Principles And Practice Of Management

Chapter One
Introduction to Management
1. Defining Management
Stoner et al. (1995) define management “as the process of planning, organising, leading and
controlling the work of organisation members and of using all available organisational
resources to reach stated organisational goals”.

“Management is the art of getting things done through other people” (Follett, 1924).

2. What is Management?
Management is the process of coordinating work activities so that they are completed
efficiently and effectively with and through other people.

Efficiency = get the most output from the least amount of inputs, i.e. doing thing right
Efficiency Manager (Being Efficient) --- Production Oriented

A measure of how well resources are used to achieve a goal; usually managers try to
minimize the input of resources to attain the same goal.

Efficiency is an input output concept. An efficient manager is one who achieve outputs or
results that measure up to the inputs; that is, labour, materials and time used to achieve them

Effectiveness = completing activities so that organizational goals are attained, i.e., doing the
right things

Effectiveness Leader (Create Effects in the environment) --- Leadership Skills

Need people to follow --- People Orientation

A measure of the appropriateness of the goals chosen (are these the right goals?), and the
degree to which they are more effective when managers choose the correct goals and then
achieve them.

1|Page
The task of management is to get work done through other people in order to achieve the
goals and objectives of an organisation

What is an organisation?
Organisation has a distinct purpose --- Vision, Mission and Objectives
It is composed of people and develops a structure that defines and limits the behaviour of its
members

People --- Unsatisfied People (Abraham Maslow)

Rules & Procedures (Induction + Establishment of Organisation)

3.Who are Managers?

A manager is someone who works with and through other people by coordinating their work
activities in order to accomplish organizational goals

Leaders are ‘Born’ and Managers are ‘Made’

Managers by virtue of their authority position, they will be respected; but nor forcibly
followed whereas leaders transcend their followers beyond expectation.

Full entrepreneurs start at Top Management

Lower level = First-line management

2|Page
3.1 Classification of managers
 First – line managers: They are responsible for day- to – day operation. They
supervise the people performing the activities required to make the good or service.
For examples: Senior managers, sub – clerks, foremen and supervisors. They make
short term plan and operational plans. They get work done through workers.

 Middle – managers: Supervise first line managers. They are also responsible to find
the best way to use departmental resources to achieve goals. For examples:
Production manager, marketing manager, HR manager, senior executives’ officer.
Their task is to translate long term plan, strategic plans into medium term plans. They
implement the medium-term plans through front level managers.

 Top – managers: Responsible for the performance of all departments and have cross
– departmental responsibility. They establish organizational goals and monitor middle
managers. Holistic view over the operation of the organisation. For examples: CEO,
general manager, chairman, managing director, executive director, deputy general
manager, assistant general manager, senior manager, chief manager and legal advisor.
They will establish the operating policies and guide the organisation.

 Functional Managers: Oversee the operations of an entire unit of an organization,

ensuring that their division’s projects are completed on time and according to budget.
This role requires a balance of high-level planning and direction and hands-on
guidance to ensure that team members complete critical tasks according to schedule.
Functional managers tend to direct the activities of project managers and team
members, providing guidance and advice through the lifecycles of several concurrent
projects.

Functional managers make many decisions that determine their unit’s effectiveness
and efficiency, from budgeting to staffing, and are frequently the main point of
contact between project teams and stakeholders. They are responsible for only 1
functional area. Types of functions: Production department, HR, Finance, sales.

For examples: Customer service manager, Sales manager, Development team

manager, Accounts Receivable manager

 General Managers: They will oversee a complex, a subsidiary or an independent

operating division. A general manager is the person in charge of a department within a
company, but in small companies, the general manager may be one of the top
executives. General managers commonly rank above most employees but below
corporate-level executives.

The responsibility and importance associated with the position varies from company
to company depending on the structure of the company's corporate ladder. For
examples: An international division or an administration division

3|Page
  Line Managers: A line manager is a person who directly manages other employees
and operations of a business while reporting to a higher-ranking manager. The line
manager term is often used interchangeably with "direct manager. “He also heads a
revenue-generating department and is responsible for achieving an organization's
main objectives by executing functions such as policy making, target setting, decision
making.

 Support Managers: Create and oversee technical solutions for a variety of different
types of companies and organizations. They typically coordinate the activities of a
company's IT department. Support managers are responsible for the coordination of
technical and information systems in an organization. They direct staff, determine
necessary technology advances and educate employees on the use of software and
hardware used in an organization's day-to-day operations.

4. Management Functions and Process

The management process is a set of ongoing decisions and work activities in which managers
engage as they Plan, Organize, Lead and Control. {The POLC Approach}

Henri Fayol was the first to describe the four managerial functions when he was the CEO of
a large mining company in the late 1800s.

4.1 Planning – Management function that involves the process of defining goals, establishing
strategies for achieving those goals, and developing plans to integrate and coordinating
activities.

3 steps to good planning:

 Which goals should be pursued?
 How should the goal be attained?
 How should resources be allocated?

The planning function determines how effective and efficient the organization is and
determines the strategy of the organization.

4.2 Organizing – Management function that involves the process of determining what tasks
are to be done, who is to do them, how the tasks are to be grouped, who reports to whom, and
where decisions are to be made.

4|Page
  In organizing, managers create the structure of working relationships between
organizational members that best allows them to work together and achieve goals.

 Managers will group people into departments according to the tasks performed.

 An organizational structure is the outcome of organizing. This structure coordinates

and motivates employees so that they work together to achieve the goals.

4.3 Leading – Management function that involves motivating subordinates, influencing

individuals or teams as they work, selecting the most effective communication channels, or
dealing in any way with employee behaviour issues.

 Leadership involves a manager using power, influence, vision, persuasion, and

communication skills; help employees understand the role they play in attaining
objectives.

 The outcome of the leading function is a high level of motivation and commitment
from employees to the organization.

4.4 Controlling – Management function that involves monitoring actual performance,

comparing actual to standard, and take action, if necessary.

 In controlling managers evaluate how well the organization is achieving its goals and
takes corrective action to improve performance. Managers will monitor individuals,
departments, and the organization to determine if desired performance has been
reached.

 The outcome of the controlling function is the accurate measurement of performance

and regulation of efficiency and effectiveness.

5. Management Roles
Henri Mintzberg, a prominent management researcher, says that managerial activities can
be best described by looking at the roles they play at work. Roles are directed inside as well
as outside the organization. There are 3 broad role categories: -
̶ Informational,
̶ Interpersonal and
̶ Decisional roles

5|Page
5.1 Informational Roles
The informational roles involve receiving, collecting and disseminating information. The
three informational roles include a monitor, disseminator, and spokesperson

a. Monitor Role: analyses information form both the internal and external environment
e.g. Reading reports and periodicals.

b. Disseminator Role: manager transmits information to influence attitudes and

behaviour of employees, e.g. holding informational meetings.

c. Spokesperson Role: transmit information to outsiders on organisation’s plans,

policies, action, results, etc. e.g. holding board meetings, giving information to media.

5.2 Interpersonal Roles

The interpersonal roles are roles that involves people (subordinates and persons outside the
organization) and other duties that are ceremonial and symbolic in nature. The three
interpersonal roles include being a figurehead, leader and liaison.

 Figurehead Role: Symbolizes the organization and what it is trying to achieve, e.g.
greeting visitors, signing legal documents.

 Leader Role: Train, counsel, mentor and encourage high employee performance.

 Liaison Role: Link and coordinate people inside and outside the organization to help
achieve goals, e.g. acknowledging mails, doing external board work.

5.3 Decisional Roles

Finally, the decisional roles revolve around making choices. The four decisional roles
include entrepreneur, disturbance handler, resource allocator and negotiator.

 Entrepreneur role: deciding upon new projects or programs to initiate and invest.
They search for opportunities and initiates improvement projects. E.g. they organize
sessions to review new programs.

6|Page
  Disturbance handler: responsible for corrective action when organization faces
important and unexpected disturbances.

 Resource allocator: responsible for the allocation of organizational resources of all

kind. E.g. involved in budgeting.

 Negotiator: seeks to negotiate solutions between other managers, unions, customers

or shareholders. E.g. participating in union contract preparation.

6. Management Skills
A manager’s job is varied and complex. Managers need certain skills to perform the duties
and activities associated with being a manager. Research by Robert Katz found that
managers need three essential skills or competencies.

6.1 Technical skills

Include knowledge of and proficiency in a certain specialized field; the job-specific
knowledge required to perform a task. The technical skills are mostly needed by lower level
managers, middle managers and then by top managers. E.g. accounting, engineer, marketing.

6.2 Human skills

Involve the ability to work well with other people; the ability to understand, alter, lead, and
control people’s behaviour. The human skills is of utmost importance and is needed by the 3
levels of managers.

6.3 Conceptual skills

Are the skills managers must have to think and to conceptualize about abstract and complex
situations; The ability to analyse and diagnose a situation and find the cause and effect.
Mostly needed by top managers, middle managers and then lower level managers.

7. The Challenge of Management

7.1 The Need for Vision

 New technologies – The world is shrinking. New telecommunication technologies

continue to expand our reach and speed up our communication. Expansion of e-

7|Page
 commerce due to the growth of the Internet has enabled businesses to compete
globally. Essentially, due to the availability of the Internet, consumers are interested
to buy products online at a low price after reviewing best deals from multiple vendors.
At the same time, online suppliers are saving a lot of marketing costs.

Global Village - The world is fast becoming a global village where there are no
boundaries to stop free trade and communication. Keeping pace with it, the way we
do business has changed in an unprecedented manner. The competition, in the global
marketplace, is at its peak where all companies want to sell their goods to everyone,
everywhere on the globe.

 Changing economy - The International business environment includes various

factors like social, political, regulatory, cultural, legal and technological factors that
surround a business entity. There are exogenous factors relative to the home
environment of the organization in the international environment.

These factors influence the decision-making process on the use of resources and
capabilities. They also make a nation either more or less attractive to an international
business firm.

Firms do not have any control over the external business environment. Therefore, the
success of an international company depends upon its ability to adapt to the overall
environment.

Its success also depends on the ability to adjust and manage the company’s internal
variables to leverage on the opportunities of the external environment. Moreover, the
company’s capability to control various threats produced by the same environment,
also determines its success. + Country Attractiveness

 Globalisation - Globalization is a much larger process and often includes the

assimilation of the markets as a whole and the cultural context as well

Globalization is an intensified process of internationalizing a business. In general

terms, global companies are larger and more widespread than the low-lying
international business organizations.

Globalization means the intensification of cross-country political, cultural, social,

economic, and technological interactions that result in the formation of transnational
business organization. It also refers to the assimilation of economic, political, and
social initiatives on a global scale.

Globalization also refers to the costless cross-border transition of goods and services,
capital, knowledge, and labour.

8|Page
7.2 The Need for Ethics and Social Responsibility
Ethics deals with both conflict and opportunity in human relationships. Ethics provides the
glue that holds our relationships, and the larger society together. Business ethics is a major
concern today.

You increase performance while remaining ethical managers.

7.3 The Need for Responsiveness to Cultural Diversity

Managers must be prepared to deal with diversity at the workplace. More women have
incorporated in today’s workforce.

Cultural environments include educational, religious, family, and social systems within the
marketing system. Knowledge of foreign culture is important for international firms.
Marketers who ignore cultural differences risk failure.
 Language
 Colours
 Customs
 Values
 Aesthetics
 Time
 Religious beliefs

7.4 The Need for Training

Managers have to continually upgrade their management skills through formal education or
ongoing practice to maintain high levels of productivity and to keep pace with new
technology.

9|Page
Chapter Two
Evolution Of Management
1. Management History
As any other fields, management too has some history.
 First Business and Management programmes were offered by the Wharton School at
the University of Pennsylvania in 1881. (Bateman & al., 1990)

 Management concepts and techniques have existed since ancient civilisations;

examples Egyptians

2. Management Evolution
The evolution of management dates from the year 1700s with Adam smith (Division of
labour):
Adam Smith, 18th century economist, found firms manufactured pins in two ways:
 Craft - Each worker did all steps
 Factory – Each worker specialized in one step.

Smith found that the factory method had much higher productivity. Each worker became very
skilled at one, specific task.
Breaking down the total job allowed for the division of labour.

3. Why Study Management Theories?

 Theories are perspectives with which people make sense of their world experiences.

 Theories provide a stable focus for understanding what we experience. A theory

provides criteria for determining what is relevant.

 Theories enable us to communicate efficiently and thus move into more and more
complex relationships with other people.

4. Schools of Management Thoughts

4.1 Classical Management Approach (SBA)
 Scientific Management
 Bureaucratic Management
 Administrative Management

10 | P a g e
4.2 Behavioural Management Approach
 The Hawthorne Studies
 The Human Relations Movement
 Behavioural Science Management

4.3 Quantitative Management Approach

 Management Science
 Operations Management
 Management Information Systems (MIS)

4.4 Contemporary Management Approach

a) The Systems Theory
b) The Contingency Theory
c) Theory Z
d) Total Quality Management

4.1 Classical Management Approach

4.1.1 Scientific Management
Definition by Frederick Taylor (1856 – 1915):
Taylorism Approach Production Oriented (Efficiency)
The use of the scientific method to determine the one best way for a job to be done.
The systematic study of the relationships between people and tasks to redesign the work for
higher efficiency. Taylor sought to reduce the time a worker spent on each task by optimizing
the way the task was done.

Examples where Taylor’s approach or concept is used or being implemented: Textiles, Car
production, Mining (Production Sector)
Country: - China, Indonesia, Taiwan, Thailand

Henry Ford – ‘Any one can afford a ford car as long as it is black (colour) – Fordism
Concept
Ford cars produced in large scale Mass production (Economies of scale {EOS}, lower
costs (car cheaper)

11 | P a g e
(A) Four Basic Principles to Increase Efficiency:
 The development of a true science of management, so that the best method for
performing each task could be determined.

 The selection of workers so that each worker would be given responsibility

for the task for which he or she was best suited.

 The scientific education and development of the worker.

 Intimate, friendly cooperation between management and labour.

 Taylor contended that the success of these principles required a complete

mental revolution on the part of management and labour.

 Rather than quarrel over profits, both sides should try to increase production;
by so doing, he believed, profits would rise to such an extent that labour and
management would no longer have to fight over them.

 In short, Taylor believed that management and labour had a common interest
in increasing productivity.

 Using Time Study as his base, he broke each job down into its components
and designed the quickest and best methods of performing each component.

 Under the Differential Rate System, employers were also encouraged to pay
more productive workers at a higher rate than others.

Contributions of Scientific Management

 Demonstrated the importance of compensation for performance.
 Initiated the careful study of tasks and jobs.
 Demonstrated the importance of training.

(B) Criticisms of Scientific Management

Managers often implemented only the increased output side of Taylor’s plan. However,
Taylor’s approach is purely engineer focus and purely money motivated
̶ They did not allow workers to share in increased output.

̶ Specialised jobs became very boring and dull.

12 | P a g e
 ̶ Workers ended up distrusting scientific management.

̶ Workers could purposely “under-perform”

̶ Did not appreciate social context of work and higher needs of workers such as the
human desire for job satisfaction

̶ Did not acknowledge variance among individuals.

̶ Tended to regard workers as uninformed and ignored their ideas.

̶ People were considered as being “rational” and motivated primarily by the desire for
material gain.

̶ Dehumanising (No pity For Employees and they deliberately break the chain of
production)

(C) Other Contributors

The Gilbreths (1868 – 1972)
Frank and Lillian Gilbreth refined Taylor’s methods.
They find ways to remove motion in the production process in order to reduce fatigue and
upgrade performance. By removing stress, they confirm management concern for workers

Improvements through Time and Motion studies:

1.    Break down each action into components
2.    Find better ways to perform it
3.    Reorganise each action to be more efficient

Gilbreths studied fatigue problems, lighting, heating and other work issues to promote the
individual workers welfare. His focus was on Profitability and Production Results

4.1.2 Bureaucratic Management

Max Weber (1864–1920) developed a theory of bureaucratic management that seeks to
create an organization that leads to both efficiency and effectiveness. A formal system that
has a structure, specialisation, predictability and stability, rationability and democracy.
Examples include politics – government sectors (Bureaucracy) and Red Rape – Excessive
bureaucracy or adherence to official rules and formalities

 A formal system of organization and administration.

 He stressed the need for a strictly defined hierarchy governed by clearly

defined regulations and line of authority.

13 | P a g e
  He considered the ideal organization to a bureaucracy whose activities and
objectives were rationally thought out and whose divisions of labour were
explicitly spelled out.

(A) Weber’s Principles

A bureaucracy should have:
1) Written rules – Rules, Standard operating procedures and norms are used to
determine how the firm operates

2) Hierarchy of authority & Division of labour – Authority is the power to hold

people accountable for their actions. Lines of authority should be clearly identified.
Workers know who reports to whom.

3) Fair evaluation and reward

4) System of task relationships/Impersonality –Positions in the firm should be held

based on performance not social contacts.

Advantages of Bureaucratic Management

1. Top level managers exercise a great deal of control over organisational strategy
decision.

2. Standardisation and best practices ensure that work is consistently completed

efficiently and effectively.

3. Due to rules and procedures for doing task; management and employees ae more
objective in their approach.

4. Provide the organisation with long term perspectives and quality employees as
emphasis is on job position, specialised employees and job continuity.

Disadvantages of Bureaucratic Management

1. Organisation is bound to rigid controls and found themselves to adopt to changing
conditions in the industry.

2. Discourage creativity and innovation.

3. Front line employees receive less satisfaction from their jobs in a rigidly bureaucratic
organisation; increasing employee’s turnover rates.

14 | P a g e
 4. Few people in the hierarchy had authority; thus, leading to abuse of power and
control.

Government Sectors – Absence of innovation

V/S
Private Sector – Performance appraisal every 6 months, climb the ladder, opportunity for
prospects + job security

4.1.3 Administrative Management

Henri Fayol (1841-1925) is generally hailed as the founder of the classical management
school–not because he was the first to investigate managerial behaviour but because he was
the first to systematize it.

While, Taylor was basically concerned with organizational functions (work done in the
organisation), however, Fayol focused on management, which he felt had been the most
neglected of business operations.

(A) Henri Fayol’s 14 principles of Management:

1. Division of Labour - The more people specialize, the more efficiently they can perform
their work.

2. Authority - Managers must give orders so that they can get things done. While their
formal authority gives them the right to command, managers will not always compel
obedience unless they have personal authority such as relevant expertise as well.

3. Discipline - Members in an organization need to respect the rules and agreements that
govern the organization. To Fayol, discipline results from good leadership at all levels of the
organization, fair agreements such as provisions for rewarding superior performance, and
judiciously enforced penalties for infractions.

4. Unity of Command - Each employee must receive instructions from only one person.
Fayol believed that when an employee reported to more than one manager, conflicts in
instructions and confusion of authority would result.

15 | P a g e
5. Unity of Direction - Only one manager using one plan should direct those operations
within the organization that have the same objective. For example, the personnel department
in a company should not have two directors, each with a different hiring policy.

6. General interest over Individual Interest - In any undertaking, the interests of

employees should not take precedence over the interests of the organization as a whole.

7. Remuneration - Compensation for work done should be fair to both employees and
employers

8. Centralisation - Decreasing the role of subordinates in decision-making is centralization:

increasing their role is decentralization. Fayol believed that managers should retain final
responsibility, but should at the same time give their subordinates enough authority to do
their jobs properly. The problem is to find the proper degree of centralization in each case.

9. The Hierarchy (Scalar Chain) - The line of authority is a clear chain that runs from top
management to the lowest level of the enterprise.

Advantages of Hierarchy (Scalar Chain)

 Management is seen as a profession that can be trained and developed.
 Universal managerial guidelines are offered.
 Communication between managers and employees is endorsed.
 Employees are motivated to act on their own indicators.

Disadvantages of Hierarchy (Scalar Chain)

 It is management oriented and does not give much attention to problems of the
workers.

 Has a mechanical approach and does not deal with some of the important aspects of
management such as motivation, communication and leading.

