Fom Final

Management Concepts and Evolution
Meaning
Management is the process of designing and maintaining an environment in which individuals,
working together in groups, efficiently accomplish selected aims.
This basic definition needs to be expanded:
 As managers, people carry out the managerial functions of planning, organizing, staffing,
leading, and controlling.
 Management applies to any kind of organization.
 It applies to managers at all organizational levels.
 The aim of all managers is the same: to create a surplus.
 Managing is concerned with productivity, which implies effectiveness and efficiency.
Definitions
“Management is the art of getting things done through people.”
Mary Parker Follett
Management is defined as a process “consisting of planning, organizing, actuating and

controlling, performed to determine and accomplish the objectives by the use of people and
resources.”
George R. Terry
“To manage is to forecast, to plan, to organize, to command, to coordinate and to control.”

Henry Fayol
“Management is the development of people and not the direction of things…… Management
is personnel administration.”
Lawrence A. Appley
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BBA I Sem Fundamentals of Management
Nature / Characteristics / Features of Management
1. Management is goal oriented
2. Management is group activity
3. Management is an universal process
4. Management is a social process
5. Management is a profession:
6. Management is both a science and an art:
7. Human element is inseparable from management:
8. Coordination of human and physical resources
9. Activating employees
Role / Importance of Management

The modern business owes its formation, efficient operation and development to the
management. Business itself is inactive. It is the management who activates it.
Edwin M. Robinson rightly views,
“No business runs itself even on momentum…… Every business needs repeated stimulus.”
The important role of the management can be justified on the following grounds:
1. Helps in achieving organizational goals

2. Best possible utilization of resources
3. Effective leadership and motivation
4. Effective organization and coordination
5. Establishing clear authority and responsibility
6. Solution of labour problems
7. Fulfilling social responsibility
8. Reduces costs
9. Develops cordial human relations
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Managerial Skills
A skill is an individual’s ability to translate knowledge into action. Hence, it is manifested in an
individual’s performance. Skill is not necessarily inborn. It can be developed through practice
and through relating learning to one’s own personal experience and background.
In order to be able to successfully discharge his roles, a manager should possess three major
skills. These are: conceptual skill, human relations skill and technical skill.
Conceptual skill deals with ideas, technical skill with things and human skill with people.
With both conceptual and technical skills are needed for good decision-making, human skill is
necessary for a good leader.
Conceptual Skill:
The ability of a manager to take a broad and foresighted view of the organization and its future,
his ability to think in abstract, his ability to analyze the forces working in a situation, his creative
and innovative ability and his ability to assess the environment and the changes taking place in it.
Technical Skill:
The manger’s understanding of the nature of job that people under him have to perform. It refers
to a person’s knowledge and proficiency in any type of process or technique. In a production
department, this would mean an understanding of the technicalities of the process of production.
Human Relation Skill:
The ability to interact effectively with people at all levels. This skill develops in the manager
sufficient ability:
a. To recognize the feelings and sentiments of others.

b. To judge the possible reactions to, and outcomes of various courses of action he may
undertake.
c. To examine his own concepts and values this may enable him to develop more useful
attitudes about himself.
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Functions of Managers / Management
The functions of managers provide a useful structure for organizing management knowledge.
They are:
Planning:
Planning involves selecting missions and objectives as well as the actions to achieve them; it
requires decision making that is, choosing future courses of action from among alternatives.
There are various types of plans, ranging from overall purposes and objectives to the most
detailed actions to be taken, such as ordering a special stainless steel bolt for an instrument or
hiring and training workers for an assembly line. No real plan exists until a decision – a
commitment of human or material resources – has been made. Before a decision is made, all that
exists is a planning study, an analysis, or a proposal; there is no real plan.
Organizing:
Organizing is that part of managing which involves establishing an intentional structure of roles
for people to fill in an organization. It is intentional in the sense of making sure that all the tasks
necessary to accomplish goals are assigned to people who can do those best.
The purpose of an organization structure is to help create an environment for human

performance. It is then a management tool and not an end in itself. Although the structure must
define the tasks to be done, the roles so established must also be designed in light of the abilities
and motivations of the people available.
Staffing:
Staffing involves filling and keeping filled, the positions in the organization structure. This is
done by identifying work force requirements; inventorying the people available; and recruiting,
selecting, placing, promoting, appraising, planning the careers of, compensating and training or
otherwise developing both candidates and current jobholders so that tasks are accomplished
effectively and efficiently.
Leading:
Leading is influencing people so that they will contribute to organizational and group goals; it
has to do predominantly with the interpersonal aspect of managing. All managers would agree
that their most important problems arise from people – their desires and attitudes as well as their
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behavior as individuals and in groups – and their effective managers also need to be effective
leaders. Since leadership implies followership and people tend to follow those who offer a means
of satisfying their own needs, wishes and desires, it is understandable that leading involves
motivation, leadership styles and approaches and communication.
Controlling:
Controlling is measuring and correcting individual and organizational performance to ensure that
events conform to plans. It involves measuring performance against goals and plans, showing
where deviations from standards exist, and helping to correct deviations from standards. In short,
controlling facilitates the accomplishment of plans. Although planning most precede controlling,
plans are not self-achieving. Plans guide managers in the use of resources to accomplish specific
goals; then activities are checked to determine whether they conform to the plans.
Coordination:
Some authorities consider coordination to be a separate function of the manager. It seems more
accurate, however, to regard it as the essence of managership, for achieving harmony among
individual efforts toward the accomplishment of group goals. Each of the managerial functions is
an exercise contributing to coordination.
Scope of Management
Scope of management is quite comprehensive and covers almost every walk of life. No human activities
can be successfully executed unless it is nicely managed. In fact, in view of the vast coverage of
management, it is difficult to determine the scope of management. Management pervades all human
activities including household management, factory management, hospital administration and
management managing defence forces and even running a government. Precisely speaking, management
is the key to successful operations.
Broadly, the scope of management includes the following:
(1) Production Management: Production management is an important branch of general management. The
object of production management is to plan, organize, co-ordinate and control the production functions in
such a way that right product, of right quality, at right cost, in right quantity and at right time be possibly
produced. Production management includes production planning and control, job analysis, scheduling
quality control and supervision and materials management, etc. In fact, rightful administering and
governing production is known as production management.
(2) Personnel Management: Significance of personnel management is apparent from the very fact that
almost every big organization maintains a separate personnel department. Personnel management is that
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part of total management which concentrates on effective planning, utilization and control of human
resource of an organization. Personnel management includes several functions like scientific recruitment
of employees their promotion demotion, transfer training compensation, motivation, labour welfare and
social security, etc.
(3) Financial Management: Finance is the pivot around which all the commercial activities rotate. Growth
and expansion of any organization entirely depends on the successful management of finance of the
organization. This implies that finances should be left to be governed only by an expert in the financial
matters. Financial management includes capital budgeting, financial operations (financial planning,
raising of funds, employment of funds, management of earrings) and financial controls (cost control and
budgetary controls); etc. Thus financial management encompasses all the activities related to procurement
and utilization of financial resources.
(4) Marketing Management: In the modern competitive age, marketing management constitutes a very
significant part of total managerial system. In fact, all the business activities are guided by what the
consumers demand. Peter Drucker has opined that the consumer is sovereign of the business. The very
objective of marketing management is to explore the market potentiality and use them for maximum
benefit of the organization. Marketing management includes market survey and research, product
planning, developing brand loyalty, pricing policy, advertising and selection of distribution channel, etc.
No business can succeed unless it has sound marketing management.
(5) Purchase Management and Inventory Management: Purchase management can be regarded as base to
business operations. Generally speaking, purchase management refers to determining purchases to be
made, inviting tenders from prospective suppliers contracting with the parties and making actual
purchases, whereas inventory management primarily concentrates on storage of materials, managing
material issues and determining minimum ordering level, etc. Inventory management may be regarded as
an aid to production management.
(6) Office Management: Office management is an indispensable part of managerial system. Office is an
organization is as important as mainspring in a clock. Office is the place which controls every operative
activity of the business. Office management includes office planning, office organization, office
communication and maintenance of office records, etc. With growing business activities, office
operations and their management gains more attention.
Functional Areas of Management

Various functional areas of management are:
 Production management
 Marketing management
 Financial management
 Personnel management
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Production Management
Production means creation of utilities by converting raw material in to final product by various scientific
methods and regulations. It is very important field of management. Various sub-areas of the production
department are as follow.
Plant lay out and location: This area deals with designing of plant layout, decide about the plant location
for various products and providing various plant utilities.
Production planning: Managers has to plan about various production policies and production methods.
Material management: This area deals with purchase, storage, issue and control of the manufacturing
department. Refinement in existing product line or develop a new product are the major activities.
Quality Control: Quality control department works for production of quality by doing various tests which
ensure the customer satisfaction.
Marketing Management
Marketing management involves distribution of the product of the buyers. It may need number of steps.
Sub areas are as follows.
Advertising: This area deals with advertising of product, introducing new product in market by various
means and encourage the customer to buy thee products.
Sales management: Sales management deals with fixation of prices, actual transfer of products to the
customer after fulfilling certain formalities and after sales services.
Market research: It involves in collection of data related to product demand and performance by research
and analysis of market.
Finance and Accounting Management
Financial and accounting management deals with managerial activities related to procurement and
utilization of fund for business purposes. Its sub areas are as follows
Financial accounting: It deals with analysis and interpretation of financial record so that management can
take certain decisions on investment plans, return to investors and dividend policy.
Taxation: This area deals with various direct and indirect taxes which organization has to pay.
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Costing: Costing deals with recording for costs, their classification, analysis and cost control.
Personnel Management
Personnel management is the phase of management which deals with effective use and control of
manpower. Following are the sub areas of Personnel management
Personnel and selection: This deals hiring and employing human being for various positions as required.
Training and development: Training and development deals with process of making the employees more
efficient and effectives by arranging training programmes. It helps in making team of competent
employees which work for growth of organization.
Wage administration: It deals in job evaluation, merit rating of jobs and making wage and incentive
policy for employees.
Industrial relation: It deals with maintenance of overall employee relation, providing good working
conditions and welfare services to employees.
ROLES OF A MANAGER
The idea of a role comes from sociology and is the pattern of actions expected of a person in his activities
involving others. It arises as a result of the position that he occupies in a group in a group in a given
situation. Thus a manager who occupies different positions in different situations plays different roles
because people in each situation have different expectations of him concerning his functions. According
to Mintzberg13, a manager should be regarded as playing the following ten different roles.
Interpersonal Roles
Figurehead: In this role, every manager has to perform some duties of a ceremonial nature, such as
greeting the touring dignitaries, attending the wedding of an employee, taking an important customer to
lunch and so on.
Leader: As a leader, every manager must motivate and encourage his employees. He must also try to
reconcile their individual needs with the goals of the organization.
Liaison: In his role of liaison, every manager must cultivate contacts outside his vertical chain of
command to collect information useful for his organization.
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Informational Roles
Monitor: As monitor, the manager has to perpetually scan his environment for information, interrogate his
liaison contacts and his subordinates, and receive unsolicited information, much of it as a result of the
network of personal contacts he has developed.
Disseminator: In the role of a disseminator, the manager passes some of his privileged information
directly to his subordinates who would otherwise have no access to it.
Spokesman: In this role, the manager informs and satisfies various groups and people who influence his
organization. Thus, he advises shareholders about financial performance, assures consumer groups that
the organization is fulfilling its social responsibilities and satisfies government that the organization is
abiding by the law.
Decisional Roles
Entrepreneur: In this role, the manager constantly looks out for new ideas and seeks to improve his unit
by adapting it to changing conditions in the environment.
Disturbance Handler: In this role, the manager has to work like a fire fighter. He must seek solutions of
various unanticipated problems-a strike may loom large, a major customer may go bankrupt, a supplier
may renege on his contract, and so on.
Resource Allocator: In this role, the manager must divide work and delegate authority among his
subordinates. He must decide who will get what.
Negotiator The manager has to spend considerable time in negotiations. Thus, the president of a company
may negotiate with the union leaders a new strike issue, the foreman may negotiate with the workers a
grievance problem, and so on.
POSDCORB
POSDCORB is a word composed of the initials of the functions of the executives. POSDCORB
is developed by Luther Gulick.
POSDCORB lists the functions of the executives. According to Luther Gulick who was a well
known member of the classical school. POSDCORB includes seven functions. According to
POSDCORB model the seven functions of executives are as follows:
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POSDCORB is an acronym created by Luther Gulick and Lyndall Urwick in their Papers on the
Science of Administration (1937). Developed as a means to structure and analyze management
activities, it set a new paradigm in Public Administration
The acronym which formulates the responsibility of a chief executive or administrator stands for:
Planning, Organizing, Staffing, Direction, Coordinating, Reporting, and Budgeting. It defines the
principles as follows:
PLANNING
Planning is working out in broad outline the things that need .to be done and the methods for
doing them to accomplish the purpose set for the enterprise.

ORGANIZING
Organizing is the establishment of the formal structure of authority through which work
subdivisions are arranged, defined and coordinated for the defined objective.

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STAFFING
Staffing is the whole personnel function of bringing in and training the staff and maintaining
favorable conditions of work.
DIRECTING
Directing is the continuous task of making decisions and embodying them in specific and general
orders and instructions and serving as the leader of the enterprise.

CO-ORDINATING
Coordinating is the all-important duty of interrelating the various parts of the work.

REPORTING
Reporting is keeping those to whom the executive is responsible informed as to what is going on,
which thus includes keeping himself and his subordinates informed through records, research
and inspections.
BUDGETING
A budget is a document that translates plans into money - money that will need to be spent to get your planned
activities done (expenditure) and money that will need to be generated to cover the costs of getting the work
done (income). It is an estimate about what you will need in monetary terms to do your work. The process
of making budgets is known as budgeting.
Management and Administration
Basis of
Administration Management
difference
It is concerned about the determination

Nature of It puts into action the policies and plans laid
of objectives and major policies of an
work down by the administration.
organization.
Type of
It is a determinative function. It is an executive function.
function
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It takes major decisions of an It takes decisions within the framework set
Scope
enterprise as a whole. by the administration.
Level of
It is a top-level activity. It is a middle level activity.
authority
It consists of owners who invest capital It is a group of managerial personnel who

Nature of
in and receive profits from an use their specialized knowledge to fulfill
status
enterprise. the objectives of an enterprise.
It is popular with government, military,

Nature of
educational, and religious It is used in business enterprises.
usage
organizations.
Its decisions are influenced by public

Decision Its decisions are influenced by the values,
opinion, government policies, social,
making opinions, and beliefs of the managers.
and religious factors.
Main Planning and organizing functions are Motivating and controlling functions are
functions involved in it. involved in it.
It needs administrative rather than

Abilities It requires technical activities.
technical abilities.
VARIOUS APPROACHES TO MANAGEMENT

1. The Classical School including:
a) The Scientific Management School

b) The Management Process School
c) The Bureaucracy Theory School.
2. The Human Relations School
3. The Decision Theory School
4. The Management Science School
5. The Systems Theory School
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6. The Contingency Theory School
1. The Classical School

The classical school includes three theories. Two of these theories - the Scientific Management
Theory and the Management Process Theory - developed separately, but at about the same time
period. The Scientific Management Theory owes its origin to Frederick W. Taylor, who is
regarded as “the father of scientific management”. He aimed at making management a science
based on “well recognized clearly defined and fixed principles, instead of depending on more or
less hazy ideas.”
The Management Process Theory was developed by Henry Fayol. He focused on a systematic
understanding of the overall management process.
Another important classicist was Max Weber, who developed the theory of bureaucratic
organization and management. It has provided the point of departure for the study of
organization structure and function for over half a century.
a) The Scientific Management School
Frederick Winslow Taylor

Taylor, commonly known as the father of scientific management was born in 1856 in
Philadelphia, USA. He started his career as the operator in small machine making shop in 1870
and rose to the position of Chief Engineer of Midvale Steel Works in 1884 at the age of 28. He
conducted a series of experiments in management science for two decades. After leaving
Medvale Steel Work he joined Bethlehem Steel Company, where he introduced his scientific
management. He was opposed by both workers and management and unceremoniously
terminated in 1901.
Taylor contributed to management science by presenting the following papers and books:
1. A piece-rate system – 1895

2. Shop management – 1909
3. Principles and methods of scientific management – 1911
4. Testimony before the special house committee – 1912
Taylor was the first person to introduce scientific approach to management.

