
customer service, and greater commitment from the employees of the
organization.
Each business must go through the process of identifying its individual
management philosophy and continuously review and evaluate the same to
see if it is aligned with its larger purpose.

Leadership Styles
Leadership can be stated as the ability to influence others. We may also
define leadership as the process of directing and influencing people so that
they will strive willingly and enthusiastically towards the achievement of
group objectives.

Ideally, people should be encouraged to develop not only willingness to work

but also willingness to work with confidence and zeal. A leader acts to help a
group achieve objectives through the exploitation of its maximum
capabilities.

In the course of his survey of leadership theories and research, Management

theorist, Ralph Stogdill, came across innumerable definitions of leadership.
Qualities/Ingredients of Leadership
Every group of people that perform satisfactorily has somebody among them
who is more skilled than any of them in the art of leadership. Skill is a
compound of at least four major ingredients −

 The ability to use power effectively and in a responsible manner.

 The ability to comprehend that human beings have different
motivation forces at different times and in different situations.
 The ability to inspire.
 The ability to act in a manner that will develop a climate conducive to
responding and arousing motivation.

Leadership styles/types can be classified under the following categories −

Leadership Style Based on the Use of Authority

The traditional way of classifying leadership is based on the use of authority
by the leader. These are classified as −

Autocratic leadership Democratic Free-rein

leadership leadership

Use of coercive power to Participative leader who As opposed to

give order and expect usually consults with autocratic
compliance. Dogmatic and subordinates on leadership, this
leads by the ability to proposed actions and leadership style
withhold or give punishment decisions, and provides maximum
or rewards, commands and encourages participation freedom to
expects compliance. from them. subordinates.

Some autocratic leaders Ranges from the person Favors autonomy

happen to be benevolent
autocrats, willing to hear
and consider subordinates’
ideas and suggestions but
when a decision is to be
made, they turn to be more
autocratic than benevolent.
who does not take and exercises
action without minimal control.
subordinates’ Gives workers a high
concurrence to the one degree of
who makes decisions independence in
but consults with sub- their operations.
ordinates before doing
so.
Leadership Continuum
Propounded by Robert Tannenbaum and Warren H. Schmidt, according to
the Leadership Continuum, leadership style depends on three forces: the
manager, employees and the situation.

Thus, instead of suggesting a choice between the two styles of leadership,

democratic or autocratic, this approach offers a range of styles depicting the
adaptation of different leadership styles to different contingencies
(situations), ranging from one that is highly subordinate-centered to one
that is highly boss-centered.

Features of Leadership Continuum

 The characteristics of individual subordinates must be considered
before managers adopt a leadership style.
 A manager can be employee-centered and allow greater freedom
when employees identify with the organization’s goals, are
knowledgeable and experienced, and want to have decision making
responsibility.
 Where these conditions are absent, managers might need to initially
adopt a more authoritarian style. As employees mature in self-
confidence, performance and commitment, managers can modify their
leadership style.

Leadership Styles in Managerial Grid

Developed by Robert Blake and Jane Mouton, this approach as shown in the
following grid, has two dimensions −

 Concern for people which includes such elements as provision of

good working conditions, placement of responsibility on the basis of
trust rather than concern for production.
 Concern for production includes the attitudes of a supervisor toward
a wide variety of things, such as quality of staff services, work
efficiency, volume and quality of output, etc.

The bi-dimensional managerial grid identifies a range of management

behavior based on the various ways that task-oriented and employee-
oriented styles (each expressed as a continuum on a scale of 1 to 9) can
interact with each other.
 Management Style 1,1 −
o Impoverished management with low concern for both people
and production.
o This is called laissez-faire management because the leader does
not take a leadership role.
o Also known as delegative leadership is a type of leadership style
in which leaders are hands-off and allow group members to
make the decisions.
 Management Style 1,9 −
o Country club management having high concern for employees
but low concern for production.
o These leaders predominantly use reward power to maintain
discipline and to encourage the team to accomplish its goals.
 Management Style 5,5 −
o Middle of the road management with medium concern for
production and for people.
o Leaders who use this style settle for average performance and
often believe that this is the most anyone can expect.
 Management Style 9,1 −
o Authoritarian management with high concern for production but
low concern for employees exercising disciplinary pressure.
o This approach may result in high production but low people
satisfaction levels.
 Management Style 9,9 −
 o Democratic management with high concern for both production,
and employee morale and satisfaction.
o The leader's high interest in the needs and feelings of
employees affects productivity positively.

This theory concluded that style 9,9 is the most effective management style
as this leadership approach will, in almost all situations, result in improved
performance, low turnover and absenteeism, and high employee
satisfaction.

Systems of Management
Professor Rensis Likert of Michigan University studied the patterns and styles
of managers and leaders for three decades. He suggests four styles of
management, which are the following −

 Exploitative-authoritative management −
o Managers are highly autocratic, showing little trust in
subordinates.
o The prime drivers are motivating people through fear and
punishment.
o Managers engage in downward communication and limit
decision making to the top.
 Benevolent-authoritative management −
o The manager has condescending confidence and trust in
subordinates (master-servant relationship).
o Management uses rewards and upward communication is
censored or restricted.
o The subordinates do not feel free to discuss things about the job
with their superior. Teamwork or communication is minimal and
motivation is based on a system of rewards.
 Consultative management −
o Managers have substantial but not complete confidence and
trust in subordinates.
o Use rewards for motivation with occasional punishment and
some participation, usually try to make use of subordinates'
ideas and opinions.
o Communication flow is both up and down.
o Broad policy and general decisions are made at the top while
allowing specific decisions to be made at lower levels and act
consultatively in other ways.
  Participative management −
o Managers have trust and confidence in subordinates.
o Responsibility is spread widely through the organizational
hierarchy.
o Some amount of discussion about job-related issues take place
between the superior and subordinates.

Likert concluded that managers who applied the participative management

approach to their operations had the greatest success as leaders.

Mission, Vision and Values

Every organization to be successful needs to be guided by a clear strategy.
Vision, mission, and values form the ground for building the strategic
foundation of the organization. They direct and guide the purpose, principles
and values that govern the activities of the organization and communicate
this purpose of the organization internally and externally.

Successful organizations ensure that their goals and objectives are always in
synergy with their vision, mission and values and consider this as the basis
for all strategic planning and decision making.

By developing clear and meaningful mission and vision statements,

organizations can powerfully communicate their intentions and inspire
people within and outside the organization to ensure that they understand
the objectives of the organization, and align their expectations and goals
toward a common sense of purpose.

Importance of Mission, Vision, and Values

Vision and mission statements play an important role in strategy
development by −

 Providing means to create and weigh various strategic plans and

alternatives.
 Laying down the fundamentals of an organization’s identity and
defining its purpose for existence.
 Providing an understanding of its business directions.
By identifying and understanding how values, mission, and vision interact
with one another, an organization can create a well-designed and successful
strategic plan leading to competitive advantage.
An organizational mission is a statement specifying the kind of business it
wants to undertake. It puts forward the vision of management based on
internal and external environments, capabilities, and the nature of customers
of the organization.

A mission statement therefore −

 Communicates the organization’s reason for being.

 Reveals a company's philosophy, as well as its purpose.
 Specifies how it aims to serve its key stakeholders.
 Defines the current and future business in terms of product, markets,
customer, etc.
 Is often longer than vision statements and sometimes also includes a
summation of the firm’s values.
Following are the mission statements of some of the most successful
companies.

Microsoft
At Microsoft, our mission is to enable people and businesses throughout the
world to realize their full potential. We consider our mission statement a
commitment to our customers. We deliver on that commitment by striving to
create technology that is accessible to everyone—of all ages and abilities.
Microsoft is one of the industry leaders in accessibility innovation and in
building products that are safer and easier to use.

