EDVManagement

THEME 1 FORMATION AND DEVELOPMENT OF MANAGEMENT
Plan
1. Introduction to management. Definition of the management 2. Skills and

levels of management 3. Schools of management thought
1. Organization is a group of people intentionally organized to accomplish an

overall, common goal or a set of goals. It is management that regulates man's
productive activities through coordinated use of material resources. Without the
leadership provided by management, the resources of production remain resources
and never become production. Management is the specific organ of all kinds of
organizations since they all need to utilize their limited resources most efficiently
and effectively for the achievement of their goals
All organizations exist for certain purposes or goals, and managers are responsible
for combining and using organizational resources to ensure that their organizations
achieve their purposes. Management moves an organization toward its purposes or
goals by assigning activities organization members perform. Management strives
to encourage individual activity that will lead to reaching organizational goals and
to discourage individual activity that will hinder the accomplishment of those
goals. Because the process of management emphasizes the achievement of goals,
managers must keep organizational goals in mind at all times. Management is the
process of reaching organizational goals by working with and through people and
other organizational resources.
The four basic management functions—activities that make up the management

process— are described in the following sections.
Planning involves choosing tasks that must be performed to attain organizational

goals, outlining how the tasks must be performed, and indicating when they should
be performed. Planning activity focuses on attaining goals. Through their plans,
managers outline exactly what organizations must do to be successful. Planning is
essential to getting the “right” things done. Planning is concerned with
organizational success in the near future (short term) as well as in the more distant
future. Planning means identifying goals for future organizational performance and
deciding on the tasks and use of resources needed to attain them. In other words,
managerial planning defines where the organization wants to be in the future and
how to get there.
Organizing can be thought of as assigning the tasks developed under the planning
function to various individuals or groups within the organization. Organizing, then,
creates a mechanism to put plans into action. People within the organization are
given work assignments that contribute to the company’s goals. Tasks are
organized so that the output of individuals contributes to the success of
departments, which, in turn, contributes to the success of divisions, which
ultimately contributes to the success of the organization. Organizing includes
determining tasks and groupings of work. Organizing should not be rigid, but
adaptable and flexible to meet challenges as circumstances change. Organizing
typically follows planning and reflects how the organization tries to accomplish the
plan. Organizing involves assigning tasks, grouping tasks into departments,
delegating authority, and allocating resources across the organization. In recent
years, companies as diverse as IBM, the Catholic Church, Motorola, and the
Federal Bureau of Investigation have undergone structural reorganizations to
accommodate their changing plans. At Avon Products, where sales have stalled and
overhead costs have run amok, CEO Andrea Jung recently trimmed seven layers of
management and reorganized the company into a structure where more decisions
and functions are handled on a global basis to achieve greater efficiency of scale.
Influencing is another of the basic functions within the management process. This
function—also commonly referred to as motivating, leading, directing, or actuating
—is concerned primarily with people within organizations. Influencing can be
defined as guiding the activities of organization members in appropriate directions.
An appropriate direction is any direction that helps the organization move toward
goal attainment. The ultimate purpose of influencing is to increase productivity.
Human-oriented work situations usually generate higher levels of production over
the long term than do task-oriented work situations, because people find the latter
type less satisfying. Leading is the use of influence to motivate employees to
achieve organizational goals. Leading means creating a shared culture and values,
communicating goals to employees throughout the organization, and infusing
employees with the desire to perform at a high level. Leading involves motivating
entire departments and divisions as well as those individuals working immediately
with the manager. In an era of uncertainty, global competition, and a growing
diversity of the workforce, the ability to shape culture, communicate goals, and
motivate employees is critical to business success. One doesn’t have to be a well-
known top manager to be an exceptional leader. Many managers working quietly in
both large and small organizations around the world also provide strong leadership
within departments, teams, non-profit organizations, and small businesses.
Controlling is the fourth function in the management process. Controlling means

monitoring employees’ activities, determining whether the organization is on target
toward its goals, and making corrections as necessary. Managers must ensure that
the organization is moving toward its goals. Trends toward empowerment and trust
of employees have led many companies to place less emphasis on top down control
and more emphasis on training employees to monitor and correct themselves.
Information technology is helping managers provide needed organizational control
without strict top-down constraints. Companies such as Cisco Systems and Oracle
use the Internet and other information technology to coordinate and monitor
virtually every aspect of operations, which enables managers to keep tabs on
performance without maintaining daily authoritarian control over employees.
Controlling is the management function through which managers:
1. Gather information that measures recent performance within the organization.
2. Compare present performance to pre-established performance standards.
3. From this comparison, determine whether the organization should be modified

to meet pre-established standards.
Controlling is an ongoing process. Managers continually gather information, make
their comparisons, and then try to find new ways of improving production through
organizational modification. History shows that managers commonly make
mistakes when planning, organizing, influencing, and controlling.
Figure1 shows a number of such mistakes managers make related to each function.
Studying this text carefully should help managers avoid making such mistakes.
Figure 1 Classic mistakes commonly made by managers in carrying out various

management functions
Planning
Not establishing objectives for all important organizational areas
Making plans that are too risky
Not exploring enough viable alternatives for reaching objectives
Organizing
Not establishing departments appropriately
Not emphasizing coordination of organization members
Establishing inappropriate spans of management
Influencing
Not taking the time to communicate properly with organization members
Establishing improper communication networks
Being a manager but not a leader
Controlling
Not monitoring progress in carrying out plans
Not establishing appropriate performance standards
Not measuring performance to see where improvements might be made
Management must always be aware of the status and use of organizational

resources. These resources, composed of all assets available for activation during
the production process, are of four basic types:
1. Human
2. Monetary
3. Raw materials
4. Capital
Human resources are the people who work for an organization. The skills they
possess and their knowledge of the work system are invaluable to managers.
Monetary resources are amounts of money that managers use to purchase goods
and services for the organization. Raw materials are ingredients used directly in
the manufacturing of products. For example, rubber is a raw material that
Goodyear would purchase with its monetary resources and use directly in
manufacturing tires. Capital resources are machines used during the
manufacturing process. Modern machines, or equipment, can be a major factor in
maintaining desired production levels.Worn-out or antiquated machinery can make
it impossible for an organization to keep pace with competitors.
Organizational Inputs outputs

Resources Production Finished products
People process Goods and services
Money
Raw materials
Capital
resources
Thus far, the introduction to the study of management has focused on discussing
concepts such as the importance of management, the task of management, and the
universality of management.
2. Management skill is the ability to carry out the process of reaching

organizational goals by working with and through people and other organizational
resources. Learning about management skill and focusing on developing it are of
critical importance because possessing such skill is generally considered the
prerequisite for management success. A manager with the necessary management
skills will probably perform well and be relatively successful.
There are three types of skills are important for successful management
performance: technical, human, and conceptual skills.
Technical skills involve the ability to apply specialized knowledge and expertise
to workrelated techniques and procedures. Examples of these skills are
engineering, computer programming, and accounting. Technical skills are mostly
related to working Technical skill is the understanding of and proficiency in the
performance of specific tasks. Technical skill includes mastery of the methods,
techniques, and equipment involved in specific functions such as engineering,
manufacturing, or finance. Technical skill also includes specialized knowledge,
analytical ability, and the competent use of tools and techniques to solve problems
in that specific discipline. Technical skills are particularly important at lower
organizational levels. Many managers get promoted to their first management jobs
by having excellent technical skills. However, technical skills become less
important than human and conceptual skills as managers move up the hierarchy.
For example, in his seven years as a manufacturing engineer at Boeing, Bruce
Moravec developed superb technical skills in his area of operation. But when he
was asked to lead the team designing a new fuselage for the Boeing 757, Moravec
found that he needed to rely heavily on human skills in order to gain the respect
and confidence of people who worked in areas he knew little about. with
“things”—processes or physical objects.
Human skill is the manager’s ability to work with and through other people
and to work effectively as a group member. Human skill is demonstrated in the
way a manager relates to other people, including the ability to motivate,
facilitate, coordinate, lead, communicate, and resolve conflicts. A manager
with human skills allows subordinates to express themselves without fear of
ridicule, encourages participation, and shows appreciation for employees’
efforts. Heather Coin, manager of the Sherman Oaks, California, branch of
The Cheesecake Factory, demonstrates exceptional human skills. She considers
motivating and praising her staff a top priority. “I really try to seek out
moments because it’s so hard to,” she says. “You could definitely go for days
without doing it. You have to consciously make that decision [to show
appreciation]. Human skills are essential for managers who work with
employees directly on a daily basis. Organizations frequently lose good people
because of front-line bosses who fail to show respect and concern for
employees. However, human skills are becoming increasingly important for
managers at all levels. In the past, many CEOs could get by without good
people skills, but no longer. Today’s employees, boards, customers, and
communities are demanding that top executives demonstrate an ability to
inspire respect, loyalty, and even affection rather than fear. “People are
expecting more from the companies they’re working for, more from the
companies they’re doing business with, and more from the companies they’re
buying from,” says Raj Sisodia, a professor of marketing at Bentley College
and co-author of a recent book called Firms of Endearment.
Conceptual skills involve the ability to see the organization as a whole. A manager
with conceptual skills is able to understand how various functions of the
organization complement one another, how the organization relates to its
environment, and how changes in one part of the organization affect the rest of the
organization. As one moves from lower-level management to upper-level
management, conceptual skills become more important and technical skills less
important. Conceptual skill is the cognitive ability to see the organization as a
whole system and the relationships among its parts. Conceptual skill involves the
manager’s thinking, information processing, and planning abilities. It involves
knowing where one’s department fits into the total organization and how the
organization fits into the industry, the community, and the broader business and
social environment. It means the ability to think strategically—to take the broad,
long-term view—and to identify, evaluate, and solve complex problems.
Conceptual skills are needed by all managers but are especially important for
managers at the top. Many of the responsibilities of top managers, such as decision
making, resource allocation, and innovation, require a broad view. Consider how
recent strategic changes at General Electric reflect the conceptual skills of CEO
Jeff Immelt. Immelt is remaking GE by thinking on a broad, long-term scale about
the types of products and services people around the world are going to need in the
future. He’s pushing for growth by investing heavily in basic scientific and
technological research, looking toward the needs of developing countries, and
making structural and cultural changes that focus GE toward creating innovative
products and services to meet shifting customer needs.
The major activities that modern managers typically perform are of three basic
types.
1. Task-related activities are management efforts aimed at carrying out

critical management-related duties in organizations. Such activities include short-
term planning, clarifying objectives of jobs in organizations, and monitoring
operations and performance.
2. People-related activities are management efforts aimed at managing people

in organizations. Such activities include providing support and encouragement to
others, providing recognition for achievements and contributions, developing skill
and confidence of organization members, consulting when making decisions, and
empowering others to solve problems.
3. Change-related activities are management efforts aimed at modifying

organizational components. Such activities include monitoring the organization’s
external environment, proposing new strategies and vision, encouraging innovative
thinking, and taking risks to promote needed change.
To increase the probability of being successful, managers should have

competence in . . .
• Clarifying roles: assigning tasks and explaining job responsibilities, task