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Scientific Management
Meaning
Scientific management refers to the application of science to management practices. It involves

use of scientific methods in decision-making for solving management problems rather than
depending on rule of thumb or trial & error methods for the purpose.
The use of scientific methods in the field of management is called scientific management.
Principles of Scientific Management
1. Scientific study and analysis of work

2. Cooperation between labour and management
3. Division of responsibility between workers and management
4. Scientific selection, training and development of workers
5. Maximum prosperity of employers and employees
6. Mental revolution
Technique of Scientific Management
In order to achieve the desired result the introduction of scientific management, techniques of
work studies, standardization, administrative re-organization and scientific rate setting should be
adopted.
1. Work Studies
The ultimate end of scientific management is to maximize production at minimum cost. It is,
therefore, necessary that the best possible contribution from every factor should be obtained. It
requires scientific scrutiny of every factor, influencing efficiency with a view to effect
improvement therein. This critical examination is known as work studies. Work study is
classified as under:
A. Methods Study:
After careful study and analysis of the jobs, methods for every job are standardized.
These methods are to be applied to eliminate the defects of ‘hit and miss’ method of
traditional management.
Methods study simplifies the operations by:

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I. Reducing the distance between the place of storing and consuming raw material.
II. Simplifying the use of tools and equipments.
III. Improving the storing and inspection facilities.
IV. Eliminating unnecessary actions and movements.
V. Integration of identical activities.
B. Motion Study:
Every action requires certain motions, such as holding, molding, folding, putting, fixing,
moving, removing, carrying and pressing etc. The purpose of the motion study is to
eliminate unnecessary motions and to reinforce necessary actions.
Motion study includes the following processes:
I. Selection of efficient workers.

II. Analysis of the motions involved in every job.
III. Finding the minimum time of every operation with the help of stop watches.
IV. Keeping record of the best motions and the minimum time taken.
V. Advocating the most appropriate motions and discarding the unnecessary ones.
C. Time Study:
Every job or if necessary parts thereof are studied as regards their nature, and the time
taken by different employees in the performance of that job is noted, and the time taken
by the average worker is standardization. Every worker is expected to perform the job in
the standard time.
Time study includes the following operations:
I. Sub-dividing the work.

II. Noting time taken by different employees in performing that piece of work
III. Selection of the average worker.
IV. Noting time taken by the average worker in normal conditions.
V. Standardizing time taken by the average worker for other workers.
D. Fatigue Study:
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Fatigue in the work is natural. When a worker is required to work continuously his zeal,
speed and efficiency in the work goes on diminishing i.e., he is tired and needs rest to
recapture his energies and refresh himself. Scientific management studies the nature of
jobs and determines the standard time when the worker on the specific job will be tired
and need rest. The nature, time and the period of rest is also predetermined. Necessary
changes may also be made in the working methods and conditions to reduce the fatigue.
2. Standardization
According to Taylor maximum objectives of the business can be achieved only when the new
material, labour, machines equipments, methods and techniques are standardization and
predetermined, so that nothing could be left to trial and error, standardization may take the
following forms:
1. Standardization of product
2. Standardization of raw material
3. Standardization of machines and equipments
4. Standardization of methods
5. Standardization working conditions
3. Administrative Reorganization – Functional Foremanship
F. W. Taylor in his administrative reorganization advocated functional foremanship i.e., the

appointment of specialist foremen for specific jobs. He classified specialist foremen into two
departments viz. Planning and Production department and thus differentiated his views from the
traditional approach, wherein foremen were responsible for both planning and productive
activities. Both the departments have four foremen each. The names and the functions of these
specialist foremen are as follows:
Specialist Foremen in the Factory and Their Functions
S.No. Name of the Boss Functions

Planning Department
1. Route Clerk Determining the process of production and deciding the route
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through which the raw material will pass.
2. Instruction Card Laying down instructions according to which workers are
Clerk required to perform their jobs.
3. Time and Cost Setting the time-table for doing a job as per predetermined route
Clerk and time schedule. Specifying the material and labour costs in
respect to each operation.
4. Shop Maintaining proper discipline in the factory. Offering immediate
Disciplinarian solution to clashes and making provisions for punishment.
Production Department
1. Gang Boss Making arrangement of workers, machines, materials, tools, etc.
for the jobs.
2. Speed Boss Maintaining the planned speed of production. Investigating the
causes for the delay and to remove them.
3. Repair Boss Maintenance of the machines and equipments. Proper
arrangements of their oiling, greasing cleaning and repairs.
Preventing the misuse of machines and equipments.
4. Instructors Seeing that the work conforms to the standard of quality laid
down by the planning department.
4. Scientific Rate Setting – Differential Piece Rate System
Differential piece-rate system is also a part of F.W. Taylor’s scientific management. In this
method, increase in efficiency is co-related with an increase in the wage rates. This is why, an
efficient worker gets more wages, whereas an inefficient gets lesser. The system is a source of
incentive to workers, who go on improving their efficiency to get more wages. The important
characteristics of the system are as under:
a) Differential piece-rate system has two different rates:

1) Higher rate for those, who produce standard quantity or more.
2) Lower rates for those who produce lesser than the standard quantity.
b) Minimum wages is not guaranteed.
c) Standard time is fixed for the standard amount of work.
Importance / Advantages of Scientific Management

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Advantages to Producers
1. Reducing cost of production

2. Effective planning and control
3. Simplification of productive process
4. Benefits of standardization
5. Increasing profit
6. Better relations between labour and management
Advantages to the Workers
1. Improved working conditions

2. Higher standard of living
3. Free training
4. Interesting job
5. Incentive wages system
Advantages to the Society
1. Increased production
2. Industrial progress
3. Prosperity
4. Fair price
Criticism / Disadvantages of Scientific Management

Disadvantages for Employees or Workers
1. Rigid control
2. Monotonous work
3. Lack of initiative
4. Exploitation
5. Lack of employment opportunities
6. Weak unions
7. No place for an ordinary worker
Disadvantages for Employers or Producers
1. Expensive system
2. Dependence on specialist
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3. Instability
4. Lack of trained and experienced workers
5. Complete standardization not possible
6. Lack of freedom
7. Burden in depression
b) The Management Process School

The management process school regards management as the process of getting things done with
and through people as individuals and as members of work-groups. It holds that management is a
process which can best be understood by analyzing its functions. It uses the managerial
experience as the basis for developing certain generalizations or principles which can be further
used for the study and research of management as well as for improving the practice of
management. It also regards management as a universal process, applicable to all kinds of
enterprises and to all levels of management.
Henry Fayol
Henry Fayol, the father of Administrative Management, the universalist and the father of Geneal
Management was born in France in 1841. He graduated in 1860 as mining engineer and joined a
French Mining Company. The same year, he worked as junior executive in the company upto
1892. Thereafter he was promoted as General Manager of the company. In 1898 he was
appointed as the Chief Executive of the company. His managerial excellence was reflected by
the fact that he turned the losing company into flourishing organization.
After his retirement in 1916 he devoted himself for writing principles and practice of
management. Fayol’s original classic book “Administration Industrielle Generale’ was written in
French and published in 1916. It was translated into English as ‘General and Industrial
Administration.’
Fayol’s General Principles of Management
Fayol suggested 14 principles:
1. Division of work:
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Fayol stressed on specialization of jobs. It requires that every job and its part should be
identified as separate work and entrusted to the most suited person. The quality and quantity
of production will improve, if every job is assigned to the right person.
2. Authority and responsibility:
Authority and responsibility are co-existing. If authority is granted to a person, he should also
be made responsible. In the same way, if anybody is made responsible for any job, he should
also have the concerned authority.
3. Discipline:
According to Fayol, discipline means sincerity about the work and enterprise, carrying out
orders and instruction of superiors and to have faith in the policies and programmes of the
business enterprise.
4. Unity of command:
According to Fayol, every employee should receive orders and instructions from one boss
and he should be responsible and accountable to him only. The principle of unity of
command provides the enterprise disciplined, stable and orderly existence. It creates
harmonious relationship between officers and subordinates and provides congenial
atmosphere of work.
5. Unity of direction:
Fayol advocates “one head and one plan” which means that group efforts on a particular plan
be led and directed by single person. This will enable effective co-ordination of individual
efforts and energies. This fulfills the principle of unity of command and brings uniformity in
the work of same nature.
6. Subordination of individual interest to group interest:
Employees should surrender their personal interest before the general interest of the
enterprise. Sometimes the employees due to their ignorance, selfishness, laziness,
carelessness and emotional pleasure overlook the interest of the organization. This attitude
proves to be very harmful to the enterprise.
7. Remuneration of employees:
According to Fayol, wage-rates and method of their payment should be fair, proper and
satisfactory. Both employers and employees should agree to it. Logical and appropriate
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wage-rates and methods of their payment reduce tension and differences between workers
and management, create harmonious relationship and a pleasing atmosphere of work.
8. Centralization:
Confinement of authorities is restricted hands is centralization and disintegration of

authorities to more persons is decentralization. Fayol does not favour centralization or
decentralization of authorities but suggests that there should be proper and effective
adjustment between centralization and decentralization in order to achieve maximum
objectives of the business.
9. Scalar chain:
Fayol defines scalar chain as “the chain of superiors ranging from the ultimate authority to
the lowest rank.” The flow of information between management and workers is must. Orders,
instructions, messages, requests, explanations etc. are communicated between them. These
messages should pass through established scalar chain but in case of urgency the established
chains can be violated and Gang Plank (direct contact) between the two concerned authorities
and department may be established.
In normal practice messages should pass through the established chain i.e., F – E – D – C – B
– A – L – M – N – N – O – P. In case of urgency or greater loss in following established
route, direct contact between ‘F’ and 'P’ may be established.
10. Order:
According to Fayol, there should be proper systematic and orderly arrangement of physical
and social factors. Physical factors include land, raw material, tools and equipments, whereas
social factors mean employees.
11. Equity:
The principle of equity should be followed at every level. There should not be discrimination
as regards caste, gender and religion. An effective management always accords sympathetic
and humane treatment.
12. Stability of tenure of employment:
Production being a team work, an efficient management builds a team of good workers. If the
members of the team go on changing, the entire production process will be disturbed.
Stability of the job creates a sense of belongingness among workers, who with this feeling
encouraged to improve the quality and quantity of work.
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13. Initiative:
The successful management provides an opportunity to its employees to suggest their new
ideas, experiences and more convenient methods of work. The employee, who has been
working on the specific job since long discovers new, better alternative approach and
technique of work.
14. Spirit of co-operation:
In order to achieve the best possible results, individual and group efforts are to be effectively
integrated and coordinated. Production is team work for which the whole-hearted support and
co-operation of all the members is required. Every individual should sacrifice his personal
interest and contribute his best energies to achieve the best results.
Difference between Taylor and Fayol and their Scientific and Administrative Management
Points of Difference F.W. Taylor Henry Fayol

1. Period 1856 – 1915 1841 – 1925
2. Place America France
3. Post in the General turner and operator Mines engineer
beginning
4. Approach It has micro-approach because it is It has macro approach and discusses
restricted to factory only. general principles of management
which are applicable in every field of
management.
5. Scope of the These principles are restricted to These are applicable in all kinds of
principles production activities. organization as regards their
managerial affairs.
6. Human aspect Disregards human element. More stress Due regards are paid to human
on increase in the production by elements. Certain principles like
improving men, machines, material initiative, stability of service and spirit
and methods. of co-humans support the operation to
approach of Fayol.
7. Stress on Taylor’s scientific managements Fayol’s management theory stresses on
efficiency / stresses on efficiency. general administration.
administration
8. Achievement Scientific management is the Administrative management is the
achievement of Taylor’s efforts. achievement of Fayol’s efforts.
9. Status Father of scientific management Father of modern management.
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c) The Bureaucratic Theory School
Max Weber propounded the bureaucratic theory of organization and management.
Bureaucracy refers to “certain characteristics of organizational design”. Weber viewed

bureaucracy as “the most efficient from that could be used most effectively for complex
organizations – business, government, and military, for example – arising out of the needs of
modern society.”
It is characterized by:
(1) Assignment of activities to individuals as fixed duties
(2) A hierarchy of authority and chain of command running throughout the organization, with a
regulated system of appeal.
(3) Administration through well-defined rules
(4) Decision making on rational and objective criteria so that all decisions are impersonal
(5) Employment and promotion based on demonstrated competence; protection against arbitrary
dismissal, and training of officials.
(6) Office holding as a career within the hierarchical order
(7) Fixed salary based on status or rank rather on the work performed, and a guaranteed pension
on superannuation as security for old age.
The major advantage of bureaucracy is that, “precision, speed, unambiguity, knowledge of the
files, continuity, discretion, unity, strict subordination, reduction of friction, and of material and
personal costs are raised to the optimum point.” Its major disadvantages lie in red-tape, rigidity
and neglect of human factor.
Limitations of Classical Theories
23
1. Classical theorists viewed organization as a giant machine subject to certain immutable
laws in its design and management.
2. They assumed that employees could be motivated by financial incentives alone, and
ignored that people are unique, and seek satisfaction of a variety of socio-psychological
needs through their organizational membership.
3. They through that employee always acted rationally, whereas human behaviour is usually
characterized by a certain amount of non-rationality.
4. They also assumed that productivity was only criterion of organizational efficiency, and
neglected the multiplicity of organizational objectives.
5. Moreover, they ignored the influence of informal groups on individual behaviour.
6. Their overall approach is mechanistic, and they do not adequately deal with some of the
important dimensions of management such as leadership, motivation, communication and
informal relations.
7. Finally, they also failed to consider the role of group and intergroup behaviour in
organizations.
2. The Human Relations School

The human relation approach to management identifies the importance of efficient labour in
effective management. Certain experiments have been conducted on the basis of human relations
in the field of management. These experiments are known as Hawthorne Experiments, as
investigated by Elton Mayo.
Hawthorne Experiments
Hawthorne experiments were conducted at the Hawthorne Plant at Western Electric Company of
Chicago, the manufacturers of telephone apparatus. These experiments were conducted on more
than 20,000 employees.
Hawthorne experiments can be described under following three headings:
1. Illumination experiments
2. Relay assembly test room experiments
3. Bank writing observation room experiment
The research found that:
1. The workers perceived themselves as a work group.
2. The group had developed “norms” relating to production as well as personal conduct
among themselves and with the supervisor.
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3. Dexterity and intelligence tests showed that output was not related to either of them. The
key to the rate of output was social membership in the clique.
4. These studies also revealed that an organization is more than a formal structure of
positions and authority-responsibility relationships. It is indeed “a social system, a system
of cliques, grapevines, informal status system, rituals and a mixture of logical, non-
logical and illogical behaviour.”
Conclusions of Hawthorne Experiments

1. Enterprise is a social system
2. Employees’ satisfaction leads to increased productivity
3. Significance of informal organization
4. Effective communication is important
5. Understanding of employee behavior is must.
3. The Decision Theory School

The decision theory school of management, led by Simon looks upon the management process as
a decision making process.
In the view of the decision theorists, since the performance of various management functions
involves decision making, the entire field of management can be studied form the study of the
process of decision making.
They have expanded their area of theory building from the decision making process to the study
of the decision, the decision maker, and the social and psychological environment of the decision
maker.
The decision theorists start with the small area of decision making and then look at the entire
field of management through this keyhole.
It is true that decision making is central to managing, and whatever a manager does, he does
through making decisions. But the totality of managing is something more than decision making.
25
The most important tasks of a modern manager are innovating, integrating the organization with
its external environment, and creation of an organizational climate conducive to the optimum
performance by its members. No doubt he does all this by making decisions.
4. The Management Science School

The management scientists, led by operations researches and systems analysts, see management
as “a system of mathematical models and processes”.
They hold that since managing is a logical and rational process, it can be expressed in terms of
mathematical relationships and models.
There is no doubt that management science has made significant contributions by applying the
tools of mathematics to the solution of various complex problems of management. They have
successfully built models in several areas, particularly, quality control, inventory control,
production scheduling, machine loading, warehouse operations and resource allocation.
But in doing all this, management scientists have not made any contribution to the theory of
management. All they have done is that they have made available to managers quantitative tools
of analysis, decision making and control. But this is not sufficient to lend the management
scientists the status of a school of management theorists. As observed by Koontz, “it is hard to
see mathematics as truly a separate school of management theory, and more than it is a separate
‘school’ in physics”.
5. The Systems Theory School

The systems theory approach to organization and management appeared around 1960, and soon
acquired a dominant position in management literature and practice.
Its early contributors include Ludwig von Bertalanffy, Lawrence J. Henderson, W.G. Scott,
Daniel Katz, Robert L. Kahn, W. Buckley and J.D. Thompson.
They viewed organization as an organic and open system, which is composed of interacting and
interdependent parts, called subsystems.
Organization as an Open and Organic System
Organization is open system in that they are in a continuous international relationship with other
systems. These other systems comprise markets, suppliers bankers, trade unions, government,
26
educational and research institutions and other similar enterprises, industry, economy, etc., which
constitute its environment.
Organizations are also organic systems or living systems as they must satisfy three conditions for
their continuing survival. First, an organization should be stable in the sense that its various parts
should be in balance one another. Second, it should grow and mature like other living entities.
Finally, it should adapt to environmental changes.
Parts of the System
As a system, an organization is composed of a number of subsystems: (i) production subsystem,