 The consideration of the people side of business which was absent in the classical
management approach was taken on board.

10. Order - Materials and people should be in the right place at the right time.

11. Equity - Managers should be both friendly and fair to their subordinates.

16 | P a g e
12. Stability of Staff - A high employee turnover rate undermines the efficient functioning of
an organization. Long-term employment is important.

13. Initiative - Encourage innovation. Subordinates should be given the freedom to conceive
and carry out their plans, even though some mistakes may result.

14. Esprit de Corps - Promoting team spirit will give the organization a sense of unity. He
suggested, for example, the use of verbal communication instead of formal, written
communication whenever possible.

Fayol most frequently had to apply above 14 principles of management. Before Fayol, it was
generally believed that managers are born, not made.

Fayol insisted, however, that management was a skill like any other one that could be taught
once its underlying principles were understood.

4.2 Behavioural Management Approach

 The behavioural school emerged partly because the classical approach did not achieve
sufficient production, efficiency and workplace harmony.

 To managers frustration, people did not always follow predicted or expected patterns
of behaviour. Thus, there was increased interest in helping managers’ deal more
effectively with the people side of their organizations.

 Several theorists tried to strengthen classical organization theory with the insights of
sociology and psychology.

4.2.1 The Hawthorne Studies

 The most important contribution to the developing OB field came out of the
Hawthorne studies, a series of studies conducted at the Western Electric Company
Works.

 These studies, started in 1924 and continued through the early 1930s, were initially
designed by Western Electric industrial engineers as a scientific management
experiment. They wanted to examine the effect of various illumination levels on
worker productivity.

17 | P a g e
  But to the surprise of the engineers, light intensity was not directly related to worker
productivity.

 In 1927, the Western Electric engineers asked Harvard professor Elton Mayo and his
associates to join the study as consultants.

 A series of studies was then carried out that provided new insights in individual and
group behaviour. A number of variables were changed and outcomes on productivity
were noted.

 The Hawthorne studies of Elton Mayo and his associates of the Harvard Business
School emphasized the social and behavioural aspects in work situation. The attention
of managers was drawn to the fact that, among all the resources that were available to
organizations, human resources constituted a key resource in the successful
management of organisations.

4.2.2 The Human Relations Movement

The Human Relations Movement resulted from the studies of Dr Elton Mayo’s
Hawthorne Theory. This movement stated that when management consult with workers
and take an interest in their work, then motivation is improved.
 Changes to rest periods, payment system and canteen facilities.

 Satisfied employee = Productive + Commitment

 Treat employees as partners – employees feel important and valued (commitment to

move forward; not static to remove backward.

Two important contributors to this theory:

 Abraham Maslow’s Hierarchy of Needs (psychological, safety, social, esteem,
self-actualisation)

 McGregor’s Theory X and Y

(A) Maslow’s Hierarchy of Needs

His theory of human needs had three assumptions:
a) Human needs are never completely satisfied. 

b) Human behaviour is purposeful and is motivated by the need for satisfaction.

18 | P a g e
 c) Needs can be classified according to a hierarchical structure of importance, from the
lowest to highest.

(B) Douglas McGregor Theory X and Theory Y

Describes two opposing management views of employees.
 The Theory X manager, has a negative view of employees and assumes that they are
lazy, untrustworthy, and incapable of assuming responsibility.

 On the other hand, the Theory Y manager assumes that employees are not only
trustworthy and capable of assuming responsibility, but also have high levels of
motivation.

4.2.3 Behavioural Science Approach

Behavioural science approach uses research and the scientific method to determine and
understand behaviour in the workplace. The social and psychological aspects of human
behaviour in organisation have been considered.

This has created opportunities for organisations to design programmes for efficient training of
workers and managers and definitely this has impacted on numerous other areas of practical
significance.

4.3 Quantitative Management Approach

 Uses rigorous quantitative techniques to maximize resources and improve decision-
making.

 This approach to management involves applications of statistics, optimization models,

and computer simulations to management activities.

 Quantitative management utilizes linear programming, modelling, and simulation

systems.

 Linear programming, for instance is a technique that mangers use to improve resource
allocation decisions.

19 | P a g e
4.3.1 Management Science
Management science is that part of traditional operations research which is used in business
management through the application of mathematical or quantitative techniques to the
decision-making process.

Computer analysis models are used in which managers input various pieces of data and apply
a mathematical formula to generate the best possible end result.

It allows companies to foresee different possible models in case of variation and changes to
the original data. Companies can generate solutions for complex situations and process large
amounts of business information. Management science is all about modelling and forecasting.

4.3.2 Operations Management

Operations management refers to the supervising, planning, and controlling the process of
production and restructuring business operations in the production of products or services.
The concept is concerned with managing the process that converts inputs (in the form of
materials, labour and energy) into outputs (in the form of goods and services).
The aim is to ensure that business operations become efficient in terms of using fewer
resources as needed, and effective in terms of meeting customer requirements.

4.3.3 Management Information Systems (MIS)

Management Information Systems (MIS) encompass a management approach directed
towards the “collection, processing and transmission of information to support management
functions” (Bovée et al., 1993).

The role of the MIS manager is to focus on the organisation's information and technology
systems. The MIS manager typically analyses business problems and then designs and
maintains computer applications to solve the organisation's problems. Examples: - Service
Value Chain

4.4 Contemporary Management Approach

The classical, behavioural and quantitative management approaches have the tendency to
focus more on the internal aspects of organisations.

20 | P a g e
Though the contributions of each schools of thought are still being applied in today’s working
environment, both researchers and practitioners are now turning their attention towards the
interaction of the organisations with their external environment.

4.4.1 The System Theory

The Systems Theory is a simplified method to optimize efficiency choices. It considers
relationships inside and outside the organizations

A system may be defined as a set of interrelated and interdependent parts forming an

organised unit or entity. These parts are known as sub-systems which interact with each other
and are subject to change. They are interrelated as well as interdependent, hence, changes in
any sub-system lead to changes in others.

It is important to note that the system and its sub-systems also network with the environment
and in turn influence or be influenced by the system or sub-systems. The environment is the
sum total of all the factors and forces outside an organisation, which may include
customers, competitors, suppliers, investors, regulatory government agencies, etc.

4.4.2 The Contingency Theory

The well-known international economist Charles Kindleberger was fond of telling his
students that the answer to any really engrossing question in economics is ‘It depends’. The
task of the economist, Kindleberger would continue, is to specify upon what it depends, and
in what ways.

The contingency approach (sometimes called the situational approach) was developed by
managers, consultants and researchers who tried to apply the concepts of the major schools to
real life situations. When methods highly effective in one situation failed to work in other
situations, they sought an explanation. Why for example, did an organizational development
program work brilliantly in one situation and fail miserably in another. Advocates of the
contingency approach had a logical answer to all such questions. Results differ because
situations differ a technique that works in one case will not necessarily work in all cases.

4.4.3 Theory Z
William Ouchi's "Theory Z” is an emerging theory and explains the way in which workers
are perceived by managers and also how managers are perceived by workers. It is a
combination of the Japanese Style and the strict American Style

21 | P a g e
It has been assumed that workers build co-operative and intimate working relationships with
those that they work for and with, as well as the people that work for them.

In addition, Theory Z workers rely heavily on the support of the company, and highly value a
working atmosphere in which such things as cultures and customs, family, and social
institutions are valued as equally important as the work itself. Indeed, these types of workers
have a very well-developed sense of order, discipline, moral obligation to work hard, and a
sense of unity with their fellow workers.

4.4.4 Total Quality Management (TQM)

TQM is an intensive approach, long-term effort directed at the creation and maintenance of
the high standards of product quality and performance which will meet or exceed customer
expectations.

As such, it can operate as a major stimulus in developing the culture and processes of the
organisation.

The object is significantly to increase the awareness of all employees and stakeholders that
quality is vital to the organisation’s success and their future.

The business must be transformed into an entity that exists to deliver value to customers by
satisfying their needs.

 All 3 attempt to enhance management’s ability to predict and control the behaviour of
their workers.

 Designed to predict and control behaviour in organisations.

Although these schools (4 Types Of Theories) or theoretical approaches develop in historical

sequences, later ideas have not replaced earlier ones. Instead each new school has tended to
complaint or co-exist with previous ones.

At the same time, each school has continued to evolve and some have even merge with
others.

22 | P a g e
Chapter Three
The Internal and External Environment
1. The Environment Defined
 Environment is the totality of forces and institutions that are external and potentially
relevant to the organisations.

 Organisations are viewed as open and consequently adaptive systems struggling to

perform and survive in a larger context.

 The external environment becomes a source of both threats and opportunities of

constraints and contingencies.

They affect the survival’ ability of an organisation and must therefore be appreciated and
understood; if effective organisational structures and business and marketing strategies are to
be implemented

2. The Environmental Analysis and Diagnosis

(A) Environmental Analysis
 The process by which strategists monitor the environmental sectors to determine
opportunities for and threats to their firms.

 Analysis is the tracing of an opportunity or threat to a source.

It involves breaking a whole opportunity or threat into parts to find its nature, function and
relationship. Strategic management requires searching for opportunities and threats. Thus,
determining where they come from

(B) Environmental Diagnosis

Diagnosis consists of managerial decisions made by assessing the significance of the data of
the environmental analysis.
Diagnosis is an opinion resulting from an analysis of the facts to determine the nature of a
problem with a view to acting to take advantage of an opportunity or to effectively manage a
threat.
a) These decisions lead to other decisions on whether to react to, ignore, and try to
influence, or anticipate the opportunities or threats discovered.

b) Either organisations will be proactive or reactive in their approach of doing business.

23 | P a g e
Proactive business owners have a significant competitive advantage. They are flexible,
adaptable and focused on continually improving their customer service, productivity,
efficiency and workplace environments. Proactive Organizations

Proactive organizations continually analyse the business environment for signs of impending
change so they can improve their performance. For example, a manufacturer might hire a
market-research firm to analyse its target consumers and forecast shifts in consumer demand.
The proactive manufacturer can use the data to optimize its product line long before its
reactive competitors recognize they are behind the times. At the same time, the manufacturer
might institute a self-evaluation program to analyse its productivity, efficiency, worker
morale and other areas that bear improving.

Advantages
Proactive organizations are a step ahead of the game. Rather than wait for circumstances to
dictate their actions, they change long before risks materialize. Competitors find it difficult to
keep up because proactive organizations undergo continuous self-improvement even during
good times, when other organizations might rest on their laurels. Proactive organizations are
also cost-effective. By honing their performance to increase productivity and efficiency and
by dealing with small problems before they develop into bigger problems, they save money
that can be used to lower their prices, further increasing their competitiveness.

Reactive owners, on the other hand, never maximize the potential of their businesses because
they postpone change until it’s absolutely necessary - and perhaps too late. Reactive
organizations don’t change until situations force them to act. For example, an emerging new
competitor might spur a company to remain competitive and find ways to improve its
performance. Or a company might wait for an economic crisis before it researches ways to
increase productivity and cut costs. By waiting for extenuating circumstances and by failing
to anticipate major developments, reactive organizations put themselves at risk: Sooner or
later, aggressive competitors overtake slow-moving companies.

Disadvantages
A reactive business might ignore danger signs and allow serious problems to develop. For
example, if a factory waits until third-party inspectors call attention to its poor equipment
maintenance, problems that could have been easily fixed early on might now require
extensive repairs. A reactive organization might miss opportunities if it only improves itself
as situations demand. Suppose a company waits until revenues are low to find new
customers. Had it expanded its customer base earlier, the company could have kept revenues
high instead of putting itself in a precarious financial situation.

24 | P a g e
3. Forces in The Organisational Environment

Internal Customers (Employees) – Treat as Business Partners

External Customers – Internal & External Satisfaction

4. The Internal Environment

That level of an organization’s environment which exists inside the organization and
normally has immediate and specific implications for managing the organization.
Unlike components of the general and operating environments, which exist outside the
organization, components of the internal environment exist within it. The internal
environment consists of:
 Financial Aspects
 R & D Aspects
 Personnel/HR Aspects
 Marketing Aspects
 Production Aspects

4.1 Tools for Internal Analysis

(a) Finance and Accounting
Internal Rate of Return; Financial Ratios

25 | P a g e
(b) Research and Development
Patents Generated; Project Analysis

(c) Human Resources

Turnover Analysis; Training Budget; Analysis of Personnel Needs and Capabilities.

(d) Marketing
Sales Forecasts; Market share Analysis; Price Volume Relationships; Sales Force Analysis.

(e) Production
Inventory Analysis; Break Even Analysis; Labour Materials and Overhead Costs Analysis.

5. The External Environment

The external environment refers to the forces and institutions outside the organisation that
potentially affect its performance.
The external environment is made up of two components:
(a) The specific/task environment; and
(b) The general environment.

(A) Specific/Task Environment

Competitive Environment & Porter’s 5 forces Model
The five forces model identifies the 5 key factors that drive competition in a market & how
the organization should orient itself in the market to be successful and sustainable.

(i) Suppliers
 Provide organization with inputs.
 Managers need to secure reliable input sources.
 Suppliers provide raw materials, components and even labour.
 Working with suppliers can be hard due to shortages, unions and lack of substitutes.
 Suppliers with scarce items can raise the price and are in good bargaining position.
 Managers often prefer to have many, similar suppliers of each item.

26 | P a g e
(ii) Competitors
 Other organizations that produce similar goods
 Rivalry between competitors is usually the most serious force facing managers.
 High levels of rivalry often mean lower prices.
 Profits become hard to find
 Barriers to entry
 Bargaining power of buyers
 Bargaining power of suppliers
 Threat of new entrants
These consists of those players with whom an organisation must do ‘’battle’’ in order to
obtain resources. Understanding competitors is a key factor in developing effective strategy.
So, analysing the competitive environment is a fundamental challenge to management. To
increase its share of market, an organisation must take advantage of 1 or 2 opportunities

 Firstly, it must gain additional customers; either by getting a greater marker share or
by finding ways to increase the size of the market itself.

 Secondly, it must be its direct competitors in entering and winning and expanding
market.

(iii) Customers
 People who buy the goods.

 Usually, there are several groups of customers, i.e. business, home, and government
buyers.

A customer is a person who buys goods or services from a shop or business - one-time sale
The customer reflects the characteristics and behaviour of those who buy goods and services
provided by the organisation. Developing the profile of customers help management generate
ideas about how to improve customer acceptance of organisational goods and services.

(iv) Distributors or Intermediaries

Organisations that help others to sell goods, e.g., Compaq Computers first used special
computer stores to sell their computers but later sold through discount stores to reduce costs.

27 | P a g e
Importance of Distributors
 It enables to cut costs and maximise sales revenue

 It determines where and when the product will be available to ultimate consumers or
users

 It involves the long-term commitment of the firm – changes in the channel are very
difficult and costly

 Fluctuations in the production can be reduced due to continuous and effective

distribution

 Profit is shared among distributors

 More level of distributers Profit Margin
 Costs is passed onto customers.

(v) Pressure groups

Managers must recognize the special-interest groups that attempt to influence the actions of
organizations.

Consumers VS Clients
A consumer is:
 a person who purchases goods and services for personal use; or
 a person or thing that eats / consume or uses something
 usually thought of as the end user

28 | P a g e
A client is:
 a person or organization using the services of a lawyer or other professional person or
company; or

 a person being dealt with by social or medical services (Service sector: Hotels,
banking, offshore, financial services)

 Long term relationship

3 levels of product
 Core
 Actual
 Augmented

(B) The General Environment

 Consist of the wide economic, demographic, Socio-Cultural, technological, political-
Legal and global forces.

 Managers usually cannot control these forces.

 They have profound impact on the firm.

 Contemporary – Contingency Approach

(i) Economic Forces

Affect the national economy and the organization.
Includes interest rate changes, unemployment rates, economic growth
When there is a strong economy, people have more money to spend on goods and services.
It indicates how resources are distributed and used within the environment.

(ii) Demographic Forces

Result from changes in the nature, composition and diversity of a population.
These include gender, age, ethnic origin, etc.
For example, during the past 20 years, women have entered the workforce in increasing
numbers.

29 | P a g e
Currently, most industrial countries are aging.
This will change the opportunities for firms competing in these areas.
New demand for health care, assisting living can be forecast.

(iii) Socio-Cultural Forces

 Result from changes in the social or national culture of society.

 Social structure refers to the relationships between people and groups. Different
societies have vastly different social structures.

 National culture includes the values that characterize a society. Values and norms
differ widely throughout the world

 These forces differ between cultures and overtime.

It is important for managers to remember that although change in the attributes of a society
may come either slowly or quickly; changes will certainly come

(iv) Technological Forces

 Transportation (More rapid, effect of containerisation, etc)
 Communication (e-communication)
 Health care (More digital & electronic equipment on the market)
 Consumer products (availability of varieties & substitutes, better distribution network)
 Manufacturing (Just in Time in manufacturing, automation)
 Agriculture (hydroponic production)
 Marketing (electronic point of sales (EPOS), e-commerce)

New approaches to producing goods and services, new production procedures as well as
new equipment.

(v) Political-Legal forces

 Result from changes in the political arena.
 These are often seen in the laws of a society.
 Today, there is increasing deregulation of many state-run firms.

30 | P a g e
These depend on the type of government in existence; government attributes towards various
industries, lobbying effects by interest groups, progress towards the passage of laws, platform
for political parties, government intervention in industry as an entrepreneur and in natural
resource management

(vi) Global Forces

Result from changes in international relationships between countries.
Perhaps the most important is the increase in economic integration of countries.
Free-trade agreements (GATT, NAFTA, EU) decreases former barriers to trade
Provide new opportunities and threats to managers
China depreciating its currency, this was good news for importing countries.
The International Environment – Globalisation + Global Village

(C) The International Environment

The international component of the external environment comprises all factors related to
the international implications of organizational operations. Though not all organizations must
deal with international issues, the number that do is increasing dramatically. Significant
aspects of the international component include the laws, political practical practices, culture,
and economic environment that prevail in the foreign countries with which (or in which) the
firm does business. Ex: Globalisation & Global village

6. SWOT Analysis
SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business venture or in any other
situation requiring a decision.

 Strengths are attributes of the organization that are helpful to the achievement of the
objective.

 Weaknesses are attributes of the organization that are harmful to the achievement of
the objective.

 Opportunities are external conditions that are helpful to the achievement of the
objective.

 Threats are external conditions that are harmful to the achievement of the objective.

31 | P a g e
6.1 Examples of S & W / O & T
(a) Strengths and Weaknesses
 Resources: financial, intellectual, locational
 Customer Service
 Efficiency
 Competitive Advantages
 Infrastructure
 Quality
 Staff
 Management
 Price
 Distribution Channels and Hours of operations
 After sales service and Sales promotion techniques
 Transportation and Delivery time
 Diversified fields, Product line and multiple services/offers (Technical, Commercial,
Designing & Turnkey Projects etc)

(b) Opportunities and Threats

 Competitors' actions
 Economic conditions
 Interest rates
 Increasing market saturation
 Changes in laws and regulations

The purpose of SWOT Analysis - It is an easy to use tool for developing an overview of a
company’s strategic situation
The purpose in using SWOT to assess strengths and weaknesses is it helps the company
firmly understand its core market advantages and areas that competitors may criticize the
company for. Companies typically make core strengths the focal point of marketing messages
in trying to create differentiation from competitors. Companies need to understand their
weaknesses to decide what areas they should improve on and what areas are inherent to the
nature of their business.

Exploring untapped opportunities helps company leaders consider ways to grow. Generally,
strong companies are always looking for ways to grow because if they do not grow, they
typically fall behind and give up opportunities to competitors. Opportunities can include new
and emerging markets, new business and product developments and strategic business
partnerships that may create more sales and profits.