Coke
Our Roadmap starts with our mission, which is enduring. It declares our
purpose as a company and serves as the standard against which we weigh
our actions and decisions.

 To refresh the world...

 To inspire moments of optimism and happiness...
 To create value and make a difference
A vision is a clear, comprehensive snapshot of an organization at some point
in the future. It defines the company’s direction and entails what the
organization needs to be like, to be successful in future.
It is of strategic importance to an organization to create a clear and effective
vision. A clear vision helps to define the values of the organization and
guides the conduct of all employees. A strong vision also leads to improved
productivity and efficiency.

A Vision Statement is −

 A future-oriented declaration of the organization’s purpose and

aspirations.
 Lays out the organization’s purpose for being.
 A clear vision helps in aligning everyone towards the same state of
objective, providing a basis for goal congruence.

For example, the Vision Statement of PepsiCo is as follows − At PepsiCo,

we're committed to achieving business and financial success while leaving a
positive imprint on society − delivering what we call Performance with
Purpose.

Role Played by Mission and Vision

Organization mission and vision are critical elements of a company's
organizational strategy and serves as the foundation for the establishment of
company objectives.

Mission and vision statements play critical roles, such as −

 They provide unanimity of purpose to organizations and spell out the

context in which the organization operates.
 They communicate the purpose of the organization to stakeholders.
 They specify the direction in which the organization must move to
realize the goals in the vision and mission statements.
 They provide the employees with a sense of belonging and identity.
Values
Every organization has a set of values. Sometimes they are written down
and sometimes not. Written values help an organization define its culture
and belief. Organizations that believe and pledge to a common set of values
are united while dealing with issues internal or external.

An organization’s values can be defined as the moral guide for its business
practices.

Core Values
Every company, big or small, has its core values which forms the basis over
which the members of a company make decisions, plan strategies, and
interact with each other and their stakeholders. Core values reflect the core
behaviors or guiding principles that guide the actions of employees as they
execute plans to achieve the mission and vision.

 Core values reflect what is important to the organization and its

members.
 Core values are intrinsic - they come from leaders inside of the
company.
 Core values are not necessarily dependent on the type of company or
industry and may vary widely, even among organizations that do
similar types of work.

For many companies, adherence to their core values is a goal, not a reality.

It is often said that companies that abandon their core values may not
perform as well as those that adhere to them.

Stakeholders
Any individual or groups/group of individuals who believe and have an
interest in an organization’s ability to deliver intended results and affect or
are affected by its outcomes are called stakeholders. Stakeholders play an
integral part in the development and ultimate success of an organization.

An organization is usually accountable to a broad range of stakeholders,

including shareholders, who are an integral part of an organization’s strategy
execution. This is the main reason managers must consider stakeholders’
interests, needs, and preferences. A stakeholder is anybody who can affect
or is affected by an organization, strategy or project. They can be internal or
external and they can be at senior or junior levels.
Types of Stakeholders
Stakeholders are people who have the power to impact an organization or a
project in some way.

Stakeholders can be of two types −

 Primary or Internal stakeholders

 External stakeholders
Primary or Internal Stakeholders
These are groups or individuals who are directly engaged in economic
transactions within the business, such as employees, owners, investors,
suppliers, creditors, etc.

For example, employees contribute their skill/expertise and wish to earn

high wages and retain their jobs. Owners exercise control over the business
with a view to maximizing the profit of the business.

Secondary or External Stakeholders

These are groups or individuals who need not necessarily be engaged in
transaction with the business but are affected in some way from the
decisions of the business, such as customers, suppliers, creditors,
community, trade unions, and the government.
For example, the trade unions are interested in the organization’s well-being
so that the workers are well paid and treated fairly. Customers want the
business to produce quality products at reasonable prices.

Identification of Key Stakeholders

It is very important for any business to identify its key stakeholders and
scope their involvement as they play a vital role right from strategizing to
implementation of outcomes throughout the lifetime of a business.

Different stakeholders have different interests in the organization and the

management has to consider all their interests and create a synergy among
them to achieve its objectives.

Identifying all of a firm’s stakeholders can be a daunting task. It is important

to have the optimum number of stakeholders, neither too many nor too few.
Having too many stakeholders will dilute the effectiveness of the company
objectives by overwhelming decision makers with too much information and
authority. Following are some effective techniques to identify key
stakeholders −

 Brainstorming − This is done by including all the people already

involved and aware of the company and its objectives, and
encouraging them to come out with their ideas. Stakeholders can be
brainstormed based on categories such as internal or external.
 Determining power and influence over decisions − Identify the
individuals or groups that exercise power and influence over the
decisions the firm makes. Once it is determined who has a stake in
the outcome of the firm’s decisions as well as who has power over
these decisions, there can be a basis on which to allocate prominence
in the strategy-formulation and strategy-implementation processes.
 Determining influences on mission, vision and strategy
formulation − Analyze the importance and roles of the individuals or
groups who should be consulted as strategy is developed or who will
play some part in its eventual implementation.
 Checklist − Make a checklist or questions to help identify the more
influential or important stakeholders.
o Who will be affected positively or negatively, and to what
extent?
o Who influences the opinions about the company?
o Who has been involved in any similar projects in the past?
 o Which groups will benefit from successful execution of the
strategy and which may be adversely affected?
 Involve the already identified stakeholders − Once the
stakeholders are identified, it is important to manage their interests
and keep them involved and supportive. This is a daunting task to be
performed tactfully by managers so that the organization’s higher
objectives are not subordinated by individual interests.

Personality and Attitude

Every organization is a mix of individuals with a variety of personalities,
values, and attitudes. Personality and characteristics determine an
employee’s behavior and ability to perform. Organizations hire people on the
premise that they have certain knowledge, skills, abilities, personalities, and
values which they bring to the workplace.

Role of Personality and Attitude in Organization

Personality contributes in part to workplace behavior because the way that
people think, feel, and behave affects many aspects of the workplace.
Attitude is another major factor to be considered here. People's personalities
influence their behavior in groups, their attitudes, and the way they make
decisions.

Today, at the hiring stage itself many organizations are attempting to screen
applicants who are more likely to fit with their company culture.
Organizations want to hire individuals with positive traits and attitudes to
create a healthy environment.

Importance of Personality
Personality is a set of distinctive individual characteristics, including motives,
emotions, values, interests, attitudes, and competencies. It is a stable set of
characteristics representing internal properties of an individual, which are
reflected in behavioral tendencies across a variety of situations.

It determines an employee’s fitment in terms of personality, attitude and

general work style. In managing the day-to-day challenges, it is the
personality of the people involved that affects the decisions taken in an
organization. For example, a manager who cannot motivate his staff
positively risks the integrity of the team which directly impacts the quality of
service resulting in low productivity.
A manager’s personality greatly impacts motivation, leadership,
performance, and conflict. The more understanding a manager has on how
personality in organizational behavior works, the better equipped he will be
to bring out the best in people and situation.

Personality Traits
Organizations have greatly evolved over the years in the way organizations
operate and react to situations. Today they are leaner with fewer levels and
more transparency. Managers are more participative involving subordinates
at all levels. The shift towards more knowledge-oriented and customer-
focused jobs have rendered more autonomy even at fairly low levels within
organizations.

The constant volatility of the environment affecting organizations have made

them open to changes and newness. All of these factors have contributed to
personality being seen as more important now than it was in the past.

Behavior patterns have been a constantly evolving field of study where

psychologists attempt to identify and measure individual personality
characteristics, often called personality traits which are assumed to be
some enduring characteristics that are relatively constant like dependable,
trustworthy, friendly, cheerful, etc.

Modern personality theorists, Costa & McCrae, have researched and

published their study of a ‘5 trait’ model which is now widely accepted
among psychologists. These 5 aspects of personality are referred to as the
5-factors or sometimes just ‘the Big 5’.