(ii) supportive subsystem (iii) maintenance subsystem, (iv) adaptive subsystem, (v) managerial
subsystem (vi) individuals, and (vii) informal groups
The production subsystem is concerned with the process of conversion of inputs including
materials, finances, man-hours worked, etc., into outputs of goods and services. It includes into
outputs of goods and services. It includes technology, production facilities and physical layout of
the plant.
The supportive subsystem performs the function of acquiring various inputs from the
environment and marketing the final products in the form of goods and services. It also concerns
with maintaining a favorable relationship with its environment for facilitating the performance of
organizational functions and activities.
The maintenance subsystem concerns with hiring, indoctrinating, socializing, rewarding and
punishing the employees. It also pertains to the maintenance of favourable patterns of employee
attitudes and behaviour with the aim of motivating them to make their optimum contribution to
organizational goals.
The adaptive subsystem of the organization performs the crucial function of relating the
organization to its environment. It anticipates and responds to, as well as influences the
environment.
The managerial subsystem consists of planning, organizing, staffing, directing, coordinating and
controlling the activities of the various subsystems.
Individual employees also comprise a subsystem of the organization. They bring a set of
attitudes and needs to the organization which influence their work behaviour.
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Finally, every organization is characterized by the existence of a variety of informal groups
which arise spontaneously out of the interactions among employees. Group and intergroup
behaviour have an important bearing on the functioning of an organization.
Linkages
The various parts of an organization are linked with one another through its communication
network, decisions, authority-responsibility relationships and other dimensions of managerial
subsystem, including objectives, policies, plans procedures and other aspects of coordinating
mechanism.
System Goals
Organizations have a variety of goals, as discussed in. The supreme goal of aa organization is
survival. All other goals depend on the achievement of this one goal. Another goal, which is
intimately correlated with survival goal, is the goal of adaptation and integration with
environment. Generally speaking, organizations, like other systems, also seek growth. Growth is
a sign of development, promise and opportunity-all valued commodities in our society.
6. The Contingency Theory School

Contingency theory has been developed mainly during the 1970s. It builds on the major premises
of the systems theory that organizations are organic and open systems, and there is a relationship
of interdependence between an organization and its environment, as well as within and between
its various subsystems.
The contingency theorists aim at integrating theory with practice in a systems framework.
When an organization behaves in response to forces in its environment, its behavior is said to be
contingent on these forces. “Hence, a ‘contingency’ approach is an approach where the behavior
of one subunit is dependent on its environmental relationship to other units or subunits that have
some control over the consequences…..desired by that subunit.” Thus, behavior within an
organization is contingent on situations, and if a manager wants to change the behavior of any
part of the organization, he must attempt to change that part of its environment which is
influencing it.
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PLANNING
Meaning
Planning may be defined as deciding in advance what is to be done in future. It is the process of
thinking before doing.
Planning is deciding in advance what to do, how to do it, when and by whom.
In other words, planning bridges the gap between where we are and where we want to go.
Definitions
1. In the words of Urwick,
“Planning is a mental predisposition to do things in orderly way, to think before acting and to act
in the light of facts rather than guesses.”
2. In the words of Henry Fayol,
“Planning is deciding the best alternative among others to perform different managerial
operations in order to achieve the predetermined goal.”
3. In the words of Alford & Beaty,
“Planning is a thinking process, the organized foresight, the vision based on fact and experience
that is required for intelligent action.”
4. The problem of planning situation is rightly indicated by Rudyard Kipling in the

following words:
“I keep six honest serving men,

They taught me all I know.
Their names are what, where and when,
And how and why and who.”
29
It shows that planning is concerned with the following:
1. What is to be done?
2. Where is it to be done?
3. When is it to be done?
4. How is it to be done?
5. Why is it to be done?
6. Who is to do it?
Nature / Characteristics / Features of Planning

1. Intellectual process
2. Goal oriented
3. Primary function of management
4. Planning pervades all managerial functions
5. Planning is selective in nature
6. Forward looking
7. Planning does not eliminate future risk, but enables to face it.
8. Flexible
9. Continuous process
10. Helpful in achieving business objectives.
Importance / Advantages / Purpose of Planning

1. Ensures of achievement of objectives
2. Enables to face future uncertainties
3. Enables optimum utilization of resources
4. Economy of resources
5. Effective co-ordination
6. Improvement in competitive strength
7. Developing creativity
8. Providing satisfaction to employees
9. Helpful in development and expansion
10. Increase in managerial efficiency
11. Effective organization and control
12. Minimizes uncertainties
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13. Makes objectives clear and specific
14. Facilitates decision-making
Principles of Planning
1. Principle of achieving business objectives
2. Principle of time
3. Principle of efficiency
4. Principle of change
5. Principle of flexibility
6. Principle of assumptions of planning
7. Principle of established planning procedures
Qualities of Good Plan

1. Simplicity
2. Clarity
3. Economical
4. Increase in efficiency
5. Comprehensiveness
6. Balancing and adjustments
7. Regular feedback
Limitations of Planning
1. Planning depends upon forecasting
2. Hindrance in the development of initiative
3. Lack of business flexibility
4. Expensive process
5. Incompetent planners
6. Defective technique of planning
7. Time consuming device
8. Unsuitability for certain business
9. Unsuitability for small business houses
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10. Machinery of planning can never be free from bias
Steps / Process in Planning

1. Awareness of the opportunity or problem
2. Collection and analysis of the information
3. Setting the objectives
4. Determining planning premises or limitations
5. Examining alternative courses of action
6. Weighing alternative courses of action
7. Selecting a course
8. Determining secondary or derivative plans
9. Providing for future evaluation
Types of Plans / Components / Elements of Planning

Plans can be classified as:
1. Missions or purposes
2. Objectives or goals
3. Strategies
4. Policies
5. Procedures
6. Rules
7. Programs
8. Budgets
1. Missions or Purposes:
Mission or purpose identifies the basic purpose or function or tasks of an enterprise or
agency or any part of it.
2. Objectives or Goals:
Objectives and goals are the ends toward which activity is aimed.
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3. Strategies:
Strategy is defined as the determination of the basic long-term objectives of an enterprise
and the adoption of courses of action and allocation of resources necessary to achieve
these goals.
4. Policies:
Policies are general statements or understandings that guide or channel thinking in
decision making.
5. Procedures:
Procedures are plans that establish a required method of handling future activities. They are
chronological sequences of required actions. They are guides to action, rather than to thinking,
and they detail the exact manner in which certain activities must be accomplished.
6. Rules:
Rules spell out specific required actions or nonactions, allowing no discretion.
7. Programs:
Programs are a complex of goals, policies, procedures, rules, task assignments, steps to
be taken, resources to be employed, and other elements necessary to carry out a given
course of action; they are ordinarily supported by budgets.
8. Budgets:
A budget is a statement of expected results in numerical terms.
Types of Planning
Planning may be classified into two categories:
1. Long-range and short-range planning

2. Functional and corporate planning
Long-Range and Short-Range Planning:
Long-Range Planning:
1. Also called as strategic planning.
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2. Has a longer time horizon
3. Concerns mainly with the future direction of the business of the enterprise.
4. Relates to matters like product diversification, management development, research and
development, cultivation of new markets, increasing the market share, etc.
5. The period covered by long-range planning generally varies from five to ten years but it
may extend to twenty years or even more, depending upon the kind of organization.
Short-Range Planning:
1. Also called as operating planning.

2. Usually spreads over a period of one to two years.
3. More specific and more formal in nature.
4. Includes programmes, projects, budgets and courses of action for the achievement of
specific objectives at the end of its time period.
5. Integral part of long-range plans.
6. Implementation of each short-range plan is aimed at contributing to the achievement of
results expected at the end of the long-range plans.
Functional and Corporate Planning:
Functional Planning:
1. Various departments in an organization prepare their plans for the achievement of their
departmental or functional goals.
2. Thus, production, financial, personnel, research and development, marketing and all other
departments prepare their separate plans, which, when intermeshed and integrated,
constitute the corporate plan.
3. These plans are prepared within the broad framework of corporate objectives and
guidelines for functional planning.
Corporate Planning:
1. It is concerned with the enterprise as a whole.

2. It is an aggregate of all the functional plans.
3. Functional planning is thus segmental in nature whereas corporate planning is
aggregative.
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STRATEGIES
1. Strategies are major thrust or planks of an organization for the achievement of its
objectives in an uncertain and competitive environment.
2. Strategy may be defined as any decision or behavior which, after taking into account the
probable or actual actions, policies and strategies of competitors, suppliers, government,
trade unions, etc., is aimed at achieving organizational goals.
3. The strategist looks to his rivals and other external factors, existing strategies and
behavior, considers their probable counter-strategies in response to his various alternative
strategies and then selects the one which is likely to be more effective.
4. Moore distinguishes between three types of strategies:
a) External economic strategies:

External economic strategies deal with broad approaches to meet the competition,
adaptation of technological changes, responding to conditions of supplies of raw
materials, tools, equipment, etc.
b) External social strategies:

External social strategies are concerned with the company’s way of dealing with
government agencies, social and public welfare organizations, political parties,
and the community.
c) Internal organizational strategies:

Internal organizational strategies relate to the company’s approach to the most
effective utilization of its existing human, physical and financial resources,
development of potential resources and generation of new resources.
5. Strategies differ from policies. Strategies focus on action and imply deployment of
resources for their implementation, whereas, policies provide a guideline for decisions
and action.
35
POLICIES
Meaning
Polices are a guide to decision making.
They establish the broad framework within which managers operating at various levels and
engaged in various functions, make decisions of a recurrent nature.
Polices operate as guide-posts for making decisions. They also set limits within which the
decision maker can operate.
Policies do not tell a manager what he should do or how should he act in specific situations.
They tell him what he can do, and thus set the limits to his decisions.
Since policies are instruments of planning for the achievement of predetermined goals, they
direct decisions throughout the organization toward the attainment of these goals.
Importance of Policies
36
Policies ensure that all decisions are mutually consistent, uniform and viable.
1. Policies provide guidance to decision making on problems of a recurrent nature

2. Channelize all decisions toward the achievement of predetermined goals
3. Provide criteria for evaluating decisions
4. Ensure consistency and uniformity in decisions throughout the organization.
Policies, Rules and Procedures

The difference between policies, rules and procedures should be clearly understood.
Policies provide a broad framework of decision making. They always contain an element of
discretion for the decision maker.
On the other hand, a rule states what should or should not be done. “No smoking” is a rule. It
does not provide any exception. It requires no decisions, but only enforcement. Rules are also
associated with penalties for violation.
Procedures are steps involved in the transaction of the company’s business. For example, the
procedure for hiring new personnel may involve creation of the post by the competent authority,
preparation of job description and job specification requisition by the departmental head to the
central personnel department, advertisement of the post, scrutiny of applications, administration
of selection tests, hiring decision by the competent authority, issuance of the appointment order,
and medical testing of the new employee. Each of these steps must be completed in a sequential
order.
Thus, policies are a guide to decisions, rule prescribes or forbid behaviour, and procedures
are the series of steps for the transaction of company’s business.
Formulation of Policies
Policies are formulated by executives at various levels in the organization.
Top management policies relate to major areas which are of strategic importance for the
organization as a whole. The owners of the enterprise lay down policies in regard to the nature of
the business, and the intent and purpose of the enterprise.
37
The board of directors and the top management formulate basic policies of the company within
the framework of the owner’s policies. These basic policies relate to strategic areas of the
company’s business and operations such as policies for diversification, product line, capital
investments; policies relating to wage and salary, bonus and perquisites; promotion and hiring
policies; dividend policy; policies relating to issuance of stocks and debentures; raising and
deployment of financial resources; pricing and distribution policies, and so forth. These policies
are basic are basic to the enterprise, and provide direction to all its decisions.
Top management policies provide the basic framework for the formulation of derived polices for
every division, department and function of the company. For instance, advertising and sales
promotion policies are formulated by the marketing manager within the framework of top
management policies relating to product line, distribution channels and pricing. Similarly,
personnel manager formulates training policies within the framework of top management’s
employee development policies.
At the lower levels of the organization, the first line supervisors, section heads, etc., formulate
policies for the performance of their own functions within the framework of the policies of their
higher organizational unit.
Sources and Types of Policies

Policies originate from various sources. Based on the source of creation, the policies have been
classified into the following categories
1. Originated policies
2. Implied or traditional policies
3. Policy by fiat
4. Appealed policies
5. Externally imposed policies.
1. Originated Policies:
Originated policies are those policies which are created or formulated by top management
of the company. It does not mean that such policies are initiated at top management level.
Policies may be initiated at any level, including the operative level.
38
2. Implied or Traditional Policies:
Implied policies are those policies which have not been formulated by a competent
authority and have no formula sanction behind them, yet continue to guide decisions.
When a policy on a certain matter does not exist, and a decision is made to solve a
problem, this decision becomes a precedence and guide for future decisions on that
subject. Thus, implied policy is a policy which is not stated but exists and acts as a
framework for decision making.
3. Policy by Fiat:
Policy by fiat is a policy announced by a top manager or owner in an arbitrary manner
and which is changed by him as often as he likes. It does not mean that such policies are
irrational, or depend on the whims or fancies of the person concerned. Often, when an
organization is in a crisis or going through rapid change, the need for change in policies
becomes such a recurrent phenomenon that it becomes impossible to have durable or
stable policies.
4. Appealed Policies:
When an executive faces a problem which he does not know how to handle either
because of the absence or inadequacy of existing policies, he refers the matter or appeals
to the superior for a decision. The decision made by the superior becomes the appealed
policy. The danger of appealed policies is that they may not be consistent with stated
policies and channelize decisions and resources in wrong directions. If there are too many
occasions for appeals in an organization, it signifies that either there are gaps in policies,
or they have become out-of-date and need to be modified to cope with the requirements
of the enterprise. In either case, it is the time for the review of policies.
5. Externally Imposed Policies:

An organization often finds that some policies are imposed on it by government, trade
unions, community, society, chambers of commerce, and so forth. It implies that the
enterprise has no choice but to comply with such imposed policies. For instance, union
contracts and collective bargaining impose many policies on management relating to
hours of work, wages and fringe benefits, etc., government imposes many policies in the
form of regulation of prices, labour welfare laws, taxation laws, etc. Such imposed
policies restrict the managerial area of freedom of operations.
Principles for the Formulation of Policies
39
Policies are management-made laws for directing the activities of the enterprise. They should be
based on certain principles in order to be able to achieve their objectives. It is also essential for
obtaining the acceptance of policies from those who are entrusted with their implementation. The
following principles are applicable to the formulation of policies:
1. Policies should aim at contributing to the achievement of the objectives of the

enterprise.
2. Policies should be definite and in writing.
3. Policies should be stable and flexible.
4. Policies at each lower level in the origination should be derived from the policies of
its immediately higher level.
5. Policies of each department and function should coordinate with the policies of all
other departments and functions.
6. Policies should be just, fair and equitable.
7. Policies should be periodically reviewed and modified, if necessary, to cope with the
changing needs of the organization.
Uses and Limitations of Policies

Policies play a very important role in the efficient functioning of organizations. Their utility
can be appreciated from the fact that absence of policies will lead to confusion, and random
and uncoordinated decisions. Uses of policies are as following:
1. Policies canalize decisions, activities and resources the achievement of organizational

goals.
2. Policies provide a framework and a guide to decision making.
3. Policies tend to routinize decisions by providing criteria for decision making. This
several other advantages, Recurring problems, as most of the organizational problem
tend to be, do not need fresh analysis and thinking. Decisions are made within the
framework of existing policies. Thus, it saves executive time. Further, policies
facilitate, delegation by routinising decisions.
4. Policies facilitate predictability of organizational decisions and actions. They are

expressions of management’s intentions and direction of the enterprise. Employees as
well as outside groups such as trade unions, shareholders, customers, suppliers, etc.,
can predict management decisions on the basis of policies.
40
5. Policies provide consistency and uniformity to decisions, and coordinate them for the
attainment of enterprise objectives.
6. Policies provide freedom to decision makers. It is true that policies restrict managerial
freedom but at the same time they provide freedom. In the absence of policies they
would not know what decisions to make, and also feel lack of confidence about the
soundness of their decisions. Policies thus enhance their freedom by defining the area
of their freedom. There is no freedom without policies.
7. Policies provide criteria for evaluating decisions. The decision maker can evaluate the
soundness of his decision by referring to relevant policies. His superiors can also
evaluate his decisions on the same basis.
Policies have their limitations too. They are as under:
1. Policies, over a period of time, become traditional ways of doing things. This tendency of
policies to gain sanctity by tradition lends them rigidity, and makes introduction of
change a difficult task.
2. Individuals and groups also tend to develop vested interests in policies.
3. Existing policies may be more beneficial to some than the proposed policies. This tends
to cause resistance to change.
4. Moreover, the policy structure keeps on expanding as new situations arise which cannot
be handled by existing policie
41
OBJECTIVES OF BUSINESS
Meaning
Objectives are broad statements of the values which an organization aims at attaining in the
future. In the case of business enterprises, objectives generally relate to profit, market standing,
employee development, technological leadership, and so forth. Objectives thus refer to the future
destinations of an organization.
Objectives precisely define where we want to go or what we want to achieve. Objectives are a
part of the goals of the organization.
Definitions
1. In the words of Koontz and O’Donnel,
“Objective is a term commonly used to indicate the end-point of a management
programme.”
2. In the words of McFarland,

“Objectives are the goals, aims or purposes that organizations wish to achieve over
varying period of time.”
Purpose, Mission, Objectives and Goals

The words ‘purpose’, ‘mission’, objectives’ and ‘goals’ are often used interchangeably.
However, there are fine distinctions between these terms.
Purpose refers to the basic intention in the establishment of an organization.
The purpose of an organization takes the form of a mission when it is associated with some
ideology, religious or moral values and its founders are psychologically committed to its
attainment.
Objectives are more specific than purpose and have a time dimension. They relate to purpose in
such a way that their achievement will lead to the achievement of the purpose or purposes.
42
Goals constitute elements of objectives, and are more specific. Objectives refer to the values that
an organization seeks to attain in future. These objectives are broken down into goals for
attainment by its various component divisions, departments, sections and individuals. Goals are
not only specific statements of the desired results but also have relatively shorter time dimension.
Characteristics of objectives
1. Objectives must be pre-defined.

