Ugc Net Commerce: Unit Snapshot

UNIT SNAPSHOT
UGC NET COMMERCE

Unit 6
Business Management and

Human Resource Management
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What is Management?
Management is a set of principles relating to the functions of planning, organizing, directing

and controlling, and the application of these principles in harnessing physical, financial,
human and informational resources efficiently and effectively to achieve organizational
goals.
Management is to forecast, to plan, to organize, to command, to co-ordinate and control

activities of others” – HENRY FAYOL
Management as Science - Science may be defined as a body of knowledge systematized
through application of scientific methods. Management also has a theoretical base with a
number of principles relating to coordination, organization, decision-making and so on.
Management is an inexact science because it deals with complex human phenomena about
which knowledge is still limited.
Management as Art - Management is an art because it involves the use of knowhow and
skills and involves creativity on the part of manager for approaching different sets of
problems.
Management as Profession - A field is normally characterized as profession when the

following special features are present in it: (i) Systematic body of knowledge; (ii) Need for
learning and proper organization; (iii) Entry restricted on the basis of examination or
education; and (iv) Dominance of service motive. Except for restricted entry, management
qualifies all other tests of a profession.

Evolution of Management thoughts – In the beginning there were two classical schools of
management thoughts. These were- the scientific management school and the
organizational school. Later on, behavioural school and the quantitative school came into
existence. These four schools merged into integration school which led to the contemporary
school of management thoughts.
Management vs. Administration - Administration is concerned with the determination of

policies and management with the implementation of policies. Thus, administration is a
higher level function. Management is a generic term and includes administration.

Management functions
List of management functions varies from author to author:

Writers Management functions
Henry fayol Planning, Organising, commanding, coordinating and
controlling
Luther gullick POSDCORB- Planning, organising, staffing, directing, co-
ordinating, reporting and budgeting
Ralph davis Planning, organising, controlling

Koontz and O Planning, organising, staffing, leading and controlling
Donnell
Planning - Planning is looking ahead. According to Henry Fayol, drawing up a good plan of action
is the hardest of the five functions of management. This requires an active participation of the
entire organization.
Organizing-An organization can only function well if it is well-organized. This means that there
must be sufficient capital, staff and raw materials so that the organization can run smoothly
and that it can build a good working structure.
Commanding-When given orders and clear working instructions, employees will know exactly
what is required of them. Successful managers are capable of motivating a team and
encouraging employees to take initiative.
Coordinating-When all activities are harmonized, the organization will function better. Positive
influencing of employees behaviour is important in this. Coordination therefore aims at
stimulating motivation and discipline within the group dynamics.
Controlling-By verifying whether everything is going according to plan, the organization knows
exactly whether the activities are carried out in conformity with the plan. Control takes place
in a four-step process:
▪ Establish performance standards based on organizational objectives
▪ Measure and report on actual performance
▪ Compare results with performance and standards
▪ Take corrective or preventive measures as needed
Management process
Management theories/ Thought/ Approaches/ Philosophy
Pre-scientific management theory- These theories are purely based on the evolution of
management thoughts. Main thinkers are, Robert own, Dupin, Charles Babbage
Classical theory/ Traditional theory – Classical organization theories (By Taylor, Weber &
Fayol) deal with the formal organization and concepts to increase management efficiency.
Taylors Scientific management theory:
Frederick W. Taylor (1856-1915) was among the first to study worker productivity and how
best to optimize it. Taylor, who had a background in mechanical engineering, conducted
controlled experiments that led him to develop four principles of scientific management
known as "Taylorism." These principles recommend that the scientific method be used to
determine the most efficient way to perform a task in the workplace instead of simply relying
on the judgment or personal discretion of workers. The fundamental principles that Taylor saw
underlying the scientific approach to management may be summarized as follows:
1. Replace rule-of-thumb work methods with methods based on a scientific study of the tasks.
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2. Scientifically select, train, and develop each worker rather than passively leaving them to
train themselves.
3. Cooperate with the workers to ensure that the scientifically developed methods are being
followed.
4. Divide work nearly equally between managers and workers, so that the managers apply
scientific management principles to planning the work and the workers actually perform the
tasks.
Fayols administrative theory:
Henri Fayol (1841-1925), a mining engineer and senior executive in France, is considered to
be one of the most influential contributors to modern management theory. Unlike Taylor, who
improved productivity by analyzing workers' actions, Fayol took a top-down approach. Fayol
developed 14 principles of administration that outline how managers should organize and
interact with employees.
Webbers bureaucracy theory:

Max Weber (1864-1920) was a German sociologist who developed the bureaucratic
management theory, which focuses on structuring organizations in a hierarchical fashion with
clear rules of governance.
Weber's principles for creating an ideal bureaucratic system include:
• clear division of labour,
• a hierarchical chain of command,
• separation between the personal and organizational assets of the owner,
• meticulous record keeping and documentation,
• strict and consistent regulations and rules, and
• the selection and promotion of employees based on qualifications and not personal
relationships or personalities
Behavioural theory - The behavioral management theory is often called the human relations
movement because it addresses the human dimension of work.
Human relation theory:
Elton Mayo (1880-1949) was an Australian born psychologist and Harvard researcher who
helped laid the foundation for the human relations movement. Mayo conducted experiments
aimed at improving productivity among dissatisfied employees at the Hawthorne plant in
Chicago in the 1920s.
• He changed working conditions, including lighting, temperature, break times, and the length
of the workday but observed that regardless of the change, there was always an increase in
productivity.
• This led Mayo and his team to conclude that increases in workers' performance weren't due
to changes in their environment but a result of the researchers paying attention to them and
of feeling valued as part of a unified group collaborating in the study.
Behavioural science theory:

Behavioural theorist takes a complex view of the work situation. They adopt the concepts
from various disciplines and test them in business organisation.
Modern management theory:
Following can be included in it:

▪ Contingency theory- Also known as situational approach. This theory suggests that the
action must be on the basis of situation than universality
▪ System theory- According to this theory an organisation is a dynamic and interrelated set of
parts. Each part represents a department or sub system
▪ Quantitative theory- It simply means the application of scientific methods to solve the
problems. It's also known as operations research theory
▪ Operational theory- In this the management process is considered as a set of management
functions which distinguishes managers from non-managers
▪ Empirical theory- It is also known as case study and is developed by Earnest dayol, it studies
the experiences of practicing manager and previous managers
Organisational Structure
An organizational structure defines how jobs and tasks are formally divided, grouped and
coordinated. The type of organizational structure would depend upon the type of organization
itself and its philosophy of operations.
Key Elements for Proper Organizational Structure:
• Work Specialization: To what degree are articles subdivided into separate jobs?
• Departmentalization: On what basis jobs will be grouped?
• Chain of Command: To whom will individuals and groups report?
• Span of Control: Up to how many individuals can a manager efficiently direct?
• Centralization Vs Decentralization: Who will be the sole maker of decisions?
• Formalization: To what degree will there be rules and regulations to direct employees and
managers?
Types of Organization Structure

Formal Organization Structure:
By the term formal organisation, we mean a structure that comes into existence when two or
more people come together for a common purpose, and there is a legal & formal relationship
between them.
▪ The formation of such an organisation is deliberate by the top level management.

▪ The organization has its own set of rules, regulations, and policies expressed in writing.
▪ The job of each is fixed, and roles, responsibilities, authority and accountability associated
with the job is clearly defined.
▪ There exists a hierarchical structure, which determines a logical authority relationship and
follows a chain of command.
▪ The communication between two members is only through planned channels.
Types of formal organization structure
• Line Organization
• Line and Staff Organization
• Functional Organization
• Project Management Organization
• Matrix Organization
• Line Organization: Line organization is the simplest form of organization and is most
common among small companies. The authority is embedded in the hierarchical structure and
it flows in a direct line from the top of the managerial hierarchy down to different levels of
managers and subordinates and further down to the operative levels of workers. It clearly
identifies authority, responsibility and accountability at each level.

• Line and Staff Organization: In this type of organization, the functional specialists are added
to the line, thus giving the line the advantages of specialists. This type of organization is most
common in our business economy and especially among large enterprises.
• Functional Organization: The functional organizational concept, originated with Fredrick W.

Taylor and it permits a specialist in a given area to enforce his directive within the clearly
defined scope of his authority.

• Divisional Organization: The divisional or departmental organization involves grouping of
people or activities with similar characteristics into a single department or unit.
• Project Organization: These are temporary organizational structures formed for specific
projects for a specific period of time and once the goal is achieved, these are dismantled.

• Matrix Organization: A matrix structure is, in a sense, a combination and interaction of
project and functional structures and is suggested to overcome the problems associated with
project and functional structures individually. The key features of a matrix structure are that
the functional and project lines of authority are super-imposed with each other and are shared
by both functional and project managers.
Informal Organization
An informal organisation is formed within the formal organisation; that is a system of

interpersonal relationships between individuals working in an enterprise, that forms as a result
of people meet, interact and associate with one another.
▪ The organisation is created by the members spontaneously, i.e. created out of socio-
psychological needs and urge of people to talk.
▪ The organisation is featured by mutual aid, cooperation, and companionship among
members.
▪ In an informal organisation, there are no defined channels of communication, and so
members can interact with other members freely.
▪ They work together in their individual capacities and not professional.
▪ There is no defined set of rules and regulations that govern the relationship between
members.
▪ Instead, it is a set of social norms, connections, and interaction.
▪ The organisation is personal i.e. no rules and regulations are imposed on them, their
opinions, feelings, and views are given respect.

▪ However, it is temporary in nature, and it does not last long.
Centralisation vs decentralisation:
Centralization and Decentralization are the two types of structures that can be found in the
organization, government, management and even in purchasing. Centralization of authority
means the power of planning and decision making are exclusively in the hands of top
management. It alludes to the concentration of all the powers at the apex level. On the other
hand, Decentralization refers to the dissemination of powers by the top management to the
middle or low-level management. It is the delegation of authority, at all the levels of
management.
Authority and Responsibility:
These are two sides of the same coin. The term ‘authority’ stands for power or rights assigned
to an individual to make decisions, whereas ‘responsibility’ is a duty to maintain and manage
the assigned authority.

Span of Control:
The concept of "span of control," also known as management ratio, refers to the number of
subordinates controlled directly by a superior.

The concept of span of control was developed in the United Kingdom in 1922 by Sir Ian
Hamilton. It arose from the assumption that managers have finite amounts of time, energy,
and attention to devote to their jobs. In studies of British military leaders, Hamilton found that
they could not effectively control more than three to six people directly. These figures have
been generally accepted as the "rule of thumb" for span of control ever since. More than a
decade later, A.V. Graicumas illustrated the concept of span of control mathematically.
Motivation
Motivation is defined as “inner burning passion caused by need, wants and desire which
propels an individual to exert his physical and mental energy to achieve desired objectives”.
Characteristics of Motivation
•Motivation is a psychological phenomenon. It is the inner desire of an individual to accomplish

something more. The very deficiency forces him to undertake certain amount of work. More
is the individual motivated better the performance and organization relations.
•Motivation is a continuous process.
•Motivation is caused due to anticipated perceived value from an action.
Perceived value is the probability or the expectancy.

Therefore motivation=valance (value) × expectancy.
•There are unsatisfied needs. A person remains disturbed till they are satisfied. This
disturbance or tension causes disequilibria in human behaviour.
•Individual is motivated by positive motivation. It refers to incentives offered by the
organization to achieve efficiency. Incentive can be monetary like increase in pay, allowances,
and payment of bonus.
MOTIVATION THEORIES
MASLOW’S NEED HIERARCHY THEORY
Abraham Maslow was a clinical psychologist in USA. His motivation theory is widely accepted
and studied.
•Maslow suggested that every individual has complex set of needs at any particular moment
and his behaviour is determined by the existence of strongest need.
•He stated that human beings have five types of needs and physiological need is the strongest
hence the individual behaves in a particular manner to satisfy that need.