32 | P a g e
Factors that can amplify the intensity with which firms can compete
 High fixed costs (costs that cannot be eliminated easily as volume decreases)

 High storage costs

 Lack of differentiation between products or services

 Low switching costs (customer can switch suppliers without significant cost or
inconvenience)

 High exit barriers for competitors (difficult for a firm to leave a particular industry)

Managerial Environment
Adapting to Environments
Role of manager - monitor and shape the internal and external environments & to anticipate
changes and react quickly to them.

 Boundary Spanning - a process of gathering information about developments that

could impact the future of the organization.

 How? - Access information through a variety of sources: customer and supplier

feedback; professional, trade, and government publications; industry associations; and
personal contacts.

 May also influence external environments through lobbying, voting, and using the
media to influence public opinion

Environmental Scanning
In order for a business to succeed and gain the competitive edge, the business must know
what changes are indeed occurring, and what changes might be coming up in the future.

Thus, critical to the business is what is called "informational resources”

33 | P a g e
Chapter Four
Functional Areas of the Organisation
1. Marketing Management
1.1 What is Marketing?
Marketing must not be understood in the old sense of making a sale - selling - but in sense of
satisfying customer needs. Many people mistakenly identify marketing only as selling and
promotion.

 Selling (make maximum money) is a subset of marketing

 Marketing Aim – Build long term relationship with customers; goes beyond the aspect
of making money

1.2 Definition of Marketing

Marketing is the management process responsible for identifying, anticipating and satisfying
customer requirements profitably.

Some common terms you will commonly come across in the marketing jargon are:
 Needs, wants, benefits & demands
 Products
 Market
 Target Markets
 Value & satisfaction
 Segmentation
 Positioning
 Marketing mix – 4Ps

Needs – A need represents a basic state of felt deprivation to a person of a basic satisfaction.

Wants – Wants represent desires for specific satisfiers of basic needs.

Wants represent the desire to satisfy needs in ways that are culturally & socially influenced.
Benefits – Benefits in marketing represents an outcome sought by a person that motivates
buying behaviour.

34 | P a g e
Demands – Demands represent wants for products that are backed up by willingness &
ability to buy.

Products – Represents anything offered to satisfy a need or want.

Includes physical goods, services & ideas.

Market – A market represents a group of customers who share a common need that can be
satisfied by a specific product & who are willing, able, & have the authority to make the
exchange.

Target Markets – A market for specific individuals. Focus on the needs & wants of
consumers in the particular market.

Value – In marketing, value represents the trade-off between cost and benefit of purchasing
or using a particular product.

Satisfaction – People or consumers derive satisfaction when they have been able to meet or
exceed their needs & wants.

Segmentation – The process of dividing a market into different groups with different needs
that can be satisfied by different products and/or different approaches to the other marketing
mix elements.
 STP – (Segmentation, Targeting & Positioning

Positioning – The picture & perception created in the mind of the target market of a product
in comparison to competitors’ products or brands.

Marketing Mix – Consists of four elements (4Ps) that the organisation can vary by type &
amount in order to meet the needs & wants of customers within its target markets.

1.3. History of Marketing

(a) The Production Era

35 | P a g e
2nd half of the 19th Century – Produce as much as possible, as efficiently as possible,
distribute it as widely as possible for as low a cost as possible. – Fordism Concept –
Scientific Management
(b) The Product Era
Producing superior products, high in quality & performance with innovative features &
improving them over time.

The Marketing myopia syndrome – is a short-sighted and inward-looking approach to

marketing which focuses on fulfilment of immediate needs of the company rather than
focusing on marketing from consumers’ point of view. When a company focus more on sales
than on marketing and knowing about the consumers’ needs, that’s when marketing myopia
strikes in.
Or
Marketing Myopia is a situation when a company has a narrow-minded marketing approach
and it focuses mainly on only one aspect out of many possible marketing attributes. E.g.
focusing just on quality and not on the actual demand of the customer.

Effects
 Producing blindly
 No demand for that particular product
 Stock Increase
 Capital being stuck in the production plan

(c) The Sales Era

Mid 1920s & the early 1950s – Businesspeople viewed sales as the major means of
increasing profits. (make maximum revenue as possible)
1) Persuade customers to buy existing product & buy more of it.
2) Focus on aggressive selling & promotion.
3) Almost lure customers into buying it.

(d) The Marketing Era

Early 1950 – Some businesspeople recognised that they must first determine what customers
want & then produce it, rather than make products & try to persuade customers to purchase
them.

36 | P a g e
(i) The Marketing Concept – Aims particularly over long-term satisfaction rather than the
short-term one & rests on the premise that a satisfied or happy customer comes back to
purchase the product again & again.

(ii) Societal Marketing Concept – An orientation that focuses on satisfying consumers’

needs while also addressing the needs of society at large.

(e) Relationship Marketing Era

Everything is done thru networking & relationship.
Relationship marketing refers to long-term, mutually beneficial arrangements in which the
buyer & seller focus on value enhancement thru the creation of more satisfying exchanges.

Main Characteristics of RM
 Focus moves from individual transactions to value laden relationships & value
delivery networks.

 Long-term & customer retention focus

 Marketing taken out of the marketing dept. & moved thru the whole organisation
including stakeholders

 Aiming for higher customer loyalty & satisfaction

1.4 The Marketing Mix

Kotler defined the marketing mix as the set of controllable variables that the firm uses to
influence the target market.

1.4.1 The 4 P’s of the Marketing Mix

- P – Product
- P - Price
- P - Place
- P – Promotion
In product, price and place; the business incurs costs (Investments)

1.4.2 The today’s 7 P’s of the Marketing Mix – For services

37 | P a g e
- P - Product
- P - Price
- P - Place
- P - Promotion
- P - People
- P - Processes
- P - Physical Evidence
8 p’s – Productivity and operation

1.5 Product
A product is a ‘package of benefits’ meeting particular needs. It is anything that can be
offered to a market that might satisfy a wand or need.

1.5.1 Level of Product

Core product - A hotel offers rest and sleep away from home
Generic product - Any hotel is a building with rooms for rent
Expected product - Hotel must be clean and peaceful
Augmented product - Additional products ex: taxi service
Potential product - Possible improvements in the future. Ex: fax machines and Internet in
future.

1.5.2 Product Life Style Cycle:

(1) Introduction sage
(2) Growth stage
(3) Maturity stage
(4) Decline stage
 Before Introduction Stage; there is Research and Development also called Embryonic
Stage (Test Marketing)

1.5.2.1 Product Life Style Cycle Strategies

(1) Product Introduction stage

38 | P a g e
Strategy: It can set high or low level for each mix elements like price, promotion,
distribution and product quality.
Ex: Nando’s - Launched with high prices and low level of promotion.
 Profits are negative, because of high expenses. (High Brand Propensity)
(2) Growth Stage
 New product satisfies the market
 Sales start climbing
 This will attract new entrants to the market
Strategies: Improve product quality, add new features, enter new market segments, new
distribution channels.

(3) Maturity stage

Growth slow down.
Strategy: Improve the consumption, look for new users, new markets, adjust the marketing
mix.

(4) Decline stage

Sales drop.
Strategy: Reposition the brand, move it back to growth, Harvest the product - meaning
reducing costs of plant, equipment, maintenance, and R & D, hoping that the sale hold up.

1.6 Price
Price is the amount of money charged for the product or service. More broadly price is the
sum of values that consumers exchange for the benefits of having using the product or
service. – (Bring revenue back to the organisation)

 1.6.1 Pricing strategies

 (A) Market skimming Pricing
Companies that invent new products initially set high prices to “skim” revenue from the
market. (Charge high price to recover from costs of investments) – Superior Products
ex: iPhone X, Samsung S9, S9+, Note 9

(B) Market Penetration Price

39 | P a g e
Set low initial prices to in order to penetrate the markets quickly and deeply.
Ex: KFC grilled chicken

1.6 Place
This is making a product or service available for use or consumption by the consumer or
industrial user by distribution channels. Ex: Banks - open branches, Internet web site.

1.7 Promotion
Organisations enters in to a dialog with the various audiences. Such methods represent the
Communication mix:
 Advertising
 Direct mail
 Public relations
 Personal Selling
 Sales Promotion

Marketing communication convey information about the product and the company.

Interactive Marketing takes place among promotion (5 Components)

Interactive marketing is a one-to-one marketing practice that centres on individual customer
and prospects’ actions. Interactive marketing involves marketing initiatives that are triggered
by customers’ behaviours and preferences; for this reason, it is a major shift from traditional
campaign-based marketing efforts. A customer-centric strategy, interactive marketing
involves reacting to customer actions and striving to meet their expectations and demands.

In order for marketers to pull off successful interactive marketing efforts, they must have
access to advanced technology that delivers complete, 360-degree views of customers.

Types of Interactive Marketing

Interactive marketing includes many types of initiatives. Marketers may interact with
customers via dynamic content such as visual storytelling, personalized content, layered
information, and two-way interaction. No matter which type of interactive marketing
initiative you implement, the goal is to make content engaging and relevant for customers.

40 | P a g e
Interactive Storytelling – Marketers can seize opportunities to be as dynamic with content
as possible; this may mean adding an animation or infographic to a blog post or creating
native ads rooted in storytelling that incorporated mixed media elements. Break up long-form
posts and advanced landing pages with text divisions, video and audio clips, and interactive
components that allow sharing and discovering more information.
Personalized Content – Use advanced technology to gain insights into customers’
demographics, geographic data, lifecycle information, and more to deliver personalized,
relevant content and offers. When you know as much as you can about your customers as
individuals, you can create the most meaningful experiences for them. Customers will relate
to the content more fully when it is personalized appropriately, and they will be more apt to
interact with the content by sharing it.

Layered Information – Educating customers has become a top priority for marketers, and
interactive marketing is a smart way to layer in information for consumers by delivering
detailed content in increments. Marketers have the ability to tell brand stories by providing
snippets of information in easy-to-read quick takes and then delivering more detailed,
informative content in other layers to audience members who want to know as much about a
topic as possible.

Two-Way Interaction – Two-way interaction initiatives are at the heart of interactive

marketing because they give consumers a vehicle for active participation. For example,
interactive tools such as quizzes, calculators, branching content, games, and interactive
videos provide a more powerful experience for the audience.

Challenges of Interactive Marketing

One of the hurdles marketers must overcome when utilizing interactive marketing is a lack of
access Without individualized customer intelligence from all sources, marketers cannot gain a
complete view of customers. In fact, interactive marketing is an incredibly difficult
undertaking for organizations that have disparate customer data; data in warehouses, CRM
systems, contact centre applications, data lakes, and online and social activities remains
siloed, and organizations struggle to know customers on an individual level, when they do not
have a customer experience platform that aggregates data from every available source.

Other challenges of interactive marketing include grabbing the audience’s attention because
of all of the content available today, converting viewers to leads, making marketing efforts
more customer centric, increasing the reach of your content, and achieving marketing
automation.

Benefits of Interactive Marketing

41 | P a g e
There are substantial advantages to using interactive marketing, especially now that
consumers expect companies to exceed their expectations. With interactive marketing,
organizations increase their chances of meeting customer needs because they already show an
interest in the product and marketers have the ability to respond to their actions. Interactive
marketing reduces risk and increases sales because it is rooted in customer behaviors and
desires. The personalization associated with interactive marketing results in more conversions
and higher revenue. Overall, interactive marketing can boost sales, enhances customer
satisfaction, lowers marketing costs, and opens the door to automated marketing.

In addition, interactive marketing has certain drawbacks:

 the limited access of some buyers to the Internet,

 the one-sidedness of demographic and psychological information about buyers,

chaotic and information congestion of the network,

 the probability of penetration of thieves (hackers) Into a computer network in order to

obtain secret information about the numbers of credit cards and bank accounts of
customers,

 the risk of human rights violations in the process of creating data banks about buyers.
But all these are shortcomings of growth. In the future, many of these problems will be
solved with the help of certain legislative acts and reliable means of protecting the network.

 Expectation High – Perception Low (Customer Delight + satisfaction)

 Expectation Low – Perception High (Customer Dissatisfaction)

Servqual Model – used to measure customer satisfaction and customer quality

 Perception – Expectation = Gap of Service
 5 specific dimensions consisting of tangibles, reliability, responsiveness, assurance,
and empathy.

1.7.1 Integrated Marketing Communications

Recently the trend is towards Integrated Marketing Communications. In other words, the
marketing communications should be integrated with the business strategy, the other
elements of the marketing mix, and with each other.

1.8 People (Part of Service Mix)

42 | P a g e
This is the employees who deliver the services to the customers. After all, if you had a poor
service in a restaurant or in a bank you may not got there again. Managing front line
employees is important since their behaviour has an effect on customers.

 Appearance, Attitude, Commitment, Professionalism, Skills, Numbers, Discretion.

1.9 Processes (Part of Service Mix)

A process is a continuous ongoing set of activity. Using the processes, the tasks of the
marketer is achieved.

Ex: Efficient process to open a bank account, telebanking.

The following are important to create an efficient process:
 Procedures, Policies, Information, Speed, Computerization.

1.10 Physical Evidence (Part of Service Mix)

This is how the branch look like and also includes uniforms, logos etc. This builds a
corporate identity for an organisation.

2. Production and Operations Management

Production and Operations Management ("POM") is about the transformation of production
and operational inputs into "outputs" that, when distributed, meet the needs of customers.

43 | P a g e
The process in the above diagram is often referred to as the "Conversion Process". There
are several different methods of handling the conversion or production process - Job, Batch,
Flow and Group

POM incorporates many tasks that are interdependent, but which can be grouped under five
main headings:

2.1 PRODUCT
Marketers in a business must ensure that a business sells products that meet customer needs
and wants. The role of Production and Operations is to ensure that the business actually
makes the required products in accordance with the plan. The role of PRODUCT in POM
therefore concerns areas such as:

 Performance
 Aesthetics
 Quality
 Reliability
 Quantity
 Production Costs
 Delivery Dates
 TQM – Zero defects (Contemporary School of thoughts)

2.2 PLANT
To make PRODUCT, PLANT of some kind is needed. This will comprise the bulk of the
fixed assets of the business. In determining which PLANT to use, management must consider
areas such as:

̶ Future demand (volume, timing)

̶ Design and layout of factory, equipment, offices
̶ Productivity and reliability of equipment
̶ Need for (and costs of) maintenance
̶ Health and safety (particularly the operation of equipment)
̶ Environmental issues (e.g. creation of waste products)

2.3 PROCESSES
There are many different ways of producing a product. Management must choose the best
process, or series of processes. They will consider:

44 | P a g e
  Available capacity
 Available skills
 Type of production
 Layout of plant and equipment
 Safety
 Production costs
 Maintenance requirements

2.4 PROGRAMMES – Just In time Production (JIT)

The production PROGRAMME concerns the dates and times of the products that are to be
produced and supplied to customers. The decisions made about programme will be
influenced by factors such as:
 Purchasing patterns (e.g. lead time)
 Cash flow
 Need for / availability of storage
 Transportation

2.5 PEOPLE
Production depends on PEOPLE, whose skills, experience and motivation vary. Key people-
related decisions will consider the following areas:
 Wages and salaries
 Safety and training
 Work conditions
 Leadership and motivation
 Unionisation
 Communication

3. Human Resource Management – Behavioural Approach

Storey has offered the following definition to Human Resource Management:
‘Human resource management is a distinctive approach to employment management which
seeks to achieve competitive advantage through the strategic deployment of a highly
committed and capable workforce, using an integrated array of cultural, structural and
personnel techniques.’ (Storey, 1995). 

HRM is concerned with employment, development and reward of people in the organization
and the conduct of relationships between management and workforce. It involves all

45 | P a g e
managers, supervisors but HR practitioners are best suited for to contribute towards the
improvement of the process.

(A) Cultural Techniques

 The employees’ attitude (positive or negative attitude towards change, responsive to
new ideas and approaches).

 The employee’s motivation for quality and improvement.

 Human Resource Management.

 The environment of the firm: The cultural environment of the workforce (Mauritians).

 The lifestyle, mores, habits of the workforce.

(B) Structural Techniques

 Management style (authoritarian or democratic).
 Formal relationship within the organization.
 How information is communicated and reported.
 The way the organisation is managed.
 Hierarchy in the organisation.
 Philosophy of organising the business.
 Tall or Flat organisation.

(C) Human Resource Techniques

 Recruitment and Selection policy
 Training policy
 Payment Systems
 Managerial aspects (Empowerment)
 Total Quality Management

 New HR philosophies-Chasing MUDA, ISO 9000- (describes the way the

organization needs to be structured and influences the system in place).

3.1 Functions of Human Resource Management.

The functions of the Human Resources department are:
3.1.1 Recruitment and Selection
 Recruiting the most appropriate people
 Attracting best candidates to the firm

46 | P a g e
  Practice an open-door philosophy
 Provide attractive salary and conditions
 Selection Interviews
 Selection tests

3.1.2 Training and Development

1) Training philosophy
2) Effective training
3) Training-centred evaluation
4) Training strategy
3.1.3 Performance Appraisal
a) Appraising employees
b) Methods of appraisal
c) Self-Appraisal
d) Management by Objectives

3.1.4 Employee Welfare

 Industrial relations- managing and maintaining formal and informal relationship with
trade union and their members.

 Employee relations- employee involvement and participation – sharing information

with employees and consulting them on matters of mutual interest.

 Employee welfare.

 Social responsibility of the firm.

3.2 Beliefs and Assumptions

Human Resource Management is built on a set of beliefs and assumptions:
 The human resource gives competitive edge to an organisation.

 The aim of HRM should be employee commitment to the organization’s mission and
values.

 Employees should be very carefully selected and developed.

 Treating people as assets or human capital- HRM embraces strategic qualities.

3.3 Critical Role for Managers

47 | P a g e
  Since Human Resource Management practice is critical to core activities of the
business, it should not be the concern of specialists alone.

 Line managers can be considered to be the deliverers and drivers of HR policies.

 Attention should be paid to the management of managers themselves.

 Aligning skills to organizational needs and “knowledge management” (i.e. essential

for organization to identify knowledge it requires to meet its goals and satisfy
customers. Taking necessary steps to develop this intellectual capital).

Chapter Five
Planning and Decision-Making
1. What is Planning?
A process that involves defining the organisation’s goals, establishing an overall strategy for
achieving those goals, and developing a comprehensive set of plans to integrate and
coordinate organizational work.

Planning involves defining the organisational goals, establishing an overall strategy for
achieving these goals and developing a comprehensive set of plans to integrate and
coordinate organisational work.

All planning occurs within an environmental context. If managers don’t understand this
context; they are unable to develop effective plans, thus, understanding the environment is
essentially the first step in planning.

 Plans and decisions are essential requirements to organisational tasks and management.
Business success depends significantly upon successful planning and decision making.

 The planning process itself can best be thought of as a generic activity. All organizations
engage in planning activities, but no two organizations plan in exactly the same way.

Mission – Vision – Goals / Objectives – Strategies – Control – Standards

Planning can be defined as deciding now what to do in the future given certain intended
conditions

48 | P a g e
  An organisation’s mission is a statement of its fundamental unique purpose that sets a
business apart from other firms of its type and identifies the scope of the business
operations in product and market terms.

This definition of planning incorporates three important element that require attention –now,
what to do and future.