2. Must be in writing.
3. Should be defined in qualitative or quantitative terms.
4. They must have social relevance.
5. Must be attained within stipulated time period.
6. They should be inter-connected and mutually supporting.
Importance of objectives
1. Provide basis for the performance of all managerial functions.
2. Provide unique identity for the enterprise.
3. Provide direction to organized effort.
4. Help in uplifting the employee morale and motivation.
5. Serve as criteria for evaluating decisions
6. Provide a basis of control
Types of Objectives / Classification of Objectives

1. On the basis of importance
2. On the basis of hierarchy or level of organization
3. On the basis of time period
4. On the basis of disclosure
1. On the basis of importance
a. Primary objectives
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b. Secondary objectives
c. Social objectives
2. On the basis of hierarchy or level of organization
a. Top-level or corporate objectives
b. Departmental objectives
c. Sub-departmental or sectional objectives
d. Employee objectives or goals
3. On the basis of time period
a. Short-range
b. Medium-range
c. Long-range
4. On the basis of disclosure
a. Quantitative and qualitative objectives
b. Stated / official and real objectives
Davis classifies organizational objectives into three categories:
1. Primary
2. Secondary
3. Social
Drucker classifies organizational objectives into three categories:
1. Market standing
2. Innovation
3. Productivity
4. Physical and financial resources
5. Profitability
6. Manager performance and development
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7. Worker performance and attitudes
8. Social responsibility
The General Electric Company classifies organizational objectives into three categories:
1. Profit
2. Market position
3. Productivity
4. Product leadership
5. Personnel development
6. Employee attitudes
7. Public responsibility
8. Balance between short-range and long-range plans.
Objectives common to all:
1. Survival
2. Growth
3. Profit
4. Efficiency and productivity
5. Innovation
6. Employee development
7. Social responsibility
Essentials of Effective Objectives

1. Clarity and specificity
2. Measurable
3. Time-specific
4. Suitability
5. Challenging but attainable
6. Feasibility
7. Reward-linked
8. Consistency
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9. Result-oriented
10. Acceptability
11. Adaptability and flexibility
12. Comprehensive
13. Balanced
14. Participation
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MANAGEMENT BY OBJECTIVES (MBO)
Meaning and Definition

MBO is the technique of management which stresses on attainment of objectives.
Under MBO, objectives are elaborately determined by the management. The management
attempts that these objectives be accepted by the employees of the organization and their
activities are planned, directed and controlled in a way that these objectives are attained. Thus,
the management concentrates on attainment of the objectives laid down.
Renowned management authors George S. Odiorne and John H. Odiorne state, “MBO is a
process whereby the superior and subordinate managers of an enterprise jointly identify its
common goals, define each individuals’ major areas of responsibility in terms of results expected
of him, and use these measures as guides for operating the unit and assessing the contribution of
its members.” In this way, MBO can be termed as objective-oriented management.
Characteristics of MBO
1. Desired objectives
2. Delegation of authority
3. Evaluation of objectives
4. Effective control
5. Development of team spirit in determination of objectives
6. Dissemination of information regarding achievements
7. Training
8. Self-appraisal
9. Adoption of corrective measures
Process of MBO
1. Determining objectives of the organization
2. Informing and appraising people regarding objectives
3. Preparing plans and programs aiming at the objectives
4. Determining responsibilities
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5. Deciding controls
6. Review and revision of targets and programmes
Advantages of MBO
1. Improvement in management
2. Better performance through clarity of objectives and roles
3. Better utilization of human resources
4. Development of team work
5. Work appraisal
6. Best performance of work
7. High morale
8. Personal satisfaction and development
9. Basis for organizational change
Limitations and Difficulties of MBO

1. Difficulty in objective setting
2. Failure of managers
3. Expensive and time consuming
4. Short-term nature of objectives
5. Requirement for rigorous training
6. Requirement of voluntary co-operation and support
7. Less support from superiors
Ways to Make MBO More Effective

1. The objectives should be clearly defined.
2. The objectives should be achievable.
3. Time for attainment of objectives should also be set.
4. The objectives should be determined by the management in consultation with the
subordinates.
5. Team spirit among the members of the organization.
6. Objectives should be well-known to the people in the organization.
7. The morale of the employees should be boosted.
8. There should be sufficient incentive for those employees who are capable of attaining
targets.
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9. The management should be willing to accept modifications in the targets, approach and
the objectives.
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DECISION-MAKING
Meaning
Decision-making is an important function of management. A manager has several approaches,
methods and strategies to solve the organizational problems. He is supposed to choose an
approach, method or strategy which suits best in the given circumstances. This selection-making
or choice-making aspect of his behavior can be termed as decision-making.
Definitions
1. In the words of Franklin G. Moore,
“Decision-making is a blend of thinking, deciding and acting.”
2. In the words of McFarland,

“A decision is an act of choice wherein an executive forms a conclusion about what must
not be done in a given situation. A choice represents a course of behavior chosen from a
number of possible alternatives.”
3. In the words of Koontz and O’Donnel,

“Decision-making is the selection from among alternatives of a course of action.”
Characteristics of Decision-Making
1. Decisions are taken for fulfillment of pre-determined objectives.
2. Decisions are not the end but they are means to the end.
3. Decision-making is a human function.
4. It involves use of rationale and logic.
5. It includes selection of the best alternate among others available.
6. Decision can be positive or negative.
7. Right decision should be taken at the right time.
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Nature of Decision-Making
1. It is a logic.al process
2. It is evaluation oriented
3. Follows a sense of Commitment
4. Continuous process
Process of Decision-Making
1. Understand the problem
2. Analysis of problem
3. Determining and developing possible alternatives
4. Evaluation of alternatives
5. Selection of the best alternative
6. Execution of the decision
7. Review and revision
Importance of Decision-Making
1. Basis of business policies
2. Facilitates efficient performance of managerial functions
3. Decision-making capability of management is indicative of its competence and efficiency
4. Helps in maintaining cordial industrial relations.
Types of Decisions
Decisions can be classified in a number of ways:
1. Programmed and non-programmed decisions

2. Major and minor decisions
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3. Routine and strategic decisions
4. Individual and group decisions
5. Simple and complex decisions
Programmed and Non-Programmed Decisions:
Programmed decisions are those that are made in accordance with some policy, rule or procedure
so that they do not have to be handled de novo each time they occur. These decisions are
generally repetitive, routine and are obviously the easiest for managers to make.
Non-programmed decisions are novel and non-repetitive. If a problem has not arisen before or if
there is no cut and dry method for handling it or if it deserves a custom-tailored treatment, it
must be handled by a non-programmed decision. Such problems as how to allocate an
organization’s resources, what to do about a failing product line, how community relations
should be improved-will usually require non-programmed decisions for which no definite
procedure exists.
In the case of programmed decisions, since each manager is guided by the same set of rules and
policies, it is not possible for two managers to reach different solutions to the same problem. But
in the case of non-programmed decisions, since each manager may bring his own personal
beliefs, attitudes and value judgments to bear on the decision process, it is possible for two
managers to arrive at distinctly different solutions to the same problem, each claiming that he is
acting rationally.
Major and Minor Decisions:
Some decisions are considerably more important than others. We can measure the relative
significance of a decision in four ways:
1. Degree of Futurity of Decision:
A decision which has a long-range impact, like replacement of men by machinery or

diversification of the existing product lines must be rated as a very major decision. The
decision to store raw material may be taken as a minor decision, since it does not have a
long-range impact, although the amount involved may be substantial.
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2. Impact of the Decision on Other Functional Areas:
If a decision affects only one function, it is a minor decision. But a decision to change the
basis of overhead allocation in preparing department profit and loss account affects all
other functional areas, and as such it is a major decision.
3. Qualitative Factors that Enter the Decision:
A decision which involves certain subjective factors is an important decision. These

subjective factors include basic principles of conduct, ethical values, social and political
beliefs, etc. For example, the decision to pay even a small sum of Rs 25 to the Excise
Inspector as illegal gratification may be made at a very high level in certain companies
having an acute sense of propriety.
4. Recurrence of Decisions:
Decisions which are rare and have no precedents as guides may be regarded as major
decisions and may have to be made at a high level. Decisions which recur very often
become minor and routine decisions and may be taken at a lower level.
Routine and Strategic Decisions:
Routine, tactical or housekeeping decisions are those which are supportive of, rather than central
to, the company’s operations. They relate to the present. Their primary purpose is to achieve as
high a degree of efficiency as possible in the company’s ongoing activities. Provision for air
conditioning, better lighting, parking facilities, cafeteria service, deputing employees to attend
conferences, etc. are all routine decisions.
On the other hand, lowering the price of the product, changing the product line, installation of an
automatic plant, etc. are strategic decision. Usually, routine decisions require little deliberation
and money and are taken by managers at lower levels, while strategic decisions require lengthy
deliberation and large funds and are taken by managers at higher levels.
Individual and Group Decisions:
Decisions may be taken either by an individual or by a group. Individual decisions are taken
where the problem is of a routine nature, where the analysis of variable is simple and where
definite procedures to deal with the problem already exist.
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Important and strategic decisions which may result into some change in the organization are
generally taken by a group. Interdepartmental decisions are also taken by groups consisting of
managers of the departments affected by the decisions.
Simple and Complex Decisions:
When variables to be considered for solving a problem are few, the decision is simple; when they
are many, the decision is complex. When we combine these types of decisions with the low or
high certainty of their outcomes, we get four types of decisions:
1. Decisions in which the problem is simple and the outcome has a high degree of certainty.
These are called mechanistic or routine decisions.
2. Decisions in which the problem is simple but the outcome has a low degree of certainty.
These are called judgmental decisions. Many decisions in the area of marketing,
investment and personnel are of this type.
3. Decisions in which the problem in complex but the outcome has a high degree of
certainty. These are called analytical decisions. Many decisions in the area of production
are of this type.
4. Decisions in which the problem is complex and the outcome has a low degree of
certainty. These are called adaptive decisions. Changes in corporate plans and policies to
meet the changes in environment and technology are decisions of this type.
Common Difficulties in Decision-Making

1. Incomplete information
2. Unsupporting environment
3. Non-acceptance by subordinates
4. Ineffective communication
5. Incorrect timing
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FORECASTING
Meaning
Forecasting is a technique of anticipating future problems and events. It involves making a
detailed analysis of the past and present to get an idea about probable events in the future.
Forecasting, according to Fayol, includes both assessing the future and making provision for it.
Forecasting helps a businessman in a number of ways.
Uses of Forecasting
Makes Planning Possible:
Forecasting is the very basis of planning and without it, planning within the enterprise requires
estimation of prospective changes in economic conditions and in the general environment in
which the business operates. Forecasting awakens the management against business cycles,
minimizes risks and reveals management’s weaknesses if any, to face the future.
Ensures Coordination:
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As forecasting involves a joint effort of all departments in the concern, it creates team, unity and
coordination in the efforts of subordinates. By focusing attention on the future, it assists in
bringing a singleness of purpose of planning. In the words of Henri Fayol, “The act of
forecasting is a great benefit to all who take part in the process and is the best means of ensuring
adaptability to changing circumstances. The collaboration of all concerned leads to a unified
front, an understanding of the reasons and a broadened outlook.”
Facilitates Control:
Forecasting helps in exercising control. The key executives, by mutually developing the forecast,
automatically assume co-responsibility and individual accountability for such later deviation of
the actual from the estimated result as may occur. Not only this, a good forecast becomes the
basis for good budget – a widely used device for managerial control. Thus, for example,
forecasts about the receipt and disbursement of cash are translated in a cash budget; forecast
about manpower are translated into a manpower budget; forecasts about sales are translated into
a sales budget and so on.
Classification of Forecasting
Classification of forecasting may be done according to space and time.
If forecasting is done on a national level to appraise the course of general business or of major
segments of economic activity, it is “economic forecasting” or “business forecasting”.
There may be “area” or “regional” forecasts also, where the course of business activity in a
region, a state, a district or a city is studied. The two forecasts are not independent and unrelated
activities. In many cases, “regional”, forecasts are greatly influenced by the total level of
economic activity. In contrast, if the economic base of a region is substantially different from
that of the nation as a whole, a forecast of national business conditions may not be helpful in
appraising the regional outlook.
If classified according to the time span of the prediction involved, forecasting may be short,
intermediate or long-term.
The short-term forecast is a prediction extending to a maximum of two years into the future.
Short-term forecast is useful in making internal estimates of the company’s operations. It
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provides management with more rationally ordered information for effective scheduling of goods
in process and inventory requirements.
The intermediate range covers three to five years. Intermediate-range forecasting may be
especially valuable in formulating a capital expenditure programme and the related financial plan
for research and product development. Intermediate forecasts must consider the problem of
cyclical fluctuation if they are to be meaningful.
Long-range projections have a minimum time-span of five years into the future. The purpose of
the long-term projections is to give a rough picture of future prospects, a picture that has some
empirical foundation. Such forecasts are very useful, e.g., a long-range forecast may indicate the
volume of investment necessary in plant and equipment. There are, however, certain pitfalls in
long-range projections. These projections extend past economic development alone.
Difference between Planning and Forecasting

1. Planning commits individuals to certain goals. It also calls for some activity to achieve
the planned goals. Forecasting does not commit individuals to any goals nor does it
stimulate any activity among them (except when the forecast is pessimistic).
2. Planning is done with the help of forecasting which provides assumptions about the
future environment of a plan. Forecasts made about the kind of markets, quantity of sales,
prices, products, technical developments, costs wage rates, tax rates, political or social
environment and similar other maters, become premises for the future. Forecasting is thus
only a tool of planning.
3. Planning is done by every manger. It is all-pervading. Forecasting is not done by every
manager. It is mostly undertaken by staff people.
Techniques of Forecasting
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There are essentially three types of forecasting techniques used in the field of business. These are
briefly described below.
Qualitative and Judgemental Methods:
These forecasting methods involve the use of subjective judgements and are appropriate in
situations where essential data are not available. For instance, when a new product or technology
is introduced, past experience is not available for estimating what the near-term effects will be.
Examples of qualitative techniques used in economic forecasting are the jury of executive
opinion, Sales force composite and survey methods.
In a jury of executive opinion, the manager may bring together top executives from major
functional areas of organization; sales, finance, production and purchase, for example. The
manager supplies the group with background information on the item to be forecast, then
combines and averages the executives’ view.
The sales force composite is similar to the executive jury, except that it is limited to the sales
organization. In this method, the top management asks each area sales manager to develop a
sales forecast for his area. The area sales manager in his turn asks his salesmen to develop
forecasts for their areas. They in turn ask wholesalers and retailer in their areas to do the same. In
this way, different opinions are gathered and composite forecasts are made for specific products
or total sales.
In the survey method, polls and surveys are conducted to find out what the future will be. Thus,
if we wish to develop a sales forecast, we may conduct a market survey and interrogate selected
customers about their future needs.
Qualitative techniques most commonly used in technological forecasting are the Delphi method,
brainstorming and scenario construction.
In scenario construction, a scenario containing a logical and hypothetical description of events is

developed.
Method Based upon Past Results:
In many situations, where the past has been more or less consistent and the future is expected to
conform to the past, an efficient way to make a forecast is to extrapolate from past experience.
Thus, if we want to forecast sales, we may draw a graph of the past sales and project the same
into the future and then adjust it for any changes that are expected to occur.
Methods Based upon Mathematical models:
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In some situations, it may be possible to develop mathematical models showing the relationship
between the dependent factors and independent factors. Thus, we may say that the sale of cars is
dependent upon, personal income and consumer confidence. In areas where correct causal
relationships can be established, such models are the most accurate of forecasting tools.
No single method of forecasting can satisfy the requirements of all types of managers and
organizations. The methods a manager will select depends on his own technical ability, the
functional area involved, the amount of information available, the level of accuracy required, the
time-period to be forecast, the time available to complete the analysis, and the value of the
forecast to the organization.
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ORGANIZING
Meaning
Organization is the co-ordination of different factors of production aimed at attainment of pre-
determined objectives.
Organization denotes group of persons who have combined to promote the interest of the
enterprise.
Organization includes the process of identifying and grouping of work to be performed defining
and delegating responsibility and authority and establishing relationships for the purpose of
enabling people to work most effectively together in accomplishing objectives.
Definitions
 According to Oliver Sheldon,
“Organization is the process of combining the work which individuals and groups have to
perform with the facilities necessary for its execution, that the duties so performed
provide the best channels for efficient, systematic, positive and co-ordinated application
of the available efforts.”
 According to Louis A. Allen,

“Organization is the process of identifying and grouping the work to be performed,
defining and delegating responsibilities and authority and establishing relationships for
the purpose of enabling people to work most effectively together in accomplishing
objectives.”
 According to Theo Haimann,