objectives, and performance expectations
• Monitoring operations: checking on the progress and quality of the work,
and evaluating individual and unit performance
• Short-term planning: determining how to use personnel and resources to
accomplish a task efficiently, and determining how to schedule and
coordinate unit activities efficiently
• Consulting: checking with people before making decisions that affect them,
encouraging participation in decision making, and using the ideas and
suggestions of others
• Supporting: acting considerate, showing sympathy and support when
someone is upset or anxious, and providing encouragement and support
when there is a difficult, stressful task
• Recognizing: providing praise and recognition for effective performance,
significant achievements, special contributions, and performance
improvements
• Developing: providing coaching and advice, providing opportunities for
skill development, and helping people learn how to improve their skills
Every day, managers solve difficult problems, turn organizations around, and
achieve astonishing performances. To be successful, every organization needs good
managers. That is, rather than doing all the work themselves, good managers create
the systems and conditions that enable others to perform those tasks. Recognizing
the role and importance of other people is a key aspect of good management. More
recently, noted management theorist Peter Drucker stated that the job of managers
is to give direction to their organizations, provide leadership, and decide how to
use organizational resources to accomplish goals. Getting things done through
people and other resources and providing leadership and direction are what
managers do.
Management is the attainment of organizational goals in an effective and efficient

manner through planning, organizing, leading, and controlling organizational
resources. This definition holds two important ideas: (1) the four functions of
planning, organizing, leading, and controlling, and (2) the attainment of
organizational goals in an effective and efficient manner. As a new manager,
remember that management means getting things done through other people. You
can’t do it all yourself. As a manager, your job is to create the environment and
conditions that engage other people in goal accomplishment.
Human,
financial, raw
materials, Attain goals,
technological products,
services,
efficiency,
effectiveness
Planning
Select goals and ways
to attain them
Monitoring
the process Organizing
monitoring
activities and make of Assign responsibility for
corrections task accomplishment
management
Leading
use influence to motivate
employees
Based on our definition of management, the manager’s responsibility is to

coordinate resources in an effective and efficient manner to accomplish the
organization’s goals. Organizational effectiveness is the degree to which the
organization achieves a stated goal, or succeeds in accomplishing what it tries to
do. Organizational effectiveness means providing a product or service that
customers value. Organizational efficiency refers to the amount of resources used
to achieve an organizational goal. It is based on how much raw materials, money,
and people are necessary for producing a given volume of output. Efficiency can
be calculated as the amount of resources used to produce a product or service.
Efficiency and effectiveness can both be high in the same organization.
A manager’s job is complex and multidimensional and, as we shall see throughout
this book, requires a range of skills. Although some management theorists propose
a long list of skills, the necessary skills for managing a department or an
organization can be summarized in three categories: conceptual, human, and
technical. As illustrated in Exhibit 1.2, the application of these skills changes as
managers move up in the organization. Although the degree of each skill necessary
at different levels of an organization may vary, all managers must possess skills in
each of these important areas to perform effectively.
Managers use conceptual, human, and technical skills to perform the four
management functions of planning, organizing, leading, and controlling in all
organizations—large and small, manufacturing and service, profit and nonprofit,
traditional and Internet-based. But not all managers’ jobs are the same. Managers
are responsible for different departments, work at different levels in the hierarchy,
and meet different requirements for achieving high performance.
Top managers are at the top of the hierarchy and are responsible for the entire
organization. They have such titles as president, chairperson, executive director,
chief executive officer (CEO), and executive vice president. Top managers are
responsible for setting organizational goals, defining strategies for achieving them,
monitoring and interpreting the external environment, and making decisions that
affect the entire organization. They look to the long-term future and concern
themselves with general environmental trends and the organization’s overall
success. Top managers are also responsible for communicating a shared vision for
the organization, shaping corporate culture, and nurturing an entrepreneurial spirit
that can help the company innovate and keep pace with rapid change.
Middle managers work at middle levels of the organization and are responsible
for business units and major departments. Examples of middle managers are
department head, division head, manager of quality control, and director of the
research lab. Middle managers typically have two or more management levels
beneath them. They are responsible for implementing the overall strategies and
policies defined by top managers. Middle managers generally are concerned with
the near future rather than with long-range planning. The middle manager’s job has
changed dramatically over the past two decades. Many organizations improved
efficiency by laying off middle managers and slashing middle management levels.
Traditional pyramidal organization charts were flattened to allow information to
flow quickly from top to bottom and decisions to be made with greater speed.
Exhibit 1.3 illustrates the shrinking middle management. Yet even as middle
management levels have been reduced, the middle manager’s job has taken on a
new vitality. Rather than managing the flow of information up and down the
hierarchy, middle managers create horizontal networks that can help the
organization act quickly. Research shows that middle managers play a crucial role
in driving innovation and enabling organizations to respond to rapid shifts in the
environment.31As Ralph Stayer, CEO of Johnsonville Sausage said, “Leaders can
design wonderful strategies, but the success of the organization resides in the
execution of those strategies. The people in the middle are the ones who make it
work.
Lower managers is also known as supervisory / operative level of management. It
consists of supervisors, foreman, section officers, superintendent etc. According to
R.C. Davis, “Supervisory management refers to those executives whose work has
to be largely with personal oversight and direction of operative employees”. In
other words, they are concerned with direction and controlling function of
management. Their activities include -
• Assigning of jobs and tasks to various workers.

• They guide and instruct workers for day to day activities.
• They are responsible for the quality as well as quantity of production.
• They are also entrusted with the responsibility of maintaining good relation
in the organization.
• They communicate workers problems, suggestions, and recommendatory
appeals etc. to the higher level and higher level goals and objectives to the
workers.
• They help to solve the grievances of the workers.
• They supervise & guide the sub-ordinates.
• They are responsible for providing training to the workers.
• They arrange necessary materials, machines, tools etc. for getting the things
done.
• They prepare periodical reports about the performance of the workers.
• They ensure discipline in the enterprise.
• They motivate workers.
• They are the image builders of the enterprise because they are in direct
contact with the workers.
Horizontal Differences
The other major difference in management jobs occurs horizontally across the
organization. Functional managers are responsible for departments that perform a
single functional task and have employees with similar training and skills.
Functional departments include advertising, sales, finance, human resources,
manufacturing,
and accounting. Line managers are responsible for the manufacturing and
marketing departments that make or sell the product or service. Staff managers are
in charge of departments such as finance and human resources that support line
departments. General managers are responsible for several departments that
perform different functions. A general manager is responsible for a self-contained
division, such as a Macy’s department store or a General Motors assembly plant,
and for all the functional departments within it. Project managers also have general
management responsibility because they coordinate people across several
departments to accomplish a specific project.
Managers must rethink their approach to organizing, directing, and motivating

employees. Today’s best managers give up their command and-control mind-set to
focus on coaching and providing guidance, creating organizations that are fast,
flexible, innovative, and relationship-oriented. Instead of “management-bykeeping-
tabs,” managers employ an empowering leadership style.62 When people are
working at scattered locations, managers can’t continually monitor behavior. In
addition, they are sometimes coordinating the work of people who aren’t under
their direct control, such as those in partner organizations. They have to set clear
expectations, guide people toward goal accomplishment through vision, values,
and regular communication, and develop a level of trust in employees’
commitment to getting the job done.
Success in the new workplace depends on the strength and quality of collaborative
relationships. New ways of working emphasize collaboration across functions and
hierarchical levels as well as with other companies. Team-building skills are
crucial. Instead of managing a department of employees, many managers act as
team leaders of ever-shifting, temporary projects. When a manager at IBM needs to
staff a project, he or she gives a list of skills needed to the human resources
department, which provides a pool of people who are qualified. The manager then
puts together the best combination of people for the project, which often means
pulling people from many different locations. IBM estimates that about 40 percent
of its employees participate in virtual teams. The shift to a new way of managing
isn’t easy for traditional managers who are accustomed to being “in charge,”
making all the decisions, and knowing where their subordinates are and what
they’re doing at every moment. Even many new managers have a hard time with
today’s flexible work environment. Managers of departments participating in Best
Buys’ Results-Only Work Environment program, which allows employees to work
anywhere, anytime as long as they complete assignments and meet goals, for
example, find it difficult to keep themselves from checking to see who’s logged
onto the company network.64
Even more changes and challenges are on the horizon for organizations and
managers. It’s an exciting time to be entering the field of management. Throughout
this book, you will learn much more about the new workplace, about the new and
dynamic roles managers are playing in the twenty-first century, and about how you
can be an effective manager in a complex, ever-changing world.
3. The purpose of studying various schools of management thought is to enable

you to recognize and appreciate how developments in the field of management
could contribute to current practices. An examination of these past and present
approaches can help to discover the strengths and weaknesses of current
managerial practices and finally enable you, as a potential manager of an
information center, to choose appropriate management styles. During the brief
history of management as a discipline a number of more or less separate schools of
management thought have emerged, some broad, some narrow in scope, and some
quite specialized.
Classical management theory consists of a group of similar ideas on the
management of organizations that evolved in the late 19th century and early 20th
century. The Classical school is sometimes called the traditional school of
management among practitioners. This school, evolved as a result of the industrial
revolution, in response to the growth of large organizations and in contrast to the
handicraft system that existed till then. It contains three branches, namely,
scientific management, administrative principles and bureaucratic organization.
The predominant and common characteristic to all three branches is the emphasis
on the economic rationality of management and organization. The economic
rationality of the individual employee at work assumes that people choose the
course of action that maximizes their economic reward. In other words, economic
rationality assumes that people are motivated by economic incentives and that they
make choices that yield the greatest monetary benefit. Thus, to get employees to
work hard, managers should appeal to their monetary desires. These assumptions
are based on a pessimistic view of human nature. While they are true to some
extent, they also overlook some optimistic aspects. Classical theorists recognized
human emotions but felt that a logical and rational structuring of jobs and work
could control human emotions.
Scientific Management
Frederick Winslow Taylor (1856-1915) is considered the father of scientific

management. Henry Gantt, Frank and Lillian Gilberth and Harrington Emerson
supported Taylor in his efforts.
All these disciples of Taylor became famous in their own right. Together with
Taylor they revolutionized management thinking. Scientific management is the
name given to the principles and practices that grew out of the work of Frederick
Taylor and his followers and that are characterized by concern for efficiency and
systematization in management. Four basic parts of a series of ideas developed by
Taylor are as follows:
• Each person’s job should be broken down into elements and a scientific way
to perform each clement should be determined.
• Workers should be scientifically selected and trained to do the work in the
designed and trained manner.
• There should be good cooperation between management and workers so
that tasks are performed in the designed manner.
• There should be a division of labor between managers and workers.
Managers should take over the work of supervising and setting up
instructions and designing the work, and the workers should be free to
perform the work himself.
Thus, the scientific method provides a logical framework for the analysis of
problems. It basically consists of defining the problem, gathering data, analyzing
the data, developing alternatives, and selecting the best alternative. Taylor believed
that following the scientific method would provide a way to determine the most
efficient way to perform work. Instead of abdicating responsibility for establishing
standards, the management would scientifically study all facets of an operation and
carefully set a logical and rational standard. Instead of guessing or relying solely
on trial and error, the management should go through the time consuming process
of logical study and scientific research to develop answers to business problems.
Taylor believed sincerely that scientific management practices would benefit both
the employee and the employer through the creation of larger surplus and hence the
organization would receive more income. He believed that management and labor
had a common interest in increasing productivity. Taylor did a lot of work on
improving management of production operations. He demonstrated in the classic
case of the pig iron experiment at the Bethlehem Steel Company, how both output
per worker and the daily pay of worker could be increased by employing scientific
method.
As organizations became larger and more complex, the authoritarian-paternalistic