Planning involves: -
 Objective setting
 Environment scanning
 Decision making
2. Purposes of Planning
a) Gives direction
Planning establishes coordinated effort. It gives direction to managers and non-managers
alike. When employees know where the organisation or work unit is going and what they
must contribute to reach goals; they can coordinate their activities, cooperate with each
other and do what it takes to accomplish those goals.

b) Enables predictability (Forecasts things accordingly)

Planning also reduces uncertainty by forcing managers to look ahead, anticipate change,
consider the impact of change and develop appropriate responses

c) Enables adaptation to changes without crisis

Contingency Approach – adapting business to reduce uncertainty in the environment
Examples: Embrace technology, adding value to the Organization, Know Your Niche,
improve its market position

d) Minimizes waste and redundancies

Planning reduces overlapping and wasteful activities; when work activities are
coordinated around establish plans, waste time and redundancy can be minimized

e) Sets the standards used in CONTROLLING

Planning establishes goals or standards that are used in controlling. We can compare
actual performance against set goals, identify the deviations and take corrective actions

3. Benefits of planning
 Helps to prepare for unforeseen eventualities;

49 | P a g e
  Helps to clarify objectives;

 Helps to develop criteria for monitoring performance;

 Helps to think ahead systematically;

 Demands conscious co-ordination of projects and active participation and co-

operation of subordinates;

 Eases accommodation of change;

 Helps to identify opportunities for greater efficiency;

 Reveals duplication of effort, bottlenecks in workflows and foreseeable pitfalls;

 Assists in integrating activities; and

 Helps to take decisions unhurriedly, using maximum or optimum information

4. Hierarchy in Planning
Plans that emanates or emerges from different levels of an organisation have different
connotations or implications.
a) Strategic plans
b) Tactical plans
c) Operational plans

5. The Role of Goals and Plans in Planning

Planning involves two important elements: Goals and Plans
 Goals are desired outcomes for individuals, groups or entire organisations. Goals are
objectives and we use both terms interchangeably.

 Plans are documents that outline how goals are going to be met and that typically
describe resource allocations, schedules and other necessary actions to accomplish the
goals. As managers plan, they are developing both goals and plans.

Goals are critical to organisational effectiveness and they serve a number of purposes:
a) Goals provide guidance and a unified direction for the people in organisation. Goals can
help everyone understand where the organisation is going and why getting there is
important

50 | P a g e
b) Goals setting practices affect other aspects of planning. Effective goals setting promotes
good planning and good planning facilitates future goals setting

c) Goals can serve as a source of motivation to employees of the organisation. Goals that are
specific and moderately difficult can motivate people to work harder; especially if
attempting the goals is likely to result in rewards.

d) Goals provide an effective mechanism for evaluation and controls. This means that
performance can be accessed in future in terms of how successfully todays goals are
accomplished

6. Types of Goals
Goals are the outcomes we desire. Different businesses will be having different goals. E.g:
Financial objectives will include: faster revenue growth, more profits while Strategic
objectives will include: increasing market share, higher product quality.

(A) Stated Goals are official statements of what an organisation says and what it wants its
various stakeholders to believe, its goals are. E.g. Nike’s goal is “to bring inspiration and
innovation to every athlete.”

(B) Real Goals – Goals that an organisation actually pursues, as defined by the actions of its
members.

E.g: Universities that proclaim the goal of limiting class size to facilitate close student-faculty
relationship and then put them in lecture classes of 300 students together! An awareness that
real and stated objectives differ is important for understanding what might otherwise seem to
be management inconsistencies.

7. Types of Plans
7.1 Strategic Plans – Help identify and communicate the mission of the organisation. There
is usually at least one strategic plan in each planning document hierarchy. Objectives are
normally only broadly defined in strategic plans. (Objectives broadly defined – holistic)

Strategic plans are the plans develop to achieve strategic goals. A strategic plan is a general
plan outlining decision are resource allocation and actual steps necessary to reach strategic
plans. These plans are set by board of directors and top management, generally have an

51 | P a g e
extended time horizon and address questions of scope, resource development, competitive
advantage and synergy.

7.2 Tactical Plans – Support strategic plan implementation and focus on intermediate time
frames usually 1 to 3 years. Generally, they tend to be more specific and concrete than
strategic plans. They are normally developed by middle managers. (Specific – Functional
levels / areas)

A tactical plan is developed to implement specific parts of a strategic plan. Tactical plan
typically involves upper and middle management compared with strategic plan have a
somewhat shorter time horizon and a more specific and concrete focus. Thus, tactical plan is
concerned more with actually getting things done than with deciding what to do
7.3 Operational Plans – Specify how to accomplish the objectives defined broadly in the
strategic plan. There are typically several operational plans in the planning document
hierarchy. Operational plans should be checked for consistency and completeness with the
strategic plan from where they originated.

An operational plan focuses on carrying out tactical plan to achieve operational goals.
Develop by middle and lower level managers, operational plan has a short-term focus and are
relatively narrow in scope. Each one deals with a fairly small set of activities (Front line
levels / employees)

7.3.1 There are two main types of operational plans:

(a) Single-Use Plans – Suited to situations that are not likely to be repeated often, like the
acquisition of a new business or a move to new premises.

(b) Standing Plans – Suited to on-going operations and processes. Standing plans usually
include policies, procedures, budgets etc. Hiring new employees is an example of ongoing
operations.

8. Time Frames for Planning

 Long Term Plans - Plans with a time frame beyond three years. Examples: Business
expansion and growth goals, improving customer satisfaction and retention, increase
profit margins by a set percentage, Social giving, especially as it pertains to the
surrounding community

 Short Term Plans - Plans covering one year or less (Greatly affect managers day – to
– day activities)

52 | P a g e
  Specific Plans - Plans that are clearly defined and that leave no room for
interpretation. E.g. a manager who seeks to increase his unit’s output by 8% over a
given 12 months period might establish specific procedures, budget allocations and
schedules of activities to reach that goal.

 Directional Plans - Plans that are flexible and that set out the general guidelines. This
type of plan is preferred when uncertainty is high and managers must be flexible in
order to respond to unexpected changes. E.g.: A manager who wants to increase her
unit’s profits.

9. Establishing Goals and Developing Plans – Top down approach (Traditional

Approach)

9.1 Approaches to Goal Setting:

9.1.1 Traditional Goal Setting – An approach to setting goals in which goals are set at the
top level of the organisation and then broken into sub goals for each level of the organisation.
E.g. A director of a company tells the production manager what he expects the manufacturing
costs to be for the coming year and tells the marketing manager what level he expects sales to
reach for the year. These goals are then passed down to the next organisational level.

9.1.2 Management by Objectives (MBO):

A management system in which specific performance goals are jointly determined by
employees and their managers, progress toward accomplishing those goals is periodically
reviewed, and rewards are allocated on the basis of this progress.

MBO consists of four elements: Goal specificity, Participative decision making, An explicit
time period and Performance feedback.
̶ Decisions are not taken in isolation

̶ Everyone is involved

̶ Performance appraisal – Strengths and Weaknesses identified (Receive performance

feedback) -employees can be rewarded in the organisation

̶ Get reward out of performance

53 | P a g e
 ̶ Douglas Mc Gregor Philosophy

 Rewards

Financial (Intrinsic) Non Financial (Extrinsic)

9.1.2.1 Steps in a Typical MBO Program:

 The organisation’s overall objectives and strategies are formulated;

 Major objectives are allocated among divisional and departmental units;

 Unit managers collaboratively set specific objectives for their units with their
managers;
 Specific objectives are collaboratively set with all department members;

 Action plans, defining how objectives are to be achieved, are specified and agreed
upon by managers and employees;

 The action plans are implemented;

 Progress towards objectives is periodically reviewed, and feedback is provided; and

 Successful achievement of objectives is reinforced by performance-based rewards.

9.2 Developing Plans

The process of developing plans is influenced by three contingency factors and by the
planning approach followed.

The three contingency factors are:

1) Level in the organisation;
2) Environmental uncertainty; and
3) The time frames

9.2.1 Approaches to Planning

9.2.1.1 The Traditional Approach – Whereby planning was done entirely by Top-Level
Managers who were often assisted by a formal planning department, a group of planning
specialists whose sole responsibility was to help write the various organisational plans.

54 | P a g e
Under this approach, plans developed by top level managers flowed down through other
organisational levels, much like the traditional approach to goal setting. As they flowed down
through the organisation, plans were tailored to the particular needs of each level.

9.2.1.2 Another approach is to involve more organisational members in the process.

In this approach plans are developed by organisational members at the various levels and in
the various work units to meet the specific needs.

10. Criticisms of Planning

 Plans may create rigidity
 Plans can’t be developed for a dynamic environment
 Formal plans can’t replace intuition and creativity
 Planning focuses manager’s attention on today’s competition, not on tomorrow’s
survival.

 Formal planning reinforces success, which may lead to failure.

11. Decision Making Defined

Decision making can refer to either a specific act or a general process. Decision Making is
the act of choosing one alternative from among a set of alternatives. The decision-making
process, however, is much more than this. One step of the process, for example, is that the
person making the decision must recognize that a decision is necessary and identify the set of
feasible alternatives before selecting one.

Hence, the Decision-Making Process includes recognizing and defining the nature of a
decision situation, identifying alternatives, choosing the “best” alternative, and putting it into
practice.

11.1 The Decision-Making Process

Decision making can be defined as the process by which a course of action is selected as the
solution to a specific problem. Since it is a process, decision making involves a series of
steps.

11.2 Steps In An Effective Decision Making

Step 1: Identifying the Problem

55 | P a g e
The first step in the managerial decision-making process is to identify the problem. Managers
must be aware of a problem and analyze its scope and nature before they can take any steps to
solve it. To identify a problem, managers must recognize that a problem exists, define it, and
then diagnose the situation.

Step 2: Developing Various Alternative Solutions 

After the problem has been identified and analyzed, managers move to the second step of the
decision-making process – generating alternatives. In this step, managers try to develop as
many possible alternative courses of action as they can, including the most obvious as well as
the most creative, but without passing judgement on any of the ideas.

Step 3: Evaluate and Analyze the Various Alternatives Solutions

The third step is evaluating the alternatives by considering the implications, the advantages
and disadvantages and also the likely consequences of each. Managers assess each alternative
and weed out those that seem unfeasible, inadequate, too expensive, or otherwise
unacceptable.

Step 4: Select the Best Alternative

For the entire decision-making process to be successful, considerable thought must be given
to implementing and monitoring the chosen solution. It is possible to make a “good” decision
in terms of the first three steps and still have the process fail because of difficulties at this
final step.

Step 5: Implement the Decision - Take Action

After selecting the best alternative, managers implement the decision. Decision making
managers generally depend on others to carry out decisions, they must carefully consider how
implementation will affect those people and their functions. By openly discussing anticipated
changes and expected results, managers can help their employees adjust to any changes that
stem from the decisions.

Step 6: Evaluate the Results and Provide Feedback

The final step is to evaluate the results and provide feedback about the decision and its
implementation. This allows managers to see whether the results meet expectations and to
make any changes needed to improve the decisions or its implementation. If the original
decision does not achieve the desired results, then perhaps the problem was incorrectly
defined, or perhaps another alternative should be substituted. It is important to give the
decision enough time to work before retracing the decision-making process in search of other
solutions.

56 | P a g e
12. Group Decision Making
Many organisational decisions are made by groups. It’s a rare organisation that doesn’t at
some time use committees, task forces, review panels, study teams or similar groups to make
decisions.

The Manager as decision maker

 Making decisions: Rationality, Bounded Rationality and Intuition.

 Rational decision-making: Managerial decision making is assumed to be rational. By

that we mean that managers make consistent, value maximising choices within
specified constraints.

 A decision maker who was perfectly rational would be fully objective and logical.
Assumptions of rationality:
 The problem is clear and unambiguous.
 A single, well-defined goal is to be achieved.
 All alternatives and consequences are known.
 Preferences are clear.
 Preferences are constant and stable.
 No time and cost constraints exist.
 Final choice will maximize payoff.

Bounded Rationality
 Bounded rationality is a decision-making behaviour that is rational but limited by an
individual's ability to process information.

 Because managers can’t possibly analyse all information on all alternatives, managers
satisfice, rather than maximise.

 Satisficing is the acceptance of solutions that are “good enough”.

Role of intuition
Intuition decision- making is making decisions based on the basis of experience, feelings, and
accumulated judgement. Researchers identified five aspects of managers use of intuition:

1) Managers make decisions based on their past experiences

2) Managers make decisions based on ethical values or culture

57 | P a g e
 3) Managers make decisions based on feelings and emotions
4) Managers make decisions based on skills, knowledge and training.
5) Managers use data from subconscious mind to help them make decisions.

Types of problems and decision

 Structured problems and programmed decisions:
Structured problems are straight forward, familiar and easily defined problems. Programmed
decision is a repetitive decision that can be handled by a routine approach.

For instance, a server in a restaurant spills a drink on a customer’s coat; the manager has an
upset customer and something needs to be done for handling the problem which is a
repetitive problem and as a solution the manager may propose to get the coat cleaned and this
is what we call a programmed decision.
 Unstructured problems and non-programmed decisions: 
Unstructured problems are problems that are new or unusual and for which information is
ambiguous or incomplete. Non-programmed decision is a decision that requires a custom-
made solution. They are unique and nonrecurring.
When a manager confronts an unstructured problem, there is no cut and dried solution. It
requires a custom-made response through non-programmed decision making.

Decision making conditions

There are three conditions managers may face as they make decisions: certainty, risk and
uncertainty.

1) Certainty- the ideal situation for making decisions is one of certainty, that is, a
situation in which a manager can make accurate decisions because the outcome of
every alternative is known. For example, you want to go and deposit your excess
money in a bank, you know the exact interest rate and the amount that you will earn
with that fund in a year.

2) Risk – a far more common situation is one of risk, conditions in which the decision
maker is able to estimate the likelihood of certain outcomes. The ability to assign
probabilities to outcomes may be the result of personal experiences or secondary
information. Under risk, managers have historical data that let them assign
probabilities to different alternatives.

3) Uncertainty – if you are faced with a decision where you are not certain about the
outcomes and can’t even make reasonable probability estimates. Under these
conditions, the choice of alternative is influenced by the limited amount of

58 | P a g e
 information available to the decision maker and by the psychological orientation of
the decision maker. The optimistic manager will follow a maximax choice (maximum
payoff) and the pessimist will follow a maximin choice (minimum payoff).

Decision making styles

Manager’s decision-making styles differ along two dimensions. The first is an individual’s
way of thinking. Some of us are more rational and logical in the way we process information,
others tend to be creative and intuitive. The other dimension describes an individual’s
tolerance for ambiguity. (low tolerance where the person needs consistency and order in the
way they structure information and high tolerance, i.e., they are able to process many
thoughts at the same time)

 Directive style –low tolerance for ambiguity and are rational in their way of thinking.

 Analytic style- greater tolerance for ambiguity –need more information before making
a decision

 Conceptual style- very broad in their outlook and look at many alternatives. They
focus on long run and are very good at finding creative solutions to problems.

 Behavioural style- work well with others, are receptive to suggestions from others.
Acceptance by others is important to this decision-making style.

12.1 Advantages of Group Decision Making

 Generate more complete information and knowledge;
A group is better equipped as far as information is concerned. An individual cannot have all
the information that is available to a group as it consists of several individuals.

 Generate more diverse alternative;

A group always has the advantage of varied views. This is because a group always has
more than one member, and since every member is unique, there is bound to be a variety
in their views also. This is also the reason why there are varied approaches to solving a
problem. As group decisions tend to cover a greater area, they provide a better insight for
decision-making.

 Increase acceptance of a solution; and

The views expressed by a group have more acceptance than those from an individual.
This is because the decisions are not imposed, but are part of a larger consensus (general

59 | P a g e
 agreement). A group decision is automatically assumed to be more democratic, and the
decision of an individual can be perceived as being autocratic (dictatorial).

 Increase legitimacy
 Expert opinions
 Degree of involvement (Encourages people’s participation)

12.2 Disadvantages of Group Decision Making

 Time consuming;
 Minority domination; - individual domination
 Pressures to conform; and
 Ambiguous responsibility
 Compromise decisions
 Expensive
 Groupism

Chapter Six
Organising
1. Definition
Organising is the process by which managers establish working relationships among
employees to achieve goals. It is the process of creating an organisation structure.

Organisational structure is a formal system of task and reporting showing how workers use
resources. It is the formal arrangement of jobs within an organisation.

Organisational Design is when managers make specific choices resulting in a given

organisational structure. It is developing or changing an organisation’s structure.

Managers must take into account 2 kind of factors when they organise;
a) First, they must outline their goals for the organisation, their strategic plan for
pursuing those goals and the capabilities of their organisation for carrying out those
strategic plans.

b) Secondly, simultaneously; managers must consider what is going on and what is

likely to happen in the future in the organisational environment. At the intersection of
those 2 sets of factors; that is plans and environments, managers make decisions that
match goals, strategic plans and capabilities with environmental factors. This critical
first step on organising which logically follows from planning is the process of
organisational design.

60 | P a g e
2. Purposes of Organising
 Divides work to be done into specific jobs and department;
 Assigns tasks and responsibilities associated with individual jobs;
 Coordinates diverse organisational tasks;
 Clusters jobs into units;
 Establishes relationships among individuals, groups and departments;
 Establishes formal lines of authority; and
 Allocates and deploys organisational resources.

3. Organisational Design
Organisational design is a process that involves decisions about 6 key elements:

1) Work specialisation
2) Departmentalisation
3) Chain of command
4) Span of control
5) Centralisation v/s Decentralisation
6) Formalisation

3.1 Work Specialisation – Classical (Frederick Taylor) – Geared towards production

side
This is synonymous to division of labour. It is the degree to which task in an organisation are
divided into separate jobs.

Benefits
Increase efficiency and productivity
Division of works create simplified tasks that can be learned and completed relatively
quickly. Thus, it takes and foster specialisation as each person becomes expert in a certain
job. And because it creates variety of jobs; people can choose or be assigned to positions that
match their talents and interests

Drawback
Boredom or monotony at work

61 | P a g e
Boredom can be a by – product of specialized tasks that become repetitions and personally
dissatisfying. Researchers have found that absenteeism form the job can linked to these
negative effects of job specialisation

3.2 Departmentalisation
Departmentalisation is the grouping of employees and task into areas of work activities that
are similar and logically connected. It forms the basis by which jobs are grouped together.

Every organisation will have its own specific way of classifying and grouping work activities.
Five common forms of departmentalisation exist:

 Functional
 Product
 Customer
 Geographical
 Process
3.2.1 Functional Departmentalisation
It is the grouping of people having similar working skills and expertise (Group jobs by
function performed).

Advantages of Functional Departmentalisation

It makes efficient use of specialized resources. It makes supervision easier since each
manager must be expert in only a narrow range of skills. A functional structure makes it
easier to mobilise specialised skills and bring them to bear where they are most needed

Disadvantages of Functional Departmentalisation

Functional managers have to report to central headquarters. It can be difficult to get quick
decisions. It is often harder to determine accountability and judge performance in a functional
structure. If a new product fails, who is to be blamed?

 Research & Development

 Production or Marketing

Coordinating the functions of the members of the entire organisation my become a problem
for top managers. Because members of each department may feel isolated or superior to those
in other department (Conflicts between different department in 1 organisation)

62 | P a g e
3.2.2 Product Departmentalisation
It is grouping jobs by product line. Here each product area is placed under the responsibility
of a manager who’s responsible for everything having to do with that product line.

Advantages of Product Departmentalisation

1) Because all the activities, skills and expertise requisites to produce and market particular
products are grouped in 1 place under a single head, a whole job can more easily be
coordinated

2) High work performance is maintained

3) Both the quality and speed of decisions – making are enhanced

4) Accountability is clear

5) Performance of divisional management can be measured in terms of divisions’ profit and

loss

3.2.3 Customer Departmentalisation

It is the grouping of jobs on the basis of common customers.

3.2.4 Geographical Departmentalisation

It is the grouping of jobs on the basis of territory or geography.

3.2.5 Process Departmentalisation

It is the grouping of jobs on the basis of product or customer flow. In this approach, work
activities follow a natural processing flow of products or even customers. E.g: CMT –
Structure - Different processes

3.3 Chain of Command

A chain of command is the continuous line of authority that extends from upper
organizational levels to lowest levels, and clarifies who reports to whom. It helps employees
answer questions such as “who do I go to if I have a problem?” or “To whom am I
responsible?”

63 | P a g e
Chain of Command includes 3 concepts:
(1) Authority (The rights inherent in a managerial position to tell people what to do and to
expect them to do it),
(2) Responsibility (The obligation to perform any assigned duties) and
(3) Unity of Command (Each person should report to only one manager).

3.4 Span of Control

Span of Control refers to the number of subordinates reporting to a superior. It is the number
of employees a manager can efficiently and effectively manage.