The Big 5 Personality Traits

There are a number of traits on which persons can be ranked or measured.
However, five core personality traits called the five-factor model have been
found to be of value for use in organizational situations.

Each of these 5 personality traits describes, relative to other people, the

frequency or intensity of a person's feelings, thoughts, or behaviors. Every
individual possesses all 5 of these traits, but in varying degree.

For example, we can describe two managers as ‘tolerant’. But there could be
significant variation in the degree to which they exercise their tolerance
levels.
The model categorizes people as possessing the following traits in varying
degrees of high scope and low scope.

Conscientiousness
 High Score − Productive and disciplined, rigid and single tasking.
 Low Score − Less structured, less productive, more flexible,
inventive, and capable of multitasking.
Agreeableness
 High Score − Co-operative, can be submissive, and empathetic to
others.
 Low Score − Demanding, challenging and competitive, sometimes
even argumentative.

Extraversion
 High Score − Energetic, Cooperative, talkative, enthusiastic and seek
excitement.
 Low Score − Loners, not sympathetic, difficult to understand, even a
bit eccentric.

Openness to Experience
 High Score − Beginners, curious and sometimes unrealistic.
 Low Score − Grounded, practical and sometimes resist change.

Neuroticism
 High Score − Calm, relaxed and rational. Sometimes can be
perceived as being lazy and incapable of taking things seriously.
 Low Score − Alert, anxious, sometimes unnecessarily worried.

The 5 personality traits exist on a continuum rather than as attributes that a

person does or does not have. Each of these 5 traits is made up individual
aspects, which can be measured independently.

The personality traits cannot be studied in isolation. Both positive and

negative associations that these traits imply should be considered. For
example, conscientiousness is necessary for achieving goals through
dedication and focus. Conscientious people reach their goals faster.
Conversely, conscientiousness is not very helpful in situations that require
multi-tasking.

Other Personality Traits – Self Variables

In addition to the Big Five, researchers have proposed various other
dimensions or traits of personality. They are called self-variables. People's
understanding about themselves is called self-concept in personality theory
and are important self-variables that have application in organizational
behavior. These include self-monitoring, self-esteem, self-efficacy, etc.

 Self-esteem is the self-perceived competence and self-image. It is

related to higher levels of job satisfaction and performance levels on
 the job. People with low self-esteem experience high levels of self-
doubt and question their self-worth.
 Self-monitoring is the extent to which a person is capable of
monitoring his or her actions and appearance in social situations.
 Self-efficacy is the belief in one’s abilities that one can perform a
specific task successfully. A person may have high self-efficacy in
being successful academically, but low self-efficacy in relation to
his/her ability to fix the car.

Personality thus impacts a person's performance in various dimensions in

the workplace. Not every personality is suited for every job position, so
organizations need to carefully consider personality traits and assign
duties/roles accordingly. This can lead to increased productivity and job
satisfaction.

Work Attitude and Behavior

Each one of us has our own belief or attitude towards the food we eat, the
place we live, the clothes we wear, etc. Similarly, work attitude refers to
how an individual feel about his work and shows his commitment towards it.

Attitudes are a way of thinking, and they shape how we relate to the world,
both at work and outside of work. An attitude denotes our opinions, beliefs,
and feelings about various aspects of our environment.

Positive Work Attitude

Positive work attitude is extremely important because it fosters productive
thinking and leads to productive working. A positive person is more
approachable and easily builds constructive relationships, which are
essential in building cohesive teams.

The two job attitudes that have the greatest potential to influence how an
individual behaves at work are − Job Satisfaction and Organizational
Commitment.

People consider and evaluate their work environment based on several

factors like the nature of the job, the rapport and relationship they share
with their superiors and peers, how they are treated in the organization and
the level of stress the job involves. Work attitudes that have the greatest
potential to influence how an employee behaves are job satisfaction and
organizational commitment.
Job Satisfaction
The feelings people have toward their job. It is probably the most important
job attitude and denotes how satisfied an employee is at his work. A person
with high job satisfaction appears to hold generally positive attitude, and
one who is dissatisfied holds negative attitude towards their job.

Organizational Commitment
Organizational commitment is the emotional or psychological attachment
people have toward the company they work for. A highly committed
employee identifies completely with the organizations’ objectives and is
willing to put in whatever effort it takes to meet them. Such an employee
will be willing to remain with the organization and grow with it.

Factors Contributing to Job Satisfaction and Organizational

Commitment

Employees tend to associate satisfaction and commitment in jobs with

certain characteristics.
Nature of Job − Employees are satisfied and committed when they feel
that their job provides the ability to use their inherent skills, having
autonomy at work, performing a seemingly significant task, having healthy
feedback mechanism, etc. Employees also tend to be more satisfied when
their jobs help them build new skills and improve themselves.

Job Fitment − It is the degree to which an employee’s personal beliefs,

values and goals are in synergy with those of the organization. An employee
who sees a healthy synergy will remain satisfied and committed.

Organizational Justice − Every individual like to be treated fairly in all

situations. This also applies to the workplace and plays a big role in creating
and sustaining satisfaction and commitment levels. How fair the company
policies are, how fairly the management and superiors treat the employees
and how fair is the compensation an employee receives in return for his
contribution, are some factors.

Work Relationships − Another major influencer of an employee’s

satisfaction and commitment is the relationship with juniors, peers and
managers. Relationship refers to the way they are treated, whether they are
socially accepted in the work group, how considerate is the manager, how
fair he is towards the employees, etc.

Psychological Association − An employee who is emotionally attached

with the organization will be satisfied and willing to commit himself to
achieving the organizational objectives. It is the unspoken informal bond
that silently plays a major positive influence.

Decision Making Nature Significance

Decision making is an integral part of every aspect of life. This also applies
to organizations. It is one of the key factors that pave the way for its
success or failure. Every manager is required to execute decisions at various
levels of the management cycle beginning from planning to control. It is the
effectiveness and quality of those decisions that determine how successful a
manager is.

Without decision making, different managerial functions such as planning,

organizing, directing, controlling, and staffing cannot be conducted. Decision
making is a cumulative and consultative process, and should support
organizational growth.
The main function of every management is making the right decisions and
seeing them through to their logical end through execution. Every
management decision also affects employee morale and performance,
ultimately influencing the overall business performance. The importance of
decision making in management is immense, as the business policy and
strategies adopted ultimately affects the company's output and
performance.

Decision making is the coherent and rational process of identifying a set of

feasible alternatives and choosing a course of action from them.

Types of Decisions
Decision making and problem solving is a continuous process of analyzing
and considering various alternatives in various situations, choosing the most
appropriate course of action and following them up with the necessary
actions.

There are two basic types of decisions −

 Programmed Decisions
 Non-programmed Decisions
Programmed Decisions
Programmed decisions are those that are made using standard operating
procedures or other well-defined methods. They are situations that are
routine and occur frequently.

Organizations come up with specific ways to handle them. Programmed

decisions are effective for day-to-day issues such as requests for leave or
permissions by employees. Once the decision is taken, the program specifies
processes or procedures to be followed when similar situation arises.
Creating such programed routines lead to the formulation of rules,
procedures and policies, which becomes a standard in the organization.

Non-programmed Decisions
Non-programmed decisions are unique and one-shot decisions. They are not
as structured as programmed decisions and are usually tackled through
judgment and creativity.

They are innovative in essence, as newly created or unexpected problems

are settled through unconventional and novel solutions.

Factors Affecting Decision Making

Decisions are typically made under one of three conditions −

 Certainty
 Risk and
 Uncertainty
These conditions are based on the amount of knowledge the decision maker
has regarding the final outcome of the decision. The manager's decision
depends on a number of factors, like the manager's knowledge, experience,
understanding and intuition.