•Needs are hierarchal in nature and only one need dominates at any one point of time.
HERZBERG’S MOTIVATION— HYGIENE THEORY (Two factor theory)
 Fredrick Herzberg and his associates developed Motivation Theory based on two main
factors in late 1950’s.
 This theory is also known as Two Factor Theory. Herzberg carried out research in nine
different organizations where 200 respondents comprising accountants and engineers were
subjects. A structured interview was carried out.
 The purpose of the study was to identify various factors for goal achievement and also
the factors that could be included so that motivation levels do not fall.

Herzberg concluded, “ There are two types of needs, independent of each other”.
1.Motivational Factors:
There is a set of job conditions, which operates primarily to build strong motivation and job
satisfaction. These factors are called motivational factors. They are intrinsic in nature and help
increase one’s output. These factors have positive effect on morale, productivity, and job
satisfaction and overall efficiency of the organization.
These factors are as under:
 Achievement
 Advancement
 Possibility of Growth
 Work Itself
 Responsibility
2.Maintenance Factors:
There are some job conditions which operate primarily to dissatisfy employees when these
conditions are absent. These factors are also called hygiene factors. When these factors are

present they do not motivate in a strong way, when absent they dissatisfy, That is why these
factors are called dissatisfiers.
These factors are.
 Company Policy and administration.

 Technical supervision.
 Interpersonal relationship with superiors.
 Interpersonal relationship with peers.
 Interpersonal relationship with subordinates.
 Salary.
 Job security.
 Personal Life.
 Working condition.
 Status.
McGREGOR’S THEORY X AND THEORY Y
Douglas McGregor introduced Theory X and theory Y which are diagonally opposite to each
other.
ERG THEORY OF MOTIVATION

Clayton Alderfer of Yale University carried out further studies on Maslow’s theory of need
hierarchy. He identified three basic needs of human being against five needs of maslow.
These are as under:
•E-Existence need - There are related to provision of basic material requirement of human
being and are related to Maslow’s Physiological and safety needs.
•R-Relatedness - This need is related to desire of an individual to maintain sound interpersonal
relationship. It is related to Maslow’s, Social need and External component of Esteem need
i.e., status, recognition and attention.
•G-Growth - Growth is an intrinsic desire for personal development. It is related to intrinsic
component of Esteem Need like advancement, self respect, autonomy, achievement and self-
actualization need.
EXPECTANCY THEORY-VROOM
Vroom has propagated Expectancy Theory based on employee expectancy. He believes that
employee is motivated to exert high level of efforts when he believes that efforts will lead to
good performance and therefore organizational rewards that will satisfy achievement of
personal goals.
The focus of the theory has three elements.
•Efforts - Performance relationship. It is related to the probability perceived by individual that

exerting a given amount of efforts will lead to performance (Expectancy).

•Performance - Reward Relationship. The degree to which the individual believes that
performing a particular level will lead to attainment of desired outcome (Instrumentality).
•Reward-personal goal relationship. The degree to which an organizational reword will satisfy
individual needs and its attractiveness for the individual (Valence)..
PORTER AND LAWLER MODEL OF MOTIVATION
Lyman Porter and Edward Lawler came up with a comprehensive model of motivation. They
combined adding two more components to Vroom’s theory of motivation. The model is more
comprehensive as it includes various aspects that we have studied so far.

This is a multivariate model which explains the relationship that exists between job attitudes
and job performance.
Leadership
Leadership can be defined as influence, that is, the area or process of influencing people so
that they will strive willingly and enthusiastically towards achievement of group goals.
Every group in the organization has a leader. A successful leader has within him the following
ingredients.
•The ability to use power effectively

•An ability to comprehend
•Ability to inspire
•Leadership style:
Theories of Leadership
Trait Theory of Leadership
•Not all managers are effective leaders and not all leaders are effective managers. It is
therefore difficult to identify effective managers and leaders.
•Early studies of leaders defined them by traits they were supposed to exhibit.

•Sometimes it was also called “attributes” that the leader possesses. The theory therefore was
called “trait theory” or attribute theory of leadership. It is also known as “great man’s” theory.
Davis has identified four characteristics that leader tends to have.
They are more likely to be present in middle and upper-level managers than in those who hold
lower-level supervisory positions. Their characteristics are as under:
1.Intelligence: leaders tend to have higher degree of intelligence than their followers.
2.Social maturity and breadth: leaders have a tendency to be emotionally mature and to have
a broad range of interests. They are members of somewhat exclusive social club.
3.Inner motivation and achievement drives: leaders want to accomplish things, when they
achieve one goal they seek out another. They are inner motivated and do not depend on
outside forces for their motivation.
4.Human relations attitude: Leaders are able to work effectively with other persons. They
understand that to accomplish any task they must be considerate of others.
Many studies of traits have been undertaken. Ralph. M.stogdill found following traits in a
effective leader:
Physical Traits Such as Energy, appearance, height, intelligence, ability and personality traits
such as adaptability, aggressiveness, enthusiasm and self-confidence. They also have task
related characteristics such as achievement drive, persistence and initiative and social drive
like cooperativeness, interpersonal skills and administrative ability.
•Not all leaders possess all the traits.
•Trait theory of leadership gives no guidance as to how much of any trait a leader should have.
The theory is not conclusive.
•Most of the traits identified in successful leaders are actually the pattern of behaviour.
Leadership styles and behaviour
1. Leadership based on authority
Autocratic leadership:
•This type of leadership is practiced by the managers concentrating on power and authority
within themselves.
•Leader expects high degree of compliance by subordinates.
•He is dogmatic and positive in his approach. Manager exhibiting this type of style has the
ability and enforces decision by use of rewards and fear of punishment.

Democratic or Participative Leadership
•In contrast to autocratic leadership, democratic or participative leader consults subordinates,

encourages participation in decision-making.
•In the process of interaction with subordinates, democratic leader suggest actions or
decisions and obtains views of those under him.
•He has respect for subordinate’s views and does not act without their concurrence.
•The leader is supportive.
Laissez-faire Leadership
•A leader who practices laissez-faire leadership is also called “free rein” leader who uses his
power very little giving subordinate’s full freedom of action and independence for setting their
goals and means of achieving them.
•This type of leaders depends heavily on subordinates and sees their role as one of aiding the
operation of followers by furnishing required information when asked for and acts only as
contact between various departments and outside agencies (external environment).
Benevolent Autocracy
1.Most top managers have hard driving, autocratic personalities. Therefore they find
participative management difficult to accept.
2.Significant decisions affecting firm must be made by top management because of the
potential damage that could result from a poor decision.
3.Many members of large bureaucracies are in reality security seekers who do not wish to
share in the decisionmaking process.
4.Participation may be interpreted by employees as their right to veto managerial decisions
and to generally become lax in their work behaviour.
The use of any style will depend on the situation. Managers may be highly autocratic in
emergency or when they are custodian of a particular solution. The same leader may be
participative when he wishes to find alternative solutions to the problem.
2.Likert’s four system of management
•Rensis Likert carried out studies relating to patterns and styles of leadership in the university
of Michigan for almost 30 years.
•He has developed a model called likerts four system relating to leadership styles.
•His ideas and approaches are important for understanding of human behaviour in the
organizations.

Likerts four systems of management are as under System-
1.Exploitive-authoritative Managers practising exploitive–authoritative system of

management are highly autocratic, have no trust in subordinates and put a finger everywhere.
They believe in motivating people through fear and punishment and occasionally reward them.
They engage in down ward communication and limit decision-making at top level of
management only.
2.Benevolent-authoritative Managers practicing benevolent-authoritative type of leadership

displays full trust and confidence in their subordinates. They motivate the employees by giving
occasional rewards but maintain fear amongst subordinates and awards punishments
wherever it is required.
3.Consultative Managers practicing consultative type of management have substantial but not
full confidence and trust in their subordinates. Usually they make use of ideas and opinion of
subordinates. They believe in upward and downward communication when dealing with
subordinates.
4.Participative-group Likert’s fourth management system is called participative-group

leadership. In this system managers have complete confidence and full trust in subordinates
on all matters of organization. They always get ideas from subordinates and use them
constructively.
3.Managerial grid
“Managerial Grid” style of leadership was developed by Robert Blake and Jane mouton (1969).
The managerial grid model explains concern of a manager for production and people. Blake
and mouton’s model helps to measure a manager’s relative concern for people and task and
reflects bi-directional nature of leadership. The managerial grid identifies a range of
management behaviour based on the various ways that the task oriented and employee
oriented styles, which have been explained as a continuum on a scale of 1 to 9

4.Contingency or situational leadership
As studied earlier, Trait Theory is not conclusive and behavioural approach to leadership
depends largely to the nature and content of the work and prevailing organizational culture.
Researchers therefore began trying to identify those factors in each situation that influence
the effectiveness of a particular leadership style. Contingency approach to leadership is
therefore important. The theory focuses on the following factors. a) Task requirements
b) Peer’s expectations and behaviour
c) Employees characteristics, expectations and behaviour
d) Organizational culture and policies
HERSEY AND BLANCHARD’S SITUATIONAL LEADERSHIP MODEL
One of the major contingency approaches to leadership is Paul Hersey and Kenneth H.
Blanchard’s Situational Leadership model. The model emphasis on the following points:
a) The most effective leadership style varies with “readiness” of employees. The readiness is
defined as the desire for achievement, willingness to accept responsibility, and task related
skill, ability and experience. b) Goals and knowledge of followers.
Relationship Behaviour

Relationship behaviour is defined as “the extent to which the leader engages in two way or
multi way communications. The behaviours include listening, facilitating and supportive
behaviour.”
Style-S1 - This relationship style is characterized by above average amounts of task behaviour
and below average amount of relationship behaviour.
Style-S2 - This relationship style is characterized by above average amount of both task and
relationship behaviour.
Style-S3 - This style is characterized by above average amount of relationship behaviour and
below average amount of task behaviour.
Style-S4 - This style is characterized by below average amount of both relationship and task
behaviour.

FIEDLER’S CONTINGENCY APPROACH TO LEADERSHIP
•Fiddler carried out intensive work on leadership.

•He believes that most of the leaders are inflexible and tries to fit in every situation they face.
If they succeed they are considered good leaders.
•Fidler feels that matching the managerial style with the situation or changing the situation to
match the manager’s leadership style can achieve effective group performance.
•The research is based on the leadership styles similar to the employee oriented leader or the
task oriented leader studied earlier.

•What differentiate Fidler’s model is the measuring instrument he used in his research work.
•Fidler measured leadership style on the scale that indicated the degree to which a person
described favourably or unfavourably.
•He coined the concept of least preferred co-worker (LPC) –The employee with whom the
person could work least well.
5. Path-goal theory of leadership

•Path-Goal theory of leadership was proposed by Martin Evans and Robert House in 1970
•The theory is an amalgamation of Contingency approach of leadership and Expectancy theory
of motivation.
•The theory is based on situation factors that includes firstly, subordinate attributes like ability
and the locus (internal and external locus of control). Secondly, the work setting attributes like
task, formal authority system prevailing in the organization, cohesiveness of the work group
and the like.
6. Charismatic Leadership

A new theory of leadership is taking a large dimension in the organization. It has been seen
that charismatic leader aims to get willing followers to attain organizational goals. Charismatic
leader have following characteristics that make them stand out as successful leaders
a) Vision: Charismatic leader has vision. He sees an organization from futuristic point of view
and has a great foresight to pre-empt problems and seek solution and therefore he is ahead
of his competitors and sails in safe waters.
b) Risk takers: Charismatic leaders take great amount of risk to accomplish the vision. Indira
Gandhi the erstwhile prime minister of India took a risk by launching its defense forces into
East Pakistan to liberate it. She also displayed a high degree of risk while nationalizing banks
and taking away Privy Purse privilege from Indian kings.
c) Sensitivity to environment constraints and follower need: Charismatic leaders display a
high degree of knowledge and its applicability to practical problems likely to face, may be
shortage of raw material, competitors strategy, trend in market and likely pattern that may
emerge. They believe the subordinates contribution and hence the importance to their needs.
d) Distinct Behavioral pattern: Charismatic leaders are sympathetic towards subordinates
and hence a soft corner for them. They are supportive and employee oriented. They behave
differently in different situation and do not have a brand.
7. Transformational leadership.
This type of leaders guides their subordinates by establishing goals which can be achieved by
role identity and task requirement.