Narrow Span of Control - A few subordinates reporting to their superior (assume span of 4).
Too narrow a span in contrast is inefficient because managers are underutilised (Depends on
the size of the organisation)
Wide Span of Control - Large number of subordinates reporting to their superior (assume
span of 8).
Too wide a span may mean that managers are over extended and employees are receiving too
little guidance or control. When this happens, managers may be pressured to ignore or
condone serious errors. And employees ‘efforts can be stymied also. In a department where a
dozen or more employees are awaiting for their managers’ feedback; there is potential for
frustration as well as errors

3.5 Centralisation v/s Decentralisation

Centralisation is the extent to which decision making is concentrated at the upper levels of
the organisation.

Decentralisation is the extent to which power and authority is delegated to lower levels of
the organisation. (Freedom to act & Participation in decision – making)

3.6 Formalisation
Formalisation is the degree to which jobs within the organisation are standardised, and the
extent to which employee behaviour is guided by rules and procedures.

Advantage: Procedures are like training tools and thus avoid making mistakes and be more
efficient.

64 | P a g e
Disadvantage: The system can be rendered rigid – Prevent you from using your creativity.

4. Organizational Design Decisions

Organisations don’t have the same structure. A company with 30 employees isn’t going to
look like one with 30,000 employees. But even organisations with comparable size don’t
necessarily have similar structures. What works for one organisation may not work for
another.
 How do managers decide what organisational design to use?
 That decision depends upon certain factors.

4.1 Factors Affecting Organisational Design

4.1.1 Traditional Organisational Design

Traditional organisational design includes the:
(A) Simple Structure: An organisational design with, low departmentalization, wide spans
of control, centralised authority and little formalisation.

Strengths: Fast, flexible, inexpensive to maintain, clear accountability.

Weaknesses: Not appropriate as organisation grows; reliance on one person is risky.

65 | P a g e
(B) Functional Structure is one that groups similar or related occupational specialties
together.

Strengths: Cost savings advantages from specialisation and employees are grouped with
others who have similar tasks.

Weaknesses: Pursuit of functional goals can cause managers to lose sight of what’s best for
overall organisation; functional specialists become insulated and have little understanding of
what other units are doing.

(C) Divisional Structure is an organisation structure made up of separate, semi-autonomous

units or divisions.

Strengths: Focuses on results - division managers are responsible for what happens to their
products and services.
Weaknesses: Duplication of activities and resources increases costs and reduces efficiency.

4.1.2 Contemporary Organisational Designs

Contemporary Organisational Design answer to the challenges of the increasingly dynamic
and complex environments. In response to marketplace demands for being lean, flexible and
innovative, managers are finding creative ways to structure and organise work and to make
their organisations more responsive to the needs of customers, employees and other
organisational constituents.

(1) Team Structures - An organisation structure in which the entire organisation is made up
of work groups or teams. Employee empowerment is crucial in a team structure because there
is no line of managerial authority from top to bottom.

 Advantages: Employees are more involved and empowered. Reduced barriers among
functional areas.

 Disadvantages: No clear chain of command. Pressure on teams to perform.

(2) Matrix Structures - An organisational structure that assigns specialists from different
functional departments to work on one or more projects. Each project is managed by an
individual who staffs his or her projects with people from each functional department. The

66 | P a g e
structure weaves out together elements of functional and product departmentalisation. Hence
the term Matrix.

The matrix design creates a dual chain of command. This violates the organising principle i.e.
Unity of Command. Each employee has two managers.

Who are these Two managers?

They are the Functional and Project managers. These two managers share authority. To
work effectively, the managers have to communicate regularly, coordinate work demands and
resolve conflicts.

Advantages: Fluid and flexible design that can respond to environmental changes; Faster
decision making.

Disadvantages: Complexity of assigning people to projects; Task and personality conflicts.

Chapter Seven
Leadership
1. Leadership
4 Important Implications of leadership definition
It is the process of directing and influencing the tasks related activities of group member in: -
1) Leadership involves other people; that is employees or followers

2) Leadership involves an unequal of power between leaders and group members

3) Leadership is the ability to use different forms of power to influence followers’

behaviours in a number of ways

4) The fourth aspect combines the first 3 and acknowledge that leadership is about
values

 Leadership is the ability to influence employees to voluntarily pursue organisational

goals.

 Leadership means vision, cheerleading, enthusiasm, love, trust, passion, obsession,

consistency, the use of symbols, paying attention, creating heroes at all levels, coaching,
effectively wandering around and numerous other things.

67 | P a g e
2. Managers and Leaders
Leaders manage and managers lead, but the two activities are not synonymous.
̶ Managers surrender to problems
̶ Managers produce orders
̶ Leaders conquer the heart of others
̶ Leaders promote change

John Kotter suggests that one is not better than the other, that in fact they are complementary
systems of action. The difference is that:
 Management is about coping with complexity.
 Leadership is about coping with change.

 Managers are appointed; their ability to influence is based on formal authority

inherent in their position.

 Leaders can influence others to perform beyond actions dictated by formal authority.
Remember that you can be appointed a manager, but you are not a leader until your
appointment is gratified in the heart and minds of those who work for you.

A manager could have earn his / her position of authority for years of service and loyalty to
the organisation rather than owning leadership qualities. Hence, the manager will be obeyed
and will rule but not necessarily be followed

2.1 Being a Manager - Coping with Complexity

Management is necessary because complex organisations, especially the large ones that so
much dominate the economic landscape, tend to become chaotic unless there is good
management.

Managers focus on processors and systems and they work to bring about compromise and
consensus.

According to Kotter, companies manage in three ways:

1) What needs to be done? – Planning and Budgeting;
2) Creating arrangements of people to accomplish an agenda –Organising and Staffing;
3) Ensuring people do their jobs – Controlling and Problem-Solving.

68 | P a g e
2.2 Being a Leader – Coping with Change
As the business world has become more competitive and volatile, doing things the same way
as last year is no longer a formula for success. More changes are required for survival- hence
the need for leadership.

Leadership copes with change in three ways:

1) What needs to be done? – Setting a direction
2) Creating arrangements of people to accomplish an agenda – Aligning people
3) Ensuring people do their jobs – Motivating and Inspiring

Leaders develop vision and have a high sense of action and personal involvement. They
create choices and they are a source of inspiration

2.3 Comparison between a Manager and a Leader

Manager

 Motivates people and organises resources to attain stated organisational goals;

 Pragmatic;
 Limits focus;
 Rational;
 Does things right and by the book;

 Transactional (related to leadership) and linked to production; that is towards cost

management; and

 Static approach.

Leader
o Motivates people to generate new objectives;
o Visionary;
o Widens horizons;
o Emotional;
o Intuitive and does the right thing;
o Transformational; and
o Dynamic approach.

69 | P a g e
3. Five Sources of Power
To really understand leadership, we need to understand the concept of power and authority.
Authority is the right to perform or command; it comes with the job. In contrast power is the
extent to which a person is able to influence others so they respond to orders.
1) Legitimate power
2) Reward power
3) Coercive power
4) Expert power
5) Referent power

1. Legitimate Power
The leader with legitimate power has the right or the authority to tell others what to do.
Employers are obligated to comply with legitimate orders. Example; a superior tells an
employee to remove a safety hazard and the employee removes the hazard because he has to
obey the authority of his boss

2. Reward Power
The leader who has reward power influences others because he controls valued rewards.
People comply with the leader’s wishes in order to receive those rewards. Example; a
manager works hard to achieve his performance goals to get a positive performance review
and a big pay rise from his boss.

3. Coercive Power
The leader with coercive power has control over punishments. People comply to avoid those
punishments. Example; a manager implements an absenteeism policy that administer
disciplinary actions to offending employees. A manager has less coercive power, if say; a
union contract prohibits him from punishing employees harshly

4. Expert Power
The leader who has expert power has certain expertise or knowledge. People comply because
they believe in, can learn from, or can otherwise gain from that expertise. Example; a sales
manager gives his sales people some tips on closing a deal. The sales people then alter their
sales techniques because they respect the manager’s perspective

5. Referent Power

70 | P a g e
The leader with referent power has personal characteristics that appeal to others. People
comply because of admiration, a desire for approval, personal liking or a desire to be like the
leader. Example; young, ambitious managers emulate the work habits and personal style of a
charismatic executive.

4. Theories of Leadership
4.1 Trait Theory
 This approach assumed that leaders share certain inborn personality traits.

 Qualities that come to mind when one thinks about leadership – intelligence,
charisma, decisiveness, strength, bravery, integrity and self-confidence;

 Ex: Mahatma Gandhi, Condoleezza Rice, Tony Blair.

 What traits do they have that non-leaders don’t?

 They meet definition of a leader but have different characteristics.

 Attempts made to identify certain traits consistently associated with leadership.

 6 Traits - drive, desire to lead, honesty, integrity, self-confidence, intelligence and
job relevant knowledge.

 However, Traits alone do not sufficiently explain leadership.

4.2 Behavioural Approach

 When it became evident that effective leaders did not seem to have a particular set of
distinguishing traits, researchers tried to isolate the behaviour characteristic of
effective leaders. Hence, they tried to define leadership based on behaviour not traits.

 What all models of leadership behaviour have in common is the consideration of task-
orientation versus people orientation.

 Three classic studies came out of the universities of Iowa, Michigan and Ohio State.

This is because subsequently, people found that trait theory was not correct – why?
Because people who were not honest become leaders and also people with no courage or
intelligence become leaders

4.2.1 Autocratic and Democratic Leadership

71 | P a g e
One of the 1st studies by Kurt Lewin et al. (1939) at University of Iowa explored 3
leadership behaviours or styles:
1) Autocratic Style - leader typically centralises authority, dictate work methods, make
unilateral decisions and limit employee participation.

2) Democratic Style – involves employees in decision making, delegates authority,

encourages participation and uses feedback.

3) Laissez Faire – generally gives employees complete freedom to make decisions and
complete their work in whatever way they see fit.

4.2.2 The University of Michigan Leadership Model

In the late 1940s, researchers at the University of Michigan came up with what came to be
known as the University of Michigan Leadership Model.

The investigators identified two forms of leadership styles:

a) Employee oriented – emphasise interpersonal relations.

b) Production oriented – emphasise technical aspect of the job and concerned with
accomplishing tasks.

Robert Blake and Jane Mouton – managerial grid based on concern for people and concern
for production

4.2.3 The Ohio State Leadership Model

Another approach to leadership research began in 1945 and hundreds of leadership behaviour
were studied, resulting in what came to be known as the Ohio State Leadership Model.

Two major dimensions of leader behaviour were identified:

i. Initiating Structure – Extent to which leader likely to define and structure his role
and those of employees

ii. Consideration – Leader has job relationship with employees based on mutual trust
and respect for their ideas and feelings

4.3 The Contingency Leadership Model

72 | P a g e
Researchers using the Trait and Behavioural approaches showed that effective leadership
depends on many variables, such as organizational culture and the nature of tasks. No one
trait was common to all effective leaders. No one style was effective in all situations.

Researchers therefore began trying to identify those factors in each situation that influenced
the effectiveness of a particular leadership style. Taken together, the theories resulting from
this research constitute the Contingency Approach to Leadership.

Approaches to isolating key situational variables on effective leadership

 Fiedler’s LPC theory
 Vroom-Yetton Theory
 Path Goal Theory
 Hersey-Blanchard Situational Theory

4.3.1 Fiedler’s LPC Theory

Effective leadership behaviour depends on the situation at hand, say believers of Contingency
approach.

The oldest model of the contingency approach to leadership was developed by Fred Fiedler
and his associates in 1951. The contingency Leadership model determines if a leader’s style
is:

(1) Task-oriented or
(2) Relationship-oriented and if that style is effective for the situation at hand.

Two Leadership Orientations: Tasks versus Relationships

 Are you task-oriented or relationship-oriented? That is are you more concerned with
task accomplishment or with people?

 To find out, you or your employees would fill out a questionnaire in which you think
of the co-worker you least enjoyed working with and rate him or her according to an
eight-point scale of 16 pairs of opposite characteristics. The higher the score, the more
the relationship-oriented the respondent; the lower the score, the more task-oriented.

The three dimensions of Situational Control

73 | P a g e
Once the leadership orientation is known, then you determine situational control- how much
control and influence a leader has in the immediate work environment. There are three
dimensions of situational control:
1) Leader-member relations – “Do my subordinates accept me as a leader?”

2) Task structure - “Do my subordinates perform unambiguous, easily understood

tasks?”

3) Position power - “Do I have the power to reward and punish?”

4.3.2 Vroom – Yetton Theory

Identifies Five decision making styles:
1) Autocratic 1 – Leader uses information already available to make decisions.

2) Autocratic 2 – Additional information obtained from group before leader reaches

decision.

3) Consultative 1 – After sharing the problem with subordinates individually, leader

comes to a decision.

4) Consultative 2 – Group discussion on the problem before leader decides.

5) Democratic – Sharing of the problem with the group of subordinates for group
decision while leader acts as chair.

4.3.3 Path Goal Theory

The basic path goal theory is that the leader affects the subordinate performance by clarifying
behaviours (path) that will lead to desired rewards (goals).

There are Four effective leadership styles:

1) Supportive
2) Directive
3) Participative
4) Achievement-Oriented

4.3.4 Hersey-Blanchard Situational Theory

Matching leadership style to the maturity of the followers:
̶ Psychological maturity

74 | P a g e
 That is the followers’ self-confidence, desire for achievement and readiness to accept
responsibility

̶ Job maturity
That is the followers’ tasks related ability, relevant skills, technical knowledge and
experience

Leadership could involve:

̶ Delegating to followers
̶ Participating with followers
̶ Selling ideas to followers
̶ Telling followers what to do

4.4 Emerging Approaches to Leadership

4.4.1 Charismatic Leadership Theory – Followers attribute heroic or extraordinary
leadership abilities when they observe certain behaviours
 Studies attempt to identify those behaviours that differentiate charismatic leaders from
their non-charismatic counterparts.

 Examples: John Kennedy, Martin Luther King

 Some identify personal characteristics of charismatic leader.

(A) Warren Bennis found 4 competencies:

1) Have a compelling vision or sense of purpose;
2) Communicate vision in clear terms that followers can readily identify with;
3) Consistency and focus in pursuit of vision; and
4) Know their strength and capitalise on them

(B) J. Conger and R. Kanungo found 4 competencies:

1) Have an idealised goal and strong commitment to it;
2) Perceived as unconventional;
3) Assertive and self-confident; and
4) Perceived as agents of radical change rather than as managers of the status quo.

4.4.1.1 Charismatic Leaders influence followers by a 4-step process:

 Appealing vision;

75 | P a g e
  Leader communicates high expectations and confidence that followers can attain
them;

 Leader conveys new sets of values and sets examples for followers to imitate; and

 Leader makes self-sacrifices and engages in unconventional behaviour to demonstrate

courage and conviction about the vision

4.4.1.2 Visionary Leadership Style

Is the ability to create and articulate a realistic, credible, attractive vision of the future for an
organisation that grows out of and improves on the present.

Vision taps people’s emotions and energy and create the type of enthusiasm that people have
for sporting events and other leisure activities bringing this energy and commitment to the
workplace.

(A) Visionary Leaders – 3 qualities related to their effectiveness

1) Ability to explain vision to others – strong communicator
A leader’s vision cannot become a reality unless he shares it with the group

2) Ability to express vision not only through words but through leader’s behaviour
A leader has to inspire followers of that group to internalize his vision when that
internationalization takes place; the group becomes the people who are sharing that
vision

3) Ability to extend vision to different leadership contexts

4.4.2 Transactional Leadership

As a manager, your power stems from your ability to provide rewards in exchange for your
subordinates’ doing the work. When you do this, you are performing transactional leadership,
focusing on clarifying employees’ roles and task requirements and providing rewards and
punishments contingent on performance.

Transactional leadership also encompasses the fundamental managerial activities of setting

goals and monitoring progress toward their achievement.

The leader uses position power and the followers are motivated by self – interest: -
“A fair – day’s pay for a fair day’s work” is the guiding principle

76 | P a g e
Transformational leaders are objective oriented

4.4.3 Transformational Leadership

Transformational leadership transforms employees to pursue organisational goals over self-
interests.

Transformational leaders, in one description, “engender trust, seek to develop leadership in

others, exhibit self-sacrifice and serve as moral agents, focusing themselves and followers on
objectives that transcend the more immediate needs of the work group.”

Transformational leaders build a transactional leadership and try to achieve performance

beyond expectation. Transformational leaders are vision oriented.

Chapter Eight
Control
1. Definition
Control means to check or to regulate, or to give directions, so as to ensure that action is
taken to achieve a goal or target, or to conform to expectations. A control is a device or
technique for putting control into practice.

Controlling is monitoring performance, comparing it with goals, and taking corrective action
as needed. Controlling is the fourth management function, along with planning, organising
and leading, and its purpose is plain: To make sure that performance meets objectives.

Expectations = Dreams
V/s
Perception = Nightmares

 Planning is setting goals and deciding how to achieve them.

77 | P a g e
  Organising is arranging tasks, people and other resources to accomplish the work.

 Leading is motivating people to work hard to achieve the organisation’s goals.

 Controlling is concerned with seeing that the right things happen at the right time in
the right way.

2. Purpose of Control
o The purpose is to get people reporting to you to achieve productivity and results.
o Control is making something happen the way it was planned to happen.

3. The Importance of Control

There are six reasons why control is important.
 To adapt to change and uncertainty;
Uncertainty arises because organisational goals are set for future events on the basis
of the best knowledge at the time, yet things do not always go according to plan. A
variety of factors in the environment typically operate to bring about changes in such
areas such as customer demand, technology and the availability of raw materials. By
developing control systems; managers are able to monitor specific activities and react
quickly to significant changes in the environment more efficiently
 To discover irregularities and errors;
Controls also help managers detect undesirable irregularities such as product defects,
costs – overrun or rising personal turnover. Early detection of such irregularities often
can save a great deal of time and money by preventing minor problems from
mushrooming into major areas. Finding mistakes early also sometimes avoid
problems that can be difficult to rectify such as missing deadlines or selling faulty
merchandises to customers

 To reduce costs, increase productivity and add value; - MBO

Higher productivity, with minimum costs & resources [ Output, Inputs – least
resources being used for maximum profitability

 To detect opportunities; - TQM Approach

Controls also help highlight situations in which things are going better than expected
which alerts management to possible future opportunities

 To deal with complexity; and

As organisations grow larger or engage in more complex operations and projects,
control enhance coordination and help managers keep track of various major elements
to be sure that they are well synchronised. Operating on an international basis often
increases complexity and calls for further consideration of necessary controls

78 | P a g e
  To decentralise decision-making and facilitate team work.

4. Levels of Control
 Strategic Control by Top Managers
 Tactical control by Middle Managers
 Operational Control by First-Level Managers

5. Tools Of Control
 Policies and Plans: To ensure standards are adhered to there should be written policy
manuals.

 Delegation of work to the subordinates: Make the respective staff accountable for
his activities.

 Monitoring and spot-check on the workers’ performance.

 Quality and Quantity Controls: This is to be carried out by actually measuring the
amount of work done – by count, by weight and by comparing results with the
standard set.

 Expenditure Control: Budgets covering sales and expenditure and these budgets will
be incorporated in a master budget.
 Reporting: Mostly monitoring of activities is done by reporting in one form or
another.

6. Steps in the Control process

a) Determine areas to control: “What need to be controlled?”

b) Establish standards: “What is the desired outcome we want?”

c) Measure performance & Compare performance to standards:

̶ “What is the actual outcome we got?”

̶ “How do the desired and actual outcomes differ?”

d) Take corrective action if necessary: “What changes should we make to obtain

desirable outcomes?"

7. Types of Control
7.1 Controls by Timing

79 | P a g e
  Feedforward Control: Control for the future – Before the work begins. Ex:
Inventory control.

 Concurrent Control: Control for the present – While the work is in process. Ex:
Statistical Process Control (SPC).