Certainty
 Decisions are made under conditions of certainty when the manager
has enough information to know the outcome of the decision before it
is made.
 The manager knows the available alternatives as well as the conditions
and consequences of those actions.
 There is little ambiguity and hence relatively low possibility of making
a bad decision.

Risk
 Most managerial decisions are made under conditions of risk.
 Decisions are taken in risk when the manager has some information
leading to the decision but does not know everything and is unsure or
unaware of the consequences.

Under conditions of risk, the manager may find it helpful to use probability
estimates. This is where the manager’s experience and/or intelligence is of
great help.

Uncertainty
 Decisions are made under uncertainty when the probabilities of the
results are unknown.
 There is no awareness of all the alternatives and also the outcomes,
even for the known alternatives.

Under such conditions managers need to make certain assumptions about

the situation in order to provide a reasonable framework for decision
making. Intuition, judgment, and experience always play a major role in the
decision making process under conditions of uncertainty.

The decision-making process involves the following steps −

  Define the problem
 Identify limiting factors
 Develop potential alternatives
 Analyze and select the best alternatives
 Implement the decision

Define the Problem

The first step in the process of decision making is the recognition or
identification of the problem, and recognizing that a decision needs to be
taken.

It is important to accurately define the problem. Managers can do this by

identifying the problem separately from its symptoms. Studying the
symptoms helps getting closer to the root cause of the problem.

Identify Limiting Factors

In order to choose the best alternative and make a decision every manager
needs to have the ideal resources − information, time, personnel,
equipment, and supplies. But this is an ideal situation and may not always
be possible.

A limiting factor is something that stands in the way of accomplishing a

desired objective.
Develop Potential Alternatives
Recognizing the limiting factor in a given situation makes it possible to
narrow down the search for alternatives and make the best decision possible
with the information, resources, and time available.

Some methods for developing alternatives are −

 Brainstorming, where a group works together to generate ideas and

alternative solutions.
 Nominal group technique is a method that involves the use of a
highly structured meeting, complete with an agenda, and restricts
discussion or interpersonal communication during the decision-making
process.
 Delphi technique where the participants do not meet, but a group
leader uses written questionnaires to conduct the decision making.

Analyze the Alternatives

This is an important stage in the decision-making process and perhaps the
toughest. Managers must identify the merits and demerits of each
alternative and weigh them in light of various situations before making a
final decision.

Evaluating the alternatives can be done in numerous ways. Here are a few
possibilities −

 Qualitative and quantitative measurements

 Perform a cost‐effectiveness analysis for each alternative
 Marginal analysis
Selecting Alternatives
Once the alternatives are analyzed and evaluated, the manager has to
choose the best one. The manager needs to choose the alternative that
gives the most advantage while meeting all the required criteria. Sometimes
the choice is simple with obvious benefits, at times the optimal solution is a
combination of several alternatives. At times when the best alternative may
not be obvious, the manager uses probability estimates, research and
analysis aided by his experience and judgment.

Evaluating Decision Effectiveness

The job of the managers does not end with making decisions. They are also
responsible to get favorable results from the decision taken and
implemented.

The effectiveness of a decision can be understood through a systematic and

scientific evaluation system that provides feedback on how well the decision
is being implemented, what the results have been, and what amendments
and adjustments have been made to get the intended results.

Decision Making - Styles

Decision making style of managers depend greatly on their personality and
approach towards problem solving. Every leader or manager has his own
individualistic style augmented by his experience, background, and abilities.

Managers who follow this style assess few

alternatives and consider limited information
while taking any decision.
Directive or Autocratic
Decision Making They do not find it important to consult with
others or seek information in any form and
use their logic and idea while taking
decisions.

Managers using analytic decision making

style would like to have more information
and consider more alternatives before
coming to a conclusion.

Analytical Decision Making They seek relevant information from their

sources and consider factual and detailed
information before taking any decision. Such
managers are careful decision makers as
they have the ability to adapt or cope with
unique situations.

Behavioral Decision Making Leaders who follow this model believe in

participative management and consider the
 achievement of subordinates and always
take suggestions from them.

They try to get inputs from subordinates

through meetings and discussions. They try
to avoid/resolve conflicts as acceptance by
others is important to them.

Managers using conceptual decision making

style are intuitive in their thinking and have
Conceptual Decision
high tolerance for ambiguity.
Making
They look at many alternatives and focus on
long run outcomes.

Decision Making - Tools

Decision making is a very important and complex process. In order to aid
decision makers, make the right choice, quantitative techniques are used
that improve the overall quality of decision making.

Following are some of the commonly used techniques −

Decision Trees
Decision Trees are tools that help choose between several courses of action
or alternatives. They are −

 Represented as tree-shaped diagram used to determine a course of

action or show a statistical probability.
 Each branch of the decision tree represents a possible decision or
occurrence.
 The tree structure shows how one choice leads to the next, and the
use of branches indicates that each option is mutually exclusive.
 A decision tree can be used by a manager to graphically represent
which actions could be taken and how these actions relate to future
events.

Delphi Technique
Delphi Technique is a method used to estimate the likelihood and outcome
of future events. It is unique because −
  It is a group process using written responses to a series of
questionnaires instead of physically bringing individuals together to
make a decision.
 Individuals are required to respond to a set of multiple questionnaires,
with each subsequent questionnaire built from the information
gathered in the previous one.
 The process ends when the group reaches a consensus.
 The responses can be kept anonymous if required.

Payback Analysis
Payback analysis is a technique generally used in financial management.

 It refers to the period of time required to recoup the funds expended

in an investment, or to reach the break-even point.
 It is generally used to evaluate capital-purchasing alternatives.
 Alternatives are ranked according to the time each takes to pay back
its initial cost.
 The strategy is to choose the alternative that has the quickest payback
of the initial cost.

Simulations
Simulation is a technique that attempts to replace and amplify real
experiences with guided techniques.

 It is a widely used technique in operations research.

 It models the behavior of individual elements within a given system.
 Methods generally used in simulation are random sampling to
generate realistic variability.
 The overall behavior of the system emerges from the interactions
between the elements.
 Widely used application areas of the simulation technique are -
logistics and supply chain, service and operations management,
business process improvement, health and social care information
system, environment, etc.

Planning Introduction
Every organization as part of its life cycle constantly engages in the four
essential functions of management – planning, leading, organizing and
controlling. The foremost of this is planning. It is the part of management
concerned with creating procedures, rules and guidelines for achieving a
stated objective. All other managerial functions must be planned if they are
to be effective.

Managers at all levels engage in planning as objectives and goals have to be

set up for the day-to-day activities as well as the broader long-term
initiatives.

What is Planning?
Planning is the most basic of all managerial functions which involves
establishing goals, setting out objectives and defining the methods by which
these goals and objectives are to be attained. It is, therefore, a rational
approach to achieving pre-selected objectives.

Planning involves selecting missions and objectives and the actions to

achieve them. An important aspect of planning is decision making - that is,
choosing the right alternatives for the future course of action.

Organizations have to typically plan for long-range and short-range future

direction. By forecasting and predicting the market and socio-political-
economic trends, managers can plan to determine where they desire the
company to be in future.

Planning involves determining various types and volumes of physical and

other resources to be acquired from outside, allocating these resources in an
efficient manner among competing claims and to make arrangement for
systematic conversion of these resources into useful outputs.

Since plans are made to attain goals or objectives, every plan should lead to
the achievement of the organization’s purpose and objectives. An organized
enterprise exists to accomplish group objectives through willing and
purposeful co-operation.

Planning bridges the gap between where the organization stands currently
and wishes to be in future. In the absence of planning, events are left to
chance.