pattern gave way to increased functional specialization with many layers of middle
and lower management for coordinating organizational effort. The result was a
bureaucratic approach to organizational structure. With the intentions of
eliminating managerial inconsistencies and as a reaction to managerial abuses of
power, Max Weber propounded a set of principles to provide grounds for
organizing group efforts. The characteristics of bureaucratic organization are
division of labor by functional specialization. We defined hierarchy of authority, a
set of rules covering the rights and duties of employees, a system of procedures or
dealing with work situations, impersonal relations between people and promotion
and selection of employees based on technical competence, Often, public service
with a large number of offices and employees like postal services are cited as
examples of bureaucratic organizations. The strength of such a bureaucratic
organization exists in its system of workable set of rules, policies and a hierarchy
of authority. The advantages of bureaucracy are many folds. Apart from consistent
employee behavior, it eliminates overlapping or conflicting jobs or duties, and the
behavior of the system is predictable. In turn, consistency and precise job
definitions help to avoid wasteful actions and improve efficiency, Further,
bureaucracy has the advantages of basing its mode of hiring and promotion on
merit, developing expertise in employees and assuring continuity in the
organization. In other words, bureaucracy emphasizes the position rather than
person and organization continues even when individuals leave.
Despite the above advantages, bureaucratic organization has some significant
negative and side effects. Too much of red tapes and paper work not only lead to
unpleasant experiences but also to inefficient operations. Since employees are
treated impersonally and they are expected to rely on rules and policies, they are
unwilling to exercise individual judgment and avoid risks.
Consequently their growth, creativity, development and even initiative suffer
considerably. Machine like treatment makes employees unconcerned about the
organization and exhibit indifference regarding the organization and job
performance. Bureaucracy expects conformity in behavior rather than performance.
Like the scientific management school, the administrative management school is
also criticized on some grounds. Many of the principles of this school including
those of Fayol are contradictory and have dilemmas. These principles are no better
than proverbs, which give opposite messages. For example, the principle of unity
of command contradicts the principle of
specialization or division of labor and the principle of limited span of control,
contradicts that the number of organizational levels should be kept at a minimum.
Further the principle of specialization is internally inconsistent; for purpose,
process, and place are competing modes of specialization and to secure the
advantages of any one mode, the organizer must sacrifice the advantages of the
other three modes. All modes cannot be followed simultaneously while pursuing
specialization.
Secondly, these principles are based on a few case studies and they are not
empirically tested.
Thirdly, these principles are stated as unconditional statements and valid under all
circumstances, which is not practicable. More and more conditional principles of
management are needed.
Fourthly these principles result in the formation of mechanistic organization
structures, which are insensitive to employees’ social and psychological needs.
Such structures inhibit the employees’ self-actualization and accentuate their
dependence on superiors.
This school does not consider sociology, biology, psychology, economies, etc. as
relevant and included within the purview. Further, these principles are based on the
assumption that organizations are closed systems. According to this school of
thought employees tend to develop an orientation towards their own departments
rather than towards time whole organization.
Lastly, the rigid structures created by these principles do not work well under
unstable conditions.
Human Relations School
Elton Mayo has been considered as the father of the human relations movement,
which later became organizational behavior. The other two important coresearchers
of this school are F.J.
Roethlisberger and William J Dickson. They believed that organizations always
involve interrelationships among members and that it is the manager’s role to see
that relationships are as conflict free as possible, in order to accomplish the
organization’s objectives. They believed that the human aspects of business
organizations had been largely ignored. They felt that satisfaction of psychological
needs should be the primary concern of the management.
Mayo, Roethlisberger and Dickson conducted studies at the Hawthorne, Illinois
plant of Chicago Western Electric Company, which became famous Hawthorne
experiments or studies later. They felt that if the best work environment could be
determined (just as the best way to perform the job could be determined by
scientific management), then workers would be more efficient and become less
tired. They also felt the importance of evaluating the attitudes and reactions of
workers to their jobs and their environment. They attempted through several
experiments to determine the relationship between working conditions and
productivity. They set up test groups, for which changes were made in lighting,
frequency of rest periods and working hours and control groups, for which no
changes were made.
Mayo and others in their initial experiment came to the conclusion that some
factors other than light were responsible for increased productivity. From a follow
up interview of employees, they realized that people were not leaving their
feelings, attitudes, and emotions at home and employees were not at work simply
for economic benefit. But other dimensions also affected their performance. In a
final experiment they discovered that the workers had developed their own idea of
the level of fair output. This informally developed, called a norm, was enforced on
the work group to the point that total output was restricted. Any worker who
produced more than the norm was pressurized by other workers to comply with the
norm.
Mayo and his colleagues arrived at two important conclusions: (i) existence of
strong informal groups (ii) employees’ behavior at work is affected by
noneconomic factors. They revealed some inadequacies of the rational and
structured approaches of classical theory and the fallacy of viewing all workers as
rational and economic beings. Thus evolved a social person view of employees
from Hawthorne studies. As against the rational economic view, the social person
view is that (i) individuals are motivated by social needs (ii) people obtain their
sense of identity through interpersonal relationships (iii) because of industrial
progress and routinization, the work has become dissatisfying (iv) employees are
more responsive to the social forces of peer groups than to incentives and controls
of management (v) employees respond to provisions for their social needs and
acceptance offered by management. The social person view of human relations
school has necessitated managerial strategies for improving the human skills of the
supervisors, replacing individual incentive plans by group incentive plans, focusing
on employees feelings and attitudes and their effect on productivity rather than
managerial functions. The concept of social manager has
evolved and the social manager assumes the role of helper and coach and carries
out human relations programs shunning a stern and aloof attitude.
This theory virtually looked beyond organizational factors (i.e., environmental
factors) and aimed at as conflict-free inter-relationships as possible among
members of the organization.
Drawing heavily from social psychology and individual psychology this theory
expected the manager to be a leader and supervisor of a rather tolerant (democratic
and participative) type and considered every employee to be a unique
sociopsychological being. The lesson of Hawthorne experiments was that
psychological needs of individuals have a significant impact on group performance
and that employees often miss-state their concerns. As a corollary it was also learnt
that when employees are given special attention, output is likely to increase
regardless of the actual changes in the working conditions (Hawthorne effect). In
other words, the result supported the thesis that reasonable satisfaction of the needs
and desires of employees will lead to greater output.
Human relations approaches laid greater emphasis on the work group and need for
better communication between supervisors and workers. The Human relations
movement is looked as a trend towards power equalization. It is an attempt for
reduction in the power and status differential between supervisors and subordinates
and looked upon as a continuing reaction against the emphasis of programmed
work, rigid hierarchical control and a high degree of specialization of Taylorism.
However, they did not reject all the classical ideas. The neoclassical writers
believed that treating employees like individuals (neoclassical) would make them
act according to the principles (classical). They said, “treat employees as if they are
important and give the workers the feeling of participation”.
Behavioral Schools
Since the Hawthorne experiments, there has been an increased interest in and an
application of, behavioral science in management. The human relations approach
has evolved into modern behaviorism. The term modern behaviorism refers to the
current stage of evolution of the behavioral school of management, which gives
primacy to psychological considerations but treats fulfillment of emotional needs
mainly as a means of achieving other primary economic goals. Much of the
discussions under behavioral schools can as well be considered under
organizational (modern) humanism in modern management theory. Important
behavioral scientists who contributed to gain insight in ways to achieve managerial
effectiveness and
developing techniques to utilize people more effectively in organizations, are
Abraham Maslow, Douglas McGregor, Chris Argyris, Frederick Herzberg, Rensis
Likert, Kurt Lewin, Chester Barnard, Mary Parker Follett, George Homans and
Warren Bennis. They had rigorous training in various social sciences and used
sophisticated research methods. They regard the classical management theory as
highly mechanistic, which tends to degrade the human spirit and is nonresponsive
to the human needs. As against overly specialized jobs, under-utilized people, too
much control over employees with no scope to make decisions and little concern
about subordinates’ needs for recognition and self-fulfillment, the behaviorists
preferred more flexible organization structures with jobs built around the
capabilities and aptitudes of average employees.
It is difficult to classify all these researchers as neoclassical theorists. Many of

them should be considered as contributors to modern management theories in
general, social system theory and modern humanism theory in particular. Secondly,
the behavioral school is a logical extension of human relations school and both in
turn lead to social system theory and modern behaviorism. Hence, contributions
and limitations of the human relations school, and the behaviorism school overlap
to a considerable extent. All of them are largely concerned with motivation.
Theories concerning motivation are classified in many ways. They argued that the
design of work has not changed enough to keep pace with changes in the needs of
today’s employees and believed that employees today desire diverse and
challenging work. They preferred participative and group decision-making, process
of self-direction and control instead of imposed control. They put forth the
practical realistic model of human motivation and stressed the situational
constraints and social aspects of organizational and environmental changes.
List of literature
1. Dr. Karam Pal, “Management Concepts and organizational behaviour”
2. Agasef Imran, “Management”, Baku 2007
3. Richard L.Daft, “Management”, 9th edition, 2009
4. Michael H.Mescon, Michael Albert, Franklin Khedouri, “Management”,

Moscow 2004
5. Stephen P.Robbins, Mary Coulter, “Management”, 11th edition
6. E.P. Ghuseva, “Management”,Moscow 2008
7. Samuel C. Certo, S.Trevis Certo, “Modern management, concepts and skills”,

12th edition
8. https://www.managementstudyguide.com
THEME 2 ORGANIZATION AND ITS FORMS
Plan
1. Introduction to organization. Definitions of organization

2. Different forms of organization (partnership, holding, corporation, etc.)
3. Formal and informal organizations 4. Organizational structures
1. Organization - is a group of people who carry out a specific task under the
leadership of a specific person. It is a purposeful union of resources. To
successfully achieve these goals, the activities of people in the group should be
coordinated. Therefore, an organization can be viewed as a group of people whose
activities are consciously coordinated to achieve a common goal or goals. Inside
the organization, human beings play an active role. The organization must have an
absolute objective and action plan. Organizations differ in commercial and
noncommercial activities. An enterprise is an independent business entity that
produces commodities, sells, services products for the purposes of satisfying public
demands and earning money, regardless of its form of ownership. The main
difference between enterprise and organization is that first was only a commercial
entity, but organization both as a commercial and non-commercial. An
organization is defined by the elements that are part of it (who belongs to the
organization and who does not?), its communication (which elements
communicate and how do they communicate?), its autonomy (which changes are
executed autonomously by the organization or its elements?), and its rules of
action compared to outside events (what causes an organization to act as a
collective actor?).
By coordinated and planned cooperation of the elements, the organization is able to
solve tasks that lie beyond the abilities of the single elements. The price paid by the
elements is the limitation of the degrees of freedom of the elements. Effective
management can produce not only more outputs of goods and services with given
resources, but also expand them through better use of science and technology
2. All enterprises are divided into 5 groups according to the type of economic
activity:
• Industrial enterprises are created and operate in various spheres of industry