“Organization is the process of defining and grouping the activities of the enterprise and
establishing the authority relationships among them. In performing the organizing
function, the manager defines, departmentalizes and assigns activities so that they can be
most effectively executed.”
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Objectives
1. Organization is the basis of administration and management.
2. Encourages specialization.
3. Aids in production.
4. Boosts morale of workers.
5. Facilitates co-ordination and co-operation among workers.
6. Promotes managerial efficiency.
Essential Elements / Nature

1. Determination of tasks to be performed.
2. Division of labour.
3. Staffing.
4. Assignment of task.
5. Creating co-ordination.
6. Assignment of duties.
7. Determination of responsibilities.
8. Directions.
9. Attainment of objectives.
10. Span of control.
11. Flexibility.
12. Planning & research.
13. Best utilization of resources.
14. Healthy grouping of activities.
Process of Organizing
1. Determining organizational goals.
2. Identification of activities.
3. Grouping of activities.
4. Assignment of task.
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5. Decision analysis.
6. Delegation of authority.
7. Determining responsibility.
8. Creating co-ordination.
9. Creating hierarchy of managerial position.
Principles of Organization
1. Principle of unity of objectives.
2. Principle of efficiency.
3. Principle of unity of command.
4. Principle of unity of direction.
5. Principle of functional definition.
6. Principle of co-ordination.
7. Principle of balancing.
8. Principle of simplicity and continuity.
9. Principle of equality.
10. Principle of specialization.
11. Principle of span of management.
12. Principle of scalar chain.
13. Principle of parity of authority and responsibility.
14. Principle of departmentation.
15. Principle of effective communication.
16. Principle of flexibility.
17. Principle of decentralization.
18. Principle of management by exception.
19. Principle of division of labour.
Organization Structures
Organization structures differ from one another in the way responsibility-authority and
interactional relationships are established among jobs, personnel and physical factors. The basic
organization structures are:
1. Line
2. Line and staff
3. Functional
4. Committee
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5. Project
6. Matrix
Structures of most business organizations are hierarchical in nature and combine two or more of
these types.
Line organization:
In this type of organization, authority is distributed vertically. It has only line departments, which
in a manufacturing organization are production, sales and finance, etc.
Advantages:
a. It is characterized by simplicity and clarity.

b. Chain of command ties the whole organization in a coordinated and unified whole.
c. It can function with speed.
d. It is consistent with the principle of unity of command.
Disadvantages:
Its disadvantages lie in the absence of staff specialist to advice, guide and support line managers.
Line and Staff Organization:
Staff units such as personnel, quality control, etc. are established to provide specialized advice,
guidance and support to line executives. It is called secondary functional differentiation at
horizontal level.
Advantages:
The staff experts help line managers in the efficient performance of their functions by providing
them support in the form of advice and services.
Disadvantages:
a. It complicates the problems of coordination, control and communication

b. Staff specialists often break the unity of command
c. Line-staff relationships are often characterized by conflict.
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Functional Structure Based on Functional Authority:
When a staff unit exercises command authority over specific matters relating to some aspect of
line functions, it creates a functional structure. A functional structure is also created when the
corporate executives exercise functional control over their respective counterparts in the semi-
autonomous divisions of the company.
Advantages:
It makes possible the adoption and implementation of uniform systems and procedures
throughout the company.
Disadvantages:
a. It creates dual accountability and weakens the unity of command.

b. It causes conflict among line and staff managers.
Committee Structure:
The primary purpose of committees is to make decisions or recommendations on problems

requiring integration of knowledge, information, abilities and interests.
Advantages:
a. Pools information, abilities and interests for the formulation of policies, plans, etc.
b. Deals with complex problems.
c. Reduces bias and conflict.
d. Improves interpersonal relations.
e. Democratizes the decision process.
f. Gains commitment to implement decisions.
g. Pools splintered authority.
h. Owns responsibility.
i. Acts as a coordinating mechanism.
Disadvantages:
a. It creates conflicts among members.

b. Causes diversions from main problems.
c. Acts as a device for shifting responsibility and postponing decisions.
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d. Splits accountability.
Project Structure:
Project structure results from the horizontal grouping of a number of functions for creating teams
to handle specific tasks, or achieve specific goals.
Advantages:
a. Its greatest advantage is its flexibility and responsiveness to innovative ideas.

b. It is specially suited where unique solutions are needed to cope with changing
environments.
Disadvantages:
It often creates a situation of conflict of authority between the project manager and corporate
functional heads.
Matrix Structure
In matrix structures authority flows vertically within functional departments while authority of
project managers flows horizontally crossing vertical lines. This two-way flow or authority
creates a grid or matrix of authority flows.
It emphasizes multiple interdependence among various functions, horizontal relationships and

operational flexibility. This makes it more adaptable to crisis and change.
Organization Theories
1. CLASSICAL ORGANIZATION THEORY
 Scientific Management approach

 Weber's Bureaucratic approach
 Administrative theory
2. NEOCLASSICAL THEORY
3. MODERN ORGANIZATION THEORY
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 Systems approach
 Socio-technical approach
 Contingency or Situational approach
1. CLASSICAL ORGANIZATION THEORY
Classical organization theories (Taylor, 1947; Weber, 1947; Fayol, 1949) deal with the formal
organization and concepts to increase management efficiency. Taylor presented scientific
management concepts, Weber gave the bureaucratic approach, and Fayol developed the
administrative theory of the organization. They all contributed significantly to the development
of classical organization theory.
Taylor's scientific management approach
The scientific management approach developed by Taylor is based on the concept of planning of
work to achieve efficiency, standardization, specialization and simplification. Acknowledging
that the approach to increased productivity was through mutual trust between management and
workers, Taylor suggested that, to increase this level of trust,
 The advantages of productivity improvement should go to workers,

 Physical stress and anxiety should be eliminated as much as possible,
 Capabilities of workers should be developed through training, and
 The traditional 'boss' concept should be eliminated.
Taylor developed the following four principles of scientific management for improving
productivity:
 Science, not rule-of-thumb: Old rules-of-thumb should be supplanted by a scientific approach

to each element of a person's work.
 Scientific selection of the worker: Organizational members should be selected based on some
analysis, and then trained, taught and developed.
 Management and labour cooperation rather than conflict: Management should collaborate
with all organizational members so that all work can be done in conformity with the scientific
principles developed.
 Scientific training of the worker: Workers should be trained by experts, using scientific
methods.
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Weber's bureaucratic approach
Considering the organization as a segment of broader society, Weber (1947) based the concept of
the formal organization on the following principles:
 Structure: In the organization, positions should be arranged in a hierarchy, each with a

particular, established amount of responsibility and authority.
 Specialization: Tasks should be distinguished on a functional basis, and then separated

according to specialization, each having a separate chain of command.
 Predictability and stability: The organization should operate according to a system of

procedures consisting of formal rules and regulations.
 Rationality: Recruitment and selection of personnel should be impartial.
 Democracy: Responsibility and authority should be recognized by designations and not by

persons.
Weber's theory is infirm on account of dysfunctions (Hicks and Gullett, 1975) such as rigidity,
impersonality, displacement of objectives, limitation of categorization, self-perpetuation and
empire building, cost of controls, and anxiety to improve status.
Administrative theory
The elements of administrative theory (Fayol, 1949) relate to accomplishment of tasks, and
include principles of management, the concept of line and staff, committees and functions of
management.
 Division of work or specialization: This increases productivity in both technical and

managerial work.
 Authority and responsibility: These are imperative for an organizational member to

accomplish the organizational objectives.
 Discipline: Members of the organization should honour the objectives of the organization.
They should also comply with the rules and regulations of the organization.
 Unity of command: This means taking orders from and being responsible to only one
superior.
 Unity of direction: Members of the organization should jointly work toward the same goals.
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 Subordination of individual interest to general interest: The interest of the organization should
not become subservient to individual interests or the interest of a group of employees.
 Remuneration of personnel: This can be based on diverse factors such as time, job, piece
rates, bonuses, profit-sharing or non-financial rewards.
 Centralization: Management should use an appropriate blend of both centralization and de-
centralization of authority and decision making.
 Scalar chain: If two members who are on the same level of hierarchy have to work together to
accomplish a project, they need not follow the hierarchy level, but can interact with each other
on a 'gang plank' if acceptable to the higher officials.
 Order: The organization has a place for everything and everyone who ought to be so engaged.
 Equity: Fairness, justice and equity should prevail in the organization.
 Stability of tenure of personnel: Job security improves performance. An employee requires

some time to get used to new work and do it well.
 Initiative: This should be encouraged and stimulated.
 Esprit de corps: Pride, allegiance and a sense of belonging are essential for good performance.
Union is strength.
 The concept of line and staff: The concept of line and staff is relevant in organizations which
are large and require specialization of skill to achieve organizational goals. Line personnel are
those who work directly to achieve organizational goals. Staff personnel include those whose
basic function is to support and help line personnel.
 Committees: Committees are part of the organization. Members from the same or different
hierarchical levels from different departments can form committees around a common goal.
They can be given different functions, such as managerial, decision making, recommending or
policy formulation. Committees can take diverse forms, such as boards, commissions, task
groups or ad hoc committees. Committees can be further divided according to their functions. In
agricultural research organizations, committees are formed for research, staff evaluation or even
allocation of land for experiments.
 Functions of management: Fayol (1949) considered management as a set of planning,

organizing, training, commanding and coordinating functions. Gulick and Urwick (1937) also
considered organization in terms of management functions such as planning, organizing, staffing,
directing, coordinating, reporting and budgeting.
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2. NEOCLASSICAL THEORY
Neoclassical theorists recognized the importance of individual or group behaviour and

emphasized human relations. Based on the Hawthorne experiments, the neoclassical approach
emphasized social or human relationships among the operators, researchers and supervisors
(Roethlisberger and Dickson, 1943). It was argued that these considerations were more
consequential in determining productivity than mere changes in working conditions. Productivity
increases were achieved as a result of high morale, which was influenced by the amount of
individual, personal and intimate attention workers received.
Principles of the neoclassical approach
The classical approach stressed the formal organization. It was mechanistic and ignored major
aspects of human nature. In contrast, the neoclassical approach introduced an informal
organization structure and emphasized the following principles:
 The individual: An individual is not a mechanical tool but a distinct social being, with
aspirations beyond mere fulfilment of a few economic and security works. Individuals differ
from each other in pursuing these desires. Thus, an individual should be recognized as
interacting with social and economic factors.
 The work group: The neoclassical approach highlighted the social facets of work groups or
informal organizations that operate within a formal organization. The concept of 'group' and its
synergistic benefits were considered important.
 Participative management: Participative management or decision making permits workers to

participate in the decision making process. This was a new form of management to ensure
increases in productivity.
Note the difference between Taylor's 'scientific management' - which focuses on work - and
the neoclassical approach - which focuses on workers.
MODERN THEORIES
Modern theories tend to be based on the concept that the organization is a system which has to
adapt to changes in its environment. In modern theory, an organization is defined as a designed
and structured process in which individuals interact for objectives (Hicks and Gullet, 1975). The
contemporary approach to the organization is multidisciplinary, as many scientists from different
fields have contributed to its development, emphasizing the dynamic nature of communication
and importance of integration of individual and organizational interests. These were
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subsequently re-emphasized by Bernard (1938) who gave the first modern and comprehensive
view of management. Subsequently, conclusions on systems control gave insight into application
of cybernetics. The operation research approach was suggested in 1940. It utilized the
contributions of several disciplines in problem solving. Von Bertalanffy (1951) made a
significant contribution by suggesting a component of general systems theory which is accepted
as a basic premise of modern theory.
Some of the notable characteristics of the modern approaches to the organization are:
 a systems viewpoint,
 a dynamic process of interaction,
 multileveled and multidimensional,
 multimotivated,
 probabilistic,
 multidisciplinary,
 descriptive,
 multivariable, and
 adaptive.
Modern understandings of the organization can be broadly classified into:
 The systems approach,

 Socio-technical theory, and
 A contingency or situational approach.
The systems approach
The systems approach views organization as a system composed of interconnected - and thus
mutually dependent - sub-systems. These sub-systems can have their own sub-sub-systems. A
system can be perceived as composed of some components, functions and processes (Albrecht,
1983). Thus, the organization consists of the following three basic elements (Bakke, 1959):
(i) Components There are five basic, interdependent parts of the organizing system, namely:
 the individual,
 the formal and informal organization,
 patterns of behavior emerging from role demands of the organization,
 role comprehension of the individual, and
 the physical environment in which individuals work.
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(ii) Linking processes: The different components of an organization are required to operate in an
organized and correlated manner. The interaction between them is contingent upon the linking
processes, which consist of communication, balance and decision making.
 Communication is a means for eliciting action, exerting control and effecting coordination to
link decision centers in the system in a composite form.
 Balance is the equilibrium between different parts of the system so that they keep a
harmoniously structured relationship with one another.
 Decision analysis is also considered to be a linking process in the systems approach.

Decisions may be to produce or participate in the system. Decision to produce depends upon the
attitude of the individual and the demands of the organization. Decision to participate refers to
the individual's decisions to engross themselves in the organization process. That depends on
what they get and what they are expected to do in participative decision making.
(iii) Goals of organization: The goals of an organization may be growth, stability and interaction.
Interaction implies how best the members of an organization can interact with one another to
their mutual advantage.
Socio-technical approach
It is not just job enlargement and enrichment which is important, but also transforming
technology into a meaningful tool in the hands of the users. The socio-technical systems
approach is based on the premise that every organization consists of the people, the technical
system and the environment (Pasmore, 1988). People (the social system) use tools, techniques
and knowledge (the technical system) to produce goods or services valued by consumers or users
(who are part of the organization's external environment). Therefore, an equilibrium among the
social system, the technical system and the environment is necessary to make the organization
more effective.
The contingency or situational approach
The situational approach (Selznick, 1949; Burns and Stalker, 1961; Woodward, 1965; Lawrence
and Lorsch, 1967) is based on the belief that there cannot be universal guidelines which are
suitable for all situations. Organizational systems are inter-related with the environment. The
contingency approach (Hellriegel and Slocum, 1973) suggests that different environments
require different organizational relationships for optimum effectiveness, taking into
consideration various social, legal, political, technical and economic factors.
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DEPARTMENTATION
Meaning
Departmentation represents the pattern of grouping activities. Similar activities intimately related
with a distinct function are grouped together to form departments. It aims at achieving unity of
direction, effective communication, coordination and control. In order that grouping of activities
should lead to their effective performance, departmentation should be based on an analysis of
activities to find out which of them belong together.
Bases of Departmentation
1. Departmentation by function
2. Departmentation by product
3. Departmentation by process or activity
4. Departmentation by customer or service
5. Departmentation by territory
6. Alpha-numerical departmentation
7. Composite departmentation
Departmentation by Function:
Departmentation based on distinct and major functions is one of the most common bases of
organizing. It results in the creation of departments based on distinct functions such as
production, marketing, industrial relations, etc.
Advantages:
a. Promotes specialization and operational efficiency.

b. Assigns performance responsibility to functional heads.
c. Reflects the basic functions involved in the achievement of enterprise goals.
d. Helps in staffing and training.
e. Provides a means of effective coordination and control.
f. Provides unity of direction to intimately related activities.
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Disadvantages:
a. Functional departments cannot be assigned profit responsibility.

b. It creates problems of horizontal coordination among functions.
c. It causes inter-department conflicts.
d. It tends to lead to empire building.
e. It inhibits development of managers with abilities to occupy top managerial positions.
Departmentation by Product:
It is found in multi-product companies which emphasize specialization on the basis of products.