 Feedback Control: Control for the past – After the work is done. Ex: Quality
Control.

7.2 Multiple Controls

Most organisations use a combination of two or more of the control types in order to be able
to maintain higher overall quality.

This use of multiple controls scrutinises and, when required, correct at each stage, with the
aim of ensuring quality is maintained or improved, is the basis on which management
practices TQM.

7.3 Cybernetic / Non-Cybernetic Control

Cybernetic control system automatically monitors and makes the necessary adjustments when
needed.
A non-cybernetic control system relies partly on human beings and this type of control is
used in most organisations. Many times, the activities that need to be controlled are complex
and can be difficult to predict. Therefore, human decisions are essential before any action is
taken.

8. Areas of Control
 Physical Resources
 Human Resources
 Informational Resources
 Financial Resources

9. The Principle of Effective Control

9.1 Future-Oriented
To be effective, control systems need to help regulate future events, rather than fix blame for
past events.

9.2 Control systems must be high but achievable

80 | P a g e
The control system should be fair, observable, measurable, specific, relevant and
participatively set.

9.3 Acceptable to Organisation Members

The control system should be tailored to the culture of the Organization.

9.4 Control Systems should be Simple

Control system should not be too sophisticated.

9.5 Cost Effective

Control should be economical – i.e. the controls installed should not cost more than they will
save.

9.6 Accurate
Since control provides the basis for future actions, accuracy is vital.

9.7 Realistic
Control systems should incorporate realistic expectations about what can be accomplished.

9.8 Flexible
Control systems need to be flexible enough to respond rapidly to changing environments, to
meet new or revised requirements.

9.9 Timely
Control systems are designed to provide data on the state of a given production cycle or
process as of a specific time, a monthly sales report, a weekly update on a project, a daily
production report or quality inspections on a production line. Corrective action should be
taken promptly and consistently.

9.10 Monitorable

81 | P a g e
Control systems should be monitorable to ensure they are performing as expected. Feedback
information must be available to the Management in time for corrective action to be taken
before matters have gone too far wrong.

10. The Problems Of Control

Control theory may sound all well and good, but there are a number of serious problems to
overcome in applying theory to practice. The problems are:

(a) Preparing a standard or plan in the first place, which is reliable, and acceptable to the
manager who will be responsible for the achievement of the standard or plan.

(b) Measuring actual results with sufficient accuracy; this may be particularly difficult
in-service departments such as offices, since clerical work is not often directly
measurable as “output”.

(c) Measuring actual results with suitable feedback periods – keeping the reporting cycle
time sufficiently short to give managers a chance to take prompt control action when
serious deviations from plan occur.

(d) Identifying the causes of variations between actual results and the standard or plan,
and distinguishing controllable from uncontrollable causes.

(e) Drawing the attention of managers to a deviation between actual results and plan, and
persuading them to do something about it.
(f) Co-ordination the plans and activities of different departments in the Organization.

(g) Everybody who needs to be informed about how results are going must be kept in
touch in a way that they can understand. In actual work environment, this may be
difficult to achieve.

11. Budgetary Control

A budget is a formal financial projection. It states an organisation’s planned activities for a
given period of time in quantitative terms. Budgets are prepared not only for the organisation
as a whole but also for the divisions and departments within it. The purpose of a budget is to
provide a yardstick against which managers can measure performance and make
comparisons. (as with other departments or divisions).

11.1 Purposes of Budgets

 To Compel Planning;
 To Communicate Ideas & Plans to Everyone Affected by Them;
 To Co-ordinate the Activities of Different Departments;
 To Establish A System of Control; and

82 | P a g e
  To Motivate Employees to Improve Their Performance

11.2 Advantages of Budgetary Control

1) The expenditure limits set do impose a brake on extravagance and unthinking financial
commitments: they ensure that serious consideration is given before expenditure is
indulged instead of afterwards.

2) The preparation of budgets requires all concerned to examine very closely the working of
their departments. These actions tend to impose restraints on unrealistic ambitions and
emphasize the need for practical and attainable goals.

3) All budgets are interdependent; budgetary control has a positive effect on co-ordination.
Related departments must work together in order that their budgets may be compatible.

4) Periodical budget review statements and the holding of regular budgetary control review
meetings ensure constant monitoring of budget performances.

5) Monitoring has two effects.

 The first, is that Managers and others responsible for budgets are disposed to try to
ensure that the budget figures are adhered.

 The second, is the non-compliance with budgeted performance is brought to

management’s attention at an early stage so that remedial action can be taken with the
minimum of delay.

6) Monitoring may also reveal that the original budgets have been unrealistic and that the
figures may have to be adjusted in the light of internal or external conditions.

7) Managers are responsible for their own budget figures, they have an incentive to keep
within the limits set, and to ensure that their staff comply with the constraints put upon
the department.

11.3 Disadvantages of Budgetary Control

1) A budget is a monitoring aid, it is not a regulator. If expenditure is necessary outside the
scope of the budget to ensure efficient operation, this additional cost must be argued for
and in many cases, not approved by Management.

2) When a budget surplus is available, departments tend to have the “must be used up”
attitude.

83 | P a g e
3) Any surplus from one budget will not be passed over to a budget likely to be in deficit,
even though for practical reasons, this may be highly desirable. This does not benefit the
Organization as a whole.

4) In times of fluctuating prices, budgeting becomes difficult and when high rates of
inflation occur, budgets become out-of-date very quickly.

5) Budget planning and meeting is time consuming, management personnel spent too much
of their resources to get them done.

Contemporary control Issues

 Cost effectiveness
 Ethics
 Employee Theft
 Workplace Violence
 Governance

Chapter Nine
Motivation
1. The Challenge of Motivation
Managers have a direct responsibility for ensuring that the workforce is highly motivated.
 One of the manager’s primary tasks is to motivate people in the organisation to
perform at high levels.

 If managers fail in this role, the consequences for the organisation can be very severe.

 Where motivation is low or absent, performance is poor and organisations very often
face difficulties and make losses.

2. Definitions of Motivation
According to Luthans (1999), the word motivation is derived from the Latin word “movere”,
meaning to move.

84 | P a g e
  Robbins & Coulter (1999) have defined motivation as “the willingness to exert high
levels of effort to reach organisational goals as conditioned by that effort’s ability to
satisfy some individual need.”

 To Nelson & Quick (1997), motivation is “the process of arousing and sustaining
goal-directed behaviour.”

3. Theories of Motivation: An Overview

There are many motivation theories. Each motivation theory attempts to describe what
human beings are and what human beings can become.

3.1. Early Views of Motivation

3.1.1. A So-Called Traditional Model
Associated with the works of Taylor (1856–1915), Gantt (1861–1919) and Gilbreth (1868–
1924), and popularly known as the Scientific Movement, contained interesting propositions
about how to obtain higher levels of output from employees.

̶ Wage incentive models (the use of piece-rate systems) were the main tool used to
reward employees.

3.1.2. A So-Called Human Relations Model

Associated with E. Mayo and argued that people were not motivated by money, material
rewards or selfish gains only.
 Employees, being human beings, were also responsive to the human environment at
work.

 Attitudes of supervisors, work colleagues, interpersonal communication, consultation

and participation were considered to be responsible for the attitudes’ employees will
develop and their performance.

3.2. Need or Content Theories

This theory is based on the belief that an unsatisfied need creates tension and a state of
imbalance. As such, all behaviour is therefore motivated by unfulfilled needs.

Needs theories have been developed by:

Contributors Theories

85 | P a g e
1. Abraham Maslow The Hierarchy of needs
2. Douglas McGregor Theory X and Theory Y
3. Frederick Herzberg Motivation-Hygiene Theory
4. Clayton Alderfer ERG Theory
5. David McClelland Acquire-Needs Theory

3.2.1. Abraham Maslow Hierarchy of Needs

Maslow identified five main need categories which apply to people in general.

According to Maslow, individuals will be motivated to fulfill whichever need is prepotent, or

most powerful, for them at a given time.

 The prepotency of a need depends on the individual’s current situation and recent
experiences.

 Starting with the physical needs, which are most basic, each need must be satisfied
before the individual desires to satisfy a need at the next higher level.

3.2.2. Douglas McGregor Theory X and Theory Y

McGregor’s Theory X and Theory Y relate to the assumptions that managers can make
about work and human beings.

 Theory X takes the view that people cannot be trusted and they normally would avoid
work. Theory X would lead managers to adopt a “carrot and stick” philosophy.

86 | P a g e
  On the other hand, Theory Y is based on assumptions that people can be trusted and
they like working. Theory Y would encourage managers to give employees more
autonomy and help them towards self-actualisation.

3.2.3. Frederick Herzberg’s Motivation-Hygiene Theory

It was anticipated that people have the aptitude to echo accurately the settings that made them
satisfied and dissatisfied with their jobs and these were grouped into two sets of factors.

 The first set of factors, known as the Motivation factors, is directly concerned with
the content of the work and how people feel about the job.

̶ Motivation factors are the satisfiers elements. It consists of advancement, growth,

responsibility and the work itself

 The second set of factors, known as the Hygiene factors, is related to the context of
the work and can affect levels of motivation.

̶ Hygiene factors (Dis – satisfiers) – the elements are company policy and
administrative issues, supervision, salary, status, interpersonal relation and
working conditions.

̶ The dis – satisfiers are the preventive and environmental in nature and they are
roughly equivalent to as those of lower level needs. They prevent dis – satisfaction
but do not lead to satisfaction and do not motivate
3.2.4. Clayton Alderfer’s ERG Theory
ERG Theory, the needs for Existence (E), Relatedness (R) and Growth (G) as formulated by
Alderfer (1972) is about the subjective states of satisfaction and desire.

 Satisfaction concerns the outcome of events between people and their environment. It
is a subjective reaction which refers to the internal state of people who have obtained
what they are seeking and is synonymous with getting and fulfilling.

 Desire is even more subjective because it refers exclusively to the internal state of a
person related to needs, wants, preferences and motives.

Alderfer agreed with Maslow that worker motivation could be gauged according to a
hierarchy of needs. However, his ERG theory differs from Maslow’s theory in two basic
ways:

87 | P a g e
(1) First, Alderfer broke needs down into just three categories;
- Existence needs (fundamental needs)
- Relatedness needs (needs for interpersonal relation)
- Growth needs (needs for personal creativity or productive influence).

(2) Second, and more important, Alderfer stressed that when higher needs are frustrated,
lower needs will return, even though they were already satisfied.
 Maslow, in contrast, felt that a need, once met, lost its power to motivate behaviour.

 Where Maslow saw people moving steadily up the hierarchy of needs, Alderfer saw
people moving up and down the hierarchy of needs from time to time and from
situation to situation.

3.2.5. David McClelland’s Acquired Needs Theory

An alternative way of classifying needs was developed by McClelland (1975), who based it
mainly on studies of managers. He identified three needs as being most important:
 
1) Need for Achievement (nAch): the need for competitive success measures against a
personal standard for excellence.

2) Need for Affiliation (nAff): the need for warm, friendly, compassionate
relationships with others.

3) Need for Power (nPow): the need to influence or control others.

3.3. The Process or Cognitive Theories

Much focus is on the psychological processes or forces that affect motivation, as well as on
basic needs.

88 | P a g e
  It is referred to as cognitive theory because it is concerned with people’s perceptions
of their working environment and the ways in which they interpret and understand it.

 According to Guest (1992), “the process theory provides a much more relevant
approach to motivation. Process or cognitive theory can certainly be more useful to
managers than needs theory because it provides more realistic guidance on motivation
techniques.”

The major Process or Cognitive Theories are:

1. Victor Vroom’s Expectancy Theory (The VIE Theory) 
2. J. Stacy Adam’s Equity Theory 
3. Edwin A. Locke and Gary P. Latham’s Goal-Setting Theory

3.3.1. Victor Vroom’s Expectancy Theory (The VIE Theory)

The concept of expectancy was formulated by Vroom (1964) and is based on three key
concepts: 
(a) Expectancy (E) – Efforts will lead to a particular outcome.
(b) Instrumentality (I) – Performance will be rewarded.
(c) Valence (V) – Value of rewards are attractive.

The effort that employees are willing to put will be a function of (V, I and E), and the
performance itself will depend upon the available rewards, which can be either:
 Extrinsic (pay rise, bonus, promotion, commissions, awards) or
 Intrinsic (recognition, sense of achievement, growth).

Vroom’s Theory has a multiplicative dimension in that:

Motivation = V x I x E

Note that if any of the three elements, Valence, Instrumentality or Expectancy is zero,
motivation would be zero. As such, if these three conditions are satisfied, employees will be
motivated to perform their duties.

3.3.2. J. Stacy Adam’s Equity Theory

Equity theory states that if people are treated equitably, they will be motivated and if they are
treated inequitably, they will feel demotivated.

89 | P a g e
As pointed out by Adams (1965), there are two forms of equity:
a) Distributive equity is concerned with whether one believes he has received or will
receive fair rewards. The perception of fairness is based on the value of the reward as
compared to others; and

b) Procedural equity or procedural justice is concerned with the system of reward. It is

based on whether the system of reward is perceived to be fair or not in such areas as
performance appraisal, promotion and discipline in the organisations.

3.3.3. Edwin A. Locke and Gary P. Latham’s Goal-Setting Theory

It suggests that the manner in which goals are set, their attributes and characteristics, the
participation of employees, feedback are all factors that are likely to influence behaviour and
performance. The basic premise of the theory is that a person’s own objectives can have a
powerful influence on performance.

The concept of Management by Objectives (MBO) is based on this approach to motivation.

Specific goals have more motivational impact than vague and imprecise ones; when they are
self-set, they lead to self-efficacy on the part of the individuals concerned i.e., the belief that
they are capable of doing the job.

3.4. The Reinforcement Theory

The Reinforcement Theory of motivation developed by B. F. Skinner is based on the law of
effects.

The argument here is that behaviour can be explained in terms of the outcomes that they
produce.

Ex: If an employee is politely requested by the boss to help complete a piece of urgent work,
and the employee sacrifices his or her lunch-time to complete, and is thereafter warmly
congratulated by the boss, that employee is most likely to repeat the behaviour. On the
contrary, if after completion of the work, there is total ignorance or indifference on the part of
the boss, the employee will be hurt and will consider the whole experience as not being
worthwhile.

90 | P a g e
  The Reinforcement Theory does not take into account the cognitive or thought
processes of the individual performing a particular task to explain the behaviour.

 It is based on environmental conditions or cues. The guiding principle of the

Reinforcement Theory is that behaviour with pleasant consequences are more likely
to be repeated than behaviour with unpleasant consequences.

The concept of reinforcement can be used in a number of ways to obtain the desired
behaviour:

 Positive Reinforcement: Use of praise, pay rise increments, time-off, promotions.

 Negative Reinforcement: The prospect of having to bear a negative stimulus (no

recommendation for promotion from the immediate supervisor if the employee fails to
do some overtime).

 Extinction: Withholding of some privileges or facilities previously available (time-

off, leaving early to pick up children from school) until the undesired behaviour is
discontinued.

 Punishment: A direct sanction (transfer, disciplinary action, suspension) whenever

employee’s behaviour is undesirable.

Chapter Ten
Communication
[2-way process – Receive feedback {Very Important} at the end to your audience] –
expectation

1. What is Communication?
Communication is one of the most pervasive of human activities. It takes place in various
forms: talking, listening, reading, writing, drawing, gesturing, seeing, smelling, feeling,
touching or tasting.

According to Raymond et al. (1989),

It is one activity that we human beings clearly do better than other forms of life on earth, and
it largely explains our dominant role.

91 | P a g e
Some more Definitions of Communication:
 According to Carell et al., Communication is the glue that binds various elements,
coordinates activities, allows people to work together and produces results.

 Communication according to Cole is the process of creating, transmitting and

interpreting ideas, facts, opinions and feelings. It is a process that is essentially a
sharing one (interchange between two or more persons).

2. Importance of Communication for Managers

(i) Everything a manager does involves communicating
̶ A manager cannot formulate strategy or make a decision without information.
̶ That decision has to be communicated.
̶ Once decision is made, communication must again take place.

(ii) Managers therefore need effective communication skills.

(iii) Ineffective communication can lead to lot of problems.

 Active listening can lead to a better understanding of a message. Empathy require one -
self to be in the speaker’ shoes. An active listener develops acceptance. He listens
objectively without making a premature evaluation

̶ HSBC – “Never underestimate the importance of local culture”

̶ Parent company – English (England Company)

3. The Communication Process

 Communication can be thought as a flow or process

 Communication problems occur when there are deviations or blockages in the

process.

92 | P a g e
  For communication to take place, a purpose is needed which is expressed as a
message.

 It passes between a source (i.e. Sender) and a receiver.

 The message is Encoded (converted to a symbolic form) and passed by the means of a
medium (i.e. Channel) to the receiver, who translates (i.e. Decodes) the message sent
by the sender.

 The result is the transfer of meaning from one person to another. (i.e. Receiver)

3.1 How does the Communication Process work?

(a) Sender
The communication source (sender) initiates a message by encoding a thought.

(b) Encoding
The message is the physical output from the source.
 When we talk, speech is the output
 When we write, the writings are the output

The message is affected by the code (group of symbols) we use to transfer meaning, the
content of the message itself and the choices we make in selecting and arranging the code and
content.
(c) Channel
The channel is the medium through which the message travels.
 Channel is selected by the source who decides on a formal or informal channel.

 Formal channels established in organisations transmit messages that pertain to job

related activities of members. It follows the authority network within the organisation.

 Other forms of messages such as personal or social follow informal channels in the
organisation.

(d) Decoding
 Before message can be received, the symbols in it must be translated into a form that
can be understood by the receiver. This is the decoding.

93 | P a g e
  Decoding just as encoding is affected by the receiver’s skills, attitudes, knowledge
and cultural background.

(e) Receiver
The receiver is the person to whom the message is directed.

(f) Feedback
Feedback is the check on how successful we have been in transferring our messages as
originally intended. It determines whether understanding has been achieved.

Given cultural diversity of the workforce today, effective feedback is very important to
ensure proper communication.

(g) Noise
The extraneous and distracting stimuli that influence any of the six steps mentioned above.
These are usually uncontrollable factors such as competitive advertising, other sales
personnel, and confusion at the receiving end that influence the effectiveness of the
communication.

4. Types or Forms of Communication

Organisations have recourse to two broad types of communication:
(i) verbal or non-verbal
(ii) Another popular form of communication is audio-visual

All these are referred to as the media for communication. i.e., How and by what means
organisations communicates.

4.1 Verbal Communication includes both Written and Oral communication.

4.1.1 Written Communication
o These are circulars, memos, letters, faxes, e-mails, newsletters and reports

o They are tangible, verifiable and more lasting than oral communication.

o Both the sender and the receiver can retain a record of written communications.

94 | P a g e
 o It can be stored for a long period of time and be physically available for later
reference especially for lengthy or complex communications for example strategic
plan of organisations.

o Written communications are more likely to be well thought out, logical and clear.

o But writing is more time consuming.

o There is also lack of feedback.

Advantages of Written Communication

1) Written communication are permanent; tangible and can be verified
2) The message can be stored permanently, and retrieve as when necessary
3) More care is taken with conveying message on paper
4) Both the sender and the receiver have a record of the communication

Disadvantages of Written Communication

1) It is more time consuming than oral communication
2) Less information can be sent written than conveyed orally
3) There can be a slow feedback or a lack of it
4) Response rate can be poor at times
5) The sender must make the effort to read and interprete the message

4.1.2 Oral Communication

 Oral or face to face communication takes place when words are spoken directly. Such
communication can take place through some electronic media like mobile phones or
video-conferencing.

 Oral communication also includes tone, speed, pitch and volume and which are frequently
used in meetings, while doing work, during presentations and formal speeches.