Importance of Planning
The importance of planning as the major constituent in the management
process is universally accepted. Planning not only brings stability and
certainty to business, it also brings in a unified sense of direction and
purpose for the achievement of certain well-defined objectives.
The basic reasons supporting systematic planning by managers are −

 Sense of Direction − Planning provides a unity of purpose. It brings

together all resources towards achieving common goals. Without
plans and goals, organizations will respond to everyday events in an
ad-hoc manner without considering long-term possibilities.
 Resource Paucity − Resource crunch is a major challenge for
organizations today. Managements are confronted with the task of
optimizing outputs with limited human, material, and financial
resources through intelligent planning; otherwise, wasteful
inefficiencies would lead to higher prices and severe shortages.
 Uncertainty − Uncertainty is a major challenge even to the most
intelligent planner. Organizations continually face micro and macro-
economic uncertainty in the course of accomplishing their tasks.
Planning helps managers anticipate such changes and meet these
challenges.

Besides the above, there are several practical reasons for formulating plans.

 To focus organizational activity on a set of consciously created

objectives.
 To provide a systematic guide for future activities.
  To increase organizational outcome through efficient operation.
 To encourage systematic thinking. Planning facilitates effective
delegation of authority, removes communication gaps, and thereby
raises overall efficiency.

Management Principles - Types Of Plans

Plans commit the various resources in an organization to specific outcomes
for the fulfillment of future goals. Many different types of plans are adopted
by management to monitor and control organizational activities. Three such
most commonly used plans are hierarchical, frequency-of-use
(repetitiveness) and contingency plans.

Strategic Plans
Strategic plans define the framework of the organization’s vision and how
the organization intends to make its vision a reality.

 It is the determination of the long-term objectives of an enterprise,

the action plan to be adopted and the resources to be mobilized to
achieve these goals.
 Since it is planning the direction of the company’s progress, it is done
by the top management of an organization.
 It essentially focuses on planning for the coming years to take the
organization from where it stands today to where it intends to be.
  The strategic plan must be forward looking, effective and flexible, with
a focus on accommodating future growth.
 These plans provide the framework and direction for lower level
planning.

Tactical Plans
Tactical plans describe the tactics that the managers plan to adopt to
achieve the objectives set in the strategic plan.

 Tactical plans span a short time frame (usually less than 3 years) and
are usually developed by middle level managers.
 It details specific means or action plans to implement the strategic
plan by units within each division.
 Tactical plans entail detailing resource and work allocation among the
subunits within each division.

Operational Plans
Operational plans are short-term (less than a year) plans developed to
create specific action steps that support the strategic and tactical plans.

 They are usually developed by the manager to fulfill his or her job
responsibilities.
 They are developed by supervisors, team leaders, and facilitators to
support tactical plans.
 They govern the day-to-day operations of an organization.
 Operational plans can be −
o Standing plans − Drawn to cover issues that managers face
repeatedly, e.g. policies, procedures, rules.
o Ongoing plans − Prepared for single or exceptional situations
or problems and are normally discarded or replaced after one
use, e.g. programs, projects, and budgets.

Planning Environment
Planning is the fundamental process in management which moves gradually
and a step-by-step approach is usually adopted. It involves the
determination of objectives and outlines the future actions needed to
achieve these objectives. The above diagram represents the planning
process.
Establishing Objectives and Goals
The first step of the management planning process is to identify goals
specific to the organization and also for each department unit. A
comprehensive planning effort to be successful requires that managers in
each department be involved in the planning process. Thus objectives and
goals which will direct the future course of the organization must be clear,
concise and specific.

At this stage, the planning process should include a detailed overview of

each goal, including the reason for its selection and the anticipated
outcomes of goal-related projects. The objectives thus established govern
the framework for every major department, which in turn, control the
objectives of subordinate departments and so on down the line.

Determining Alternatives
The next step is to search for and find out alternatives that will guide the
fulfillment of the objectives established. At this stage, managers need to
plan on how to move from their current position towards their decided future
position.

Managers may find many alternatives, however, dropping the less desirable
ones and narrowing on the few desired alternatives is what will help in
identifying the best fit solution. The manager can take the help of
quantitative techniques, research, experimentation, and experience to
determine various alternatives.

Evaluating and Choosing Alternatives

Once alternative courses of action have been identified, each alternative has
to be analyzed and evaluated in the light of its strength and weakness and
its fitment in achieving the organizational goals. While evaluating
alternatives, managers should consider facts like the costs involved, how
resource intensive it is, the time frame for completion, the gestation period,
return on investment, etc.

Major challenges of effective evaluation can be uncertainty about the future

and risk. Various intangible factors which are not within the control of the
management like market changes, socio-economic-political factors, etc. also
have a bearing. At this stage, managers can use operations research, and
mathematical as well as computing techniques to predict and analyze
alternatives.

Creating Assignments and Timelines

As the plans are frozen and prioritized, timelines for completing associated
tasks need to be finalized. At this stage, resource allocation and the line of
authority and responsibility also needs to be established. The manager
should consider the abilities of staff members and allocate the best fit
resource for the job.

Also the timelines for completion should be realistic and fair. This step in the
planning process is important as it brings coordination in the activities of
different departments. The timings and sequence of operations must be
communicated to the concerned departments, managers and staff for
implementation of the plan.

Formulating Derivative Plans

Derivative plans are sub-sections of the operating plan. The division of
overall plan into derivative plans is necessary for effective execution.
Derivative plans are essentially required to support the basic or general plan
and explain the many details involved in reaching a broad major plan.

Budgeting
Once the plans are finalized and set, the final step is to convert them into
quantifiable parameters through budgeting. Budgets are most commonly
expressed in terms of money, but are also expressed as hours worked, as
units sold, or in any other measurable unit.

An enterprise usually has overall budgets representing the sum total of

income and expenses, with consequent profit or surplus. Each department of
the enterprise or organization can have its own budget, commonly of
expenses and capital expenditures, which make up the overall budget. A well
planned budgeting exercise can become a standard for measuring the
progress and effectiveness of the planning process.

Importance Of Organizing
Organizations are systems created to achieve common goals through
people-to-people and people-to-work relationships. They are essentially
social entities that are goal-directed, deliberately structured for coordinated
activity systems, and is linked to the external environment. Organizations
are made up of people and their relationships with one another. Managers
deliberately structure and coordinate organizational resources to achieve the
organization’s purpose.

Each organization has its own external and internal environments that define
the nature of the relationships according to its specific needs. Organizing is
the function that managers undertake to design, structure, and arrange the
components of an organization’s internal environment to facilitate
attainment of organizational goals.

Organizing creates the framework needed to reach a company's objectives

and goals.

Organizing is the process of defining and grouping activities, and establishing

authority relationships among them to attain organizational objectives.

Importance of Organizing
A comprehensive approach to organizing helps the management in many
ways. Organizing aligns the various resources towards a common mission.

Efficient Administration
It brings together various departments by grouping similar and related jobs
under a single specialization. This establishes coordination between different
departments, which leads to unification of effort and harmony in work.

It governs the working of the various departments by defining activities and

their authority relationships in the organizational structure. It creates the
mechanism for management to direct and control the various activities in
the enterprise.

Resource Optimization
Organizing ensures effective role-job-fit for every employee in the
organization. It helps in avoiding confusion and delays, as well as duplication
of work and overlapping of effort.

Benefits Specialization
It is the process of organizing groups and sub-divide the various activities
and jobs based on the concept of division of labor. This helps in the
completion of maximum work in minimum time ensuring the benefit of
specialization.

Promotes Effective Communication

Organizing is an important means of creating coordination and
communication among the various departments of the organization.
Different jobs and positions are interrelated by structural relationship. It
specifies the channel and mode of communication among different
members.