Transactional leader use reward system very effectively to achieve organizational goals and
set new standards. Transformational leadership follows various leadership models.
Transformational leadership is practiced when leader intellectually stimulates the
subordinates, excites, arouses and inspires them to perform beyond their expectations.
Corporate Governance:
Governance, the root of the word Governance is from ‘gubernate’, which means to steer.
Corporate governance would mean to steer an organization in the desired direction. The
responsibility to steer lies with the board of directors/ governing board.
Corporate or a Corporation is derived from Latin term “corpus” which means a “body”.
Governance means administering the processes and systems placed for satisfying stakeholder
expectation.
When combined, Corporate Governance means a set of systems procedures, policies, and
practices, standards put in place by a corporate to ensure that relationship with various
stakeholders is maintained in transparent and honest manner.
Corporate Governance is concerned with the intrinsic nature, purpose, integrity and identity
of an organization with primary focus on the entity’s relevance, continuity and fiduciary
aspects.

Objectives of Corporate Governance
• To align corporate goals of its stakeholders (society, shareholders, etc.)

• Corporate governance a way of Life rather than a Code
• To strengthen corporate functioning and discourage mismanagement
• To achieve corporate goals by making investment in profitable investment outlets.
• To specify responsibility of the B.O.D and managers in order to ensure good corporate
performance.
• There is a global consensus about the objective of ‘good’ corporate governance: maximising
long-term shareholder value.”
Corporate Governance is a system of structuring, operating and controlling a company with the
following specific aims:—
(i) Fulfilling long-term strategic goals of owners;

(ii) Taking care of the interests of employees;
(iii) A consideration for the environment and local community;

(iv) Maintaining excellent relations with customers and suppliers;
(v) Proper compliance with all the applicable legal and regulatory requirements.
NEED for Corporate Governance:
Corporate Governance is needed to create a corporate culture of Transparency, accountability

and disclosure. It refers to compliance with all the moral & ethical values, legal framework and
voluntary adopted practices. This enhances customer satisfaction, shareholder value and
wealth.
• Corporate Performance: Improved governance structures and processes help ensure quality
decision-making, encourage effective succession planning for senior management and
enhance the long-term prosperity of companies
• Enhanced Investor Trust: Investors consider corporate Governance as important as financial

performance when evaluating companies for investment. Investors who are provided with
high levels of disclosure & transparency are likely to invest openly in those companies.
• Better Access to Global Market: Good corporate governance systems attracts investment
from global investors, which subsequently leads to greater efficiencies in the financial sector.
• Combating Corruption: Corporate Governance enables a corporation to compete more

efficiently and prevent fraud and malpractices within the organization.
• Easy Finance from Institutions: Evidence indicates that well-governed companies receive
higher market valuations. The credit worthiness of a company can be trusted on the basis of
corporate governance practiced in the company.
• Enhancing Enterprise Valuation: Improved management accountability and operational
transparency fulfill investors’ expectations and confidence on management and corporations,
and return, increase the value of corporations.
• Reduced Risk of Corporate Crisis and Scandals: Effective Corporate Governance ensures
efficient risk mitigation system in place. The transparent and accountable system that
Corporate Governance makes the Board of a company aware of all the risks involved in
particular strategy, thereby, placing various control systems to monitor the related issues.
• Accountability: Investor relations’ is essential part of good corporate governance. Investors

have directly/ indirectly entrusted management of the company for the creating enhanced

value for their investment. The company is hence obliged to make timely disclosures on regular
basis to all its shareholders in order to maintain good investor’s relation. Good Corporate
Governance practices create the environment where Boards cannot ignore their accountability
to these stakeholders.
CODE of best Corporate Practices:
The main objective of the Code of Best Corporate Governance Practices is to suggest courses
of action to all types of companies
– Whether listed or privately held corporations, limited liability companies or partnerships
– With a view to: improving their performance facilitating access to capital
The Code is made up of six parts:
Owners – shareholders, stakeholders or partners

Board of Directors – the body representing the owners
Management – the chief executive officer and top managers
Auditing – the independent auditors
Surveillance – the fiscal council
Ethics/Conflicts of interest
The pillars of this Code of Best Practice of Corporate Governance are
▪ Transparency: The Code requires that the CEO and management meet different information
and transparency needs of the owners, the board of directors, the independent auditors, the
supervisory board, the stakeholders, and the public at large.
▪ Accountability: The following agents of corporate governance

✓ Board of directors,
✓ CEO and management,
✓ Independent auditors
✓ Fiscal council should account for their results and activities to those bodies that elected
them.
▪ Fairness: Relations between all agents of corporate governance and the different types of
owners must be based on fair treatment of all the parties involved

▪ Ethics: Good corporate governance is to comply with the law. In addition every company
should have a statement of values and a code of ethics. The key issue of ethics is the avoidance
of conflict of interests.
4Ps of Corporate Governance:
Business Ethics
Business ethics is nothing but the application of ethics in business. Business ethics is the
application of general ethical ideas to business behavior.
According to Wheeler Business Ethics is an art and science for maintaining harmonious
relationship with society, its various groups and institutions as well as reorganizing the
moral responsibility for the rightness and wrongness of business conduct.

CHARACTERISTICS OF BUSINESS ETHICS
The following are the important features of business ethics:-

▪ Business ethics are the principles, which govern and guide business people to perform
business functions and in that sense business ethics is a discipline
▪ It is considered both as a science and an art.
▪ It continuously test the rules and moral standards and is dynamic in nature
▪ It is based on theological principles such as sincerity, human welfare, service, good behaviour
etc.
▪ It is based on reality and social customs prevailing in business environment.
▪ It studies the activities , decisions and behavior which are related to human beings
▪ It has universal application because business exists all over the world
▪ Many of the ethical principles develop the personal dignity
▪ Business ethics keeps harmony between different roles of businessman, with every ci
tizen, customer, owner and investors.
Principles of Business Ethics
The Principles of business ethics developed by well-known authorities like Cantt, J.

S.Mill, Herbert Spencer, Plato, Thomas Garret, Woodard, Wilson etc. are as follows
1. Sacredness of means and ends: The first and most important principles of business ethics
emphasize that the means and techniques adopted to serve the business ends must be sacred
and pure. It means that a good end cannot be attained with wrong means, even if it is
beneficial to the society.
2. Not to do any evil: It is unethical to do a major evil to another or to oneself, whether this
evil is a means or an end.

3. Principle of proportionality: This principle suggests that one should make proper judgment
before doing anything so that others do not suffer from any loss or risk of evils by the conducts
of business.
4. Non co-operation in evils: It clearly points out that a business should with any one for doing
any evil acts.
5. Co-operation with others: This principles states that business should help others only in
that condition when other deserves for help
6.Publicity: According to W. Wilson, anything that is being done or to be done,

brought to the knowledge of everyone. If everyone knows, none gets opportunity to do an
unethical act.
7. Equivalent price: According to W. Wilson, the people are entitled to get goods equivalent
to the value of money that he will pay.
8. Universal value: According to this principle the conduct of business should be done on the
basis of universal values.
9. Human dignity: As per this principle, man should not be treated as a factor of production
and human dignity should be maintained.
10. Nonviolence: If businessman hurts the interests and rights of the society and exploits the
consumer by overlooking their interests this is equivalent to violence and unethical act.

Human Resource Management
It is the process of recruitment, selection of employee, providing proper orientation and

induction, providing proper training and the developing skills, assessment of employee
(performance of appraisal), providing proper compensation and benefits, motivating,
maintaining proper relations with labor and with trade unions, maintaining employee’s safety,
welfare and health by complying with labor laws of concern state or country.
Many great scholars had defined human resource management in different ways and with
different words, but the core meaning of the human resource management deals with how
to manage people or employees in the organization. .

Edwin Filippo defines- HRM as “planning, organizing, directing, controlling of procurement,
development, compensation, integration, maintenance and separation of human resources to
the end that individual, organizational and social objectives are achieved.”
Features of HRM or characteristics or nature
1. HRM involves management functions like planning, organizing, directing and controlling
2. It involves procurement, development, maintenance of human resource
3. It helps to achieve individual, organizational and social objective
4. HRM is a mighty disciplinary subject. It includes the study of management psychology

communication, economics and sociology.
5. It involves team spirit and team work.
Scope of HRM

•Concerned with manpower planning, recruitment, selection, placement, transfer, promotion,
induction, training and development, layoff and retrenchment, incentives, prodfuctivity, termination
Personnel and demotion, etc.
Aspect
•Concerned with working conditions and amenities such as canteens, cretches, rest and lunch rooms,
health and safety, education, medical assistance, housing, transport, recreation and cultural
Welfare Aspect activities, etc.
•Concerned with the company's relations with its employees. It includes Union Management
Relations, Joint consultations, collective bargaining, grievances, handling, settlement of industrial
Industrial disputes, etc.
Relations Aspect
Objectives of HRM
• To help the organization reach its goals.
• To ensure effective utilization and maximum development of human resources.
• To ensure respect for human beings.
• To identify and satisfy the needs of individuals.
• To ensure reconciliation of individual goals with those of the organization.
• To achieve and maintain high morale among employees.
• To provide the organization with well-trained and well-motivated employees.
• To increase to the fullest the employee’s job satisfaction and self-actualization.
• To develop and maintain a quality of work life.
• To be ethically and socially responsive to the needs of society.
• To develop overall personality of each employee in its multidimensional aspect.
• To enhance employee’s capabilities to perform the present job.
• To equip the employees with precision and clarity in transactions of business.
• To inculcate the sense of team spirit, team work and inter-team collaboration.
Human Resource Management- role of HR manager:

Human Resource or Personnel Department is established in most of the organizations, under
the charge of an executive known as Human Resource/Personnel Manager. This department
plays an important role in the efficient management of human resources.
Managerial, Operative and Advisory Function Some of the major functions of human resource
management are as follows:

Managerial Functions
The Human Resource Manager is a part of the organisational management. So he must perform
the basic managerial functions of planning, organising, directing and controlling in relation to
his department.
1. Planning: To get things done through the subordinates, a manager must plan ahead.
Planning is necessary to determine the goals of the organisation and lay down policies
and procedures to reach the goals.
2. Organizing: Once the human resource manager has established objectives and developed
plans and programs to reach them, he must design and develop organisation structure to
carry out the various operations.
The organization structure basically includes the following: (i) Grouping of personnel
activity logically into functions or positions; (ii) Assignment of different functions to
different individuals; (iii) Delegation of authority according to the tasks assigned and
responsibilities involved; (iv) Coordination of activities of different individuals.
3. Directing: The plans are to be pure into effect by people. But how smoothly the plans are
implemented depends on the motivation of people. The direction function of the personnel
manager involves encouraging people to work willingly and effectively for the goals of the
enterprise
4. Controlling: Controlling is concerned with the regulation of activities in accordance with

the plans, which in turn have been formulated on the basis of the objectives of the
organisation. Thus, controlling completes the cycle and leads back to planning.
Operative Functions: The operative functions are those tasks or duties which are specifically
entrusted to the human resource or personnel department. These are concerned with
employment, development, compensation, integration and maintenance of personnel of the
organisation. The operative functions of human resource or personnel department are
discussed below:
1. Employment: The first operative function of the human resource of personnel department
is the employment of proper kind and number of persons necessary to achieve the
objectives of the organisation. This involves recruitment, selection, placement, etc. of the
personnel.
2. Development: Training and development of personnel is a follow up of the employment

function. It is a duty of management to train each employee property to develop technical
skills for the job for which he has been employed and also to develop him for the higher
jobs in the organisation.
3. Compensation: This function is concerned with the determination of adequate and
equitable remuneration of the employees in the organisation of their contribution to the
organisational goals. The personnel can be compensated both in terms of monetary as well
as non-monetary rewards.
4. Maintenance (Working Conditions and Welfare): Merely appointment and training of
people is not sufficient; they must be provided with good working, conditions so that they
may like their work and workplace and maintain their efficiency.
5. Motivation: Employees work in the organisation for the satisfaction of their needs. In many
of the cases, it is found that they do not contribute towards the organisational goals as
much as they can. This happens because employees are not adequately motivated.
6. Personnel Records: The human resource or personnel department maintains the records
of the employees working in the enterprise. It keeps full records of their training,
achievements, transfer, promotion, etc.
7. Industrial Relations: These days, the responsibility of maintaining good industrial relations
is mainly discharged by the human resource manager. The human resource manager can
help in collective bargaining, joint consultation and settlement of disputes, if the need
arises.
8. Separation: Since the first function of human resource management is to procure the
employees, it is logical that the last should be the separation and return of that person to
society. Most people do not die on the job. The organisation is responsible for meeting
certain requirements of due process in separation, as well as assuring that the returned
person is in as good shape as possible.
Advisory Functions:
Human resource manager has specialized education and training in managing human
resources. He is an expert in his area and so can give advice on matters relating to human
resources of the organization. He offers his advice to:
• Advised to Top Management: Personnel manager advises the top management in
formulation and evaluation of personnel programs, policies and procedures. He also gives
advice for achieving and maintaining good human relations and high employee morale.
• Advised to Departmental Heads: Personnel manager offers advice to the heads of various
departments on matters such as manpower planning, job analysis and design, recruitment
and selection, placement, training, performance appraisal, etc.

Human Resource management - Functions
Human Resource Planning
Human Resource Planning (HRP) is the process of forecasting the future human resource
requirements of the organization and determining as to how the existing human resource
capacity of the organization can be utilized to fulfil these requirements. It is the process which
helps the management of the organization in meeting the future demand of human resource
in the organization with the supply of the appropriate people in appropriate numbers at the
appropriate time and place.

According to E.W. Vetter, human resource planning is “the process by which a management
determines how an organization should make from its current manpower position to its
desired manpower position
Steps in Manpower Planning
Manpower Planning is a two-phased process because manpower planning not only analyses
the current human resources but also makes manpower forecasts and thereby draw
employment programmes.
Techniques of Manpower Planning:
The manpower planning process is affected by the organisation’s strategic management

decisions and environmental uncertainties. These two factors, in turn, determine the length of
the planning horizons, the type and quality of information available to manpower planners and
the nature of jobs to be filled. Manpower demand forecasts and assessments of supply must
be continuously monitored so that adjustments can be made in the programmes designed to
reconcile the supply and demand of manpower resources.
1. Forecasting Manpower Needs (Demand): Manpower demand refers the total human resource
needs of an organisation for a given time period. The precise nature of an organisation’s
demand for manpower depends on various factors.
2. Short-term Forecasting: Short-range forecasts usually grow out of normal budgetary

processes. Manpower budgets and projections are generally based on estimates of work-loads
(production schedules, passenger loads, expansions or contractions in operations). Conversion

ratios that translate workload data into manpower demand estimates may be used for a short-
range demand forecast.
3. Long-term Forecasting: This is done with mathematical and statistical models. Unlike
forecasting shortterm needs, which generally involves necessary adjustments, to assure that
specific vacancies are filled, long-term forecasts are more general in nature. Mathematical
models used in manpower forecasting are based on selected key variables that affect the
organisation’s overall manpower needs. Some models contain both internal and external
variables.
4. Linear Regression: Another quantitative approach, viz., linear regression analysis, may also be
used to estimate the manpower necessary at a future point in time, based upon such factors
as sales, output or services rendered.
5. Forecasting Manpower Supply: Manpower planners must consider both the external supply
(employees available for hire in the organisation’s geographic workforce) and the internal
supply (the organisation’s current employees) of human resources.
6. Balancing Manpower Supply and Demand: Once an organisation’s manpower needs (demand)
are determined and the current supply of employees is assessed, then manpower supply and
demand must be balanced in order that vacancies can be filled by the right employee at the
proper time. Balancing supply and demand is largely a matter of planning, timing and use of
various personnel-related programmes to achieve the desired results.
Recruitment

Recruitment is a positive process of searching for prospective employees and stimulating them
to apply for the jobs in the organisation. When more persons apply for jobs then there will be
a scope for recruiting better persons.
According to Edwin B. Flippo, “It is a process of searching for prospective employees and
stimulating and encouraging them to apply for jobs in an organisation.” He further elaborates
it, terming it both negative and positive.
Objectives of Recruitment
The objectives of recruitment are
• To attract people with multi-dimensional skills and experiences that suits the present and
future organizational strategies,
• To induct outsiders with a new perspective to lead the company,
• To infuse fresh blood at all levels of the organization,
• To develop an organizational culture that attracts competent people to the company,
• To search or head hunt/head pouch people whose skills fit the company’s values,
• To devise methodologies for assessing psychological traits,
• To seek out non-conventional development grounds of talent,
• To search for talent globally and not just within the company,
• To design entry pay that competes on quality but not on quantum
• To anticipate and find people for positions that does not exist yet.
Sources of recruitment
Internal Sources:
• Best employees can be found within the organization when a vacancy arises in the organisation,
it may be given to an employee who is already on the pay-roll.
• Internal sources include promotion, transfer and in certain cases demotion. When a higher post
is given to a deserving employee, it motivates all other employees of the organisation to work
hard. The employees can be informed of such a vacancy by internal advertisement.
Methods of Internal Sources: The Internal Sources Are Given Below:
1. Transfers:

Transfer involves shifting of persons from present jobs to other similar jobs. These do not
involve any change in rank, responsibility or prestige. The numbers of persons do not increase
with transfers.
2. Promotions:
Promotions refer to shifting of persons to positions carrying better prestige, higher

responsibilities and more pay. The higher positions falling vacant may be filled up from within
the organisation. A promotion does not increase the number of persons in the organisation.
3. Present Employees:
The present employees of a concern are informed about likely vacant positions. The employees
recommend their relations or persons intimately known to them. Management is relieved of
looking out prospective candidates.
External Sources:
All organisations have to use external sources for recruitment to higher positions when existing
employees are not suitable. More persons are needed when expansions are undertaken. The
external sources are discussed below:
The different methods are:
Advertisement: It is a method of recruitment frequently used for skilled workers, clerical and
higher staff. Advertisement can be given in newspapers and professional journals. These
advertisements attract applicants in large number of highly variable quality.
Employment Exchanges: Employment exchanges in India are run by the Government. For
unskilled, semiskilled, skilled, clerical posts etc., it is often used as a source of recruitment.
Schools, Colleges and Universities: Direct recruitment from educational institutions for certain
jobs (i.e. placement) which require technical or professional qualification has become a
common practice. A close liaison between the company and educational institutions helps in
getting suitable candidates.
Recommendation of Existing Employees: The present employees know both the company and
the candidate being recommended.
Factory Gates: Certain workers present themselves at the factory gate every day for
employment. This method of recruitment is very popular in India for unskilled or semi-skilled
labour. The desirable candidates are selected by the first line supervisors.

Casual Callers: Those personnel who casually come to the company for employment may also
be considered for the vacant post. It is most economical method of recruitment. In the advanced
countries, this method of recruitment is very popular
Central Application File: A file of past applicants who were not selected earlier may be
maintained. In order to keep the file alive, applications in the files must be checked at periodical
intervals.
Labour Unions: In certain occupations like construction, hotels, maritime industry etc., (i.e.,
industries where there is instability of employment) all recruits usually come from unions. It is
advantageous from the management point of view because it saves expenses of recruitment.
Labour Contractors: This method of recruitment is still prevalent in India for hiring unskilled and
semiskilled workers in brick kin industry. The contractors keep themselves in touch with the
labour and bring the workers at the places where they are required.
Former Employees: In case employees have been laid off or have left the factory at their own,
they may be taken back if they are interested in joining the concern (provided their record is
good).
Selection
• Selection is a process of measurement, decision making and evaluation.
• The goal of a selection system is to bring in to the organisation individuals who will perform
well on the job.
• To have an accurate and fair selection system, an organisation must use reliable and valid
measures of job applicant characteristics. In addition, a good selection system must include
a means of combining information about applicant characteristics in a rational way and
producing correct hire and no-hire decisions.
• A good personnel selection system should add to the overall effectiveness of the
organisation.
SELECTION PROCEDURE
Selection procedure employs several methods of collecting information about the candidate’s
qualifications, experience, physical and mental ability, nature and behaviour, knowledge,
aptitude and the like for judging whether a given applicant is suitable or not for the job.

Steps in Scientific Selection Process - (i) Job Analysis, (ii) Recruitment. (iii) Application Form,
(iv) Written Examination, (v) Preliminary Interview (iv) Business Games (vii) Tests. (viii) Final
Interview. (ix) Medical Examination (x) Reference Checks. (xi) Line Manager’s Decision. (xii) Job
offer (xiii) Employment.
Test: Psychological tests play a vital role in employee selection. A psychological test is
essentially an objective and standardized measure of sample of behaviour from which
inferences about future behaviour and performance of the candidate can be drawn.
Types of Test: Tests are classified into six types. They are
1. Aptitude tests: These tests measure whether an individual has the capacity or latent ability to
learn a given job if given adequate training. Aptitudes can be divided into general and mental
ability or intelligence and specific aptitudes such as mechanical, clerical, manipulative capacity
etc.
2. Emotional Quotient (EQ): Most of the organizations realized that emotional involvement and
commitment of the employees determine their contribution to the company rather than their
intelligence quotient.
3. Achievement Tests: These tests are conducted when applicants claim to know something as
these tests are concerned with what one has accomplished. These tests are more useful to
measure the value of a specific achievement when an organization wishes to employ
experienced candidates. These tests are classified into: (a) Job knowledge test: and (b) Work
sample test.