Advantages of Oral Communication

1) There is quick transmission of information and quick feedback
2) Responds is obtained very quickly
3) It allows the sender to detect the uncertainty and correct information

Disadvantages of Oral Communication

1) The more people are involved, the greater is the message subject to distortion
2) The message content can be distorted when it reaches the receiver
3) It requires people of good oral capability to convey a clear and understandable
message

95 | P a g e
4.2 Non-Verbal Communication
 Some of the more meaningful communications are neither spoken nor written. They are
non-verbal communications. Examples are: a firemen siren or a red light.

 Body language refers to gestures, facial configurations and other movements of the body.

 Verbal intonation refers to the emphasis someone gives to words or phrases. Intonations
can change the meaning of a message.

 Oral communication also has a non-verbal message.

Advantages of Non – Verbal Communication

1) In modern times, electronic media have become important channels of
communication. The fastest growing is the electronic mail (E – Mail)

2) It allows individuals to transmit in real times written message on computers.

Messages are sent to the receivers’ terminal to be read at the receivers’ convenience.
E – Mail is fast and cheap compared with other methods

Disadvantages of Non – Verbal Communication

1) People need a computer to have access to such a message
2) Messages can be sent but are read later because they are transmitted silently

5. Communication Flows or Channels

The flow of communication can take place in two ways:
(a) Vertically – Vertical communication involves communication between two or more
levels of the organisation. When it flows from a higher to a lower level, it is referred to as
downward communication.

Management uses this channel to inform employees about plans, policies, job instructions and
feedback.

The other form of vertical communication is known as upward communication.

(b) Horizontally – Horizontal communication takes place within and across the same levels,
among people working on similar tasks or some specialists.
It is referred to as lateral communication.

96 | P a g e
It can take various forms like meetings, face to face exchanges, memos, group discussions
and telephone conversations.

Coordination, cooperation and integration are important objectives of horizontal

communication.

5.1 Grapevine (Known as Office Politics) – Sensationalism

 The grapevine is the unofficial way that communications take place in an organisation.
 Information is spread by word of mouth and even through electronic means.
 The grapevine gets information out to organisational members as quickly as possible.

6. Purposes of Communication

Organisational Communication

Achieve Share Information Express

Coordinated Feelings and
 Organisational Goals Emotions
action
 Task Directives
 Results of Effort
 Decision - making

7. Barriers to Effective Communication

̶ Filtering - This refers to a sender manipulating information so that the receiver will see it
more favourably.

̶ Selective Perception - This takes place when the receivers in the communication process
selectively see and hear, based on their needs, motivations, experience, background and
other personal characteristics. Receivers of information also associate their interests and
expectations into communications as they decode them.

̶ Information Overload – Individuals have a finite capacity for processing data. When
individuals have more information that they can sort out and use, they tend to select,
ignore, pass over or forget information or they may put off processing until overload is
over.

97 | P a g e
̶ Emotions – How the receiver is feeling when he receives a message influences how
he\she interprets it. You may interpret same message differently depending on whether
you are happy or annoyed.

̶ Defensiveness – This occurs when people try to defend their position because of certain
threats. They have a tendency to engage in such behaviours as verbally attacking others,
making sarcastic remarks, being overly judgmental, and questioning others’ motives.

̶ Language and Culture – Words and terms mean different things to different people.
Age, education and cultural background are three of the more obvious variables that
influence the language a person uses and the definitions he or she gives to words.

8. How can Managers overcome Communication Barriers?

 Use feedback;
 Use simplified language;
 Listen actively;
 Constrain emotions; and Align non-verbal signals

9. Information and Communications Technology

 Information technology has made it possible for people in organisations to be
accessible 24 hours a day, 7 days a week regardless of where they are.

 Networked Computer System - Where an organisation links its computers together,

creating an integrated network and communication applications including e-mail,
instant messaging, voice mail, fax, electronic data interchange, intranets and
extranets, talking internet applications.

 Wireless devices such as wireless smart phones, notebook computers and other pocket
communication devices are new ways for managers to “keep in touch”

Chapter Eleven
Introduction to Organizational Behaviour
1. Introduction to OB
Organisational Behaviour shows those hidden aspects that exist in an organisation
Those aspects that are visible are as follows: -
̶ Strategies
̶ Objectives
̶ Structure
̶ Technology
̶ Authority

98 | P a g e
Those which are invisible and relate to organisational behaviour are: -
 Attitudes
 Perceptions
 Group Norms
 Informal Interaction
 Interpersonal Conflicts

 Understanding people’s perceptions, attitudes, motivations and behaviours is extremely

important for achieving both managerial and organisational effectiveness.

 To get the very best out of people in work settings, managers constantly need knowledge
about the behaviour of individuals and groups in organisations; they also need to be aware
of the organisational and environmental variables that can potentially affect human
behaviour.

 They need to understand, anticipate, modify and improve behaviours that are
organisationally meaningful and relevant.

2. Definition
Organizational Behaviour:
As defined by Robbins:
A field of study that investigates the impact that individuals, groups and structure have on
behaviour within organisations for the purpose of applying such knowledge toward
improving an organisation’s effectiveness.

As defined by Luthans:
The understanding, prediction and control of human behaviour in organisations
 OB is a discipline that helps us to acquire valuable knowledge about the behaviour of
individuals and groups in organisational settings.

 It also helps us to be aware of environmental developments that affect the behaviours of

people in organisations. Such knowledge enables managers to better understand the
reasons behind human behaviour, to explain and influence such behaviour, so that
organisations respond to changing needs of societies in a more effective manner.

 The application of OB knowledge contributes towards the productive use of human

resources at work

 If a manager depends on his operatives to succeed; then the success depends on his ability
to explain why employees have a particular behaviour at the workplace

99 | P a g e
3. Frameworks for the study of OB
According to Davis (4 frameworks):
3.1 - Autocratic Model - Based on power, authority and dependency on the manager. The
worker’s role is to execute the instructions of the manager.

3.2 - Custodial Model - To overcome the limitations of the Autocratic model, it was argued
that if conditions could be created to provide some degree of satisfaction to employees, the
organisations could obtain better contributions from their workforce [Relates to democratic -
Job empowerment & Participate in decision – making]

3.3 - The Supportive Model - In the 1930’s and 1940’s, the work of E.Mayo at Western
Electric Company in USA, demonstrated that workers perform better if they are trusted, and
external control is replaced by leadership and self-control. Psychological support assumes
precedence over economic support.

3.4 - The Collegial Model - During the 1960’s and 1970’s researchers like Katz, Likert etc.
developed the collegial model. In the context of a work environment characterised by
unprogrammed activities requiring teamwork and greater flexibility, managers and employees
work as partners.

4. Focus of OB
OB focuses on two major areas:
a) Individual behaviour – personality, attitudes, perception, learning and motivation

b) Group behaviour – includes norms, roles, team building, leadership and conflict

5. Goals of OB
The goals of OB are to explain, predict and influence behaviour. Five important employee
behaviour have been identified:

5.1 - Employee productivity is a performance measure of both efficiency and effectiveness.

Managers want to know what factors will influence the efficiency and effectiveness of
employees.

5.2 - Absenteeism is the failure to report to work.

100 | P a g e
5.3 - Turnover is the voluntary and involuntary permanent withdrawal from an organisation.
Just like absenteeism, managers can never eliminate turnover but it is something they want to
minimise.

5.4 - Organisational citizenship behaviour is discretionary behaviour that is not part of an

employee’s formal job requirements, but that nevertheless promotes the effective functioning
of the organisation. E.g. helping others on one’s work team, volunteering for extended job
activities, avoiding unnecessary conflicts.

5.5 - Job satisfaction is an employee’s general attitude toward his or her job. Although job
satisfaction is an attitude rather than a behaviour, it’s an outcome that concerns many
managers because satisfied employees are more likely to show up for work and stay with an
organisation.

6. Attitudes
Attitudes are evaluating statements – either favourable or unfavourable, concerning objects,
people or events. They reflect how an individual feel about something. When a person says” I
like my job”, he or she is expressing an attitude about work.

Managers are interested in an employee’s job-related attitudes. The three most widely known
are job satisfaction, job involvement and organisational commitment.

Job involvement is the degree to which an employee identifies with his or her job, actively
participates in it and considers his or her job performance to be important to his or her self-
worth.

Managers should be interested in their employees’ attitudes because attitudes give warnings
of potential problems and because they influence behaviour. Satisfied and committed
employees, for instance, have lower rates of turnover and absenteeism.

Attitudes has three components namely:

a) The cognitive component
It is concerned with the beliefs, opinions, knowledge or information held by a person.
For example, touching a lighted matchstick for long can burn the fingers.

b) The affective component

It is concerned with the emotional or feeling segment of an attitude. When there is death,
people mourn and express their grief. At a football match, people can express their joy.

101 | P a g e
c) The behavioural component of attitude
It refers to an intention to behave in a way towards someone or something. Going
outdoors in the evening in Mauritius may not be good because of insecurity. Purchasing
products that come from a particular country may not be good because there can be a risk
of disease or contamination. People who are vegetarians would not purchase products
that contain meat not only because of their emotions (affective component) but also of
their way they behave.

7. Personality
 The unique combination of psychological characteristics that affect how a person reacts
and interacts with others. Some people are quiet and passive, others are loud and
aggressive. When we describe people using terms such as quiet, passive, loud, aggressive,
ambitious, extroverted, loyal, tense or sociable, we are describing their personalities.

 Personality is most often described in terms of measurable traits that a person exhibits.
Managers are interested in looking at personality because, just like attitudes, it too affects
how and why people behave the way they do.

7.1 Implications for Managers

The major value in understanding personality differences probably lies in employee selection.
Managers are likely to have higher-performing and more satisfied employees if consideration
is given to matching personalities with jobs.

8. Perception
Perception is a process by which individuals give meaning to their environment by organising
and interpreting their sensory impressions. Research on perception consistently demonstrates
that individuals may look at the same thing yet perceive it differently
8.1 Factors that Influence Perception:
(i) The Perceiver – When an individual looks at a target and attempts to interpret what
he or she sees, the individual’s personal characteristics will heavily influence the
interpretation. These personal characteristics include attitudes, personality, motives,
interests, experiences and expectations.

(ii) The Target – The characteristics of the target being observed can also affect what’s
perceived. Loud people are more likely to be noticed in a group than quiet people. So,
too, are extremely attractive and unattractive individuals.

(iii) The Situation – The context in which we see objects or events is also important. The
time at which an object or event is seen can influence attention, as can location, light,
heat, color and any number of other situational factors.

102 | P a g e
 8.2 Implications for Managers
 Managers need to recognise that their employees react to perceptions, not to reality.

 So, whether a manager’s appraisal of an employee is actually objective and unbiased or

whether the organisation’s wage levels are among the highest in the community is less
relevant than what employees perceive them to be.

 Employees organise and interpret what they see, so there is always the potential for
perceptual distortion.

9. Learning
Learning is any relatively permanent change in behaviour that occurs as a result of experience
̶ This concept of individual behaviour has been included here for the obvious reason that
almost all complex behaviour is learned. If we want to explain, predict and influence
behaviour, we need to understand how people learn

There are 2 types of learning: -

(i) Operant Conditioning
Operant conditioning argues that behaviour is a function of its consequences. People
learn to behave to get something they want or to avoid something that they do not like.
Operant conditioning is a type of conditioning in which the desired voluntary behaviour
leads to a reward or punishment

(ii) Social learning

Individuals learn by observing what happens to other people. They can also learn from
direct experiences like television, peers, the internet and so forth. Social learning is an
extension of conditioning but it acknowledges observational learning and perception.
Elements to be considered are attention, retention and reinforcement

The Individuals in Organisations: Personality, Perception & Decision

Making - (Looks at behaviour of people)
Uses of personality traits – The whats and the whys of people behaviour – Kyc – [Know your
customer]

Biographical Characteristics
1.1. Age
Studies on age revealed the following for Older workers.
Positive attributes
 Experience, judgement, share - work, commitment;

103 | P a g e
 Attachment to the job, reward for loyal employees;
 Less absenteeism;
 Lesser wastage, more discipline, better time management

Negative attributes
 Less flexible, more resistant to change;
 Lesser resistance to diseases, longer period of convalescence;
 Productivity affected negatively

1.2. Gender – Whether a man or woman?

Do men & women perform equally at work?
̶ It is a fact that woman cannot perform the same amount and extent of physical work as
men, but now in the age of automation; both may be having the same competency

̶ The productivity and results should be the same; whether a man or woman has done it.
But each one of them would have different means of doing the same job.

̶ Uses of technology and new organisation’s structures are available nowadays that would
counteract the differences that exists between the 2 gender

̶ Woman at any level of management are more prepared to do compromise than their male
counterparts

2. Personality
The relatively enduring individual traits & dispositions that form a pattern distinguishing one
person from another (Vecchio, 1992)

Personality can be dissected as follows: -

̶ Personality State – Exhibition of some personality trait & a temporary predisposition. Ex:
Moods swings

̶ Personality Trait – Distinguishable, relatively enduring way in which one individual

varies from another. Ex: Curiosity, indifference, talkativeness

̶ Personality Type – Collection of traits that are grouped together. A constellation of traits
& states.

2.1. Personality Types

104 | P a g e
2.1.1. Extroversion versus Introversion
Way in which we relate to the world. One can be very talkative & outgoing while others may
be very quiet & reserved.
 Extroverts are usually active and sociable and enjoy variety and stimulation. They are
talkative and assertive (can’t change decisions)

 Introverts can concentrate on an idea or thought longer than an extrovert can and are less
active and prone to change

 Right brain – Logical, sequential or Cartesian (Creative)

 Left brain – being in the artist type (reading, writing or being classical) – {Being Single}
 IQ – Intelligent Quotient
 EQ – Emotional Quotient (Feelings)
 SQ – Spiritual Quotient (Values)

2.1.2. Sensing versus Intuition

Way in which we perceive & take in information & ideas.
The sensing (Logical Person) perceives the physical and material reality of the world and is
likely to provide practical solutions to problems. An intuitive person sees beyond the obvious
and is likely to be creative, adaptable and open to new ideas

2.1.3. Thinking versus Feeling

Some people prefer to think first before making a decision while others may be ready to make
decision fast or on an impulse.
 The thinking person tends to be objective, analytical and impersonal in making decisions
and judgements
 The feeling type person is more likely to be loyal, appreciative and tactful – Sure about
decisions

2.1.4. Judgement versus Perception

Way in which we control & organise people or events. Some people take the trouble to make
judgement on others whereas some relies on the perception they have on others.
 Judgement oriented people tend to live in a plan, decided and orderly manner, wanting to
regular their lives circumstances and to control events

 Perceptive people tend to live in a flexible, spontaneous manner; wanting to understand

life and adapting to it

105 | P a g e
2.2. Using Personality Attributes to Predict Behaviour in Organisation
A number of personality attributes have been seen to influence OB. These attributes are
helpful to assist managers to predict the behaviour of individuals.

2.2.1. Locus of Control

The degree to which people believe that they are in charge of their own fate
 Two types of people identified – Internal LC & External LC

 Individuals with an Internal Locus of control believe that they control what happens to
them

 Whilst individual with an External locus of control believe that outside forces control
them and are at the mercy fate

 External locus of control people may pose problems in organisations and display
psychological disorder and have lower job satisfaction

2.2.2. Machiavellianism
The degree to which an individual is pragmatic, maintains emotional distance & believes that
the ends can justify the means.
Two types of individual identified – High-Mach type & Low-Mach type
High Mach type usually manipulate people more, win more, are less persuaded by other but
are more capable to persuade others compared to those who are of low Mach type
 Low Mach Type – Leader {Leader – Don’t Manipulate people – Create Followers}
 High Mach Type - Manager

2.2.3. Self Esteem (How much You love yourself?)

An individual’s degree of self-like or dislike
 High self-esteem people trust that they have the potential and ability required to succeed
at work. They accept to take more risks when taking decisions (Moving from one job to
another) and are less influence by others

 Individuals with low self esteem tend to be more concern with pleasing and have a lesser
inclination to take unpopular decisions in organisations

2.2.4. Self-Monitoring
A personality trait that determines an individual’s ability to adjust his or her behaviour to
external situational factors.

106 | P a g e
 Those who rate high on self-monitoring are capable of showing different behaviours in
different circumstances

2.2.5. Self-Efficacy
People’s belief that they are capable of performing a task. Efficacy enables individuals to
judge which job suit them best

2.2.6. Risk-Taking
An individual’s willingness to take chances. High risk-taking managers are more rapid
decisions makers and are less dependent on information search before they actually make
decisions

2.2.7. Type A and B Personality

Type A
 Moving, walking & eating rapidly
 Feel impatient
 Do two or more things at a time
 Cannot cope with leisure time
 Obsessed with numbers
Type A personality people can be defined as those who are involved into chronic incessant
struggle to achieve more and more in less and less time motion

Type B
 Never suffer from a sense of time urgency
 Feel no need to display or discuss their achievement
 Play for fun & relaxation
 Relax without guilt
Type B personality are rarely hurried by the desire to obtain a widely increasing number of
things are participating in an endless growing series of events in an ever-decreasing amount
of time

2.3. Understanding People by Understanding Behaviour

The following factors are in some way responsible for the personality that a person acquires.

2.3.1. Situation versus Heredity

 Is personality inherited or learnt?

107 | P a g e
 Genetic factors; example members of the same family achieving academic success one
after the other

 Environmental factors; example some individuals are quick to learn and grasp. Others
find it difficult to cope with what they are taught

 Birth order; first born children are normally seen to be more independent, more ambitious
and more influenced by social pressures than those born after

2.3.2. Personality and Social Reputation

 People are born with basic needs.
 Over time they change according to their surroundings.
 Not uncommon to see neighbours competing each other. You can compete with your
neighbours on the basis of clothing, food, cars; showing the personality of an individual is
closely associated with social status

2.4. Measuring Personality

The measurement of personality is finding increasing importance these days in organisations.
 To identify problem areas.
 To identify strength & weakness of individuals.
 To identify factors that may be impeding work performance

2.4.1. Methods of Personality Assessment

The following are the various methods commonly used to assess personality

2.4.1.1. Construction Based on Theories of Personality or Empirical Methods.

These personality tests identify a set of factors that are associated with a person and that
constitute a personality inventory.

(a) Myers-Briggs Type Indicator (MBTI)

 A tool for measuring personality types
 Involves requesting respondents to answer a questionnaire of 100 questions

(b) The Big Five Model

Psychological research has found 5 recurring factors in terms of how the world judges
personality

108 | P a g e
  Emotional Stability – People with high Emotional Stability are calm and relax.
People with low Emotional Stability are nervous and insecure

 Extraversion - People with high extraversion are talkative and loving. People with
low Extraversion are quiet and shy

 Agreeableness – People with high Agreeableness are trustworthy and caring. People
with low Agreeableness cannot be trusted and are care free

 Conscientiousness - People with high Conscientiousness are careful and productive.

People with low Conscientiousness are unproductive

 Openness to experience - People with high Openness to experience are imaginative

and original. People with low Openness to experience are unimaginative and simple

2.4.1.2. Basic Test

Involves making the person write a self-report, behavioural observation, measuring of verbal,
non-verbal & psychological responses

2.4.1.3. Paper and Pencil Type Tests

Have the advantage of being objective or projective
 Can be answered quickly.
 Items require little explanation.
 Items are amenable to quick & reliable scoring machine by hand or computer

2.5. Perception
Robbins et al. (1994) defines perception as a process by which individuals organise &
interpret their sensory impressions in order to give meaning to their environment

Factors affecting perception

 Within the perceiver – attitudes, motives, interests, experience & expectations.
 Within the situation – time, work setting & social setting.
 Within the target – novelty, motion, sounds, size, background & proximity

2.5.1. Attribution Theory

109 | P a g e
Attribution is the process by which we placed a judgement on people’s behaviours, more
specifically what really causes a person to behave in a certain manner.

The behaviour of a person is internally or externally caused by 3 factors:

 Distinctiveness – Whether an individual displays different behaviours in different
situations or the behaviour is distinct to one situation

 Consensus – The degree to which people behave in the same way in a given situation.

 Consistency – The degree to which an individual responds in the same way over time.