Creates Transparency
The jobs and activities performed by the employees are clearly defined on
the written document called job description which details out what exactly
has to be done in every job. Organizing fixes the authority-responsibility
among employees. This brings in clarity and transparency in the
organization.

Expansion and Growth

When resources are optimally utilized and there exists a proper division of
work among departments and employees, management can multiply its
strength and undertake more activities. Organizations can easily meet the
challenges and can expand their activities in a planned manner.

Management - Principles of Organizing

The following illustration shows the five principles of Organizing −
Work Specialization
Also called division of labor, work specialization is the degree to which
organizational tasks are divided into separate jobs. Each employee is trained
to perform specific tasks related to their specialized function.

Specialization is extensive, for example running a particular machine in a

factory assembly line. The groups are structured based on similar skills.
Activities or jobs tend to be small, but workers can perform them efficiently
as they are specialized in it.

In spite of the obvious benefits of specialization, many organizations are

moving away from this principle as too much specialization isolates
employees and narrows down their skills to perform routine tasks.

Also it makes the organization people dependent. Hence organizations are

creating and expanding job processes to reduce dependency on particular
skills in employees and are facilitating job rotation among them.
Authority
Authority is the legitimate power assigned to a manager to make decisions,
issue orders, and allocate resources on behalf of the organization to achieve
organizational objectives.

Authority is within the framework of the organization structure and is an

essential part of the manager’s job role. Authority follows a top-down
hierarchy. Roles or positions at the top of the hierarchy are vested with
more formal authority than are positions at the bottom.

The extent and level of authority is defined by the job role of the manager.
Subordinates comply with the manager’s authority as it is a formal and
legitimate right to issue orders.

Chain of Command
The chain of command is an important concept to build a robust organization
structure. It is the unbroken line of authority that ultimately links each
individual with the top organizational position through a managerial position
at each successive layer in between.

It is an effective business tool to maintain order and assign accountability

even in the most casual working environments. A chain of command is
established so that everyone knows whom they should report to and what
responsibilities are expected at their level. A chain of command enforces
responsibility and accountability. It is based on the two principles of Unity
of command andScalar Principle.

Unity of command states that an employee should have one and only one
manager or supervisor or reporting authority to whom he is directly
accountable to. This is done to ensure that the employee does not receive
conflicting demands or priorities from several supervisors at once, placing
him in a confused situation.

However, there are exceptions to the chain of command under special

circumstances for specific tasks if required. But for the most part
organizations to a large extent should adhere to this principle for effective
outcomes.

Scalar principle states that there should exist a clear line of authority from
the position of ultimate authority at the top to every individual in the
organization, linking all the managers at all the levels. It involves a concept
called a gang plank using which a subordinate may contact a superior or his
superior in case of an emergency, defying the hierarchy of control. However,
the immediate superiors must be informed about the matter.

Delegation
Another important concept closely related to authority is delegation. It is the
practice of turning over work-related tasks and/or authority to employees or
subordinates. Without delegation, managers do all the work themselves and
underutilize their workers. The ability to delegate is crucial to managerial
success.

Authority is said to be delegated when discretion is vested in a subordinate

by a superior. Delegation is the downward transfer of authority from a
manager to a subordinate. Superiors or managers cannot delegate authority
they do not have, however, high they may be in the organizational
hierarchy.

Delegation as a process involves establishment of expected outcomes, task

assignment, delegation of authority for accomplishing these tasks, and
exaction of responsibility for their accomplishment. Delegation leads to
empowerment, as employees have the freedom to contribute ideas and do
their jobs in the best possible ways.

Span of Control
Span of control (also referred to as Span of Management) refers to the
number of employees who report to one manager. It is the number of direct
reportees that a manager has and whose results he is accountable for.

Span of control is critical in understanding organizational design and the

group dynamics operating within an organization. Span of control may
change from one department to another within the same organization.

The span may be wide or narrow. A wide span of control exists when a
manager has a large number of employees reporting to him. Such a
structure provides more autonomy. A narrow span of control exists when the
number of direct reportees that a manager has is small. Narrow spans allow
managers to have more time with direct reports, and they tend to spark
professional growth and advancement.

Organizational Structure
An organization is a social unit of individuals that is designed and managed
to achieve collective goals. As such organizations are open systems that are
greatly affected by the environment they operate in. Every organization has
its own typical management structure that defines and governs the
relationships between the various employees, the tasks that they perform,
and the roles, responsibilities and authority provided to carry out different
tasks.

An organization that is well structured achieves effective coordination, as the

structure delineates formal communication channels, and describes how
separate actions of individuals are linked together.

Organizational structure defines the manner in which the roles, power,

authority, and responsibilities are assigned and governed, and depicts how
information flows between the different levels of hierarchy in an organization.

The structure an organization designs depends greatly on its objectives and

the strategy it adopts in achieving those objectives.

An organizational chart is the visual representation of this vertical

structure. It is therefore very important for an organization to take utmost
care while creating the organizational structure. The structure should clearly
determine the reporting relationships and the flow of authority as this will
support good communication – resulting in efficient and effective work
process flow.

Common Organization Structures

Managements need to seriously consider how they wish to structure the
organization. Some of the critical factors that need to be considered are −

 The size of the organization

 Nature of the business
 The objectives and the business strategy to achieve them
 The organization environment
Functional Organization Structure
The functional structure is the most common model found in most
organizations. Organizations with such a structure are divided into smaller
groups based on specialized functional areas, such as operations, finance,
marketing, Human Resources, IT, etc.
The organization’s top management team consists of several functional
heads (such as the VP Operations, VP Sales/Marketing). Communication
generally occurs within each functional department and is communicated
across departments through the department heads.

This structure provides greater operational efficiency as employees are

functionally grouped based on expertise and shared functions performed. It
allows increased specialization as each group of specialists can operate
independently.

In spite of the above benefits there are some issues that arise with this
structure. When different functional areas turn into silos they focus only on
their area of responsibility and do not support other functional departments.
Also expertise is limited to a single functional area allowing limited scope for
learning and growth.

Product Organizational Structure

This is another commonly used structure, where organizations are organized
by a specific product type. Each product category is considered a separate
unit and falls within the reporting structure of an executive who oversees
everything related to that particular product line. For example, in a retail
business the structure would be grouped according to product lines.
Organization structured by product category facilitates autonomy by creating
completely separate processes from other product lines within the
organization. It promotes depth of understanding within a particular product
area and also promotes innovation. It enables clear focus with accountability
for program results.

As with every model, this model also has a few downsides like requirement
of strong skills specializing in the particular product. It could lead to
functional duplication and potential loss of control; each product group
becomes a heterogeneous unit in itself.

Geographic Organizational Structure

Organizations that cover a span of geographic regions structure the
company according to the geographic regions they operate in. This is
typically found in organizations that go beyond a city or state limit and may
have customers all across the country or across the world.
It brings together employees from different functional specialties and allows
geographical division. The organization responds more quickly and efficiently
to market needs, and focuses efforts solely on the objectives of each
business unit, increasing results.

Though this structure increases efficiency within each business unit, it

reduces the overall efficiency of the organization, since geographical
divisions duplicate both activities and infrastructure. Another main challenge
with this model is that it tends to be resource intensive as it is spread across
and also leads to duplication of processes and efforts.

Matrix Organizational Structure

A matrix structure is organized to manage multiple dimensions. It provides
for reporting levels both horizontally as well as vertically and uses cross-
functional teams to contribute to functional expertise. As such employees
may belong to a particular functional group but may contribute to a team
that supports another program.
This type of structure brings together employees and managers across
departments to work toward accomplishing common organizational
objectives. It leads to efficient information exchange and flow as
departments work closely together and communicate with each other
frequently to solve issues.

This structure promotes motivation among employees and encourages a

democratic management style where inputs from team members are sought
before managers make decisions.