4. Situational test: This test evaluates a candidate in a similar real life situation. In this test, the
candidate is asked either to cope with the situation or solve critical situations of the job.
5. Interest tests: These tests are inventories of the likes and dislikes of candidates in relation to
work, job, occupations, hobbies and recreational activities. The purpose of this test is to find
out whether a candidate is interested or disinterested in the job for which he is a candidate
and to find out in which area of the job range/occupation the candidate is interested.
6. Personality Tests: These tests prove deeply to discover clues to an individual’s value system,
his emotional reactions and maturity and characteristic mood. They are expressed in such
traits like self confidence, tact, emotional control, optimism, decisiveness, sociability,
conformity, objectivity, patience, fear, distrust, and initiative, judgment dominance of
submission, impulsiveness, sympathy, integrity, stability and self-confidence.
7. Other Tests:
• Cognitive Ability Tests: These tests measure mathematical and verbal abilities. Popularly
known tests of this category include Graduate Record Examination (GRE) and Scholastic
Aptitude Test (SAT).
• Polygraph Tests: The polygraph is an instrument that records changes in breathing, blood
pressure, pulse and skin response associated with sweating of palms and plots these
reactions on paper.
• Multi-dimensional Testing: However, the need for multi-skills is being felt by most of the
companies’ consequent upon globalization, competitiveness and the consequent
customer-centred strategies.
Interview
“An interview is an attempt to secure maximum amount of information form the candidate
concerning his suitability for the job under consideration.”
Steps in interview process
An effective interview involves the following sequence of steps:

✓ Preparation for the interview: Advance preparation is essential for a successful interview. The
following arrangements should be made before the interview begins:
▪ Determining the objectives of the interview.
▪ Choosing the appropriate type of interview.
▪ Acquainting oneself about the candidate.
▪ Determining the type of information to be obtained.
▪ Selecting the right interviewers.
▪ Selecting the candidates to be interviewed by checking and comparing their
applications and test scores.
▪ Finalizing the interview assessment forms.
✓ The physical setting: The place of interview should be both private and comfortable. It should
be neat and clean, well lighted. It should be free from noise and interruptions.
✓ Conducting the interview: This step is heart of the interview process. In this activities are
follows. Establishing rapport with the candidate and gaining his confidence exchange of a
smile, offering seat to the candidate, etc.
✓ Closing the interview: The close of the interview is as significant as it beginning. The interview
is a trying situation for the candidate. Therefore, it should end with a happy note without any
awkward situation. before closing the interview the candidate should be asked whether he
wants to make any comments in order to the interviewer may show some sing at an
appropriates time .
✓ Evaluation of results: After an interviewer is over, the interviewer should evaluatie the
candidate’s suitability for the job. It is based on observation impression and information
collected during the interview.
Types of interview
The interviews are classified by the purpose for which the interview is held.
✓ Promotion interview: Persons due for promotion are interviewed even if there is no
competition. The interview is likely to be informal and serves as induction into a new team,
with new responsibilities. Clarification about nature of duties, responsibilities and
expectations are made during a promotion interview.
✓ Informal interview: It is planned and is used when the staffs is required urgently. A friend
or relative of the employer may take a candidate to the house of employer or manager who

ask few questions like name, birth place, educations and experience, etc.
✓ Formal interview: This type of interview is pre planned and is held in a formal atmosphere.
All the formalities and procedure, e.g. the time, the venue and the questions to be asked
are decided in advance.
Stress Interview:
This interview aims at testing the candidate’s job behaviour and level of withstanding during
the period of stress and strain. Interviewer tests the candidate by putting him under stress and
strain by interrupting the applicant from answering, criticizing his opinions, asking questions
pertaining to unrelated areas, keeping silent for unduly long period after he has finished
speaking etc.
Depth Interview:
In this type of Interview, the candidates would be examined extensively in core areas of
knowledge and skills of the job. Experts in that particular field examine the candidates by posing
relevant questions as to extract critical answers from them, initiating discussions regarding
critical areas of the job, and by asking the candidates to explain even minute operations of the
job performance.
Limitations of interview
Interview is a widely used method of employee selection. But it suffers from several pitfalls,
some of which are given below:
• Personal bias: Interview like other people have personal biases. Their likes & dislikes about
hairstyle, dress, fluency of speech, etc. affect their judgment.
• Halo effect: Under this type of error, a single prominent characteristic of the candidate affects
the judgment of interviewer on all other traits. For example, an interviewer may conclude that
a poorly groomed candidate is stupid or alternatively, he may overrate the candidate’s
qualifications just because of his pleasing personality.
• Constant error: Such error arises because the interview of previous candidate unduly
influences the interviewer in favour or against the candidate. For example, a qualified
candidate may be underrated just because the previous candidate was very brilliant.
• Projection: Error of projection arises when an interviewer expects his own knowledge, skills
and values in a candidate. Therefore, he is likely to select candidates who resemble him in terms
of manners, background, voice, etc.
• Leniency: It implies the tendency to assign high scores. It’s normally associated with lack of
confidence and interest in rating. The opposite of leniency is toughness, i.e., the tendency to

constantly give low scores. This may arise due to exaggerated expectation, lack of contact with
people.
Induction
• Induction of Employee is the first step towards gaining an employees' commitment, Induction
is aimed at introducing the job and organization to the recruit and him or her to the
organization.
• Induction involves orientation and training of the employee in the organizational culture, and
showing how he or she is interconnected to (and interdependent on) everyone else in the
organization.
Induction Programme
A good induction programme should cover the following:
1. The company, its history and products, process of production and major operations involved
in his job.
2. The significance of the job with all necessary information about it including job training and
job hazards.
3. Structure of the organization and the functions of various departments.
4. Employee’s own department and job, and how he fits into the organization.
5. Personnel policy and sources of information.
6. Company policies, practices, objectives and regulations.
7. Terms and conditions of service, amenities and welfare facilities.
8. Rules and regulations governing hours of work and over-time, safety and accident
prevention, holidays and vacations, methods of reporting, tardiness and, absenteeism.
9. Grievances procedure and discipline handling.
10. Social benefits and recreation services.
11. Opportunities, promotions, transfer, suggestion schemes and job satisfaction.
JOB CHANGE

Changes in duties and responsibilities of a position may result in a change of classification
and/or grade level.
The change of job can take place in different forms. They are:
Promotion: The employees are given the promotions to higher posts and positions as and when
vacancies are available or when new posts are created at the higher levels. It is quite common
in all types of organizations. It is the product of internal mobility of the employees due to
change in organizational processes, structure etc.
Transfer: One of the internal mobility of the employee is transfer. It is lateral movement of
employee in an organization by the employee. “A transfer involves the shifting of an employee
from one job to another without changing the responsibilities or compensation
Types of Transfers
Most of the transfers generally carried out four types of transfers which are discussed below:
✓ Production Transfer: Such transfers are resorted to when there is a need of manpower in
one department and surplus manpower in other department. Such transfers are made to
meet the company requirements.
✓ Replacement Transfers: This takes place to replace a new employee who has been in the
organization for a long time and thereby giving some relief to an old employee from the
heavy pressure of work.
✓ Remedial Transfers: As the name suggest, these transfers are made to rectify the situation
caused by faulty selection and placement procedures. Such transfers are made to rectify
mistakes in placement and recruitments.
✓ Versatility Transfer: Such transfers are made to increase versatility of the employees from
one job to another and one department to another department. Transfer (Job Rotation) is
the tool to train the employees. Each employee should provide a varied and broader job
experiences by moving from one department to another.
✓ Demotion: Demotion is just the opposite of promotion. It is a downward movement of an
employee in the organizational hierarchy with lower status and lower salary. It is a
downgrading process and is insulting to an employee. Demotion is a punishment for
incompetence or mistakes of serious nature on the part of an employee.
Separation
Separation of an employee exists when the service of an employee comes to an end because
of one reason or other. Separation arises due to resignation; lay off, dismissal and retirement.

Types of separation
1. Resignation: when the employee himself initiates the separation then it is termed as
separation. There are some resignation which are avoidable and others which are
unavoidable.
2. Lay off: lay off is generally done to reduce the financial burden of the organization by
temporary removing the surplus employees. This is done due to inability of the employee
to recruit them due to shortage of sufficient resources.
3. Dismissal: dismissal or discharge means separating the employee from the payroll due to
unsatisfactory performance where the employee fails to perform his duties well and he is
not properly skilled to perform his job or due to violation of organizational rules it means
indiscipline, dishonesty.
4. Retirement: number of separation in the organization happen due to retirement. There

must be clear rules of retirement there may be compulsory retirement where an employee
has to retire after attaining a particular age. Forced retirement means when a person is
found guilty in the court of law or breaks any service agreement then has to retire forcibly
irrespective of his age. Premature retirement means that the employee becomes disable
to perform the job in that case he may be given the option to take retirement before his
retirement age.
Training
Human Resource Management is concerned with the planning, acquisition, training &
developing human beings for getting the desired objectives & goals set by the organization. The
employees have to be transformed according to the organizations' & global needs. This is done
through an organized activity called Training.

Training is a process of learning a sequence of programmed behaviour. It is the application of
knowledge & gives people an awareness of rules & procedures to guide their behaviour. It helps
in bringing about positive change in the knowledge, skills & attitudes of employees.
Training Methods:
A. On-the-job training Methods:
Under these methods new or inexperienced employees learn through observing peers or
managers performing the job and trying to imitate their behaviour. These methods do not cost
much and are less disruptive as employees are always on the job, training is given on the same
machines and experience would be on already approved standards, and above all the trainee
is learning while earning. Some of the commonly used methods are:
1. Coaching: Coaching is a one-to-one training. It helps in quickly identifying the weak areas
and tries to focus on them. It also offers the benefit of transferring theory learning to practice.
The biggest problem is that it perpetrates the existing practices and styles. In India most of the
scooter mechanics are trained only through this method.
2. Mentoring: The focus in this training is on the development of attitude. It is used for
managerial employees. Mentoring is always done by a senior inside person. It is also one-to-
one interaction, like coaching.
3. Job Rotation: It is the process of training employees by rotating them through a series of
related jobs. Rotation not only makes a person well acquainted with different jobs, but it also
alleviates boredom and allows to develop rapport with a number of people. Rotation must be
logical.
4. Job Instructional Technique (JIT): It is a Step by step (structured) on the job training
method in which a suitable trainer (a) prepares a trainee with an overview of the job, its
purpose, and the results desired, (b) demonstrates the task or the skill to the trainee, (c) allows
the trainee to show the demonstration on his or her own, and (d) follows up to provide
feedback and help.
5. Apprenticeship: Apprenticeship is a system of training a new generation of practitioners
of a skill. This method of training is in vogue in those trades, crafts and technical fields in which
a long period is required for gaining proficiency.
6. Understudy: In this method, a superior gives training to a subordinate as his understudy
like an assistant to a manager or director (in a film). The subordinate learns through experience
and observation by participating in handling day to day problems. Basic purpose is to prepare
subordinate for assuming the full responsibilities and duties.
B. Off-the-job Training Methods:

Off-the-job training methods are conducted in separate from the job environment, study
material is supplied, there is full concentration on learning rather than performing, and there
is freedom of expression. Important methods include:
1. Lectures and Conferences: Lectures and conferences are the traditional and direct method
of instruction. Every training programme starts with lecture and conference.
2. Vestibule Training: Vestibule Training is a term for near-the-job training, as it offers access
to something new (learning). In vestibule training, the workers are trained in a prototype
environment on specific jobs in a special part of the plant. An attempt is made to create working
condition similar to the actual workshop conditions.
3. Simulation Exercises: Simulation is any artificial environment exactly similar to the actual
situation. There are four basic simulation techniques used for imparting training: management
games, case study, role playing, and in-basket training.
(a) Management Games: Properly designed games help to ingrain thinking habits, analytical,
logical and reasoning capabilities, importance of team work, time management, to make
decisions lacking complete information, communication and leadership capabilities.
(b) Case Study: Case studies are complex examples which give an insight into the context of a
problem as well as illustrating the main point. Case Studies are trainee cantered activities based
on topics that demonstrate theoretical concepts in an applied setting.
(c) Role Playing: Each trainee takes the role of a person affected by an issue and studies the
impacts of the issues on human life and/or the effects of human activities on the world around
us from the perspective of that person. It emphasizes the “real- world” side of science and
challenges students to deal with complex problems with no single “right” answer and to use a
variety of skills beyond those employed in a typical research project.
(d) In-basket training: In-basket exercise, also known as in-tray training, consists of a set of
business papers which may include e-mail SMSs, reports, memos, and other items. Now the
trainer is asked to priorities the decisions to be made immediately and the ones that can be
delayed.
4. Sensitivity Training: Sensitivity training is also known as laboratory or T-group training. This
training is about making people understand about themselves and others reasonably, which is
done by developing in them social sensitivity and behavioural flexibility.
Succession Planning
Succession Planning is defined as the systematic process of recognizing and creating
future leaders who are able to take the position of the old ones or replace old leaders

when they leave the organization due to retirement, resignation, termination, transfer,
promotion or death. Succession planning, also known as "replacement planning. “It
increases the availability of experienced and capable employees that are prepared to
assume these roles as they become available.
Succession Planning is all about developing a leadership substitute, for a perpetual

succession of the organization without any kind of disturbance, when there are changes
in the top management.
Process of Succession Planning

Human Resource Development
• Human Resource Development (HRD) is a process of developing skills, competencies,
knowledge and attitudes of people in an organization.
• The people become human resource only when they are competent to perform
organizational activities. Therefore, HRD ensures that the organization has such competent
human resource to achieve its desired goals and objectives.
• HRD imparts the required knowledge and skill in them through effective arrangement of
training and development programs.
• HRD is an integral part of Human Resource Management (HRM) which is more concerned
with training and development, career planning and development and the organization
development.
Nature of HRD
1. HRD is a continuous process
2. HRD concerned with behavioural knowledge.
3. HRD is a well integrated system
4. HRD provides better quality of life.
5. HRD focuses on all round development of human resources.
Executive Development Programme:
• The term ‘development’ implies overall development in a person. Accordingly, executive

development means not only improvement in job performance, but also improvement in
knowledge, personality, attitude, behaviourism of an executive, etc.
• It means that executive development focuses more on the executive’s personal growth.
Thus, executive development consists of all the means that improve his/her performance
and behaviour.
• Executive development helps understand cause and effect relationship, synthesizes from
experience, visualizes relationships or thinks logically. That is why some behavioural
scientists suggest that the executive development is predominantly an educational process
rather than a training process.