The departments or divisions are regarded as ‘profit centres’ and function as semi-autonomous
units with decentralized operations and centralized controls.
Advantages:
a. Specialization of production facilities.

b. Assignment of full responsibility for the division’s performance on its head.
c. Development of top managers.
d. Overcoming diseconomies of large size.
e. Effective coordination.
f. Greater organizational flexibility and adaptability
g. Benefits of decentralized operations with centralized control.
Disadvantages:
a. Tendency of divisional managers to become too division-oriented.

b. Pressure on the need for a larger number of top managers.
c. Increase in overhead costs.
d. Difficulties in coordinating interdivisional operations.
Departmentation by Process or Activity:
It is used by companies where production operations flow in a sequence from one stage to
another.
Advantages:
a. Facilitates coordination.
b. Provides for more effective utilization of specialized equipment.
c. Puts full responsibility for completed operation at each stage on the process departmental
head.
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d. Is simple and widely used.
Disadvantages:
a. Difficulties lie in coordination between departments.

b. Narrow focusing of vision.
c. Lack of profit responsibility of process departments.
d. Duplication of general purpose equipment.
Departmentation by Customer or Service:
It is based on the existence of distinctly different customer needs.
Advantages:
Its advantages are that it permits focus on special customer needs and aids in staffing.
Disadvantages:
a. It creates problems when salesman are getting bonus on sales revenues and their market
potential differ significantly.
b. It may also cause under utilization of sales personnel, particularly during recession.
Departmentation by territory:
It is found useful when the operations of a company are widely dispersed.
Advantages:
a. Ability of the company to adapt to local environment.

b. More aggressive marketing.
c. Savings in costs of transportation.
d. Economical procurement of raw materials and distribution of finished products.
e. Operation as profit centers.
f. Better focus on customer needs.
Disadvantages:
a. Its disadvantages are the same as that of product departmentation.

b. Moreover, it hampers efficient utilization of centralized staff departments.
Alpha-Numerical Departmentation
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This kind of departmentation takes place at lower levels in an organization when work is divided
on the basis of alphabetical order or numbers.
Composite Departmentation:
Generally companies use a combination of two or more types of departmentation.
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SPAN OF MANAGEMENT
Meaning
The term ‘span of management’ is also referred to as span of control, span of supervision, span
of authority or span of responsibility. It indicates the number of subordinates who report directly
to a manager.
Factors Governing the Span of Management

1. Ability of the manager
2. Ability of the employees
3. Type of work
4. Well-defined authority and responsibility
5. Geographic location
6. Sophisticated information and control system
7. Level of management
8. Economic considerations
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DELEGATION OF AUTHORITY
Meaning
The process by which a manager shares some of his work and authority with his subordinates is
known as delegation of authority.
Delegation of authority is based on the elementary principle of division of work.
Definitions
 In the words of Haimann,
“Delegation of authority merely means the granting of authority to subordinates to
operate within prescribed limits.”
 In the words of Moore,

“Delegation means assigning work to others and giving them authority to do it.”
 In the words of Koontz & O’Donnel,

“Delegation is an elementary art of managing.”
Elements of Delegation
1. Assigning duty or task or responsibility
2. Granting authority
3. Creation of obligation or accountability
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Principles of Delegation
1. Principle of division of work
2. Principle of parity of authority and responsibility
3. Principle of functional definition
4. Principle of unity of command
5. Principle of absolute responsibility
6. Principle of scalar chain
7. Authority level principle
8. Principles of delegation by results expected
Types of Delegation
1. Written or oral delegation
2. Delegation of general or specific authority
3. Soft and hard delegation of authority
4. Lazy delegation
5. Lateral delegation
6. Informal delegation
Importance / Advantages of Delegation

1. Multiplication of the executives’ capacity
2. Facilitating replacement of top managers
3. Opportunity for professional growth
4. Helping the expansion of business
5. Increasing morale of employees
6. Means of co-ordination
7. Achieving business goal
Difficulties in Delegation
Difficulties from the side of executives:
1. Opposition from senior executives
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2. Unfamiliarity with the art of delegation
3. Lack of confidence in subordinates
4. Fear about his position
5. Unwillingness in the delegation of authority
6. Customs and traditions
7. Tendency of centralization
Difficulties from the side of delegates:
1. Non co-operation
2. Inability of subordinates
3. Inadequate motivation of subordinates
4. Lack of proper atmosphere
Organizational difficulties:
1. Lack of policy and planning of delegation

2. Follow of traditional approach.
3. Important decision making and policy matters to be retained by top executives.
Essentials of effective delegation

1. Clear objectives
2. Unity of command
3. Clear explanation of the work assigned and authority delegated
4. Reasonable control over subordinate
5. Full communication facilities
6. No intervention in day to day work
7. Reasonable training
8. Sympathetic and co-operative attitude and atmosphere
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Authority & Responsibility
A manager alone cannot perform all the tasks assigned to him. In order to meet the targets, the
manager should delegate authority. Delegation of Authority means division of authority and
powers downwards to the subordinate. Delegation is about entrusting someone else to do parts of
your job. Delegation of authority can be defined as subdivision and sub-allocation of powers to
the subordinates in order to achieve effective results.
Elements of Delegation
1. Authority - In context of a business organization, authority can be defined as the power

and right of a person to use and allocate the resources efficiently, to take decisions and to
give orders so as to achieve the organizational objectives. Authority must be well-
defined. All people who have the authority should know what is the scope of their
authority is and they shouldn’t misutilize it. Authority is the right to give commands,
orders and get the things done. The top level management has greatest authority.
Authority always flows from top to bottom. It explains how a superior gets work done
from his subordinate by clearly explaining what is expected of him and how he should go
about it. Authority should be accompanied with an equal amount of responsibility.
Delegating the authority to someone else doesn’t imply escaping from accountability.
Accountability still rest with the person having the utmost authority.
2. Responsibility – It is the duty of the person to complete the task assigned to him. A
person who is given the responsibility should ensure that he accomplishes the tasks
assigned to him. If the tasks for which he was held responsible are not completed, then he
should not give explanations or excuses. Responsibility without adequate authority leads
to discontent and dissatisfaction among the person. Responsibility flows from bottom to
top. The middle level and lower level management holds more responsibility. The person
held responsible for a job is answerable for it. If he performs the tasks assigned as
expected, he is bound for praises. While if he doesn’t accomplish tasks assigned as
expected, then also he is answerable for that.
3. Accountability – It means giving explanations for any variance in the actual performance
from the expectations set. Accountability can not be delegated. For example, if ’A’ is
given a task with sufficient authority, and ’A’ delegates this task to B and asks him to
ensure that task is done well, responsibility rest with ’B’, but accountability still rest with
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’A’. The top level management is most accountable. Being accountable means being
innovative as the person will think beyond his scope of job. Accountability, in short,
means being answerable for the end result. Accountability can’t be escaped. It arises from
responsibility.
For achieving delegation, a manager has to work in a system and has to perform following steps:
1. Assignment of tasks and duties

2. Granting of authority
3. Creating responsibility and accountability
Delegation of authority is the base of superior-subordinate relationship, it involves following

steps:-
1. Assignment of Duties – The delegator first tries to define the task and duties to the
subordinate. He also has to define the result expected from the subordinates. Clarity of
duty as well as result expected has to be the first step in delegation.
2. Granting of authority – Subdivision of authority takes place when a superior divides

and shares his authority with the subordinate. It is for this reason, every subordinate
should be given enough independence to carry the task given to him by his superiors. The
managers at all levels delegate authority and power which is attached to their job
positions. The subdivision of powers is very important to get effective results.
3. Creating Responsibility and Accountability – The delegation process does not end
once powers are granted to the subordinates. They at the same time have to be obligatory
towards the duties assigned to them. Responsibility is said to be the factor or obligation
of an individual to carry out his duties in best of his ability as per the directions of
superior. Responsibility is very important. Therefore, it is that which gives effectiveness
to authority. At the same time, responsibility is absolute and cannot be shifted.
Accountability, on the others hand, is the obligation of the individual to carry out his
duties as per the standards of performance. Therefore, it is said that authority is
delegated, responsibility is created and accountability is imposed. Accountability arises
out of responsibility and responsibility arises out of authority. Therefore, it becomes
important that with every authority position an equal and opposite responsibility should
be attached.
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Differences between Authority and Responsibility
Authority Responsibility
It is the legal right of a It is the obligation of subordinate to

person or a superior to perform the work assigned to him.
command his subordinates.
Authority is attached to the Responsibility arises out of superior–

position of a superior in subordinate relationship in which
concern. subordinate agrees to carry out duty given
to him.
Authority can be delegated Responsibility cannot be shifted and is

by a superior to a absolute
subordinate
It flows from top to bottom. It flows from bottom to top.
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Centralization and Decentralization
Centralization is said to be a process where the concentration of decision making is in a few

hands. All the important decision and actions at the lower level, all subjects and actions at the
lower level are subject to the approval of top management.
According to Allen, “Centralization” is the systematic and consistent reservation of authority at

central points in the organization. The implication of centralization can be :-
1. Reservation of decision making power at top level.

2. Reservation of operating authority with the middle level managers.
3. Reservation of operation at lower level at the directions of the top level.
Under centralization, the important and key decisions are taken by the top management and the
other levels are into implementations as per the directions of top level.
On the other hand, Decentralization is a systematic delegation of authority at all levels of

management and in all of the organization. In a decentralization concern, authority in retained by
the top management for taking major decisions and framing policies concerning the whole
concern. Rest of the authority may be delegated to the middle level and lower level of
management.
The degree of centralization and decentralization will depend upon the amount of authority
delegated to the lowest level.
According to Allen, “Decentralization refers to the systematic effort to delegate to the lowest
level of authority except that which can be controlled and exercised at central points.
Decentralization is not the same as delegation. In fact, decentralization is all extension of

delegation. Decentralization pattern is wider is scope and the authorities are diffused to the
lowest most level of management. Delegation of authority is a complete process and takes place
from one person to another. While decentralization is complete only when fullest possible
delegation has taken place.
For example, the general manager of a company is responsible for receiving the leave application
for the whole of the concern. The general manager delegates this work to the personnel manager
who is now responsible for receiving the leave applicants. In this situation delegation of
authority has taken place. On the other hand, on the request of the personnel manager, if the
general manager delegates this power to all the departmental heads at all level, in this situation
decentralization has taken place.
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There is a saying that “Everything that increases the role of subordinates is decentralization
and that decreases the role is centralization”. Decentralization is wider in scope and the
subordinate’s responsibility increase in this case. On the other hand, in delegation the managers
remain answerable even for the acts of subordinates to their superiors.
Implications of Decentralization
1. There is less burden on the Chief Executive but this is not in the case of centralization.
2. In decentralization, the subordinates get a chance to decide and act independently which
develops skills and capabilities. This way the organization is able to process reserve of
talents in it.
3. In decentralization, diversification and horizontal can be easily implanted.
4. In decentralization, concern diversification of activities can place effectively since there
is more scope for creating new departments. Therefore, diversification growth should be
at a good level.
5. In decentralization structure, operations can be coordinated at divisional level which is
not possible in the centralization set up.
6. In the case of decentralization structure, there is greater motivation and morale of the
employees since they get more independence to act and decide.
7. In a decentralization structure, co-ordination to some extent is difficult to maintain as
there are lot many department divisions and authority is delegated to maximum possible
extent, i.e., to the bottom most level delegation reaches.
8. Centralization and decentralization are the categories by which the pattern of authority
relationships became clear. The degree of centralization and de-centralization can be
affected by many factors like nature of operation, volume of profits, number of
departments, size of a concern, etc. The larger the size of a concern, a decentralization set
up is suitable in it.
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LINE AND STAFF RELATIONSHIPS
Line-Staff Relations
Line managers are those who are directly responsible for the achievement of organizational
objectives and staff managers are those who provide support in the form of expert advice,
guidance and service to line managers in the effective performance of their functions.
Types of Staff
Employees performing staff functions in an organization may be classified into three categories:
Personal staff refers to employees such as personal assistant, private secretary, etc. Their
primary function is to relieve their superior of routine tasks like attending the routine mail,
setting up appointment, etc.
Specialized staff comprises experts like personnel manager, chief accountant, quality control
manager, etc. Their major function is to render expert advice, guidance and help to line managers
in the performance of their functions.
General staff refers to those managers whose primary function is to coordinate the activities of
staff units at headquarters and divisions.
Line and Staff Relationships

Line and staff managers are in an interactional and interdependent relationship. The line depends
on the staff for its expert advice and specialized services and the staff depends on the line for the
utilization of its advice.
In its advisory role the staff has no command authority over the line.
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Besides advisory relationship, there are a number of dimensions of authority relationships
between line and staff. These relationships are based on the staff’s:
1. Implied authority
2. Compulsory staff consultation
3. Concurrent authority
4. Functional authority
5. Administrative authority
6. Splintered authority
Line and Staff Conflict

It is a common occurrence. The major reasons underlying these conflicts are;
1. Clear ambition and individualistic behavior among staff mangers.

2. Staff’s anxiety to justify its existence and gain acceptance of its contribution.
3. Staff’s dependence on the line for its existence.
4. Vague definition of staff duties and authority.
5. Scarcity of effective staff managers.
6. Mixing staff and operating duties.
7. Disregard by top management.
Resolving Line and Staff Conflict

It can be done by adopting one or more of the following devices:
1. Recognition of mutual dependence.

2. Clear understanding of staff role.
3. De-emphasis on staff control function.
4. Right use of staff authority.
5. Constructive staff attitudes and skills.
6. Emphasis on the staff manager’s role as a team member.
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COORDINATION
Meaning
Coordination is the process of pulling all the parts of the organization together so that decisions,
tasks, activities and functions of all of its employees and their groups contribute their optimum
toward the achievement of its predetermined goals.
Definitions
According to Tead,
Coordination is “the effort to assure a smooth interplay of all functions and forces of all the
different parts of an organization to the end that its purpose will be realized with a minimum of
friction and maximum of collaborative effectiveness.”
Haimann and Scott defines,
Coordination as “the conscious process of assembling and synchronizing differentiated activities

so that they function harmoniously in the attainment of organizational objectives.”
McFarland defines,
“Coordination as the process of developing the required patterns of group effort and securing
unity of action for the accomplishment of common goals.”
Nature of Coordination
1. It outshines all managerial functions.
2. Coordination and cooperation
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3. Voluntary coordination
Need for Coordination

1. Division of labour
2. Vertical differentiation
3. Functional differentiation
4. Line and staff functions
5. Allocation of limited resources
6. Individual differences
Types of Coordination
1. Vertical
2. Horizontal
Methods of Coordination
1. Authority
2. Objectives, policies, rules, procedures and methods
3. Liaison men
4. Committees and conferences
5. Communication
6. Bargaining
7. Reward system
8. Voluntary coordination
9. Project management
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GROUP DYNAMICS
Meaning
This is the field of enquiry that deals with the development of small groups, interactions among
group members, and group and intergroup behavior.
Basic Assumptions
The basic assumptions underlying the study of group dynamics are:
1. Groups are unavoidable and everywhere.

2. Groups activate powerful forces that produce effects of greatest importance to
individuals.
3. Groups may produce good or bad consequences for the organization.
4. Correct understanding of group dynamics permits the possibility that desirable
consequences from groups can be deliberately enhanced.
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DIRECTION
Meaning
Directing as a function of management is concerned with instructing, guiding and inspiring
people in the organization to achieve its objectives.
Direction is the process of activating human resources to achieve the objective of the business.
Definitions
 In the words of Earnest Dale,
“Directing is telling people what to do and seeing that they do it to the best of their
ability”.
 In the words of Joseph L. Masside,

Directing concerns the total manner in which a manager influences the subordinates. It is
the final action of a manager in getting others to act after all preparations have been
completed.”
 In the words of Koontz and O’Donnel,

Direction is a complex function that includes all those activities, which are designed to
encourage subordinate to work effectively and efficiently”.
Nature of Direction
1. Direction is related to performance
2. Direction is pervasive action of management
3. Direction is a continuous activity
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Elements of Direction
1. Motivation
2. Communication
3. Training
4. Supervision
5. Leadership
Principles of Direction
1. Principle of achieving objectives
2. Principle of harmony of objectives
3. Principle of unity of command
4. Principle of managerial communication
5. Principle of efficiency of direction
6. Principle of direct supervision
7. Principle of appropriateness of direction technique
8. Principle of informal relation
9. Principle of comprehension
10. Principle of information
11. Principle of leadership
Importance of Direction
1. It deals with human factor
2. It is an activating force
3. Leads to integrated group activity
4. Induces to implement changes
5. It is important at all levels of the management
6. It is helpful in making effective plans
7. It is means of motivation
8. Provides stability to the enterprise
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PROBLEMS IN HUMAN RELATIONS
Introduction
People are the most precious resource of an organization, as it is the level of their willing
contribution to the achievement of organizational goals that provides it a real and enduring edge
over its competitors. It was also pointed out that employees will to work competitively and
productively depends on their perception that by doing so they are advancing simultaneously
toward their own goals. A manager’s success in directing depends on his ability to create such a
healthy human relations climate.
He can do so by:
1. Providing appropriate leadership.