• Trade enterprises – realizes purchase and sale operations of commodities
• Transport enterprises – engaged in transportation of goods
• Transport-forwarding enterprises engaged in transportation of goods from
producers to consumers
• Insurance enterprises – deal with insurance of property
It is known that enterprise is a legal personality, it possesses certain property,

utilizes and manages it, maintain an independent balance, records the profits and
losses that are the result of economic activities.
According to the legal status, all enterprises are divided into two groups:
• Individual businesses are enterprises that are in common ownership of a

citizen or of his family members. The owner of this type of enterprise shall
be liable for the performance of the obligations of the enterprise in the
manner prescribed by the legislation of the Azerbaijan Republic.
• Enterprise associations can create alliances, partnerships, corporations, and
other communities based on different principles on the basis of coordination
of the activities of enterprises incorporated into these associations,
protections of their rights, etc. The Unions operate on the basis of the
Chapter approved by the founders.
Partnerships
In a Partnership, two or more people share ownership of a single business. Like

proprietorships, the law does not distinguish between the business and its owners.
The Partners should have a legal agreement that sets forth how decisions will be
made, profits will be shared, disputes will be resolved, how future partners will be
admitted to the partnership, how partners can be bought out, or what steps will be
taken to dissolve the partnership when needed; Yes, its hard to think about a
“break-up” when the business is just getting started, but many partnerships split up
at crisis times and unless there is a defined process, there will be even greater
problems. They also must decide up front how much time and capital each will
contribute, etc.
Advantages of a Partnership
• Partnerships are relatively easy to establish; however time should be invested in

developing the partnership agreement.
• With more than one owner, the ability to raise funds may be increased.
• The profits from the business flow directly through to the partners’ personal tax
return.
• Prospective employees may be attracted to the business if given the incentive to

become a partner.
• The business usually will benefit from partners who have complementary skills.
Disadvantages of a Partnership
• Partners are jointly and individually liable for the actions of the other partners.
• Profits must be shared with others.

• Since decisions are shared, disagreements can occur.
• Some employee benefits are not deductible from business income on tax returns.
• The partnership may have a limited life; it may end upon the withdrawal or death
of a partner.
There are distinguished the following types of enterprise associations:
 Joint ventures are established on a contractual basis by at least two

individuals and legal entities. The affiliates of the enterprise are responsible
for the performance of its obligations by all their property.
 Limited Liability Company (LLC) is an entity created by one or more
natural or legal persons, divided into shares by the founding agreement of
the Fund in the amount defined by the Charter. This business structure
protects the owner's personal assets from financial liability and provides
some protection against personal liability. There are situations where an
LLC owner can still be held personally responsible, such as if he
intentionally does something fraudulent, reckless or illegal, or if she fails to
adequately separate the activities of the LLC from her personal affairs. The
founders of the enterprise are liable only for the obligations of the Charter
Fund in accordance with its obligations.
 Joint-stock company, a forerunner of the modern corporation that was
organized for undertakings requiring large amounts of capital. Money was
raised by selling shares to investors, who became partners in the venture.
One of the earliest joint-stock companies was the Virginia Company,
founded in 1606 to colonize North America. By law, individual shareholders
were not responsible for actions undertaken by the company, and, in terms
of risk exposure, shareholders could lose only the amount of their initial
investment. Under the existing law, shareholders are responsible for the
share of their share in the shareholder's commitment. The joint-stock
company is responsible for the shareholders' property obligations.
Shareholder societies are open and closed. Closed joint stock companies are
distinguished by the fact that the shares of this company are distributed only
amongst participants and are not traded on the securities market. Open
jointstock societies are distributed among the participants of this society, and
they are bought and sold in the open market. A person who receives a share
of the company becomes its shareholder.
 A conglomerate - a legal entity (holding), which includes companies that
carry out entrepreneurial activities in various sectors of the economy. As a
rule, conglomerates are formed by the absorption by a large company of
several dozens of small and medium-sized firms in various industries and
spheres of activity that do not have any production, sales or other functional
connections.
 A Concern is a financial and industrial group of companies, mainly in the
German-speaking countries of Europe and the Baltic countries. Typical is
the preservation of the legal and economic independence of the participants,
but taking into account the coordination of the dominant financial structures.
The main advantage of the concern is the concentration of financial and
other resources.
 The consortium is an organizational form of temporary association of
independent enterprises and organizations with a view to coordinating their
entrepreneurial activities. A consortium can be created to implement a large
capital-intensive project or to co-locate a loan. In international trade,
consortia are created to jointly fight for the receipt of orders. Within the
consortium, the roles are distributed in such a way that each participant
works in the field of activity where he reached the highest technical level
with the lowest production costs. Each participant prepares a proposal for its
share of supplies, from which the general proposal of the consortium is
formed.
 A syndicate is an organizational form of a monopolistic association, under
which the companies that enter it lose commercial and marketing
independence, but retain legal and operational freedom of action. In other
words, in the syndicate, the sale of products and the distribution of orders are
carried out centrally.
 The cartel is the simplest form of monopolistic unification. Unlike other
more stable forms of monopolistic structures (syndicates, trusts, concerns),
every enterprise that enters the cartel retains financial and production
independence. The objects of the agreement can be: pricing, spheres of
influence, terms of sale, use of patents, regulation of production volumes,
coordination of conditions for marketing products, hiring workers. Acts, as a
rule, within the framework of one industry.
 The trust is one of the forms of monopolistic associations, within which
participants lose their production, commercial, and sometimes even legal
independence. The real power in the trust is concentrated in the hands of the
chief company.
3. An organization is a collection of people who work together to attain specified

objectives. There are two types of organization structure, that can be formal
organization and informal organization.
An organization is said to be formal organization when the two or more than two
persons come together to accomplish a common objective, and they follow a
formal relationship, rules, and policies are established for compliance, and there
exists a system of authority.
On the other end, there is an informal organization which is formed under the
formal organization as a system of social relationship, which comes into existence
when people in an organization, meet, interact and associate with each other. In
this article excerpt, we are going to discuss the major differences between formal
and informal organization.
BASIS FOR FORMAL INFORMAL
COMPARISON ORGANIZATION ORGANIZATION
Meaning An organization type in An organization formed within

which the job of each the formal organization as a
member is clearly defined, network of interpersonal
whose authority, relationship, when people
responsibility and interact with each other, is
accountability are fixed is known as informal
formal organization. communication.
Creation Deliberately by top Spontaneously by members.

management.
Purpose To fulfill, the ultimate To satisfy their social and

objective of the organization. psychological needs.
Nature Stable, it continues for a long Not stable

time.
Communication Official communication Grapevine
Control Rules and Regulations Norms, values and beliefs

mechanism
Focus on Work performance Interpersonal relationship
Authority Members are bound All members are equal.

by hierarchical
structure.
Size Large Small
Key Differences Between Formal and Informal Organization

The difference between formal and informal organization can be drawn
clearly on the following grounds:
1. Formal Organization is an organization in which job of each member is
clearly defined, whose authority, responsibility and accountability are fixed.
Informal Organization is formed within the formal organization as a network
of interpersonal relationship when people interact with each other.
2. Formal organization is created deliberately by top management.
Conversely, informal organization is formed spontaneously by members.
3. Formal organization is permanent in nature; it continues for a long
time. On the other hand, informal organization is temporary in nature.
4. The formal organization follows official communication, i.e. the
channels of communication are pre-defined. Unlike informal organization, the
communication flows in any direction.
5. In the formal organization, the rules and regulations are supposed to be
followed by every member. In contrast to informal communication, there are
norms, values, and beliefs, that work as a control mechanism.
6. In the formal organization, the focus is on the performance of work
while in the case of an informal organization, interpersonal communication is
given more emphasis.
7. The size of a formal organization keeps on increasing, whereas the size
of the informal organization is small.
8. In a formal organization, all the members are bound by the hierarchical
structure, but all the members of an informal organization are equal.
A leader in a formal, hierarchical organization, who is appointed to a managerial

position, has the right to command and enforce obedience by virtue of the authority
of his position. However, he must possess adequate personal attributes to match his
authority, because authority is only potentially available to him. In the absence of
sufficient personal competence, a manager may be confronted by an emergent
leader who can challenge his role in the organization and reduce it to that of a
figurehead. However, only authority of position has the backing of formal
sanctions. It follows that whoever wields personal influence and power can
legitimize this only by gaining a formal position in the hierarchy, with
commensurate authority.
4. Another important thing we must know about is the organizational structures.
I want to say you some definitions of this category:
1) Organizational structure is a set of organizational units and their

interrelations, where managerial tasks are divided between divisions (such as
IT, finance, operations, and marketing), the powers and responsibilities of
managers and officials are determined.
2) An organizational structure defines how activities such as task allocation,
coordination and controlling are directed toward the achievement of
organizational aims. Organizational structure allows the expressed allocation
of responsibilities for different functions and processes to different entities
such as the branch, department, workgroup.
There are many types of organizational structures. There’s the more traditional
functional structure, the divisional structure, the matrix structure and the flatarchy
structure.
Functional structure
This kind of organizational structure classifies people according to the function

they perform in professional life. The functional structure is based on an
organization being divided up into smaller groups with specific tasks or roles. For
example, a company could have a group working in information technology,
another in marketing, finance, engineering, manufacturing, etc. Each department
has a manager or director who answers to an executive a level up in the hierarchy
who may oversee multiple departments. One such example is a director of
marketing who supervises the marketing department and answers to a vice
president who is in charge of the marketing, finance and IT divisions.
There is important to emphasize the advantage and disadvantage of functional

structure:
The advantages are as follows:
• High degree of specialization

• Clear order of subordination
• Clear understanding of responsibility
• All functions are equally important
• High efficiency and speed
The disadvantages are as follows:
• Communications faces several barriers

• Lack of team work between different units or departments
• Since all functions are separated, employees may not be aware of what is
going on with colleagues.
Divisional structure
Definitions of this structure
 The organization is structured according to departments according to one of

three criteria: on output (product specialization), on consumer orientation, on
served regions.
 They group employees based on products, markets and geographic location.
 Each divisions has its own functional units like research, manufacturing,
marketing, sales, finance, etc.
Product oriented structure - this structure is based on the organization of

employees and work around different products. If the company produces three
different products, then it will have three different units for these products. This
type of structure is best suited for retail stores with a variety of products.
The market approach to the formation of the organizational structure is that

each division produces products or provides services, focusing on a certain group
of buyers, which together form the market. Under this structure, each division
essentially operates as its own company, controlling its own resources and how
much money it spends on certain projects or aspects of the division.
Territorial approach to building the structure of such an organization, states that
each of its divisions (enterprises) specializes in the production of products and
services for the needs of the region
Product oriented Photo 1