• Flippo has viewed that “executive/management development includes the process by
which managers and executives acquire not only skills and competency in their present
jobs but also capabilities for future managerial tasks of increasing difficulty and scope”.
Methods of executive development
Methods of development or executive development can be broadly divided into two

categories.
1) On the job development or executive development: it means increasing the ability of the
executives while performing their duties, to develop them in real work situation. It includes the
following methods:
a) On the job coaching: under this method superior only guides his subordinate about
various methods and skill required to do the job. Here the superior only guides his subordinate
he gives his assistance whenever required.
b) Understudy: under this method of development the trainee is prepared to fill the position
of his superior. He in the near future will assume to do the duties of his superior when he leaves
the job due to retirement, transfer or promotion.
c) Job rotation: here the executive is transferred from one job to another or from one plant
to other. The trainee learns the significance of the management principles by transferring
learning from one job to another. This method helps in injecting new ideas into different
departments of the organization.
d) Committee assignment: under this method committee is constituted and assigned a
subject to give recommendations. The committee makes a study of the problem and gives
suggestions to the departmental head. It helps the trainees because every member of the
committee gets a chance to learn from others.
2) Off the job development or executive development: here the executives gets the training
off the job means not when they are doing the job. It involves following methods:
a) Special courses: here the executives attend the special courses which are organized by the
organization. Under this experts from professional institutions provide them the training. Now
days it is becoming popular but it is difficult to say whether these courses improve the
performance of the employees or not.
b) Specific readings: here the human resource development manager provides copies of specific
articles published in the journals to the executives to improve their knowledge. The executives
study such books or articles to enhance their knowledge.

c) Special projects: under this method the trainee is given a project related to the objective of the
department. The project helps the trainee in acquiring the knowledge of the particular topic.
d) Conference training: here the organization conducts a group meeting. In which the executive
learn from the others by comparing his opinion with others.
e) Sensitivity training:
• it is also known as T group training or laboratory training.

• It is conducted under controlled conditions.
• T group help in learning certain things, they help the participants to understand how group
actually work.
• It helps in increasing the tolerance power of the individual and ability to understand others.
• T group generally sits together and discuss for hours where the members learn about their
own behaviour and behaviour of others.
Job Analysis
• Job analysis refers to the process of collecting information about a job.
• In other words, it refers to the anatomy of the job. Job analysis is performed upon ongoing
jobs only.
• It contains job contents.
• For example, what are the duties of a supervisor, grade II, what minimal knowledge, skills
and abilities are necessary to be able to adequately perform this job? How do the
requirements for a supervisor, grade II, compare with those for a supervisor, grade I? These
are the questions that job analysis answers.
Edwin B. Flippo has defined job analysis as the process of studying and collecting information
relating to the operations and responsibilities of a specific job. The immediate products of
this analysis are job descriptions and job specifications”.
There are two major aspects of job analysis:
These are:
1. Job Description
2. Job Specification

Job Description:
• Job description is prepared on the basis of data collected through job analysis.
• Job description is a functional description of the contents what the job entails.
• It is a narration of the contents of a job.
• It is a description of the activities and duties to be performed in a job, the relationship of
the job with other jobs, the equipment and tools involved, the nature of supervision,
working conditions and hazards of the job and so on.
Job description is done for fulfilling the following purposes:
1. Grading and classification of jobs
2. Placement and Orientation of new employees
3. Promotions and transfers
4. Outlining for career path
5. Developing work standards
6. Counselling of employees
7. Delimitation of authority
Job Specification:
• While job description focuses on the job, job specification focuses on the person i.e, the job
holder. Job specification is a statement of the minimum levels of qualifications, skills,
physical and other abilities, experience, judgment and attributes required for performing
job effectively.
• In other words, it is a statement of the minimum acceptable qualifications that an
incumbent must possess to perform a given job.
• It sets forth the knowledge, skills and abilities required to do the job effectively.
• Job specification specifies the physical, psychological, personal, social and behavioural
characteristics of the job holders.
Usages of Job Specification: The usages of job specification include:

1. Personnel planning
2. Performance appraisal
3. Hiring
4. Training and development
5. Job evaluation and compensation
6. Health and safety
7. Employee discipline
8. Work scheduling
9. Career planning
Contents of Job Description and Job Specification:
❖ Concept of job evaluation
In simple words, job evaluation is the rating of jobs in an organisation. This is the process of
establishing the value or worth of jobs in a job hierarchy. It attempts to compare the relative
intrinsic value or worth of jobs within an organisation. Thus, job evaluation is a comparative
process.

Below are given some important definitions of job evaluation:
According to the International Labour Office (ILO) “Job evaluation is an attempt to determine
and compare the demands which the normal performance of a particular job makes on
normal workers, without taking into account the individual abilities or performance of the
workers concerned”.
The British Institute of Management defines job evaluation as “the process of analysis and
assessment of jobs to ascertain reliably their negative worth using the assessment as the
basis for a balanced wage structure”.
In the words of Kimball and Kimball “Job evaluation is an effort to determine the relative value
of every job in a plant to determine what the fair basic wage for such a job should be”.
Wendell French defines job evaluation as “a process of determining the relative worth of the
various jobs within the organisation, so that differential wages may be paid to jobs of
different worth. The relative worth of a job means relative value produced. The variables
which are assumed to be related to value produced are such factors as responsibility, skill,
effort and working conditions”
The objectives of job evaluation, to put in a more orderly manner are to:
1. Provide a standard procedure for determining the relative worth of each job in a plant.
2. Determine equitable wage differentials between different jobs in the organisation.
3. Eliminate wage inequalities.
4. Ensure that like wages are paid to all qualified employees for like work.
5. Form a basis for fixing incentives and different bonus plans.
6. Serve as a useful reference for setting individual grievances regarding wage rates.
7. Provide information for work organisation, employees’ selection, placement, training and
numerous other similar problems.
8. Provide a benchmark for making career planning for the employees in the organisation.
Procedure of job evaluation:
Though the common objective of job evaluation is to establish the relative worth of jobs in a
job hierarchy, there is no common procedure of job evaluation followed by all organisations.
As such, the procedure of job evaluation varies from organisation to organisation.

1. Preliminary Stage:
• This is the stage setting for job evaluation programme.

• In this stage, the required information’s obtained about present arrangements, decisions are
made on the need for a new programme or revision of an existing one and a clear cut choice is
made of the type of programme is to be used by the organisation.
2. Planning Stage:
• In this stage, the evaluation programme is drawn up and the job holders to be affected are
informed.
• Due arrangements are made for setting up joint working parties and the sample of jobs to
be evaluated is selected.
3. Analysis Stage:
This is the stage when required information about the sample of jobs is collected. This
information serves as a basis for the internal and external evaluation of jobs.
4. Internal Evaluation Stage:
Next to analysis stage is internal evaluation stage. In the internal evaluation stage, the sample
of bench-mark jobs are ranked by means of the chosen evaluation scheme as drawn up at the
planning stage. Jobs are then graded on the basis of data pending the collection of market rate
data. Relative worth of jobs is ascertained by comparing grades between the jobs.

5. External Evaluation Stage:
In this stage, information is collected on market rates at that time.
6. Design Stage:
Having ascertained grades for jobs, salary structure is designed in this stage.
7. Grading Stage:
This is the stage in which different jobs are slotted into the salary structure as designed in the
preceding stage 6.
8. Developing and Maintaining Stage:
• This is the final stage in a job evaluation programme.

• In this stage, procedures for maintaining the salary structure are developed with a view to
accommodate inflationary pressures in the salary levels, grading new jobs into the structure
and regarding the existing jobs in the light of changes in their responsibilities and market
rates.
Compensation Management
Meaning:
• Compensation of employees for their services is an important responsibility of Human

resource management. Every organization must offer good wages and fringe benefits to
attract and retain talented employees with the organization.
• If at any time, the wages offered by the firm are not competitive as compared to other firms,
the efficient workers may leave the firm. Therefore, the workers must be remunerated
adequately for their services.
• Compensation to workers will vary depending upon the nature of job, skills required, risk
involved nature of working conditioning ,paying capacity of the employer, bargaining power
of the trade union, wages and benefits offered by the other units in the region or industry,
etc.
Concept:
Compensation refers to a wide range of financial and non-financial rewards to employees for
their services rendered to the organization. It is paid in the form of wages,salaries and

employee benefits such as paid vacations, insurance,maternity leave,free travel facility,
retirement benefits, etc.
Types of compensation:
1. Base compensation: Base compensation involves monetary benefits in the form of wages and
salaries. The term ‘wage’ is used to denote remuneration to workers and the term ‘salary’ is
usually defined to mean compensation to office employees, foremen, managers and
professional and technical staff.
2. Supplementary compensation: Supplementary compensation involves ‘fringe benefits’ offered
through several employee services and benefits such as housing, subsidized food, medical aid,
crèche, etc. it is also known as non-wage payments/service programmes/employee benefits. It
helps to retain the employees on a long term basis.
Wage and salary administration:
Wages and salaries represent a substantial part of total costs in most of the organization. Wage
and salary administration is essentially the systematic approach to the problem of ensuring that
employees are paid in a logical, equitable and fair manner. The most important objective of any
pay system is fairness and equity.
The term equity has three dimensions:
1. Internal equity: This refers to the pay corresponding to difficulty level of the job assigned
to an employee. More difficult jobs should be paid more.
2. External equity: External equity ensures that an employee is compensated equally in
comparison to similar jobs in the labour market.
3. Individual equity: Individual equity highlights equal pay for equal jobs, i.e. each individual
pay is fair in comparison to others doing the same/similar job.
Elements of compensation:
Workers are compensated in the form of following benefits:
• Monthly wage and salary or total pay including wage, house rent allowance, dearness
allowance and city compensatory allowance.
• Bonus at the end of the year
• Economic benefits such as paid holidays leave travel concessions.
• Contribution towards insurance premium

• Contribution towards retirement benefits such as employee provident fund
• Transport and medical facilities
Dearness Allowance
• The Dearness Allowance (DA) is a cost of living adjustment allowance paid to Government
employees, Public sector employees (PSU) and pensioners in Pakistan, Bangladesh and
India.
• Dearness Allowance is calculated as a percentage of an Indian citizen's basic salary to
mitigate the impact of inflation on people.
• Indian citizens may receive a basic salary or pension that is then supplemented by a housing
or a dearness allowance, or both.
• The guidelines that govern the DA vary according to where one lives (for example, whether
rural or urban).
Bonus:
• A bonus is an additional compensation given to an employee above his/her normal wage.

• A bonus can be used as a reward for achieving specific goals set by the company, or for
dedication to the company.
Fringe benefits
• Supplementary compensation involves ‘fringe benefits’ offered through several employee

services and benefits such as housing, subsidized food, medical aid, crèche, etc.
• It is also known as non-wage payments/service programmes/employee benefits.
• It helps to retain the employees on a long term basis.
Performance Appraisal
Performance Appraisal is defined as a systematic process, in which the personality and

performance of an employee is assessed by the supervisor or manager, against
predefined standards, such as knowledge of the job, quality and quantity of output,
leadership abilities, attitude towards work, attendance, cooperation, judgment,
versatility, health, initiative and so forth.
It is also known as performance rating, performance evaluation, employee assessment,
performance review, merit rating, etc.