2. Creating conditions conducive to the development of satisfying interpersonal
relationships.
3. Motivating employees by providing them challenging and meaningful work and scope for
growth, advancement and achievement.
4. Establishing a healthy and effective communication system.
Most managers are, however, deficient in the art of human relations. Even the most effective
mangers / leaders face human relations problems, but the magnitude and complexity of human
relations problems is much more in case of managers who treat employees as inanimate objects.
Nature and Causes of Human Relations Problems

Conflict Between Individual and Organization:
According to Argyris, a mature person wants to utilize and develop his abilities on the job, seeks
challenge and opportunities to be creative, wants autonomy and relationships of equality rather
than subordinacy, develops a long-term perspective, acquires deeper interest in his activities, and
establishes his sense of identity. On the other hand, organization demands conformity, obedience
and performance of standardized and repetitive tasks.
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Although Strauss & Dubin stress that work is not of central life interest to most people and they
can seek satisfaction of the job and in the community and home, they do not deny the existence
of conflict between the individual and organization. This conflict results in frustration and causes
human relations problems.
Individual Differences:
Individual differences in needs and patterns of responses to need fulfillment, attitudes and
perceptions create human relations problems.
Role and Status Incongruities and Conflict:
Role and status incongruities and conflicts are another source of human relations problems.
Interpersonal Conflicts:
Interpersonal conflicts based on personality differences serve some useful purpose as they force
re-examination of ideas and approaches and resultant modifications may benefit the organization
as a whole. But persistent conflicts cause damage to it.
Informal Groups and Human Relations Problems:
Informal groups serve many useful functions by providing opportunities for fulfillment of
security, social and esteem needs of their members, but at the same time create a number of
human relations problems. They put pressure on deviants and isolates if they produce more than
group norms of production, do not easily accept new employees in the group and resist transfer
of group members. Intergroup conflicts also create problems.
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STRATEGIES FOR ESTABLISHING HEALTHY
HUMAN RELATIONS
Concept
Integrating the individual and the group with the organization:
It is the function of leadership to create a supportive environment and a relationship of mutual

trust and confidence for facilitating this integration.
Involving individuals and groups in decision-making:
This will result not only in improvement in the quality of decisions but also provide satisfaction
of ego needs to employees.
Communicating Effectively:
Managers should pay special attention to open communication, particularly upward

communication.
Adaptive Leadership:
Since people are different, complex and variable and the situations are also continually changing,
managers must adapt their leadership style accordingly.
Conditioning Behavior:
Healthy human relations can be established by conditioning the behavior of people by

reinforcing desirable behavior by positive rewards and extinguishing undesirable behavior either
by not rewarding it or by punishing it.
Resolving Conflicts:
This should be done by adopting the win-win strategy called integrative method, in place of win-
lose or lose-lose strategy called distributive method.
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MOTIVATION
Meaning
Motivation is the process of generating enthusiasm among subordinates to dedicate their
integrated efforts towards achieving the objectives of the business.
Definitions
 In the words of Farland,
“Motivation refers to the ways in which urges, drives, desires, aspirations, strivings or
needs direct, control or explain the behavior of human beings.”
 In the words of Scott,

“Motivation means a process of stimulating people to action to accomplish desired
goals.”
Types of Motivation
1. Positive motivation
2. Negative motivation
3. Financial motivation
4. Non-financial motivation
Elements of Motivation
1. The individual
2. The job
3. The work situations
Importance of Motivation
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1. Role in management
2. Creating enthusiasm and interest in work
3. Achievement of organizational goals
4. Satisfaction of employees needs
5. Low absenteeism and turnover
6. Arranging job relationship
7. High level of performance
8. Filtrates change
9. Effective utilization of resources
10. Creates congenial work environment
11. Builds morale
Theories of Motivation
Maslow’s Needs Theory / Maslow’s Theory of Human Motivation:
Abraham Maslow, a famous social scientist and a psychologist developed a theory of motivation
which is based on the hierarchy of needs. According to him there are five kinds of needs, viz,
physiological, safety, social, esteem and self actualization.
Maslow saw human needs in the form of a hierarchy, ascending from the lowest to the highest,
and he concluded that when one set of needs is satisfied, this kind of need ceases to be a
motivator.
As per his theory these needs are:
Physiological Needs:
These are important needs for sustaining the human life. Food, water, warmth, shelter, sleep,
medicine and education are the basic physiological needs which fall in the primary list of need
satisfaction. Maslow was of an opinion that until these needs were satisfied to a degree to
maintain life, no other motivating factors can work.
Security or Safety Needs:
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These are the needs to be free of physical danger and of the fear of losing a job, property, food or
shelter. It also includes protection against any emotional harm.
Social Needs:
Since people are social beings, they need to belong and be accepted by others. People try to
satisfy their need for affection, acceptance and friendship.
Esteem Needs:
According to Maslow, once people begin to satisfy their need to belong, they tend to want to be
held in esteem both by themselves and by others. This kind of need produces such satisfaction as
power, prestige, status and self-confidence. It includes both internal esteem factors like self-
respect, autonomy and achievements and external esteem factors such as status, recognition and
attention.
Need for Self-Actualization:
Maslow regards this as the highest need in his hierarchy. It is the drive to become what one is
capable of becoming, it includes growth, achieving one’s potential and self-fulfillment. It is to
maximize one’s potential and to accomplish something.
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As each of these needs are substantially satisfied, the next need becomes dominant. From the
standpoint of motivation, the theory would say that although no need is ever fully gratified, a
substantially satisfied need no longer motivates. So if you want to motivate someone, you need
to understand what level of the hierarchy that person is on and focus on satisfying those needs or
needs above that level.
Maslow’s need theory has received wide recognition, particularly among practicing managers.
This can be attributed to the theory’s intuitive logic and ease of understanding. However,
research does not validate this theory. Maslow provided no empirical evidence and other several
studies that sought to validate the theory found no support for it.
Douglas McGregor’s “X” and “Y” Theory of Motivation:
McGregor, in his book “The Human side of Enterprise” states that people inside the organization
can be managed in two ways. The first is basically negative, which falls under the category X
and the other is basically positive, which falls under the category Y. After viewing the way in
which the manager dealt with employees, McGregor concluded that a manager’s view of the
nature of human beings is based on a certain grouping of assumptions and that he or she tends to
mold his or her behavior towards subordinates according to these assumptions.
Under the assumptions of theory X:
 Employees inherently do not like work and whenever possible, will attempt to avoid it.
 Because employees dislike work, they have to be forced, coerced or threatened with
punishment to achieve goals.
 Employees avoid responsibilities and do not work till formal directions are issued.
 Most workers place a greater importance on security over all other factors and display
little ambition.
In contrast under the assumptions of theory Y:
 Physical and mental effort at work is as natural as rest or play.
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 People do exercise self-control and self-direction and if they are committed to those
goals.
 Average human beings are willing to take responsibility and exercise imagination,
ingenuity and creativity in solving the problems of the organization.
 That the way the things are organized, the average human being’s brainpower is only
partly used.
On analysis of the assumptions it can be detected that theory X assumes that lower-order needs
dominate individuals and theory Y assumes that higher-order needs dominate individuals. An
organization that is run on Theory X lines tends to be authoritarian in nature, the word
“authoritarian” suggests such ideas as the “power to enforce obedience” and the “right to
command.” In contrast Theory Y organizations can be described as “participative”, where the
aims of the organization and of the individuals in it are integrated; individuals can achieve their
own goals best by directing their efforts towards the success of the organization.
However, this theory has been criticized widely for generalization of work and human behavior.
Frederick Herzberg’s Motivation-Hygiene Theory:
Frederick has tried to modify Maslow’s need Hierarchy theory. His theory is also known as two-
factor theory or Hygiene theory. He stated that there are certain satisfiers and dissatisfiers for
employees at work. Intrinsic factors are related to job satisfaction, while extrinsic factors are
associated with dissatisfaction. He devised his theory on the question: “What do people want
from their jobs?” He asked people to describe in detail, such situations when they felt
exceptionally good or exceptionally bad. From the responses that he received, he concluded that
opposite of satisfaction is not dissatisfaction. Removing dissatisfying characteristics from a job
does not necessarily make the job satisfying. He states that presence of certain factors in the
organization is natural and the presence of the same does not lead to motivation. However, their
non-presence leads to demotivation. In similar manner there are certain factors, the absence of
which causes no dissatisfaction, but their presence has motivational impact.
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Examples of Hygiene factors are:
Security, status, relationship with subordinates, personal life, salary, work conditions,
relationship with supervisor and company policy and administration.
Examples of Motivational factors are:
Growth prospectus, job advancement, responsibility, challenges, recognition and achievements.
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LEADERSHIP
Meaning
Leadership is concerned with influencing the subordinates to contribute towards organizational
goal.
Leadership may be defined as an art of extracting, co-ordinating and channelizing the best
energies and efforts of subordinates towards attaining the desired goal of the business.
Definitions
 In the words of Bernard,
“Leadership is the quality of behavior of individuals, whereby they guide people or their
activities in organizing efforts”.
 In the words of Haimann,

“Leadership is the process by which an executive directs, guides amd influences the work
of others in choosing and attaining specified goals.”
Features
1. Leadership is the personal quality of the manager.
2. Continuous process of influencing behavior.
3. Develops relationship and confidence.
4. Related to particular situation.
Functions of Leader
1. Determining and interpreting the goals of the business.
2. Co-ordinating group efforts.
3. Proper motivation of subordinates.
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4. Guiding subordinates.
5. Representing the group.
Qualities of a Leader
1. Intelligence
2. Good and pleasing personality
3. Self-confidence
4. Vision and foresight
5. Ability to inspire
6. Ability to communicate
7. Sincerity and honesty
8. Courage and will power
9. Tact and humour
10. Sound judgement
11. Maturity
12. Flexible and dynamic
13. Positive attitude
14. Human relations skills
Importance
1. Developing team spirit
2. Establishing relationship between top management and subordinates
3. Dynamic direction
4. Worker’s friend, philosopher and guide.
5. Modifier of behavior
Leadership Styles
In the past several decades, management experts have undergone a revolution in how they define
leadership and what their attitudes are toward it. They have gone from a very classical autocratic
approach to a very creative, participative approach. Somewhere along the line, it was determined
that not everything old was bad and not everything new was good. Rather, different styles were
needed for different situations and each leader needed to know when to exhibit a particular
approach.
Four of the most basic leadership styles are:

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--Autocratic
--Bureaucratic
--Laissez-faire
--Democratic
Autocratic Leadership Style
This is often considered the classical approach. It is one in which the manager retains as much
power and decision-making authority as possible. The manager does not consult employees, nor
are they allowed to give any input. Employees are expected to obey orders without receiving any
explanations. The motivation environment is produced by creating a structured set of rewards
and punishments.
This leadership style has been greatly criticized during the past 30 years. Some studies say that
organizations with many autocratic leaders have higher turnover and absenteeism than other
organizations. Certainly Gen X employees have proven to be highly resistant to this management
style. These studies say that autocratic leaders:
--Rely on threats and punishment to influence employees
--Do not trust employees
--Do not allow for employee input
Yet, autocratic leadership is not all bad. Sometimes it is the most effective style to use. These
situations can include:
--New, untrained employees who do not know which tasks to perform or which procedures to
follow
--Effective supervision can be provided only through detailed orders and instructions
--Employees do not respond to any other leadership style
--There are high-volume production needs on a daily basis
--There is limited time in which to make a decision
--A manager’s power is challenged by an employee
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--The area was poorly managed
--Work needs to be coordinated with another department or organization
The autocratic leadership style should not be used when:
--Employees become tense, fearful, or resentful
--Employees expect to have their opinions heard
--Employees begin depending on their manager to make all their decisions
--There is low employee morale, high turnover and absenteeism and work stoppage
Bureaucratic Leadership Style
Bureaucratic leadership is where the manager manages “by the book¨ Everything must be done
according to procedure or policy. If it isn’t covered by the book, the manager refers to the next
level above him or her. This manager is really more of a police officer than a leader. He or she
enforces the rules.
This style can be effective when:
--Employees are performing routine tasks over and over.
--Employees need to understand certain standards or procedures.
--Employees are working with dangerous or delicate equipment that requires a definite set of
procedures to operate.
--Safety or security training is being conducted.
--Employees are performing tasks that require handling cash.
This style is ineffective when:
--Work habits form that is hard to break, especially if they are no longer useful.
--Employees lose their interest in their jobs and in their fellow workers.
--Employees do only what is expected of them and no more.
Democratic Leadership Style
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The democratic leadership style is also called the participative style as it encourages employees
to be a part of the decision making. The democratic manager keeps his or her employees
informed about everything that affects their work and shares decision making and problem
solving responsibilities. This style requires the leader to be a coach who has the final say, but
gathers information from staff members before making a decision.
Democratic leadership can produce high quality and high quantity work for long periods of time.
Many employees like the trust they receive and respond with cooperation, team spirit, and high
morale. Typically the democratic leader:
--Develops plans to help employees evaluate their own performance
--Allows employees to establish goals
--Encourages employees to grow on the job and be promoted
--Recognizes and encourages achievement.
Like the other styles, the democratic style is not always appropriate. It is most successful when
used with highly skilled or experienced employees or when implementing operational changes or
resolving individual or group problems.
The democratic leadership style is most effective when:
--The leader wants to keep employees informed about matters that affect them.
--The leader wants employees to share in decision-making and problem-solving duties.
--The leader wants to provide opportunities for employees to develop a high sense of personal
growth and job satisfaction.
--There is a large or complex problem that requires lots of input to solve.
--Changes must be made or problems solved that affect employees or groups of employees.
--You want to encourage team building and participation.
Democratic leadership should not be used when:
--There is not enough time to get everyone’s input.
--It’s easier and more cost-effective for the manager to make the decision.
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--The business can’t afford mistakes.
--The manager feels threatened by this type of leadership.
--Employee safety is a critical concern.
Laissez-Faire Leadership Style
The laissez-faire leadership style is also known as the “hands-off¨ style. It is one in which the
manager provides little or no direction and gives employees as much freedom as possible. All
authority or power is given to the employees and they must determine goals, make decisions, and
resolve problems on their own.
This is an effective style to use when:
--Employees are highly skilled, experienced, and educated.
--Employees have pride in their work and the drive to do it successfully on their own.
--Outside experts, such as staff specialists or consultants are being used.
--Employees are trustworthy and experienced.
This style should not be used when:
--It makes employees feel insecure at the unavailability of a manager.
--The manager cannot provide regular feedback to let employees know how well they are doing.
--Managers are unable to thank employees for their good work.
--The manager doesn’t understand his or her responsibilities and is hoping the employees can
cover for him or her.
Varying Leadership Style
While the proper leadership style depends on the situation, there are three other factors that also
influence which leadership style to use.
1. The manager’s personal background. What personality, knowledge, values, ethics, and
experiences does the manager have. What does he or she think will work?
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2. The employees being supervised. Employees are individuals with different personalities and
backgrounds. The leadership style managers use will vary depending upon the individual
employee and what he or she will respond best to.
3. The company. The traditions, values, philosophy, and concerns of the company will influence
how a manager acts.
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COMMUNICATION
Meaning
Communication means an exchange of ideas, facts, opinions, information and understanding
between two or more persons.
Communication is the systematic process of creating mutual understanding through exchange of

messages.
Definitions
 In the words of Meyer,
“Communication is the intercourse by words, letters or messages, intercourse of thoughts
or opinions.”
 In the words of Cumming,

“Communication is the process of conveying messages (facts, ideas, attitudes &
opinions) from one person to another so that they are understood.”
Importance of Communication
1. Prompt decision and immediate action.
2. Possibility of maximum output at minimum cost.
3. Co-ordination of activities.
4. Effective leadership.
5. Helping in the adoption of definite line of action.
6. Increase in co-operation.
7. Democratic method.
Process / Stages / Steps of Communication
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1. Ideation
2. Encoding
3. Transmission
4. Receiving messages
5. Decoding
6. Action
7. Feedback
Selection of Effective Means of Communication

1. Suitability
2. Cost
3. Accuracy
4. Secrecy
5. Speedy
6. Evidence
7. Convenient
Essentials of Effective Communication System

1. The message must be useful and purposive.
2. Brief but complete.
3. Simplicity and clarity.
4. Effective language and useful subject-matter.
5. Follow up of the communication.
6. Communication should be preferably informal.
7. Communication should be economical.
8. Messages should be according to needs and real situations of the business.
9. Communication should not be contradictory.
Problems / Barriers to Communication

1. Problem of language.
2. Indifferent attitude of the employees.
3. Haste in decision.
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4. Distortion of facts.
5. Inefficient managers.
6. Ambiguous ideas.
7. Mutual distance.
8. Mechanical barriers.
9. Organizational barriers.
10. Physical barriers.
11. Other barriers.
Steps / Measures to Overcome Barriers of Communication

1. Direct contact between sender and receiver of message.
2. Use of simple and correct language.
3. Development of listening habits.
4. Use of informal and face to face communication.
5. Developing mutual trust and confidence.
6. Removing mechanical defects.
7. Encouragement to informal communication.
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STAFFING
Meaning & Definition

The term staffing may be defined as the managerial function of hiring and developing the
required personnel to fill in various positions in the organization.
Staffing is the process through which competent employees are selected, properly trained,
effectively developed, suitably rewarded and their efforts harmoniously integrated towards
achieving the objectives of the business.
In the words of Koontz & O’Donnel,
“The managerial function of staffing involves managing the organizational structure through
proper and effective selection, appraisal and development of personnel to fill the roles designed
into the structure”.
Nature / Features of Staffing

1. It is the function of management.
2. Integral part of management process.
3. Continuous process.
4. Concerned with the human resource of an organization
5. Pervasive function of management.
6. Difficult and tactful function, distinct from physical factors.
7. Concerned with the optimum utilization of human resources.
Process / Elements / Steps / Functions of Staffing

1. Manpower planning
2. Recruitment and selection of staff
3. Training and development of staff
4. Promotion and transfer
5. Remuneration
6. Orientation of staff
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7. Performance evaluation
Need / Importance of Staffing

1. Helps in discovering competent staff.
2. Ensuring maximum productivity.
3. Developing personnel for shouldering greater responsibilities.
4. Meeting future requirements of talented personnel.
5. Job satisfaction due to proper placement.
6. Maximum utilization of work force.
7. Supplying information regarding transfer, promotion, death, demotion, etc.
Performance Appraisal
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Performance appraisal is the process by which organizations evaluate employee job performance.
Benefits of Performance Appraisal