However, the matrix structure often increases the internal complexity in

organizations. As reporting is not limited to a single supervisor, employees
tend to get confused as to who their direct supervisor is and whose direction
to follow. Such dual authority and communication leads to communication
gaps, and division among employees and managers.

Organizational Process
Organizing, like planning, must be a carefully worked out and applied
process. This process involves determining what work is needed to
accomplish the goal, assigning those tasks to individuals, and arranging
those individuals in a decision‐making framework (organizational structure).

The Organization Process Chart

Following is a representation of organization process chart.
A well-defined organizing process leads to improved communication,
transparency and efficiency in the organization.

Organizational Change
One of the greatest challenges faced by organizations today is the volatility
of the global markets. Globalization has greatly affected the market and so
have opportunities for more growth and revenue. However, to serve such a
diverse marketplace, organizations need to respond to and understand the
needs and expectations of the marketplace.

Organizations are required to constantly innovate and update their

processes and operational efficiencies to collaborate with the expanding
markets. Organizations that refuse to change or move forward are forced to
exit the market or may be wiped out by forward looking companies.

It is this movement or shift in an organization to improve the performance of

the entire organization or a part of the organization that is referred to as
Organizational Change.

Organizational change is a process in which a large company or an

organization changes its working methods or aims, in order to develop and
respond to new situations or markets.

Why Organizations Need to Change

Substantial organizational changes take place typically when organizations
perceive a need to change the overall strategy and direction for success,
adds or discontinues a major segment or practice, and/or wants to change
the very nature by which it operates.

It also occurs when an organization evolves through its life cycles, and has
to restructure itself to grow. Organizational change is often a response to
changes in the environment. Some of the reasons prompting changes are −

Market Dynamics
The changing market conditions cause unexpected changes which
organizations find hard to adjust to. To stay in business and continue to
serve the customers, organizations have to align themselves to these
variations.

Globalization
Globalization has created enormous opportunities as well as global
challenges to organizations. The market has thus expanded across
geographies, and organizations in order to succeed have to serve customers
across these regions. While doing this, organizations are finding it more
affordable and logical to produce goods and deliver services in certain
countries compared to others. The availability of local resources, the
environment of the countries they serve in, localization of goods and
services, etc. are some reasons for this. To cater to global market,
organizations have to understand the global environment and market
behavior, and align the organizations to these new situations.

Organizational Development
As organizations grow and develop in size, the policies, procedures and the
structure that forms the core, also needs to evolve. Organizational changes
may involve changes to its mission and objectives, strategy and direction,
organizational structure and hierarchy, etc. Adjusting an organization’s
internal direction and environment requires considerable dedication and a
careful management.

Reaction to External Environments

Organizations are greatly impacted by the environments that surround it.
External pressures come from many areas, including customers,
competition, changing government regulations, shareholders, financial
markets, and other factors in the organization's external environment.
Performance Gaps
Organizations that have been having issues with their results are often the
ones that consider changes. Performance gaps can be identified in several
areas like production, sales and marketing, service, etc. Such companies
need to conduct a serious study and identify factors causing gaps and
change accordingly to succeed.

Mergers & Acquisitions

Mergers and acquisitions create reorganization in a number of areas. When
two organizations merge, significant changes are expected.

Organizational Change Factors

Organizational change as we have read is a strategic initiative impacting
almost every aspect of its operations and functions. The factors that induce
changes almost always require immediate attention. The major forces that
drive this change in business are −

 Internal environment
 External environment
The Internal Environment
The internal environment of an organization consists of factors within the
organization over which it can exercise a fair amount of control. Some of the
internal factors are −

Employees − Employees are the human capital of the organization. An

organization without a motivated and dedicated workforce will not be able to
perform in spite of having the best products and capital. Employees must
take the initiative to change their workplace, or changes in work tasks for
more efficient and effective performance.

The Organizational Structure − The organizational structure is what

governs and guides the effective operations of the company. It defines and
scopes the authority and hierarchy in the company. However, over time the
organizational structure needs reorganization to answer to the needs of an
evolving entity and becomes an internal source of organizational change.

Organization Processes − The processes in organization are collections of

activities that need to be undertaken in order to produce an output, and that
will have a value for consumers. There are various processes in the
organization that need to be constantly updated to keep serving the market
like – manufacturing, distribution, logistics, information technology, etc.

Apart from the above factors like the company's mission and objectives,
organizational culture and style of leadership are factors typically associated
with the internal environment of an organization and can have a
considerable impact on the organization.

The External Environment

The external environment of an organization are those set of factors which
the organization cannot exercise control on. Though these factors are
external to the organization, they have a significant influence over its
operations, growth and sustainability.

Economic Factors − The macroeconomic factors like the political and legal
environment, the rate of inflation and unemployment, monetary and fiscal
policies of the government, etc. are causes that have a high influence on
companies and prompt for changes in the organization. Managers need to
carefully track these indicators in order to make the right decisions for
change.

Socio-cultural Factors − The local and regional conditions greatly

influence people’s values, habits, norms, attitudes and demographic
characteristics in the society. All of these factors highly influence the
business operations or will do so in the future.

Global Environment − The increasing globalization of markets has made

organizations sensitive to changes. Any change or crisis in the global market
affects every business, and corrective measures are not often easy and
immediately taken.

Technology − Technology has become an intrinsic part of business

operations. It regulates processes in all aspects like manufacturing,
distribution, logistics, finance, etc. Organizations have to be up-to-date with
the ever-changing technological advancements in order to improve
efficiencies and remain competitive.

Organizational Change Management

When organizations undertake initiative to improve performance, seize
opportunities or address key issues, they often require changes − changes
to processes, job roles, organizational structure, and types and use of
technology.
 Change Management

 It is the discipline that guides, prepares, and equips organizations to

successfully adopt change in order to drive organizational success.
 It provides a structured approach for supporting the employees in
moving forward from their current state to desirable and progressive
future state.

Planning Organizational Change

Organizational change often, if not always, is an indicator of potential
problems or issues with the organization. In some cases, however, voluntary
changes happen in forward looking organizations that proactively recognize
potential opportunities or situations.

Whatever the case, change is a shift from the current comfort state for any
organization and needs to be well planned so as to not imbalance the
current environment.Key steps in the process of implementing a planned
organizational change is depicted in the following figure.

Organizations need to undertake thorough study to understand the existing

processes and procedures, and identify the snags. Each problem area has to
be evaluated and the changes required for improvement have to be
assessed.
The next step is to determine the desired future state the management
wishes the organization to be in. This will need to be communicated to all
concerned and design the means of smooth transition.

The transition plan once finalized has to be implemented in an orderly

manner. Plans have to be made and resources need to be allocated.
Responsibility has to be assigned to a key person in the organization to take
charge of the change process. It is essential for the top management to be
involved in the whole process to direct and govern the process.

Resistance to Changes
Organizational change is sometimes unavoidable. It is a complex process
that affects the organization all across. Not all employees and departments
welcome changes to their existing environment and processes. It is normal
human reaction to defend the status quo if security or status is threatened.

In fact, organizational change can generate skepticism and resistance in

employees, making it sometimes difficult or impossible to implement
organizational improvements. This makes the role of the management even
more critical, to make an effort to support the employees during and even
after the process of transformation.
Managing resistance to change is challenging. Some reasons why change is
resisted in organizations are −

Impact of Change
Employees resist change if it is not favorable to them. They tend to be more
welcoming of changes that are favorable to them and empower them.
Resistance also happens when change is thrust onto people without giving
them adequate warning and without helping them through the process of
understanding what the change will entail and how it will impact their
jobs/work.

Self-Interest Before Organizational Well-being

Some employees resist changes as it comes in the way of their personal
interest and agenda. They fear that the change will delay or obstruct the
fulfillment of their hidden agenda.