A matrix type of organizational structure combines the traditional departments seen
in functional structures with project teams. In a matrix structure, individuals work
across teams and projects as well as within their own department or function.
For example, a project or task team established to develop a new product might
include engineers and design specialists as well as those with marketing, financial,
personnel and production skills. These teams can be temporary or permanent
depending on the tasks they are asked to complete. Each team member can find
himself/herself with two managers - their normal functional manager as well as the
team leader of the project. A matrix organizational structure is a company structure
in which the reporting relationships are set up as a grid, or matrix, rather than in the
traditional hierarchy. In other words, employees have dual reporting relationships -
generally to both a functional manager and a product manager. This structure is
built on the principle of double subordination of performers: on the one hand - to
the immediate head of the functional service, on the other hand - to the project
manager, who is endowed with the necessary powers in accordance with the
planned terms of the project. Under this system, the project manager has two
groups of subordinates: permanent employees of the project team and employees
of other functional departments who are subordinate to him temporarily, while
maintaining their administrative subordination to the immediate heads of the
functional departments.
Matrix structures have advantages and disadvantages.
Advantages
• Can help to break down traditional department barriers, improving

communication across the entire organization
• Can allow individuals to use particular skills within a variety of contexts
• Avoid the need for several departments to meet regularly, so reducing costs
and improving coordination
• Likely to result in greater motivation amongst the team members
• Encourages cross-fertilization of ideas across departments – e.g. helping to
share good practice and ideas
• A good way of sharing resources across departments – which can make a
project more cost-effective
Disadvantages
• Members of project teams may have divided loyalties as they report to two
line managers. Equally, this scenario can put project team members under a
heavy pressure of work.
• There may not be a clear line of accountability for project teams given the
complex nature of matrix structures.
• Difficult to co-ordinate
• It takes time for matrix team members to get used to working in this kind of
structure
• Team members may neglect their functional responsibilities
List of literature

Moscow 2004

12th edition
THEME 3 ORGANIZATION AND IT IS ENVIRONMENT Plan
1. Definition of organizational environments 2. External environment and

its influence on activity of organization 3. Internal environment and its
influence on activity of organization
1. Since the establishment of the organization, around and inside it, there are many
elements that affect the conduct of business. This is a set of functions, factors,
processes, inputs and outputs, as well as the conditions and restrictions associated
with daily work. The totality of such elements is the environment of the
organization or its context. An organization is social inventions for accomplishing
goals through group effort. In acommon definition this can –take as a group of
people working to obtain a certain goal or Group of people working
interdependently toward some purpose. Business organization is a gathering of
people in order to achieve profits as the common goal.Business organization can be
seen in various types and sizes. And we know that organization is a social entity
that has a hierarchical structure where all necessary items are put together and they
act within it to reach the collective goal. Organization or more specific business
organization and it activates are always being affected by the environment. In an
organization, every action of the management body is influenced by the
environment. The organization works within the framework provided by various
elements of society. All such elements which lie outside the organization are called
external environment or simply as environment. Also, the organization may create
an environment internal to it which affects the various subsystems of the
organization .The organization needs to properly understand the environment for
effective management. The organization's environment plays an important role in
the existence and development of the company. Understanding the organization's
environment is the key to a proper business strategy, not to mention a proper
quality strategy.
The goal of understanding the organization's environment is to identify factors that

affect work. Factors can be external and internal. To understand the conditions
under which an organization operates, it is necessary to take into account both. A
mandatory requirement for analyzing the environment is to consider all the factors
that affect the organization.
Organizations have an external and internal environment;
 External Environment 
Internal Environment.
2.External Environment of Organization
In a simple way factor outside or organization are the elements of the external
environment. The organization has no control over how the external environment
elements will shape up.
The external environment can be subdivided into 2 layers: the general environment
and the task environment.
• General Environment
• Task Environment
General Environment of Organization
The general environment consists of factors that may have an immediate direct
effect on operations but nevertheless influences the activities of the firm. The
dimensions of the general environment are broad and non-specific whereas the
dimensions of the task environment are composed of the specific organization.
Let’s see the elements or dimensions of the general environment.
Economic Dimension
The economic dimension of an organization is the overall status if the economic

system in which the organization operates. The important economic factors for
business are inflation, interest rates, and unemployment. These factors of the
economy always affect the demand for products. During inflation, the company
pays more for its resources and to cover the higher costs for it, they raise
commodity prices. When interest rates are high, customers are less willing to
borrow money and the company itself must pay more when it borrows. When
unemployment is high, the company is able to be very selective about whom it
hires, but customers’ buying power is low as fewer people are working.
Technological Dimension
It denotes to the methods available for converting resources into products or

services. Managers must be careful about the technological dimension. Investment
decision must be accurate in new technologies and they must be adaptable to them.
Socio-cultural dimension
Customs, mores, values and demographic characteristics of the society in which the
organization operates are what made up the socio-cultural dimension of the general
environment. The socio-cultural dimension must be well studied by a manager.It
indicates the product, services, and standards of conduct that the society is likely to
value and appreciate. The standard of business conduct vary from culture to culture
and so does the taste and necessity of products and services.
Demographics are measures of the various characteristics of the people and social
groups who make up a society. Age, gender, and income are examples of
commonly used demographic characteristics.
Values refer to certain beliefs that people have about different forms of behavior or
products. Changes in how a society values an item or a behavior can greatly affect
a business. (Think of all the fads that have come and gone)
Political-Legal Dimension
The politico-legal dimension of the general environment refers to the government

law of business, business-government relationship and the overall political and
legal situation of a country. Business laws of a country set the dos and don ts of an
organization. A good business-government relationship is essential to the economy
and most importantly for the business. And the overall situation of law
implementation and justices in a country indicates that there is a favorable situation
in of business in a country.
International Dimension
Virtually every organization is affected by the international dimension. It refers to

the degree to which an organization is involved in or affected by businesses in
other countries. Global society concept has brought all the nation together and
modern network of communication and transportation technology, almost every
part of the world is connected.
Task Environment of Organization
The task environment consists of factors that directly affect and are affected by the
organization’s operations. These factors include suppliers, customers, competitors,
regulators and so on. A manager can identify environmental factors of specific
interest rather than having to deal with a more abstract dimension of the general
environment.
The different elements of the task environment may be discussed as under:
Competitors
Policies of the organization are often influenced by the competitors. Competitive

marketplace companies are always trying to stay and go further ahead of the
competitors. In the current world economy, the competition and competitors in all
respects have increased tremendously. The positive effect of this is that the
customers always have options and the overall quality of products goes high.
Customers
“Satisfaction of customer”- the primary goal of every organization. The customer

is who pays money for the organization’s product or services. They are the peoples
who hand them the profit that the companies are targeting. Managers should pay
close attention to the customers’ dimension of the task environment because its
customers purchase that keeps a company alive and sound.
Suppliers
Suppliers are the providers of production or service materials. Dealing with

suppliers is an important task of management. A good relationship between the
organization and the suppliers is important for an organization to keep a steady
follow of quality input materials.
Regulators
Regulators are units in the task environment that have the authority to control,
regulate or influence an organization’s policies and practices. Government
agencies are the main player in the environment and interest groups are created by
its members to attempt to influence organizations as well as government. Trade
unions and chamber of commerce are the common examples of an interest group.
There are two important kinds of regulators:
1.Regulatory agencies are created by the government to protect the public from
certain business practices or to protect organizations from one another.
2.Interest group is organized by its members to attempt to influence organizations.
Strategic Partners
They are the organization and individuals with whom the organization is to an
agreement or understanding for the benefit of the organization. These strategic
partners in some way influence the organization’s activities in various ways.
3. Internal Environment of Organization
Forces or conditions or surroundings within the boundary of the organization are

the elements of the internal environment of the organization. The internal
environment consists mainly of the organization’s owners, the board of directors,
employees and culture.
Owners
Owners are people who invested in the company and have property rights and
claims on the organization. Owners can be an individual or group of person who
started the company; or who bought a share of the company in the share market.
They have the right to change the company’s policy at any time.
Board of Directors
The board of directors is the governing body of the company who are elected by
stockholders, and they are given the responsibility for overseeing a firm’s top
managers such as the general manager.
Employees
Employees or the workforce, the most important element of an organization’s

internal environment, who performs the tasks of the administration. Individual
employees and also the labor unions they join are important parts of the internal
environment. If managed properly they can positively change the organization’s
policy. But ill-management of the workforce could lead to a catastrophic situation
for the company.
Culture
Organizational culture is the collective behavior of members of an organization and

the values, visions, beliefs, habits that they attach to their actions. An
organization’s culture plays a major role in shaping its success because culture is
an important determinant of how well their organization will perform. As the
foundation of the organization’s internal environment, it plays a major role in
shaping managerial behavior.
The environment irrespective of its external or internal nature, a manager must

have a clear understanding of them. Normally, you would not go for a walk in the
rain without an umbrella, because you understand the environment and you know
when it rains you can get wet. Similarly, if a manager does not know and
understand the environment of the organization, he or she will definitively get wet
or dry and the organization also in today’s fast and hyper-moving organizational
environment.
The study of external environment is essential because if an organization is not

aware of thechanges occurring outside, it can not cope with the technology
advancement and can notachieve the future position that is ‘Its Goal’.Internal
environment as we discussed contains all the members involved in achieving the
goalof organization. If the internal environment is friendly and can be adopted by
all newmembers easily it will increase work efficiency and effectiveness.
List of literature

Moscow 2004
12th edition
THEME 4 ETHICS AND RESPONSIBILITY IN MANAGEMENT
SYSTEM
Plan
1. Essence of ethic in management system 2. Essence of social responsibility

in management system 3. Responsibility, authority, accountability 4.
Responsibilities and appropriate skills of managers
1.To be truly effective, organizations should interact with their external

environment. The external environment can be divided into the general or mega
environment and the specific task environment. Social responsibility refers to the
obligation of a business firm to enhance the condition of society along with its own
interests. Business firms are accountable to six major stakeholder groups:
shareholders, employees, customers, creditors and suppliers, society and the
government.
Ethics
• An area of study that deals with ideas about what is good and bad behavior
and with moral duty and obligation
• The rules and principles that defines right and wrong conduct
• Management ethics is the ethical treatment of employees, stockholders,
owners and public by a company
Managers in today's business world increasingly need to be concerned with two

separate but interrelated concerns—business ethics and social responsibility. The
movement toward including ethics as a critical part of management education
began in the 1970s, grew significantly in the 1980s, and is expected to continue
growing. Hence, business ethics is a critical component of business leadership.
Ethics can be defined as our concern for good behavior. Ethical business leaders
strive for fairness and justice within the confines of sound management practices.
Many people ask why ethics is such a vital component of management practice. It
has been said that it makes good business sense for managers to be ethical. Without
being ethical, companies cannot be competitive at either the national or
international level.
The employment of ethical business practices can enhance overall corporate health
in three important areas.
The first area is productivity. The employees of a corporation are stakeholders

who are affected by management practices. When management considers ethics in
its actions toward stakeholders, employees can be positively affected. For example,
a corporation may decide that business ethics requires a special effort to ensure the
health and welfare of employees. Many corporations have established employee
advisory programs (EAPs) to help employees with family, work, financial, or legal
problems, or with mental illness or chemical dependency. These programs can be a
source of enhanced productivity for a corporation.
A second area in which ethical management practices can enhance corporate

health is by positively affecting outside stakeholders, such as suppliers and
customers. A positive public image can attract customers. For example, a
manufacturer of baby products carefully guards its public image as a company that
puts customer health and well-being ahead of corporate profits, as exemplified in
its code of ethics.
The third area in which ethical management practices can enhance corporate
health is in minimizing regulation from government agencies. Where companies
are believed to be acting unethically, the public is more likely to put pressure on
legislators and other government officials to regulate those businesses or to enforce
existing regulations.
Business managers in most organizations commonly strive to encourage ethical