Performance appraisal process
Methods of performance appraisal

In the process of designing performance appraisal process, it is important to identify the
best method for assessment. There are a number of methods introduced to gauge the
quantity and quality of work performed by an individual. These methods are broadly
classified into two categories:
Past-oriented Methods (Also known as Traditional Methods of Performance Appraisal)

▪ Rating Scales
▪ Checklists
▪ Forced Choice
▪ Forced Distribution
▪ Critical Incident
▪ Performance test and observation
▪ Field review

▪ Confidential Record
▪ Essay method
▪ Comparative Evaluation Approaches
▪ Cost Accounting Method
▪ Behaviorally Anchored Rating Scales
Future Oriented Methods (Also known as Modern Methods of Performance Appraisal)
▪ Management by objectives
▪ Psychological Appraisal
▪ Assessment Centres
▪ 360-Degree Feedback
▪ 720-Degree Feedback
Performance Appraisal is a part of performance management. It helps in gaining the
competitive edge, by improving the performance level of the employees working in the
organization, making rational decisions regarding hike in salaries, promotions, transfers,
discharge of the employees, reducing job dissatisfaction and employee turnover.
Collective Bargaining
The Collective Bargaining is the process wherein the unions (representatives of

employees or workers), and the employer (or their representative) meet to discuss the
issues related to wage, the number of working hours, work environment and the other
terms of the employment.
There are four types of Collective Bargaining classified on the basis of their nature and
the objectives, and can be practiced depending on the different situation requirements.
Types of Collective Bargaining

1. Conjunctive or Distributive Bargaining: In this form of collective bargaining, both
the parties viz. The employee and the employer try to maximize their respective gains. It
is based on the principle, “my gain is your loss, and your gain is my loss” i.e. one party
wins over the other.
The economic issues such as wages, bonus, other benefits are discussed, where the
employee wishes to have an increased wage or bonus for his work done, whereas the
employer wishes to increase the workload and reduce the wages.
2. Co-operative or Integrative Bargaining: Both the employee and the employer sit
together and try to resolve the problems of their common interest and reach to an
amicable solution. In the case of economic crisis, such as recession, which is beyond the
control of either party, may enter into a mutual agreement with respect to the working
terms.
For example, the workers may agree for the low wages or the management may agree
to adopt the modernized methods, so as to have an increased production.
3. Productivity Bargaining: This type of bargaining is done by the management, where

the workers are given the incentives or the bonus for the increased productivity. The
workers get encouraged and work very hard to reach beyond the standard level of
productivity to gain the additional benefits.
Through this form of collective bargaining, both the employer and the employee enjoy
the benefits in the form of increased production and the increased pay respectively.

4. Composite Bargaining: In this type of collective bargaining, along with the demand
for increased wages the workers also express their concern over the working conditions,
recruitment and training policies, environmental issues, mergers and amalgamations
with other firms, pricing policies, etc. with the intention to safeguard their interest and
protect the dilution of their powers.
Workers Participation in Management

Workers participation in management is an essential ingredient of Industrial democracy.
The concept of workers participation in management is based on Human Relations
approach to Management which brought about a new set of values to labor and
management. Traditionally the concept of Workers Participation in Management refers
to participation of non-managerial employees in the decision-making process of the
organization. Workers’ participation is also known as ‘labour participation’ or ‘employee
participation’ in management. In Germany it is known as co-determination while in
Yugoslavia it is known as self-management.
Workers’ participation in management implies mental and emotional involvement of
workers in the management of Enterprise. It is considered as a mechanism where
workers have a say in the decision-making.
Levels of Workers Participation in Management
1. Information participation: It ensures that employees are able to receive

information and express their views pertaining to the matter of general economic
importance.
2. Consultative importance: Here workers are consulted on the matters of employee
welfare such as work, safety and health. However, final decision always rests with the
top-level management, as employees’ views are only advisory in nature.
3. Associative participation: It is an extension of consultative participation as
management here is under the moral obligation to accept and implement the unanimous
decisions of the employees. Under this method the managers and workers jointly take
decisions.
4. Administrative participation: It ensures greater share of workers’ participation in
discharge of managerial functions. Here, decisions already taken by the management
come to employees, preferably with alternatives for administration and employees have
to select the best from those for implementation.
5. Decisive participation: Highest level of participation where decisions are jointly
taken on the matters relating to production, welfare etc.

Personality
Personality is sum total of ways in which an individual reacts and interacts with others. It is the
charm, positive attitude, smiling face, growth and the development of a person that adds to
personality.
Personality Traits
• Personality traits are the characteristics of an individual when exhibited in large number of
situations.
• More predominant the traits in an individual are more consistence the individual is and more
frequent occurrences in diverse situations.
• There are thousands of traits that have been identified.
❖ PERSONALITY ORIENTATION
1. Achievement Orientation –
• Achievement orientation of an individual also indicates the personality of an individual.

• Every person possesses need to achieve (nAch) phenomenon in his personality.
• It could be high degree nAch or low degree.
• A person who possesses high nAch displays very dominant personality. He is generally very
ambitious, hard working and fixes his goal at a very high level and strives to achieve the
same.
2. Authoritarianism: Close to the personality trait that a person possesses who is achievement
oriented is a person who believes in having a reasonably high authority in the organization.
Theory is related with status and power. The theory states that there should be status and
power difference between various people in the organization.

3. Theory of Machiavellianism –
• Niccolo Machivelli introduced theory of Machivellianism. The theory refers to degree to

which an individual is pragmatic and maintains emotional distance with co-workers while
accomplishing any task.
• A person who practices this theory believes in “end justifies means.” In any organization
people can be classified as having high Machiavellianism or low Machiavellianism
tendencies.
4. Self-Esteem –
• Self-esteem refers to individuals’ degree of liking or disliking himself.

• People’s self-esteem has to do with their self-perceived competence and self-image.
• Most recent studies indicate that self-esteem plays an important moderating role in areas
such as emotional and behavioural responses and stress of organizational members.
5. Self-Monitoring -
• Self-monitoring is related to self-efficacy. It is situation specific.
• A person must always examine efficiency and attribute it to his behaviour with subordinates
and improve upon it.
• This quality displays high degree of adaptability and high sensitivity of an individual.
• A person possessing self monitoring trait is likely to behave differently in different situation.
6. Risk Taking -
Risk taking trait is commonly seen in various entrepreneurs. They display rapid decision making
ability.
❖ Types of Personality
Type A:
• People having Type A personality are always moving, walking and eating rapidly.
• They feel impatient with the speed the events take place.

• They always strive to do two or three thing at any one time and cannot cope with leisure.
• They are generally obsessed with work involved with numbers.
Type B
• Personality never suffers from sense of urgency and takes thing as it comes coolly.
• They do not discuss achievement and leave it to the superiors to identify it.
• People having B type of personality play for fun and relaxation rather than to show off.
• These people have the tendency to relax without guilt.
Big 5 Personality Traits:
Lewis Goldberg may be the most prominent researcher in the field of personality psychology.
The five factors Goldberg identified as primary factors of personality are:
1. Openness - People who like to learn new things and enjoy new experiences usually score
high in openness. Openness includes traits like being insightful and imaginative and having
a wide variety of interests.
2. Conscientiousness - People that have a high degree of conscientiousness are reliable and
prompt. Traits include being organized, methodic, and thorough.
3. Extroversion - Extraverts get their energy from interacting with others, while introverts get
their energy from within themselves. Extraversion includes the traits of energetic, talkative,
and assertive.
4. Agreeableness - These individuals are friendly, cooperative, and compassionate. People
with low agreeableness may be more distant. Traits include being kind, affectionate, and
sympathetic.
5. Neuroticism - Neuroticism is also sometimes called Emotional Stability. This dimension
relates to one’s emotional stability and degree of negative emotions. People that score high
on neuroticism often experience emotional instability and negative emotions. Traits
include being moody and tense.

PERCEPTION
Perception is defined as “a process by which individuals organise and interpret their sensory
impressions in order to give meaning to their environment (Robbins)”.
Following three factors influence the perception:
1. Perceiver:
2. Situation
3. Target
Perceiver
When an individual looks at the object and attempts to interpret the same, what he or she
sees it is largely influenced by the personal characteristics.
• Perception is a matter of attitude that can be positive or negative.
• Motive is another factor that plays an important role in perception. Motive is nothing but
unsatisfied needs.
• Interest is persons liking for a particular thing in an individual. May be some people get
attracted to eyes of a girl because he has interest in the eyes while other person may be
interested in hair style, therefore different person (perceiver) will perceive a girl based on
perceivers’ interest.
• Past experience also plays an important role in perception. Just as interest narrows down
one’s perception so does past experience.
• Expectations can distort one’s perception in what one sees and what one expects to see.

For example power hungry police officer to be strict regardless of his actual traits.
The Target:
Objects, events that are similar to each other tend to group together and have a tendency
of perceiving them as common group for example. Blacks, Whites or Indians etc
irrespective of their different characteristics. Physical and time proximity also leads us to
perceiving a situation in a different form than actual reality.
The Situation:
Change in situation leads to incorrect perception about a person. Time is one factor, which
influences the perception. Time is related to work setting and social setting. A person
decked up for party may not be noticeable but the same dress in office would be noticed
distinctly, though the person has not changed.
Attribution Theory of Perception:
In day-to-day life, we come across people with whom we interact. Motives, intentions,
belief and attitude of people have an impact as to how they behave. It has been seen that
our perception about the people is greatly influenced by the assumption we make about a
person and not by reality. There are two factors, which has an impact on human behaviour.
First is internally caused behaviour – refers to internal factors on which individual has a full
control, secondly the externally caused behaviour refers to the behaviour which has been
caused due to external factors and that the individual has no control over it. Attribution
theory suggest that when we evaluate human behaviour, it is either internally caused or it
is caused due to external factors.

Attitude
According to G.W. Allport, “Attitude is a mental and neutral state of readiness organized
through experience, exerting a directive or dynamic influence upon individual’s response
to all objects and situations with which it is related.”
Krech and Crutchfield defined “attitude as an enduring organization of motivational,
emotional, perceptual and cognitive processes with respect to some aspect of the
individual’s world” According to Katz and Scotland, “Attitude is a tendency or
predisposition to evaluate an object or symbol of that object in a certain way”.
In effect attitude is used in a generic sense, as to what people perceive, feel and express their
views about a situation, object or other people.
Attitude cannot be seen, but the behaviour can be seen as an expression of attitude.
Components of Attitude
1. Cognitive component: Cognitive component of attitude is related to value statement. It

consists of belief, ideas, values and other information that an individual may possess or has
faith in.
2. Affective component: Affective component of attitude is related to person’s feelings about
another person, which may be positive, negative or neutral.
3. Behavioural component: Behavioural component of attitude is related to impact of various
situations or objects that lead to individual’s behaviour based on cognitive and affective

components.
Attitude and Consistency
• As stated earlier that the attitude of an individual is not visible but is reflected through his
behaviour as a mirror of his attitude.
• It is seen that people seek consistency among their attitudes or between attitude and
behaviour. They seek to reconcile their attitudes and align their attitudes with behaviour
so that it is rational and consistent.
COGNITIVE DISSONACE THEORY
• Leon Festinger proposed cognitive dissonance theory in 1950s.