For the appraise (employee)
 Better understanding of his role in the organization—what is expected and what needs to
be done to meet those expectations
 Clear understanding of his strengths and weaknesses to develop himself into a better
performer in future
 Increased motivation, job satisfaction, and self-esteem
 Opportunity to discuss work problems and how they can be overcome
 Opportunity to discuss aspirations and any guidance, support or training needed to fulfil
those aspirations
 Improved working relationships with supervisors
For the Management
 Identification of performers and non-performers and their development towards better

performance
 Opportunity to prepare employees for assuming higher responsibilities
 Opportunity to improve communication between the employees and management
 Identification of training and development needs
 Generation of ideas for improvements
 Better identification of potential and formulation of career plans
For the Organization
 Improved performance throughout the organization
 Creation of a culture of continuous improvement and success
 Conveying the message that people are valued
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Selection
Selection of employees is the process of picking up the most competent and suitable candidates.
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Steps in Selection Process
1. Preliminary interview
2. Application blank
3. Selection test
4. Employment interview
5. Medical examination
6. Reference checks
7. Final approval
Career Planning
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Career planning is a lifelong process, which includes choosing an occupation, getting a job,
growing in our job, possibly changing careers, and eventually retiring. This may happen once in
our lifetimes, but it is more likely to happen several times as we first define and then redefine
ourselves and our goals.
Career Planning: A Four Step Process
The career planning process is comprised of four steps. One might seek the services of a career
development professional to help facilitate his or her journey through this process. Whether or
not you choose to work with a professional, or work through the process on your own is less
important than the amount of thought and energy you put into choosing a career.
Self
Gather information about yourself (self assessment)

 Interests
 Values
 Roles
 Skills/Aptitudes
 Preferred Environments
 Developmental Needs
 Your realities
Options
 Explore the occupations in which you are interested

 Research the industries in which you would like to work
 Research the Market
Get more specific information after you narrow down your options by:
 Job Shadowing
 Part time work, internships, or volunteer opportunities
 Written materials
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 Informational interviews
Match
During this phase of the process, you will:

 Identify possible occupations
 Evaluate these occupations
 Explore alternatives
 Choose both a short term and a long term option
Action
You will develop the steps you need to take in order to reach your goal, for example:
 Investigating sources of additional training and education, if needed
 Developing a job search strategy
 Writing your resume
 Gathering company information
 Composing cover letters
 Preparing for job interviews
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Morale
According to Flippo, Morale is a mental condition or attitudes of individuals and groups which
determines their willingness to cooperate.
Importance of Morale
1. Higher performance
2. Better quality of work
3. Low absenteeism
4. Low labour turnover
5. Good discipline
6. Fewer industrial accidents
7. Stability and growth of the organization
Factors influencing morale

1. Nature of work
2. Working conditions
3. Supervision
4. Interpersonal relations
5. Management policies
6. Personal factors
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Measures for building high morale
1. Proper work environment
2. Job security
3. Sound compensation system
4. Sound promotion policy
5. Job enrichment
6. Grievance procedure
7. Suggestion scheme
8. Employee counseling
9. Worker’s participation in management
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HUMAN RESOURCE DEVELOPMENT
Meaning
HRD is an organized learning experience aimed at matching the organizational need for human
resource with the individual need for career growth and development.
Definitions
According to Prof. T.V. Rao,
HRD is a process in which the employees of an organization are continually helped in a planned
way to:
a. Acquire or sharpen capabilities required to perform various functions associated with

their present or expected future plans.
b. Develop their general capabilities so that they may be able to discover their own inner
potentialities and exploit them to fullest for their own and organizational development
purpose.
c. To develop an organizational culture where superior-subordinate relationships, teamwork
and collaboration among different sub-units are strong and contribute to organizational
wealth and motivation and pride of the employees.”
Features
1. Planned and systematic approach towards the development of people.
2. Continuous process of developing the competencies, motivation, dynamism and
effectiveness of employees.
3. Interdisciplinary concept.
4. Has both micro and macro aspects.
5. Is a process not merely a set of mechanisms and techniques.
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Objectives
1. To provide a comprehensive framework and methods for the development of human
resources in an organization.
2. To generate systematic information about human resources for purposes of manpower
planning, placement, succession planning, etc.
3. To increase the capabilities of an organization to recruit, retain and motivate talented
employees.
4. To create a climate that enables every employee to discover, develop and use his / her
capabilities to a fuller extent, in order to further achieve both individual and
organizational goals.
Mechanisms of HRD
1. Performance appraisal
2. Potential appraisal and development
3. Feedback and performance counseling
4. Career planning
5. Training
6. Organization development
7. Rewards and employee welfare
8. Quality of work life
Need / Significance of HRD

1. Improves the capabilities of people.
2. Improves communication system.
3. Helps in procuring the right people at the right time.
4. Improves employee commitment.
5. Provides an opportunity of continuous and all round growth.
6. Improves collaboration and team work.
7. Improves problem-solving and adaptation skills.
8. Facilitates human resource planning.
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Qualities of an HRD Manager
Essential Qualities:
a. Positive thinking and positive attitude

b. Desire to learn
c. Helping nature
d. Initiative
e. Good communication skills
f. Patience
g. Discipline
Functional Competencies:
a. Knowledge of appraisal systems and their functioning.

b. Knowledge of potential appraisal
c. Knowledge of various tests, questionnaires, etc.
d. Ability to design and coordinate training programmes.
e. Knowledge of personality development.
f. Knowledge of role analysis methods, team building interventions, job rotation, etc.
g. Knowledge and skills of counseling.
h. Professional knowledge of HRM.
i. Knowledge of organizational culture.
j. Knowledge of career planning.
Managerial Competencies:
a. Organizational abilities
b. Implementation abilities
c. Leadership skills.
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ORGANIZATIONAL BEHAVIOR
Concept
 Organizational behaviour is the study of human behavior in organizations.

 Knowledge about human behavior would be useful in improving an organization’s
effectiveness.
Definitions
 “Organizational behaviour is the study and application of knowledge about how people
act within organizations. It is the human tool for human benefit. It applies broadly to the
behavior of people in all types of organizations such as business, government, schools
and service organizations.”
 “Organizational behaviour is directly concerned with the understanding, prediction, and
control of human behavior in organizations.”
 “It is a field of study that investigates the impact that individuals; groups and structure
have on organizations for the purpose of applying such knowledge towards improving an
organization’s effectiveness.”
 “Organizational behavior is the study of organizational components, and their impact on
human behaviour and organizational performance. Such study can benefit from various
behavioral and social sciences.”
 “Organizational behaviour means the study of the behavior of individuals and groups in
organizations and the organizations themselves, as they act and interact to attain desired
outcomes.”

Benefits of OB
1. OB is a systematic study of the actions and attitudes that people exhibit within the
organization. It also helps any individual to understand his behaviour.
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2. OB has proved instrumental for managers in getting their work done effectively.
3. OB lays emphasis on the interaction and relations between organization and individual
behaviour. It works as a positive attempt in fulfilling psychological agreement between
organization and the individuals.
4. OB delivers job satisfaction to employees and helps in developing work-related
behaviour in the organization.
5. OB helps in building motivating climate in the organization.
6. OB helps in building cordial industrial relations.
7. OB smoothes the progress of marketing by providing deeper insight of consumer
behaviour and motivating and managing field employees.
8. OB helps in predicting behaviour and its application in meaningful way delivers
effectiveness in the organization.
9. OB implies effective management of human resources.
10. OB helps in improving functional behaviour within the organization. It helps in attaining
higher productivity, effectiveness, efficiency, organizational citizenship. It works
effectively in reducing dysfunctional behaviour at work place like absenteeism, employee
turnover, dissatisfaction, tardiness etc.
Skills Developed Through OB
1. Self development
2. Personality development
3. Development of human values and ethical perspective
4. Managing stress and achieving mental hygiene
5. Creative use of emotions
6. Creating learning individual and learning organization
7. Managing creativity and innovation
8. Motivation and morale
9. Job satisfaction
10. Effective communication
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11. Interpersonal effectiveness including persuasion, coaching, counseling, mentoring, goal
setting, decision making, negotiation, conflict handling
12. Team building
13. Leadership
14. Creating effective organizational culture
15. Managing change
16. Continuous development through behavioral interventions.
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CONTROL
Meaning
It is the process through which managers assure that the actual activities conform to the planned
activities.
Definitions
 In the words of Henry Fayol,
“Control consists in verifying whether everything occurs in conformity with the plans
adopted, the instructions issued and principles established. It has for its object to point out
weaknesses and errors in order to rectify them and prevent recurrence”.
 In the words of Philip Kotler,

Control is the process of taking steps to bring actual results and desired results closing
together”.
 In the words of Koontz & O’Donnel,

“The managerial function of control is the measurement and correction of the
performances of subordinates in order to make sure that enterprise objectives and the plan
devised to attain them are accomplished.”
Essentials / Characteristics / Features / Nature of Control

1. Essential function of management
2. Continuous activity
3. Forward looking
4. Backward looking
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5. Dynamic activity
6. Seeks to improve future results
7. Action-oriented
8. Pervasive
9. Integrates both human and physical resources
10. Last function
Steps / Process or Stages of Control

1. Establishing standards
2. Appraisal of performance
a. Measurement of actual performance
b. Comparison of actual results with the desired results
3. Directing control points, i.e., deviation of the actual performance with expected
performance
4. Corrective measures
a. Removing performance barriers
b. Preventing recurrence of barriers
Objectives of Control
1. Ascertaining the progress of work
2. Detecting and identifying deviation between the planned and actual work
3. Investigating causes for deviation
4. Applying corrective measures
5. Preventing the recurrence of deviations
Essential Features / Requisites of a Good Control System

1. Simplicity
2. Suitability
3. Objectivity
4. Economy
5. Utility
6. Flexibility
7. Quick reporting
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Importance of Control
1. It is the basis of planning
2. Helpful in coordination
3. Helpful in decentralization
4. Source of motivation
5. Pervasive function
6. Evaluation of actual performance
7. Useful in large scale business units
8. Helps in achieving the objectives
9. Efficient use of resources
10. Facilitates decision-making
Limitations of Control
1. External factor such as government policies, technological changes etc. cannot be
controlled.
2. It is an expensive process.
3. Proves to be ineffective, if standards of performance are not specified in quantitative
terms.
4. Proves to be ineffective, if accountability cannot be fixed.
Control Techniques
A variety of tools and techniques has been used over the years to help managers control the
activities in their organizations. These techniques can be classified as old and new.
Old Control Techniques:
1. Budgeting
2. Standard costing
3. Responsibility accounting
4. Financial statements and ratio analysis
5. Return on investment
6. Break-even analysis
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7. Internal and external audit
8. Reports
9. Standing orders, rules, limitations
10. Personal observation
New Control Techniques:
1. PERT and CPM

2. Human resource accounting
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CONFLICT MANAGEMENT
Meaning
Conflict management is the process of planning to avoid conflict where possible and organizing
to resolve conflict where it does happen, as rapidly and smoothly as possible.
Difference between "Competition" and "Conflict"
"Competition" usually brings out the best in people, as they strive to be top in their field, whether
in sport, community affairs, politics or work.
In fact, fair and friendly competition often leads to new sporting achievements, scientific
inventions or outstanding effort in solving a community problem.
When competition becomes unfriendly or bitter, conflict can begin - and this can bring out the
worst in people.
Common Causes of Conflict
Causes or sources of organizational conflict can be many and varied. The most common causes
are the following:
1. Scarcity of resources (finance, equipment, facilities, etc)

2. Different attitudes, values or perceptions
3. Disagreements about needs, goals, priorities and interests
4. Poor communication
5. Poor or inadequate organizational structure
6. Lack of teamwork
7. Lack of clarity in roles and responsibilities
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Types of Conflicts
1. Conflict between individual:

People have differing styles of communication, ambitions, political or religious views
and different cultural backgrounds. In our diverse society, the possibility of these
differences leading to conflict between individuals is always there, and we must be alert
to preventing and resolving situations where conflict arises.
2. Conflict between groups of people:
Whenever people form groups, they tend to emphasize the things that make their group
"better than" or "different from" other groups. This happens in the fields of sport, culture,
religion and the workplace and can sometimes change from healthy competition to
destructive conflict.
3. Conflict within a group of people:

Even within one organization or team, conflict can arise from the individual differences
or ambitions mentioned earlier; or from rivalry between sub-groups or factions. All
leaders and members of the organization need to be alert to group dynamics that can spill
over into conflict.
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DYNAMICS OF CHANGE
Whatever the kinds of change that people encounter, there are certain patterns of response that
occur and re-occur. It is important that change leaders understand some of these patterns, since
they are normal outcomes of the change process. Understanding them allows leaders to avoid
over-reacting to the behaviors of people who, at times, seem to be reacting in mysterious, non-
adaptive ways.
Ken Blanchard has described seven dynamics of change designed to help managers better
address employee reactions to change. They are:
1. People Will Feel Awkward, Ill-At-Ease and Self-Conscious:

Whenever you ask people to do things differently, you disrupt their habitual ways of
doing things. This tends to make people feel awkward or uncomfortable as they struggle
to eliminate the old responses and learn the new. People want to get it right, and fear that
they will appear inadequate.
2. People Initially Focus on What They Have to Give Up:

Even for positive changes such as promotions, or those that result in more autonomy or
authority, people will concentrate on what they will be losing.
3. People Will Feel Alone Even if Everyone Else is Going Through the Same Change:
Everyone feels (or wants to feel) that their situation is unique and special. Unfortunately,
this tends to increase the sense of isolation for people undergoing change. It is important
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for the change leader to be proactive and gentle in showing that the employee's situation
is understood. If employees see you as emotionally and practically supportive during the
tough times your position will be enhanced and the change will be easier.
4. People Can Handle Only So Much Change:

On a personal level, people who undergo too much change within too short a time will
become dysfunctional, and in some cases may become physically sick. While some
changes are beyond our control, it is important not to pile change upon change upon
change. While changes such as downsizing bring opportunity to do other positive things,
the timing of additional changes is important.
5. People Are At Different Levels of Readiness For Change:

Some people thrive and change. It's exciting to them. Others don't. It's threatening to
them. Understand that any change will have supporters and people who have difficulty
adapting. In time many people who resist initially will come onside. Consider that those
people who are more ready for the change can influence others who are less ready. Open
discussion allows this influence process to occur.
6. People Will Be Concerned That They Don't Have Enough Resources:

People perceive that change takes time and effort, even if it has the long term effect of
reducing workload. They are correct that there is a learning time for most change, and
that this may affect their work. It is important for change leaders to acknowledge that
this may occur, and to offer practical support if possible. In the downsizing scenario this
will be even more crucial, since resources themselves are cut.
133
7. If You Take The Pressure Off, People Will Revert To Their Old Behavior:
If people perceive that you are not serious about doing things the new way, they will go
back to the old way. Sometimes this will be in the open, and sometimes this will be
covert.
Conclusion
It is important for leaders to anticipate and respond to employee concerns and feelings, whether
they are expressed in terms of practical issues, or emotional responses. When planning for, and
anticipating change, include a detailed reaction analysis. Try to identify the kinds of reactions
and questions that employees will have, and prepare your responses. Remember that the success
of any change rests with the ability of the leaders to address both the emotional and practical
issues, in that order.
134

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Management Concepts and Evolution

This basic definition needs to be expanded:

Management is defined as a process “consisting of planning, organizing, actuating and

“To manage is to forecast, to plan, to organize, to command, to coordinate and to control.”

Role / Importance of Management

Edwin M. Robinson rightly views,

1. Helps in achieving organizational goals

Human Relation Skill:

a. To recognize the feelings and sentiments of others.

The purpose of an organization structure is to help create an environment for human

Broadly, the scope of management includes the following:

Functional Areas of Management

Finance and Accounting Management

Management and Administration

It is concerned about the determination

It consists of owners who invest capital It is a group of managerial personnel who

It is popular with government, military,

Its decisions are influenced by public

It needs administrative rather than

VARIOUS APPROACHES TO MANAGEMENT

a) The Scientific Management School

2. The Human Relations School

3. The Decision Theory School

4. The Management Science School

5. The Systems Theory School

1. The Classical School

a) The Scientific Management School

Frederick Winslow Taylor

1. A piece-rate system – 1895

Taylor was the first person to introduce scientific approach to management.

Scientific management refers to the application of science to management practices. It involves

Principles of Scientific Management

1. Scientific study and analysis of work

Technique of Scientific Management

Methods study simplifies the operations by:

Motion study includes the following processes:

I. Selection of efficient workers.

Time study includes the following operations:

I. Sub-dividing the work.

3. Administrative Reorganization – Functional Foremanship

F. W. Taylor in his administrative reorganization advocated functional foremanship i.e., the

Specialist Foremen in the Factory and Their Functions

S.No. Name of the Boss Functions

4. Scientific Rate Setting – Differential Piece Rate System

a) Differential piece-rate system has two different rates:

Importance / Advantages of Scientific Management

1. Reducing cost of production

Advantages to the Workers

1. Improved working conditions

Advantages to the Society

Criticism / Disadvantages of Scientific Management

Disadvantages for Employers or Producers

b) The Management Process School

Fayol’s General Principles of Management

Fayol suggested 14 principles:

2. Authority and responsibility:

6. Subordination of individual interest to group interest:

Confinement of authorities is restricted hands is centralization and disintegration of

12. Stability of tenure of employment:

14. Spirit of co-operation:

Points of Difference F.W. Taylor Henry Fayol

Bureaucracy refers to “certain characteristics of organizational design”. Weber viewed

(1) Assignment of activities to individuals as fixed duties