practices not only to ensure moral conduct but also to gain whatever business
advantage there may be in having potential consumers and employees regard the
company as ethical. Creating, distributing, and continually improving a company's
code of ethics is one usual step managers can take to establish an ethical
workplace.
Another way to promote ethics in the workplace is to provide the work force with
appropriate training. Several companies conduct training programs aimed at
encouraging ethical practices within their organizations. Such programs do not
attempt to teach what is moral or ethical but, rather, to give business managers
criteria they can use to help determine how ethical a certain action might be.
Finally, managers can take responsibility for creating and sustaining conditions in
which people are likely to behave ethically and for minimizing conditions in which
people might be tempted to behave unethically. Two practices that commonly
inspire unethical behavior in organizations are giving unusually high rewards for
good performance and unusually severe punishments for poor performance. By
eliminating such factors, managers can reduce much of the pressure that people
feel to perform unethically. They can also promote the social responsibility of the
organization.
2. A responsibility - it is the employee's obligation to perform all the work and
solve specific tasks inherent in a particular position held and to be responsible for
the results of his activities. Responsibility is determined by the constitution and the
civil code. There is a responsibility of the performer and leader. Responsibility of
the executor is the obligation of the employee to perform all the tasks delegated to
him and to be responsible for the results of labor. The responsibility of the
manager it is his obligation to answer for the tasks and results of the work of all
employees subordinate to him. The term social responsibility means different
things to different people. Generally, corporate social responsibility is the
obligation to take action that protects and improves the welfare of society as a
whole as well as organizational interests. According to the concept of corporate
social responsibility, a manager must strive to achieve both organizational and
societal goals. Social responsiveness refers to the ability of a firm to implement
policies and take part in activities that would benefit both society and the firm. The
following categories are generally considered when measuring social
responsiveness: contributions, fund-raising, volunteerism, recycling, diversity
policies, direct corporate investment, quality of work life, attention to consumers
and pollution control. The need to measure social responsiveness led to the
development of social audits. Social audits are of two types - audits required by the
government and voluntary audits. Although social audits are not legally
mandatory, many organizations make social involvement disclosures in their
annual reports. This shows the growing concern among major firms about their
social responsibility. The ethical conduct of an organization depends on the ethical
standards of its managers. To conduct business in an ethical manner, managers
should be aware of the factors that affect ethical behavior. Through mechanisms
such as top management commitment, code of ethics, ethics committees, ethics
audits, ethics training and ethics hotlines, managers can inculcate ethical behavior
in the employees.
Organizations can manage ethics in their workplaces by establishing an ethics

management program. Typically, ethics programs convey corporate values, often
using codes and policies to guide decisions and behavior, and can include
extensive training and evaluating, depending on the organization. They provide
guidance in ethical dilemmas.
"All organizations have ethics programs, but most do not know that they do," wrote
business ethics professor Stephen Brenner in the Journal of Business. A corporate
ethics program is made up of values, policies and activities which impact the
propriety of organization behaviors."
3. It is necessary to have brief understanding of three terms intimately

connected with the concept and process of delegation.
These terms are: 1) Responsibility, 2) Authority, and 3) Accountability.
Responsibility
Responsibility indicates the duty assigned to a position. The person holding the
position has to perform the duty assigned. It is his responsibility. The term
responsibility is often referred to as an obligation to perform a particular task
assigned to a subordinate. In an organization, responsibility is the duty as per the
guidelines issued. According to Davis, "Responsibility is an obligation of
individual to perform assigned duties to the best of his ability under the direction of
his executive leader." In the words of Theo Haimann, "Responsibility is the
obligation of a subordinate to perform the duty as required by his superior".
McFarland defines responsibility as "the duties and activities assigned to a position
or an executive".
Characteristics of Responsibility
The essence of responsibility is the obligation of a subordinate to perform the duty

assigned. It always originates from the superior-subordinate relationship.
Responsibility cannot be delegated. The person accepting responsibility is

accountable for the performance of assigned duties. It is hard to conceive
responsibility without authority. Determining exactly which social responsibilities
an organization should pursue and then deciding how to pursue them are perhaps
the two most critical decision-making aspects of maintaining a high level of social
responsiveness within an organization. That is, managers must decide whether their
organization should undertake the activities on its own or acquire the help of
outsiders with more expertise in the area.
Authority
Authority is the right or power assigned to an executive or a manager in order to

achieve certain organizational objectives. A manager will not be able to function
efficiently without proper authority. Authority is the genesis of organizational
framework. It is an essential accompaniment of the job of management. Without
authority, a manager ceases to be a manager, because he cannot get his policies
carried out through others. Authority is one of the founding stones of formal and
informal organizations. An Organization cannot survive without authority. It
indicates the right and power of making decisions, giving orders and instructions to
subordinates. Authority is delegated from above but must be accepted from below
i.e. by the subordinates. In other words, authority flows downwards. According to
Henri Fayol, "Authority is the right to give orders and the power to exact
obedience." According to Mooney "Authority is the principle at the root of
Organization and so important that it is impossible to conceive of an Organization
at all unless some person or persons are in a position to require action of others."
Accountability
Every employee/manager is accountable for the job assigned to him. He is

supposed to complete the job as per the expectations and inform his superior
accordingly. Accountability is the liability created for the use of authority. It is the
answerability for performance of the assigned duties. According, to McFarland,
"accountability is the obligation of an individual to report formally to his superior
about the work he has done to discharge the responsibility." When authority is
delegated to a subordinate, the person is accountable to the superior for
performance in relation to assigned duties. If the subordinate does a poor job, the
superior cannot evade the responsibility by stating that poor performance is the
fault of the subordinate. A superior is normally responsible for all actions of groups
under his supervision even if there are several layers down in the hierarchy. Simply
stated, accountability means that the subordinate should explain the factors
responsible for non-performance or lack of performance.
Authority, Responsibility and Accountability are Inter-related
They need proper consideration while introducing delegation of authority within an

Organization. In the process of delegation, the superior transfers his
duties/responsibilities to his subordinate and also give necessary authority for
performing the responsibilities assigned. At the same time, the superior is
accountable for the performance of his subordinate.
When entering a management position, you can expect the following ten day to day
responsibilities:
Daily Operations: The primary role of a manager is to ensure the daily functioning
of a department or group of employees.
Staffing: Most employers expect their managers to interview, hire, and train new
employees.
Set Goals: A manager articulates both short and long-term goals to ensure a
company’s longevity.
Liaising: Although a manager typically oversees a group of employees, managers

also effectively communicate with their bosses and convey the necessary
information to the various company parties.
Administration: Managers complete administrative work and correspond with

other departments.
Delegation: Effective managers have confidence in their employees and delegate

tasks according to the department’s needs.
Motivate: As a leader, a manager motivates staff and creates an environment where

employees thrive.
Enforcing Policy: Managers enforce company policy to cultivate an environment

that makes employees hold one another accountable for their actions.
Training: If new technologies or systems are introduced to business, employers

turn to managers to train employees.
Evaluation: To encourage satisfactory work, managers evaluate data and employee

performance.
To be an effective business manager, consider sharpening the following skills:
Coaching: In the business world, managers coach employees to help them perform
their positions more efficiently.
Organization: Although departments vary in size, managers are responsible for the
performances of other employees, meaning that managers maintain an organised
work environment.
Budget Development: Many managers oversee business financials, meaning that

managers have the skills to make budgets.
Handling Pressure: The business world is often competitive and high pressure, so
an effective manager handles that pressure and thrives in a high stakes
environment.
Adaptation: The business sector is constantly changing, and managers adapt to

alternative technologies, management structures, and forms of communication.
Initiative: Managers do not always wait for their boss to give them directions.
Instead, they take the initiative and begin projects when necessary.
Collaboration: The best ideas are often created during collaborative efforts,
meaning that managers take the time to work with their employees, other
managers, and their bosses.
Project Management: To ensure success, managers oversee every step of a project

and intervene when necessary.
List of literature

10.Agasef Imran, “Management”, Baku 2007
11.Richard L.Daft, “Management”, 9th edition, 2009
12.Michael H.Mescon, Michael Albert, Franklin Khedouri, “Management”,
Moscow 2004
13.Stephen P.Robbins, Mary Coulter, “Management”, 11th edition
14.E.P. Ghuseva, “Management”,Moscow 2008
15.Samuel C. Certo, S.Trevis Certo, “Modern management, concepts and skills”,
12th edition
16.https://www.managementstudyguide.com
COMUNICATION IN MANAGEMENT SYSTEM
Plan
1. Introduction to communication process 2. Importance of the

communication process 3. Forms of communication 4. Barriers of
communication and its ways to eliminate these barriers 5. Flows of
communication and concept of 7C for effective communication
6. Business meetings as a component of communication.
1.To lead others, you must demonstrate effective communication skills. Otherwise,
a manager will lack the credibility to implement his employer's objectives, and
struggle to rally worker teams behind them. Managers who communicate well are
also more likely to become good problem solvers, which is an essential skill to
function well in an international workplace where diversity is increasingly the
norm. Employees who show an aptitude for verbal and written communication are
more likely to advance up the corporate ladder, as well. Effective communication
between managers and employees is requisite for a well-functioning workplace.
The best managers understand the need for building alliances and communicating
throughout all levels of the organization. Effective communications skills are a
must for breaking down barriers, which promotes the collaborative atmosphere that
an organization needs to thrive. A typical employee's engagement and interest in
work varies from day to day. Astute managers accept this reality but can tailor their
own communication style to motivate an employee to achieve the desired result.
Effective Communication is significant for managers in the organizations so as to
perform the basic functions of management, i.e., Planning, Organizing, Leading
and Controlling.
Communication helps managers to perform their jobs and responsibilities.