• The theory seeks to explain linkage between attitudes and behaviour.
• We have often observed workers saying that working conditions in an organization are
poor. Does it mean that if the working conditions were improved the workers will achieve
higher productivity? It is a difficult question to answer, because there is in-consistency
between working conditions and its impact on changing of attitude of workers in relation
to productivity.
• Festinger explains that dissonance is inconsistency, and cognitive dissonance refers to any
inconsistency or incompatibility that an individual might perceive between two or more
attitudes, and attitude and behaviour.
He further argues that
• Any form of inconsistency is uncomfortable and individual attempts to reduce dissonance

or discomfort.
• Individual tries to reduce dissonance to achieve stable state of behaviour. For example Non-
payment of tax (behaviour) while recommending payment and displaying honesty towards
social obligation (attitude)
Emotion
Emotions are intense feelings that are directed at someone or something. Emotion is a complex
psycho physiological experience of an individuals state of mind as interacting with
biochemical(internal) and environmental(external)influences.
Emotional Intelligence is the ability to deal with other people successfully. By understanding
one's own feelings they can understand and evaluate others.
According to Daniel Goleman, there are five main elements of emotional intelligence.

1. Self-awareness: The ability to be aware of what you are feeling
2. Self-management: The ability to manage one’s own emotions and impulses
3. Self-motivation: The ability to persist in the face of setbacks and failures
4. Empathy : The ability to sense how others are feeling
5. Social skills: The ability to handle the emotions of others
APPLICATION OF EMOTION
1. Selection: EI should be a hiring factor, especially for social jobs
2. Decision Making: Positive emotions can lead to better decisions.
3. Creativity: Positive mood increases flexibility, openness, and creativity.
4. Motivation: Positive mood affects expectations of success; feedback amplifies this effect.
5. Leadership: Emotions are important to acceptance of messages from organizational

leaders.
Group Dynamics
Group dynamics is concerned with interaction and forces between group members in a
social situation. Concept of group dynamics was first evolved by Kurt Lewin in 1930s who
viewed the concept from the perspective of internal nature of group, why they form, how
they form, the structure of group, how they function and its effect on other group

members, other groups and the organization. Following concepts are relevant for the study
of group dynamic.
Members in the organization want to belong to a group for various reasons. First they want
to belong to a group to fulfil the need of social security. The second reason is the
conformity to group decisions in conflicting and confusing situation as a best bet.
Norms
“Group Norms are set of beliefs, feelings, and attitude commonly shared by group
members. These are also referred to as rules of standards of behaviour that apply to
group members”. These are prescriptions of behaviour accepted and determined by the
group.
Types of Norms
Norms may differ from organization to organization, nature of work and the location. Following
norms are generally found and practiced by all the organizations.
1. Performance Norms: Performance standard is set by the individual worker and
approved by the superiors. These are general norms, industry standards prevailing in a
particular type of industry and restricted to geographical limits.
2. Appearance Norms: Appearance norms are related to dress code and code of conduct
in the organization.
3. Behaviour Norms: Guidelines for general behaviour are issued by the management so
that all the employees display behaviour in an identical manner. These guidelines may
cover various aspects relating to the work. This may include time management,
punctuality, salutation, showing respect to the views of other member’s behaviour
while on shop floor and level of professionalism that an individual should possess.
Cohesion
• Cohesiveness defines the degree of closeness that the members feel with the group.
• It identifies the strength of the member’s desires to remain in the group and degree of
commitment to the group.
• Cohesiveness of the group is reflected to the extent of unity displayed by the group
members and adherence to the group norms.
• It is “WE” feeling displayed by the members of the group.
Group Size

• Cohesiveness of a group depends upon the close interaction of the group members with
each other.
• In a large group it not possible for the individual to communicate with each other hence
there is likelihood of large group being less cohesive than the small group.
• In work environment small group is more effective.
Power
Power has been defined as “the ability to influence and control anything that is of value to
others”.
✓ French and Raven, social psychologists, identified five sources of power: legitimate,
reward, coercive, referent and expert power.
1. Legitimate power: Legitimate power is power you derive from your formal position or
office held in your organization's hierarchy of authority. For example, the leader of an
organization had certain powers because of the position they holds within the
organization.
2. Expert power: Individuals power deriving from the skills or expertise of the person and
the organizations needs for the same. Target complies because he believes that the agent
has special knowledge.
3. Referent Power: Power to attract others and build loyalty. Based on the charisma and
interpersonal skills of the power holder. Target complies because he admires or identifies
with the agent and wants to gain it.
4. Reward Power: Refers to the degree to which the individual can give others a reward of
some kind such as benefits, time off, desired gifts, promotions or increases in pay or
responsibility. Power a person has because he or she has control of the resources. Target
complies in order to obtain rewards he or she believes in.
5. Coercive Power: Power because the person has control of the punishments or demotions.
Victim complies in order to avoid punishments believed to be controlled by the agent. It’s
often considered the most extreme form of autocratic leaders.
Organization Politics
“Organizational politics involves those activities by organizations to acquire, develop, and use
power and other resources to obtain one’s preferred outcomes in a situation in which there is
uncertainty or dissent about choices.”

Organizational Conflicts
In simplest words, conflict is a situation of disagreement between two or more persons, groups
or organization on some issue.
Process of Conflict is shown in the following diagram:
Types of Conflict:

I) On the basis of involvement / levels of conflicts:
1. Individual Conflicts
i. Intra Individual Conflicts: Intrapersonal conflict takes place within an individual.
The person experiences it in his own mind. Thus, it is a type of conflict that is
psychological involving the individual’s thoughts, values, principles and emotions.
a) Goal conflicts
b) Role conflicts
ii. Inter Individual Conflict: Interpersonal conflict means a conflict between two
individuals. Basically, this occurs because of some differences in people. We have
varied personalities which usually lead to incompatible choices and opinions. So, it
is a natural occurrence which can eventually help in personal growth or developing
our relationships with others. It may be classified in the following 2 categories –
a) Horizontal Conflicts
b) Vertical Conflicts
2. Group Level Conflicts:
i. Intra-group Conflicts: Intra-group conflicts refer to those conflicts which arise
between two or more members of the same group.
ii. Inter-group Conflicts: Intergroup conflict occurs when a misunderstanding arises
among different teams/groups within an organization. For example, the marketing
department of an organization can come in conflict with the customer support
department.
3. Organizational level Conflicts:
i. Intra-organizational Conflicts: Conflicts within the organization may be termed as
intra-organizational conflicts.
ii. Inter-organizational Conflicts: Conflicts between two or more organizations are
known as inter-organizational conflicts.
II) On the basis of Scope:

1. Substantive: A substantive conflict is associated with the job, not individuals. Substantive
conflicts may be over the facts of a situation, the method or means of achieving a solution
to the problem, ends or goals, and values. Thus it includes task conflict and process
conflict in its scope.
2. Affective: An affective conflict (also called as relationship or opposite of agreeable
conflict) deals with interpersonal relationships or incompatibilities and centers on
emotions and frustration between parties.
III) On the basis of Results:

1. Destructive Conflicts: Destructive conflicts are also known as dysfunctional conflicts,
because such conflicts prevent a group from attaining its goals.

2. Constructive Conflicts: Constructive conflicts are also known as functional conflicts,
because they support the group goals and help in improving performance.
IV) On the basis of contents

1. Task Conflicts: Conflicts relating to the goals & contents of the work are called task
conflicts.
2. Process Conflicts: Conflicts relating to the sequential steps to be taken for doing piece of
work are known as process conflicts.
3. Relationship Conflicts: Conflicts relating to interpersonal relationship are termed as
relationship conflicts.
V) On the basis of Rights and Interests:

1. Conflict of rights means where people are granted certain rights by law or by contract or
by previous agreement or by established practice. If such a right is denied, it will lead to
conflict. Such a conflict is settled by legal decision or arbitration, not negotiation.
2. On the other hand conflict of interests means where a person or group demands certain
privileges, but there is no law or right in existence. Such a dispute can be settled only
through negotiation or collective bargaining.
Negotiation
A process in which two or more parties exchange goods or services and attempt to agree on the
exchange rate for them.
Process of Negotiation:
1. Preparation and planning :
✓ Make sure that your goal stays paramount in your discussions
✓ Put your goals in writing and develop a range of outcomes to keep your attention
focused.
✓ Assess what you think are the other party’s goals.
✓ Once you have gathered your information, use it to develop a strategy.
2. Definition of ground rules:
✓ During this phase, the parties will exchange their initial proposals or demands.
✓ At this phase you are ready to begin defining with the other party the ground rules and
procedures of the negotiation itself
3. Clarification and justification: At this phase both you and the other party will explain,
amplify, clarify and justify your original demands.
4. Bargaining and problem solving: This is where both parties will undoubtedly need to make
concessions.

5. Closure and implementation: The final step in the negotiation process is formalizing the
agreement that has been worked out and developing any procedures necessary for
implementation and monitoring.
Stress Management
John M. Ivancevich and Michael T. Matterson have defined stress as “adoptive response,
mediated by individual characteristics and/ or psychological processes, that is a
consequence of any external action, situation or event that places special physical and/or
psychological demands upon a person”
Stress should not be confused with anxiety or nervous tension and damaging. They occur as
regular features in many cases and have no long – lasting impact on the working capacities of
the employees.
When stress attains a chronic stage, where a person develops instability, frustration and
feels uncomfortable and cannot cope up with problems. It affects physical efficiency and
subsequently a psychological strength. This stage is called “Burn out”. In this stage
individual is emotionally weakened. The stage of burn-out is reached when an individual
fails to achieve his objective.

General Adaptation Syndrome
The general adaptation syndrome (GAS) refers to development of individual’s responses to

stressful events in the form of physiological, psychological and behaviour patterns. They follow
a fairly consistent pattern.
These are of three types as classified by Hans Selve.
• Alarm Stage: This is a warning stage and occurs as first sign of stress. Many physiological
and chemical reactions occur. During this stage muscle becomes tense, pupils dilate and
there is an increased hormone flow.
• Resistance Stage: If the alarm stage is not controlled in time, body organs develop
resistance but leave its ill effects. During the resistance stage individual is unable to rest
and develops irritating nature.
• Exhaustion: When the body, psyche is affected it is believed the stress has reached the
stage of exhaustion. During this stage individual experiences physical and mental pressures
individual develops ulcers and high blood pressure.


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UNIT SNAPSHOT

UGC NET COMMERCE

Business Management and

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Management is a set of principles relating to the functions of planning, organizing, directing

Management is to forecast, to plan, to organize, to command, to co-ordinate and control

Management as Profession - A field is normally characterized as profession when the

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Management vs. Administration - Administration is concerned with the determination of

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List of management functions varies from author to author:

Ralph davis Planning, organising, controlling

Management theories/ Thought/ Approaches/ Philosophy

Taylors Scientific management theory:

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Fayols administrative theory:

Webbers bureaucracy theory:

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Human relation theory:

Behavioural science theory:

Following can be included in it:

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Key Elements for Proper Organizational Structure:

Types of Organization Structure

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▪ The formation of such an organisation is deliberate by the top level management.

Types of formal organization structure

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• Functional Organization: The functional organizational concept, originated with Fredrick W.

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An informal organisation is formed within the formal organisation; that is a system of

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Authority and Responsibility:

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•Motivation is a psychological phenomenon. It is the inner desire of an individual to accomplish

Perceived value is the probability or the expectancy.

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MASLOW’S NEED HIERARCHY THEORY

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HERZBERG’S MOTIVATION— HYGIENE THEORY (Two factor theory)

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 Company Policy and administration.

McGREGOR’S THEORY X AND THEORY Y

ERG THEORY OF MOTIVATION

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•Efforts - Performance relationship. It is related to the probability perceived by individual that

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PORTER AND LAWLER MODEL OF MOTIVATION

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•The ability to use power effectively

Trait Theory of Leadership

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Leadership styles and behaviour

1. Leadership based on authority

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•In contrast to autocratic leadership, democratic or participative leader consults subordinates,

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1.Exploitive-authoritative Managers practising exploitive–authoritative system of

2.Benevolent-authoritative Managers practicing benevolent-authoritative type of leadership

4.Participative-group Likert’s fourth management system is called participative-group