2.5.2. Making Judgement on Others

̶ Selective Perception – Based upon an individual’s interests, background, experience &
attitudes

̶ Projection – Involves one’s own characteristics to others

̶ Stereotyping – Involves judging someone based on one’s perception of the group to

which that person belongs.

̶ Halo Effect – Means drawing a general impression about an individual based upon a
single characteristics.

̶ Contrast Effects – Involves the evaluation of a person’s characteristics that are affected
by comparison with other people recently encountered who rank higher or lower on the
same characteristics.

2.6. Decision Making

One of the most important tasks that both the individuals & organisations have to carry out in
everyday life.

The Decision-Making Process

a. Define the problem
b. Analyse the problem
c. Develop alternate solutions
d. Decide on the best solution through evaluation of alternate solutions
e. Convert decisions into effective actions

110 | P a g e
 2.6.1. Individual Decision Making versus Organisational Decision Making
 DM takes place at both the individual & organisational levels.

 The quality of organisational decision making largely depends on the choices that
managers & administrators make

 Researchers have identified several models of decision making

2.6.1.1. Rational Decision Making Model

It describes what individuals must do in order to maximise some outcome

Participation can vary from:

 Discussion – Members are involved in discussion but the manager decides.

 Information seeking – Manager seeks information to facilitate the decision-making of

members.

 Democratic centralist – Members are actively involved in discussion & the manager
makes the decision that will reflect member’s interests.

 Parliamentarian – Members are fully involved & vote on decision.

 Participant-determining – Decision is made through group consensus.

2.6.1.2. The Bounded Rational Decision-Making Model

 It assumes that decision makers have a number of constraints & limitations in their search
for complete information before a decision is taken.
 It is both open & dynamic – decision makers act on changes taking place in the
environment.

2.6.1.3. Other Models of Decision Making

1. Participative Decision-Making
 Based on the premise that the manager & others in the organisation have more or less
equal power & influence

Under this model, Owens argues for three tests

i. The test of relevance – Personal stake of participants is high

ii. The test of expertise – Personal expertise in area is high

111 | P a g e
iii. The test of jurisdiction – Person has formal jurisdiction in area

This is a rational model that assumes that there is a clear goal, that all options are known, that
preferences are clear & constant, and that the final choice will maximise the outcome.

2. Satisficing Model
 The first solution that is “good enough” is chosen

 Experience & judgement play a significant role in this model.

3. Implicit Favourite Model

 A preferred alternative is implicitly selected early in the decision process.

 Involves the early closure of the evaluation of alternative solutions & thus is not a rational
or objective process.

4. Intuitive Model
̶ An unconscious process created out of experience

̶ Seen to work well in situations where there is little or minimal information, high
uncertainty, new situations and/or little time available in which to make decisions.

Emotional Intelligence - The ability to accurately perceive, evaluate, express and regulate
emotions and feelings. In addition to cognitive and technical skills, EI may be an important
predictor of employee performance, especially certain occupations and professions.

Chapter Twelve
Managing Groups and Teams - Understanding Group Behaviour

1. Understanding Groups and Teams

 What is a group?
A group is defined as two or more interacting and interdependent individuals who come
together to achieve particular goals. Groups can either be formal or informal.

112 | P a g e
1.1 Formal Groups are work groups defined by the organisation’s structure that have
designated work assignments and specific tasks. Here, appropriate behaviours are established
by and directed toward organisational goals.

1.2 In contrast, Informal Groups are social. These groups occur naturally in the workplace
in response to the need for social contact. For example, three employees from different
departments who regularly eat lunch together are an informal group. Informal groups tend to
form around friendships and common interests.

2. Why People Join Groups

2.1 Security
By joining groups, people find that there can be more security among themselves. One person
cannot stand alone since groups are strong when they are united. New employees are usually
vulnerable and feel that they are alienated from the group. They will turn to the group to find
support and guidance

2.2 Status
Some people may join a club where there are members from the affluent society with a view
to achieving a status on being a member. Anyone can become a member, the group ‘spoke –
person or the leader. In work situations, the individuals can be an ordinary employee

2.3 Self-esteem
Group membership raises the feeling of self-esteem. It makes a person more visible than he
or she was previously

2.4 Affiliation
For most people, work groups significantly contribute to fulfilling their needs for friendship
and social relations. People enjoy the regular interaction that comes with group membership.
For many people; those job interactions are their primary means of fulfilling the needs of
affiliation

2.5 Power
What often cannot be achieved individually becomes possible through group interaction.
Informal groups provide opportunities for individuals to exercise power over others. One of

113 | P a g e
the interesting aspects of group membership is power. As a group leader, one can obtain
compliance with the members and exercise some authority over them

2.6 Goal Achievement

Groups are created to achieve a goal that could have been impossible if it were worked out
alone. At times, there is a need for more than one person to accomplish a task, at other times,
certain tasks may require people having different competences.

3. Stages of Group Development

Group development is a dynamic process. Most groups are in a continual state of change.
Even though groups probably never reach complete stability, there is a general pattern that
describes how most groups evolve. Research shows that groups pass through a standard
sequence of five stages. They are Forming, Storming, Norming, Performing and Adjourning.

3.1 The first stage, Forming has two aspects:

1. people join the group either because of a work assignment or for some other benefit
desired. (status, self-esteem, power, or affiliation)

2. The tasks of defining the group’s purpose, structure and leadership

3.2 The second stage is Storming

It is characterised by intragroup conflict. There is conflict as to who will control the group.
When this stage is complete, there will be a relatively clear hierarchy of leadership within the
group and agreement on the group’s direction.

3.3 The third stage is Norming

It is characterised by close relationships and cohesiveness. There’s now a strong sense of
group identity. This norming stage is complete when the group structure solidifies and the
group has assimilated a common set of expectations of what defines correct member
behaviour.

3.4 The fourth stage is performing

The group structure at this point is fully functional and accepted. Group energy has moved
from getting to know and understand each other to performing the task at hand. Performing is
the last stage in the development of permanent work groups. Group members operates as a
knit or unite team and members are well conversed

114 | P a g e
Temporary groups such as project teams, task forces and similar groups that have a limited
task to perform have a fifth stage - Adjourning

3.5 The fifth stage is Adjourning

In this stage, the group prepares to disband. High levels of task performance are no longer the
group’s top priority. Instead, attention is directed at wrapping up activities. This occurs in
groups that are not permanent. They will terminate and the team will cease to exist.

4. Group Effectiveness
Group effectiveness has to be considered in at least two dimensions-effectiveness in terms of
(i) task accomplishment, and (ii) effectiveness in terms of satisfaction of group members.

From the organisational point of view, group effectiveness is more concerned with output,
efficiency and other benefits, than with satisfying the needs of individuals.

By comparison, an individual’s view of effectiveness is more concerned with personal

success in his role and the personal satisfaction from being a member of a team.

Effectiveness is essentially achieved when the needs and expectations of the organisation
tally with those of the individual.

5. Factors Affecting Group Performance

 Group Behaviour Model
̶ Group member resources
̶ Group structure: roles, norms, conformity, group size and group cohesiveness.
̶ Group Processes: Group decision-making
̶ Group tasks
6. Effective & Ineffective Groups
Douglas MC Gregor {Classical Work} “The human side of enterprise” provided a
perceptive account of the differences between effective and ineffective group.
 Void – eradication of differences
 Inertia – Status Quo – (Don’t want to make a step forward)

6.1 Effective Groups

 Relaxed atmosphere. Members did not feel tense and they could work without pressure.
 Relevant discussion among members with a high degree of participation.
115 | P a g e
 Group task or objective was clearly understood.
 Members tend to listen to each other.
 Conflict is not avoided but brought into the open and dealt with constructively

 Most decisions are reached by general consensus with a minimal amount of formal voting
or enforcement.

 Ideas are expressed freely and openly.

 Leadership is not always with the chairman, but tends to be shared as appropriate.
 The group examines its own progress and behaviour.
 
6.2 Ineffective Groups
 There was usually a bored and tense atmosphere. Links were not good among members.
 Discussion was dominated by one or two people and it was often irrelevant.
 There were no clear and common objectives.
 It was difficult for members to listen to and understand each other’s motives.
 Conflict is either avoided or allowed to degenerate and develop into warfare.
 Simple majorities are seen as sufficient basis for group decision which the minority has to
accept

 Personal feelings are kept hidden and criticism is embarrassing.

 Leadership rests with the chairman. He leads the group through his decisions.
 The group avoids any discussion about its own behaviour.

7. Turning Groups into Teams

7.1 What is a team?
Work teams are groups whose members work intensely on a specific, common goal using
their positive synergy, individual and mutual accountability, and complementary skills.
Teams are a special subset of groups; that is, the team will emanate itself
Teams can do a variety of things. They can design products, provide services, negotiate deals,
coordinate projects, offer advice and make decisions.
 Members of teams are highly interdependent, typically being connected through
comprehensive interdependence.

 Teams are formed using work flow grouping. So, the members of a team are responsible
for performing several functions

 Skills, knowledge, expertise and information are often distributed among the members of
a team; owing to differences in their background training, abilities and access to
resources. Thus, the members are not interchangeable

116 | P a g e
8. Types of Teams
8.1 Problem Solving Team
A team of 5 to 12 employees from the same department or functional area who are involved
in efforts to improve work activities or to solve specific problems. Here, members share ideas
and offer suggestions on how work processes and methods can be improved.

8.2 Self-Managed Work Team

A type of work team that operates without a manager and is responsible for a complete work
process or segment. The self-managed team are responsible for getting the work done and for
managing themselves. This usually includes planning and scheduling of work, assigning task
to members, collective control over the pace of work, making operating decisions and taking
action on problems.

8.3 Cross Functional Team

A type of work team that’s a hybrid grouping of individuals who are experts in various
specialties and who work together on various tasks. E.g. used in hospitals for ICU treatment.

8.4 Virtual Team

A type of work team that uses computer technology to link physically dispersed members in
order to achieve a common goal. E.g. advertising agency

9. Creating Effective Teams

Teams are not automatic productivity enhancers. They can also be disappointments. Research
on teams provides insights into the characteristics associated with effective teams. These
characteristics are:
9.1 Clear Goals
High performance teams have a clear understanding of the goal to be achieved. Members are
committed to the team’s goals; they know what they’re expected to accomplish and
understand how they will work together to achieve these goals.

9.2 Relevant Skills

Effective teams are composed of competent individuals who have the necessary technical and
interpersonal skills to achieve the desired goals while working well together. This last point is
important since not everyone who is technically competent has the interpersonal skills to
work well as a team member.

117 | P a g e
9.3 Mutual Trust
Effective teams are characterized by high mutual trust among members. That is, members
believe in each other’s ability, character and integrity. But as you probably know from
personal relationships, trust is fragile. Maintaining this trust requires careful attention by
managers.

9.4 Unified Commitment

It is characterized by dedication to the team’s goals and a willingness to expend extraordinary
amounts of energy to achieve them. Members of an effective team exhibit intense loyalty and
dedication to the team and are willing to do whatever it takes to help their team succeed.

9.5 Good Communication

Not surprisingly, effective teams are characterised by good communication. Members convey
messages, verbally and nonverbally, to each other in ways that are readily and clearly
understood. Also, feedback helps to guide team members and to correct misunderstandings.
Like a couple who has been together for many years, members on high-performing teams are
able to quickly and efficiently share ideas and feelings.

9.6 Negotiating Skills

Effective teams are continually making adjustments as to whom does what. This flexibility
requires team members to possess negotiating skills. Since problems and relationships are
regularly changing in teams, members need to be able to confront and reconcile differences.

9.7 Appropriate Leadership

Effective leaders can motivate a team to follow them through the most difficult situations.
How? By clarifying goals, demonstrating that change is possible by overcoming inertia,
increasing the self-confidence of team members, and helping members to more fully realise
their potential. Increasingly, effective leaders act as coaches and facilitators. They help guide
and support the team but don’t control it.

9.8 Internal and External Support

The final condition necessary for an effective team is a supportive climate.

118 | P a g e
Internally, the team should have a sound infrastructure which means having proper training,
a clear and reasonable measurement system that team members can use to evaluate their
overall performance, an incentive program that recognizes and rewards team activities, and a
supportive human resource system. The right infrastructure should support members and
reinforce behaviours that lead to high levels of performance.

Externally, managers should provide the team with the resources needed to get the job done.

Importance of OB to managers
 Attitudes and behaviours are changing.
 New values in societies – more quality products and services
 Work and Life balance
 Understanding organisation and employees in a better way
 Helps in motivating employees
 Improving industrial or labour relations
 Predicting and controlling human behaviour
 Effective utilisation of human resources

However, 3 major limitations of OB are;

 Behavioural Bias
 The Law of Diminishing Returns
 Unethical Manipulation of People

Chapter Thirteen
Managing Conflict
“Conflict is the primary engine of creativity and innovation” Ronald Heifetz
 Development of new ideas & merging of ideas
 Arguments between 2 groups / 2 persons regarding advantages & disadvantages
 Competition
Conflicts are created on purpose to make employees adapt to the environment

119 | P a g e
1. What is Conflict? – Bring disruption in an organisation
Cole (1998) defines conflict as:

“a condition that arises when the perceived interests of an individual or a group clash with
those of another individual or group in such a way that strong emotions are aroused and
compromise is not considered to be an option. Conflict, when managed effectively, can
contribute to organisational effectiveness, but when mishandled, can give rise to counter-
productive behaviour, in which both sides lose.”

 Litterer (1985) views conflict as the outcome of perceived inequity:

“Conflict is a type of behaviour which occurs when two or more parties are in opposition or
in battle as a result of a perceived relative deprivation from the activities of or interaction
with another person or group.”

 Robbins (1998):
“Conflict is a process that begins when one party perceives that another party has negatively
affected, or is about to negatively affect, something that the first party cares about.”

2. Views on Conflict
2.1 The Traditional View:
Referred as the Unitary perspective by Morgan (1986). He viewed conflict to be bad and
harmful for organisation in the sense that conflict tended to deflect organisations from
pursuing their objectives.

2.2 The Human Relation View:

Referred as the Pluralist perspective. Cole (1995) views organisation as a loose coalition of
different interest groups. As such, he believed that conflict is a natural and inevitable
outcome of organisational processes and it is through conflict that the organisation learn to
know about what is dysfunctional and find measures to correct them.

2.3 The Interactionist View:

This view goes one step further to the Human Relation View. It holds the belief that conflict
is not only a positive force in a group but it is absolutely necessary for a group to perform
effectively. However, it precise that not all conflict is good. This view, therefore,
distinguishes two forms of conflicts:
 Functional Conflict - Functional conflict is healthy, constructive disagreement
between groups or individuals (Creativity & value added)

120 | P a g e
  Dysfunctional Conflict - Dysfunctional conflict is unhealthy disagreement that occurs
between groups or individuals (Unnecessary evil to the smooth running of the
organisation, flow, advancement and information)

3. The Conflict Process

3.1 Antecedent Conditions: this first step occurs when there is the presence of factors that
create opportunities for conflict to occur, for example, misunderstanding.

3.2 Perceived Conflict: when the difference of opinion or perception is felt this ignites
conflict.

3.3 Felt Conflict: once the conflict is perceives, the person feel it inside.

3.4 Manifest Behaviour: this feeling can make the person o adopt a certain behaviour.

3.5 Conflict Resolution: attempts are made in several ways to resolve the conflict.
 Accept changes – No resistance
 Accept what is right and what is wrong
 Compromise
 Forgive & forget

3.6 Resolution Aftermath: Once the conflict is resolved, satisfaction occurs , and the person
forgets about the conflict.

4. Levels of Conflict

121 | P a g e
Conflict manifests itself at several levels in organisations.
4.1 Intra-Individual Conflict
4.2 Inter-Individual Conflict
4.3 Intra-Group Conflict
4.4 Inter-Group Conflict
4.5 Inter-Organisational Conflict

5. Strategies for Managing Conflict

5.1 Emphasise the organisation’s wide goals and effectiveness: this will ensure that
individuals know what is expected of them and what they are supposed to achieve.

5.2 Provide stable, well-structured tasks: In line with the above approach, this will enable
individuals to have a clear idea of the tasks to accomplish and this will minimised frustration.

5.3 Facilitate inter-group communication: Managers should ensure that communication

takes place in the most effective manner within and among groups.

5.4 Avoid win-lose situations: Managers must create opinions or situations that lead to win-
win for both parties, so that hard feelings and frustration are minimised.

5.5 Negotiation: this strategy has the following benefits –

 Helps to approach conflicts, or potential conflicts, with more confidence;
 To resolve conflict without acrimony {rancour- ill feelings};
 To see opportunities to negotiate, which one may have overlooked before;
 To obtain better outcomes.
5.5.1 Myths about Negotiation
 If you are not tough, you are always going to lose.
 Have a firm position and a clear idea of the outcome you expect.
 Don’t give away too much information or else they will take advantage of you.
 Don’t acknowledge the other side’s case.
 Give an inch and they’ll take a mile – never make the first concession.
 Try to get the other side to do things they don’t want to do.
 Negotiation is about getting the other side to agree with you.
 If you don’t have all the power, there’s no point in negotiating.
 When you win a negotiation, make sure your victory is clear to yourself and to your
opponent.

122 | P a g e
6. Techniques to Stimulate Conflict
Robbins (1974) propose the following techniques to stimulate conflict:
6.1 Communication: using ambiguous or threatening messages to increase conflict levels.

6.2 Bringing in outsiders: adding employees to a group coming from different background,
values, attitudes or managerial styles. This will help to create interactions that will unearth
long existing problems.

6.3 Restructuring the organisation: realigning work groups, altering rules and regulations,
increasing interdependence and making other changes to disrupt the status quo.

6.4 Appointing a devil’s advocate: designing a critic to purposely argue against the majority
positions held by the group.

7. Techniques to Resolve Conflict

7.1 Problem solving: face to face meeting of the conflicting parties for the purpose of
identifying and examining the problem.

7.2 Super-ordinate goals: Creating and formulating a shared goal that can be attained
through the collaboration and cooperation of the conflicting parties.

7.3 Expansion of resources: This is particularly applicable if the conflict has risen due to a
scarcity in resources, for example, money. By expanding this resource this can create a win-
win situation.
7.4 Avoidance: Forget that a conflict has taken place at one point in time.

7.5 Smoothing: Both parties try to understand what each party will gain if the conflict is
ignored.

7.6 Compromise: Each party gives up something valuable and shake hands with the other
party to create a win-win situation.

123 | P a g e
7.7 Authoritative command: Management uses its authoritative style to resolve the conflict
and communicates its decision to the parties involved.

7.8 Altering the human variable: Using behavioural change techniques such as human
relations including interpersonal skills training to alter attitudes and behaviours that cause
conflict.

7.9 Altering the structural variables: Changing the formal organisation structure through
job designs, including job rotations, transfers, ...

Employee conflict in the workplace is a common occurrence. Dealing with employee conflict
in a timely manner is important to maintaining a healthy work environment. Believing that a
conflict will simply disappear is an inaccurate assumption to make because simple conflicts
can grow into major problems if not dealt with appropriately. Managers should understand
the common causes of employee conflicts, so that a solution is found before the issues
become unmanageable.

Involve all parties, if possible, when drafting conflict resolutions. The theory of Management
By Objectives (MBO) states that employees are generally more committed to goals that they
have helped to create. The same holds true for conflict resolutions. There is more than one
side to every conflict, and all sides should benefit from conflict resolution. Seek resolutions
that will prevent the conflict from occurring again, rather than simply delaying a repeat
occurrence.

Give all parties to a conflict an equal voice, regardless of their position, length of service or
political influence. Conflict participants can become defensive if they feel they are being
marginalized or are going through a process leading to a predetermined outcome. It can be
tempting to take the word of managers over front-line employees, or to take the word of a
loyal employee over a new employee, but remember that your most trusted associates are not
necessarily infallible. Go beyond simply giving everyone an equal chance to speak; give their
arguments an equal weight in your mind when mediating a conflict.

124 | P a g e