Communication serves as a foundation for planning. All the essential information
must be communicated to the managers who in-turn must communicate the plans
so as to implement them. Organizing also requires effective communication with
others about their job task. Similarly leaders as managers must communicate
effectively with their subordinates so as to achieve the team goals. Controlling is
not possible without written and oral communication. Managers devote a great part
of their time in communication. They generally devote approximately 6 hours per
day in communicating. They spend great time on face to face or telephonic
communication with their superiors, subordinates, colleagues, customers or
suppliers. Managers also use Written Communication in form of letters, reports or
memos wherever oral communication is not feasible.
2.The importance of communication in an organization can be summarized as

follows:
1) Communication promotes motivation by informing and clarifying the

employees about the task to be done, the manner they are performing the task, and
how to improve their performance if it is not up to the mark.
2) Communication is a source of information to the organizational members for

decision-making process as it helps identifying and assessing alternative course of
actions.
3) Communication also plays a crucial role in altering individual’s attitudes,

i.e., a well-informed individual will have better attitude than a less-informed
individual. Organizational magazines, journals, meetings and various other forms
of oral and written communication help in molding employee’s attitudes.
4) Communication also helps in socializing. In today’s life the only presence of
another individual fosters communication. It is also said that one cannot survive
without communication.
5) As discussed earlier, communication also assists in controlling process. It

helps controlling organizational member’s behavior in various ways. There are
various levels of hierarchy and certain principles and guidelines that employees
must follow in an organization. They must comply with organizational policies,
perform their job role efficiently and communicate any work problem and
grievance to their superiors. Thus, communication helps in controlling function of
management.
3. An effective and efficient communication system requires managerial

proficiency in delivering and receiving messages. A manager must discover
various barriers to communication, analyze the reasons for their occurrence and
take preventive steps to avoid those barriers. Thus, the primary responsibility of a
manager is to develop and maintain an effective communication system in the
organization.
Oral communication implies communication through mouth. It includes

individuals conversing with each other, be it direct conversation or telephonic
conversation. Speeches, presentations, discussions are all forms of oral
communication. Oral communication is generally recommended when the
communication matter is of temporary kind or where a direct interaction is
required. Face to face communication (meetings, lectures, conferences, interviews,
etc.) is significant so as to build a rapport and trust.
Written communication has great significance in today’s business world. It is an

innovative activity of the mind. Effective written communication is essential for
preparing worthy promotional materials for business development. Speech came
before writing. But writing is more unique and formal than speech. Effective
writing involves careful choice of words, their organization in correct order in
sentences formation as well as cohesive composition of sentences. Also, writing is
more valid and reliable than speech. But while speech is spontaneous, writing
causes delay and takes time as feedback is not immediate.
Kinesics or study of body language must be understood by all. Whether it is an

interview or a presentation, one must be aware of how to use body language
effectively.
Read on to understand more about various non-verbal components of

communication...
Eye Contact: Always maintain eye contact with your audience. However, a person
must ensure that he / she should not fix his gaze at one person for more than 5
seconds. Too much fluttering of eyes could indicate lack of confidence. Staring at a
person could be daunting and hence is not such a good idea.
Hand Shake: While shaking hands especially in a professional environment, the

hand shake should be firm and not loose. An iron handshake [very strong
handshake] can indicate that a person is trying to dominate.
Crossing your Arms: Crossing your arms could imply that a person is not open to
new ideas / opinion especially in case of giving a presentation. However, in a
oneon-one interview if the interviewer has his / her arms crossed, the candidate
could do the same.
Sitting Posture: Leaning on a chair is not a good idea. One must sit upright though
in a relaxed position. Sitting back in your chair implies lack of interest or rejection.
Gesture: Gesture refers to a type of non-verbal communication which uses a part

of the body with or without verbal communication. Gestures include facial
expressions, nods [which is a sign of approval in most cultures], head bobbling /
shaking.
Facial Expression: The face is a best reflection of what a person feels. More often
than not it is easy to recognize if a person is happy, sad, anxious, irritated, or
excited. It is very important that in a professional scenario a person must control
his / her facial expressions. For e.g. If a presenter gets a feel that his presentation is
not going on very well, he / she should not show the sign of losing of hope and
instead try for a greater involvement from the participants.
Communication is a process of exchanging verbal and nonverbal messages. It is a

continuous process. Pre-requisite of communication is a message. This message
must be conveyed through some medium to the recipient. It is essential that this
message must be understood by the recipient in same terms as intended by the
sender. He must respond within a time frame. Thus, communication is a two way
process and is incomplete without a feedback from the recipient to the sender on
how well the message is understood by him.
The main components of communication process are as follows:
1) Context - Communication is affected by the context in which it takes place.

This context may be physical, social, chronological or cultural. Every
communication proceeds with context. The sender chooses the message to
communicate within a context.
2) Sender / Encoder - Sender / Encoder is a person who sends the message. A
sender makes use of symbols (words or graphic or visual aids) to convey the
message and produce the required response. For instance - a training
manager conducting training for new batch of employees. Sender may be an
individual or a group or an organization. The views, background, approach,
skills, competencies, and knowledge of the sender have a great impact on the
message. The verbal and non-verbal symbols chosen are essential in
ascertaining interpretation of the message by the recipient in the same terms
as intended by the sender.
3) Message - Message is a key idea that the sender wants to communicate. It is
a sign that elicits the response of recipient. Communication process begins
with deciding about the message to be conveyed. It must be ensured that the
main objective of the message is clear.
4) Medium - Medium is a means used to exchange / transmit the message. The
sender must choose an appropriate medium for transmitting the message else
the message might not be conveyed to the desired recipients. The choice of
appropriate medium of communication is essential for making the message
effective and correctly interpreted by the recipient. This choice of
communication medium varies depending upon the features of
communication. For instance - Written medium is chosen when a message
has to be conveyed to a small group of people, while an oral medium is
chosen when spontaneous feedback is required from the recipient as
misunderstandings are cleared then and there.
5) Recipient / Decoder - Recipient / Decoder is a person for whom the
message is intended / aimed / targeted. The degree to which the decoder
understands the message is dependent upon various factors such as
knowledge of recipient, their responsiveness to the message, and the reliance
of encoder on decoder.
6) Feedback - Feedback is the main component of communication process as it
permits the sender to analyze the efficacy of the message. It helps the sender
in confirming the correct interpretation of message by the decoder. Feedback
may be verbal (through words) or non-verbal (in form of smiles, sighs, etc.).
It may take written form also in form of memos, reports, etc.
Receivers are not just passive absorbers of messages; they receive the message and
respond to them. This response of a receiver to sender’s message is called
Feedback. Sometimes a feedback could be a non-verbal smiles, sighs etc.
Sometimes it is oral, as when you react to a colleague’s ideas with questions or
comments. Feedback can also be written like - replying to an e-mail, etc.
Feedback is your audience’s response; it enables you to evaluate the effectiveness

of your message. If your audience doesn’t understand what you mean, you can tell
by the response and then refine the message accordingly. Giving your audience a
chance to provide feedback is crucial for maintaining an open communication
climate. The manager must create an environment that encourages feedback. For
example after explaining the job to the subordinated he must ask them whether
they have understood it or not. He should ask questions like “Do you understand?”,
“Do you have any doubts?” etc. At the same time he must allow his subordinated
to express their views also. Feedback is essential in communication so as to know
whether the recipient has understood the message in the same terms as intended by
the sender and whether he agrees to that message or not.
There are lot of ways in which company takes feedback from their employees, such
as: Employee surveys, memos, emails, open-door policies, company news, letter
etc. Employees are not always willing to provide feedback. The organization has to
work a lot to get the accurate feedback. The managers encourage feedback by
asking specific questions, allowing their employees to express general views, etc.
The organization should be receptive to their employee’s feedback.
4.Communication is a process beginning with a sender who encodes the message

and passes it through some channel to the receiver who decodes the message. If
any kind of disturbance blocks any step of communication, the message will be
destroyed. Due to such disturbances, managers in an organization face severe
problems. Thus the managers must locate such barriers and take steps to get rid of
them.
There are several barriers that affects the flow of communication in an

organization. These barriers interrupt the flow of communication from the sender
to the receiver, thus making communication ineffective. It is essential for managers
to overcome these barriers.
The main barriers of communication are summarized below.
Perceptual and Language Differences: Perception is generally how each

individual interprets the world around him. All generally want to receive messages
which are significant to them. But any message which is against their values is not
accepted. A same event may be taken differently by different individuals. For
example : A person is on leave for a month due to personal reasons (family
member being critical). The HR Manager might be in confusion whether to retain
that employee or not, the immediate manager might think of replacement because
his teams productivity is being hampered, the family members might take him as
an emotional support.
The linguistic differences also lead to communication breakdown. Same word

may mean different to different individuals. For example: consider a word “value”.
Information Overload: Managers are surrounded with a pool of information. It is

essential to control this information flow else the information is likely to be
misinterpreted or forgotten or overlooked. As a result communication is less
effective.
Inattention: At times we just not listen, but only hear. For example a traveler may
pay attention to one “NO PARKING” sign, but if such sign is put all over the city,
he no longer listens to it. Thus, repetitive messages should be ignored for effective
communication. Similarly if a superior is engrossed in his paper work and his
subordinate explains him his problem, the superior may not get what he is saying
and it leads to disappointment of subordinate.
Time Pressures: Often in organization the targets have to be achieved within a

specified time period, the failure of which has adverse consequences. In a haste to
meet deadlines, the formal channels of communication are shortened, or messages
are partially given, i.e., not completely transferred. Thus sufficient time should be
given for effective communication.
Distraction/Noise: Communication is also affected a lot by noise to distractions.

Physical distractions are also there such as, poor lightning, uncomfortable sitting,
unhygienic room also affects communication in a meeting. Similarly use of loud
speakers interferes with communication.
Emotions: Emotional state at a particular point of time also affects
communication. If the receiver feels that communicator is angry he interprets that
the information being sent is very bad. While he takes it differently if the
communicator is happy and jovial (in that case the message is interpreted to be
good and interesting).
Complexity in Organizational Structure: Greater the hierarchy in an

organization (i.e. more the number of managerial levels), more is the chances of
communication getting destroyed. Only the people at the top level can see the
overall picture while the people at low level just have knowledge about their own
area and a little knowledge about other areas.
Poor retention: Human memory cannot function beyond a limit. One cant always
retain what is being told specially if he is not interested or not attentive. This leads
to communication breakdown.
As, we have discussed the major barriers of communication. Let’s talk about how
to overcome these barriers of communication.
Eliminating differences in perception: The organization should ensure that it is

recruiting right individuals on the job. It’s the responsibility of the interviewer to
ensure that the interviewee has command over the written and spoken language.
There should be proper Induction program so that the policies of the company are
clear to all the employees. There should be proper trainings conducted for required
employees (for eg: Voice and Accent training).
Use of Simple Language: Use of simple and clear words should be emphasized.
Use of ambiguous words and jargons should be avoided.
Reduction and elimination of noise levels: Noise is the main communication

barrier which must be overcome on priority basis. It is essential to identify the
source of noise and then eliminate that source.
Active Listening: Listen attentively and carefully. There is a difference between
“listening” and “hearing”. Active listening means hearing with proper
understanding of the message that is heard. By asking questions the speaker can
ensure whether his/her message is understood or not by the receiver in the same
terms as intended by the speaker.
Emotional State: During communication one should make effective use of body
language. He/she should not show their emotions while communication as the
receiver might misinterpret the message being delivered. For example, if the
conveyer of the message is in a bad mood then the receiver might think that the
information being delivered is not good.
Simple Organizational Structure: The organizational structure should not be

complex. The number of hierarchical levels should be optimum. There should be a
ideal span of control within the organization. Simpler the organizational structure,
more effective will be the communication.
Avoid Information Overload: The managers should know how to prioritize their
work. They should not overload themselves with the work. They should spend
quality time with their subordinates and should listen to their problems and
feedbacks actively.
Give Constructive Feedback: Avoid giving negative feedback. The contents of

the feedback might be negative, but it should be delivered constructively.
Constructive feedback will lead to effective communication between the superior
and subordinate.
Proper Media Selection: The managers should properly select the medium of
communication. Simple messages should be conveyed orally, like: face to face
interaction or meetings. Use of written means of communication should be
encouraged for delivering complex messages. For significant messages reminders
can be given by using written means of communication such as : Memos, Notices
etc.
Flexibility in meeting the targets: For effective communication in an organization
the managers should ensure that the individuals are meeting their targets timely
without skipping the formal channels of communication. There should not be much
pressure on employees to meet their targets.
5.In an organization, communication flows in 5 main directions-
• Downward
• Upward
• Lateral
• Diagonal
• External
Downward Flow of Communication: Communication that flows from a higher

level in an organization to a lower level is a downward communication. In other
words, communication from superiors to subordinates in a chain of command is a
downward communication. This communication flow is used by the managers to
transmit work-related information to the employees at lower levels. Employees
require this information for performing their jobs and for meeting the expectations
of their managers.
Organizational publications, circulars, letter to employees, group meetings etc. are

all examples of downward communication. In order to have effective and errorfree
downward communication, managers must:
• Specify communication objective