Personality Trait
Some are inherently more resistant to any kind of change than others.
Employees having a positive and optimistic approach are more willing to
accept changes than employees who have a negative approach.

Uncertainty
Change often brings feelings of uncertainty as the end result is usually
unknown. The environment after transformation could change for the better
or sometimes worse than it was earlier. This lack of clarity creates insecurity
in employees as it leads to a sense of loss of control.

Fear of Failure
Changes in the work processes can create uncertainty over their capabilities
in employees as they fear that they may not be able to adapt to the new
requirements. Thus employees who are confident of their abilities and
performance are more likely to welcome the proposed change, than those
who have lower confidence.

Fear of Job Loss

Another important factor that causes employees to resist change is the fear
that they may lose their job in the organization once the transformation is
affected. This usually happens in organizations that undertake restructuring
or downsizing as a major cause of the change.
Overcoming Resistance to Change
Implementing change is always difficult for organizations. But the transition
can be made smooth if the management goes through it with empathy and
compassion after thorough analysis, planning, and strategizing.

The top management must fully understand how change works in order to
lead their organizations successfully into the future. The introduction and
management of change are emerging as two of the most critical elements of
leadership for the future.

Address Employee Concerns

A management that is truly concerned about its employees will address and
deal with the concerns of the employees first, by giving them confidence and
assuring that the change will bring positive results and then focus on the
organizational benefits.

Effective Communication
A good leader is also an effective communicator. As a change agent, the
leader rather than communicating with the employees what they stand to
gain from the change, can have a greater impact by telling them what they
stand to lose if they don’t accept the change.

Creating an Atmosphere of Trust

Exercises such as teambuilding, trust-building, and open and honest
communication with the employees prior to the introduction of change will
help create an atmosphere of trust. If employees are involved in the change
process and their inputs sought, it will help them accept the changes
implemented without fear.

Link Changes to Employee Concerns

Employees’ perception of change can be made positive and welcoming by
associating the need for change to other issues that they are concerned
about like issues of health, job security, and better working atmosphere.

Multinational Organizations
The evolution of multinational corporations has its root in the origin of trade
in and between various cultural communities across regions. Marked by the
struggle of transacting across regions, trading has always been affected by
the unequal and varied distribution of resources across geographies. It is
this unequal distribution that has led traders to travel long distances and
undergo unusual risks for the hope of gain.
The past few decades have witnessed the way global boundaries have
shrunk, and communications and technology has bridged the gap.
Advancements in technology have resulted in the development of new
products, processes and forms of business that have changed the dynamics
of economic environment the world over.

Economies started to change to accommodate these progressive

developments. Organizations in order to capitalize on the growing
opportunities globally started to change and expand. This gave rise to
multinational corporations.

What are MNCs?

Multinational corporations are profit seeking enterprises having international
power, capital, manpower, and resource-seeking practices. We can say that
an organization that performs its business in two or more countries is a
multinational company. These companies operate worldwide through their
own branches and subsidiaries or through agents who represent them.

All the business activities are managed and controlled by the central head
office of the organization, which is usually situated in the home country of
the company.

The equity capital of the subsidiaries or branches in various countries is

contributed by both the host company and the parent company. However,
management and control of the branches is governed and controlled by the
parent company.

As these organizations coordinate production and distribution on a global

scale, they become enormous in size and wield enormous power, both
economically and politically.

Multinational firms arise −

 Because capital as a resource is mobile and can be used across

geographies.
 The growing global marketplace has created enormous consumerism.
 The mutual cooperation among friendly nations and development of
new technology has facilitated mass production.
 Inexpensive labor and skills are available in many countries.
 Raw materials availability is spread across geographically.

Managers working in multinationals are required to understand and operate

in multi-cultural international environment. As a result, they are required to
constantly monitor the political, legal, sociocultural, economic, and
technological environments across international markets.

Types of Multinational Corporations

Some of the common forms of Multinational Companies are −

Franchise Operations
Under this form, a multinational corporation endows firms in foreign
countries the legal right to use its business model and brand per the terms
and conditions of franchise agreement, which can be reviewed and renewed
periodically. The firms who get the right or license pay royalty or license fee
to multinational corporations.

Branches and Subsidiaries

In this kind of a system, the multinational company opens its own braches in
different countries, which operate under the direct control and supervision of
the company’s head office. Sometimes, a multinational company may
establish subsidiaries in foreign countries. These subsidiaries may be fully
owned by the multinational (parent company) or partly owned, where the
host countries own share capital. The subsidiaries follow the guidelines of
the parent company.

Joint Venture
A multinational company establishes its company in a foreign country in
partnership with the local firms or companies in the host company. The
ownership and control of the business is shared by multinational and foreign
company, where the governing policies are that of the multinational
company and the day-to-day management is left to the local company.

Global Ecosystem and its Impact

Over the past decade, the business framework and environment has
undergone dramatic changes. Due to the intensification of globalization,
international organizations are faced with unprecedented competition and
pressures.

Organizations and respective managements have to understand that

operating in the global marketplace multiplies the variables and
interdependencies to be considered while making decisions. The volatile
global dynamics make the decisions and plans of today outdated by next
month.
The need for companies in this environment is global executives and
managers who apart from analytics, skills and technical insights are able to
be effective in such diverse and dynamic settings.

Thus, international managers are required to operate in the global context

with changing workforce while dealing with unknown rules and regulations
that are subject to unprecedented changes. The development in
transnational trade has resulted in higher global standards of productivity
and quality. This has changed the guidelines of leading and managing
businesses internationally, making it much more complex and challenging.

Challenges Faced by International Managers

International managers are constantly faced with multiple challenges, which
need to be properly understood and dealt with. Some of the challenges are
−

 Conduct business under local legislations in different countries,

languages and currencies, for serving local markets while complying
with global company standards.
 Location-specific risks like unstable economies and governments,
security concerns and labor availability.
  Work and deal with employees from different nationalities and
cultures, which requires a lot of understanding.
 The ever volatile global markets, its infrastructure and the
technological disparities among countries.

Overcoming Global Challenges

Organizations have to understand these challenges and work on ways to
overcome them if they are to conduct successful business globally. The have
to develop competencies that will enable them and their managers to
effectively manage and lead international companies.

Global Competencies
Multinationals should develop global competencies based on factors like the
kind of global presence the company desires, the number and type of
international or global jobs it requires, etc.

Business Competencies
Business competencies involve developing business knowledge and
understanding of the global business environment.

 Understanding how the company fits into the global marketplace,

including business strategies and products, and the organizational
resources to pursue global market opportunities.
 Understanding international business issues, global social, political and
economic events.
 Balancing global versus localization issues.
 Creating learning systems for management focused on managing and
leading global organizations.
 Effective strategic planning and analysis of global trends to manage
uncertainty.
 Developing flexible policies and procedures adaptable to changing
situations.
 Groom globally competent managers through global leadership and
development programs.
 Ability to change leadership and management styles and approach
based on global situations.

Personal Competencies
Personal competencies are cognitive and affective abilities that enable
managers to operate in the global environment.
Learning − An important trait that enables managers learn about the work
environment, the organization, the external environment and how these
elements interact.

Global attitude − Sharing information, knowledge and experience across

national, functional and business boundaries, and balancing business and
functional priorities that emerge in the globalization process. Also includes
flexibility to change leadership style and approach based on the socio-
cultural behavior patterns.

Intercultural competency − Knowledge of the culture, language, cultural

standards, and behavioral skills such as optimism, empathy, human warmth
and the ability to manage anxiety and uncertainty.

Every international organization therefore has to carefully consider its vision

and long-term strategy suitably and develop its competencies. Successful
multinationals are those that have been able to break the cross-border,
cultural and socio-economic barriers, aligning and localizing themselves to
the countries they operate in.

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