• Ensure that the message is accurate, specific and unambiguous.
• Utilize the best communication technique to convey the message to the
receiver in right form
Upward Flow of Communication: Communication that flows to a higher level in
an organization is called upward communication. It provides feedback on how well
the organization is functioning. The subordinates use upward communication to
convey their problems and performances to their superiors. The subordinates also
use upward communication to tell how well they have understood the downward
communication. It can also be used by the employees to share their views and ideas
and to participate in the decision-making process. Upward communication leads to
a more committed and loyal workforce in an organization because the employees
are given a chance to raise and speak dissatisfaction issues to the higher levels. The
managers get to know about the employees feelings towards their jobs, peers,
supervisor and organization in general. Managers can thus accordingly take actions
for improving things.
Lateral / Horizontal Communication: Communication that takes place at same

levels of hierarchy in an organization is called lateral communication, i.e.,
communication between peers, between managers at same levels or between any
horizontally equivalent organizational member. The advantages of horizontal
communication are as follows:
• It is time saving.
• It facilitates co-ordination of the task.
• It facilitates co-operation among team members.
• It provides emotional and social assistance to the organizational members.
• It helps in solving various organizational problems.
• It is a means of information sharing
• It can also be used for resolving conflicts of a department with other
department or conflicts within a department.
Diagonal Communication: Communication that takes place between a manager

and employees of other workgroups is called diagonal communication. It generally
does not appear on organizational chart. For instance - To design a training module
a training manager interacts with an operations personnel to enquire about the way
they perform their task.
External Communication: Communication that takes place between a manager

and external groups such as - suppliers, vendors, banks, financial institutes etc. For
instance - To raise capital the Managing director would interact with the Bank
Manager.
There are 7 C’s of effective communication which are applicable to both written as
well as oral communication. These are as follows:
Completeness - The communication must be complete. It should convey all facts

required by the audience. The sender of the message must take into consideration
the receiver’s mind set and convey the message accordingly. A complete
communication has following features:
Complete communication develops and enhances reputation of an organization.

Moreover, they are cost saving as no crucial information is missing and no
additional cost is incurred in conveying extra message if the communication is
complete. A complete communication always gives additional information
wherever required. It leaves no questions in the mind of receiver. Complete
communication helps in better decision-making by the audience/readers/receivers
of message as they get all desired and crucial information.
Conciseness - Conciseness means wordiness, i.e, communicating what you want to

convey in least possible words without forgoing the other C’s of communication.
Conciseness is a necessity for effective communication.
Consideration - Consideration implies “stepping into the shoes of others”.

Effective communication must take the audience into consideration, i.e, the
audience’s view points, background, mind-set, education level, etc. Make an
attempt to envisage your audience, their requirements, emotions as well as
problems. Ensure that the self-respect of the audience is maintained and their
emotions are not at harm. Modify your words in message to suit the audience’s
needs while making your message complete. Show optimism towards your
audience. Emphasize on “what is possible” rather than “what is impossible”. Lay
stress on positive words such as jovial, committed, thanks, warm, healthy, help,
etc.
Clarity - Clarity implies emphasizing on a specific message or goal at a time,

rather than trying to achieve too much at once. Clarity in communication has
following features:
Concreteness - Concrete communication implies being particular and clear rather

than fuzzy and general. Concreteness strengthens the confidence.
Courtesy - Courtesy in message implies the message should show the sender’s
expression as well as should respect the receiver. The sender of the message should
be sincerely polite, judicious, reflective and enthusiastic. Courteous message has
following features:
Correctness - Correctness in communication implies that there are no grammatical

errors in communication.
Awareness of these 7 C’s of communication makes you an effective

communicator.
6. Communicating in a meeting is an essential part of effective communication.

Some meetings are not conducted in an efficient manner due to which they fail in
accomplishing the sole objective of the meeting. It may be because:
• They do not involve participation of all

• They may be too long
• They may be unsystematic
• They may lack a clear agenda
• They may not begin on the planned time  They may end without any
conclusion.
As a result, such meetings lead to agitation and sheer wastage of time. In order to
ensure effectiveness of a meeting, it must be planned, systematic and rational.
The process of running an effective meeting includes the following steps:
Plan the meeting: Plan the meeting in advance. With the plan clear in mind, the
objective of the meeting can be well accomplished. Planning includes-
• Outline the objective of the meeting.

• Decide the attendees/participants of the meeting.
• Plan an agenda for the meeting, i.e., the topics to be discussed, the sequence
in which they will be discussed, in how much detail they will be discussed,
the time given to each agenda topic, etc.
• Plan the starting time of the meeting, plan for the breaks, and also plan the
approximate time by which the meeting should end.
Announce/declare the meeting: After planning the meeting and before actually
beginning the meeting, the participants should be delivered a
message/memorandum to make them aware and ready for the topics to be
discussed in the meeting. Give each participant responsibility for the agenda item.
Issue the agenda.
Conduct the meeting: Be punctual. Try and arrive before time for the meeting.
The meeting should begin on time. State the objective of the meeting in the very
beginning so that all are clear with the purpose of the meeting. Give a brief
introduction of the members/participants so that all are familiar. Circulate notes
and handouts. Involve all attendees during the discussion. Encourage new ideas
from the participants. Respect their ideas. Ask for a feedback. Make sure that there
are no distractions during the meeting (such as ringing cell phones, or participants
fiddling with pen, or gossiping, etc.). Give a quick review of the issues discussed in
the meeting. Make sure that all the issues are discussed within the time frame. If
time does not permit discussion of all issues, ask the participants if they are
comfortable in discussing those issues in next meeting. Fix and decide upon the
time for the next meeting.
Evaluate the meeting: Assess the meeting after it is conducted. Distribute an

evaluation form to all participants which provides you a feedback on the
effectiveness of the meeting. To get credible and honest feedback, do not give a
space for name of the attendee on the form. Ask questions such as whether the
objectives of the meetings were well met, did it involve participation of all, which
part of the meeting did the attendee found most constructive and which part of
meeting was not significant.
List of literature

Moscow 2004

12th edition
THEME 6 FUNCTIONS AND PRINCIPLES OF MANAGEMENT
Plan
1. Definition of the functions of management 2. Principles of the

management
1.We can say that management is the process of planning, organizing, leading and
controlling the efforts of organization members and of using all other
organizational resources to achieve stated organizational goals. Management
process suggests that all the managers in the organization perform certain functions
to get the things done by others. The functions of management are relatively
isolated areas of management activities that allow to exercise a certain influence on
the management object in order to achieve the task.
Management functions determine the specificity of managerial work, are closely

related to other categories of management science: structure, methods, technology,
management personnel, information and management decisions.
Functions must have a clearly defined meaning, a well-developed implementation

mechanism and a specific structure within which its organizational isolation is
completed.
The content of actions and functions performed in the management process

depends on the type of organization (administrative, public), the size and scope of
its activities (production, education, trade, household services), management level
in the management hierarchy (higher, middle or lower) its inside the organization
(production, marketing, finance, personnel) and a number of other factors.
Planning
The first of the managerial functions is planning. In this step, the manager will
create a detailed action plan aimed at some organizational goal. Planning means
defining performance goals for the organization and determining what actions and
resources are needed to achieve the goals. Planning is future oriented and
determines an organization’s direction. It is a rational and systematic way of
making decisions today that will affect the future of the company. Through
planning, management defines what the future of the organization should be and
how to get there. Strategic plans are long-term and affect the entire organization. A
strategic plan bridges the gap between what an organization is and what it will
become. Tactical plans translate strategic plans into specific actions that need to be
implemented by departments throughout the organization. The tactical plan defines
what has to be done, who will do it, and the resources needed to do it. Planning is
looking ahead. According to Henri Fayol, drawing up a good plan of action is the
hardest of the five functions of management. This requires an active participation
of the entire organization.
Peter Drucker has defined planning as follows:
“Planning is the continuous process of making present entrepreneurial decisions
systematically and with best possible knowledge of their futurity, organizing
systematically the efforts needed to carry out these decisions and measuring the
results of these decisions against the expectations through organized and
systematic feedback”.
Organizing
After managers develop objectives and plans to achieve the objectives, they must
design and develop an organization that will be able to accomplish the objectives.
Thus the purpose of the organizing function is to create a structure of task and
authority relationships that serves this purpose. Organizing is the process of
arranging and allocating work, authority, and resources among an organization’s
members so they can achieve the organization’s goals. Organizing, then, can be
thought of turning plans into actions. The organizing function involves deciding
how the organization will be structured (by departments, matrix teams, job
responsibilities, etc.). Organizing is thus the basic process of combining and
integrating human, physical and financial resources in productive interrelationships
for the achievement of enterprise objectives.
According to Henry Fayol, “To organize a business is to provide it with everything

useful or its functioning i.e. raw material, tools, capital and personnel’s”.
The function of organizing is concerned with:
• Identifying the tasks that must be performed and grouping them whenever
necessary
• Assigning these tasks to the personnel while defining their authority and
responsibility.
• Delegating this authority to these employees
• Establishing a relationship between authority and responsibility
• Coordinating these activities
Staffing
After the objectives have been determined, strategies, policies, programs,

procedures and rules formulated for their achievement, activities for the
implementation of strategies, policies, programs, etc. identified and grouped into
jobs, the next logical step in the management process is to procure suitable
personnel for manning the jobs.
Staffing is the function of hiring and retaining a suitable work-force for the
enterprise both at managerial as well as non-managerial levels. It involves the
process of recruiting, training, developing, compensating and evaluating
employees, and maintaining this workforce with proper incentives and motivations.
Since the human element is the most vital factor in the process of management, it is
important to recruit the right personnel.
Directing
Directing is the function of leading the employees to perform efficiently, and

contribute their optimum to the achievement of organizational objectives. Jobs
assigned to subordinates have to be explained and clarified, they have to be
provided guidance in job performance and they are to be motivated to contribute
their optimum performance with zeal and enthusiasm. The function of directing
thus involves the following subfunctions:
• Communication
• Motivation
• Leadership
• Supervising
The directing function is concerned with leadership, communication, motivation

and supervision so that the employees perform their activities in the most efficient
manner possible, in order to achieve the desired goals.
The leadership element involves issuing of instructions and guiding the

subordinates about procedures and methods.
The communication must be open both ways so that the information can be passed
on to the subordinates and the feedback received from them.
Motivation is very important, since highly motivated people show excellent

performance with less direction from superiors.
Supervising subordinates would lead to continuous progress reports as well as

assure the superiors that the directions are being properly carried out.
Coordinating
When all activities are harmonized, the organization will function better. Positive
influencing of employees behavior is important in this. Coordination therefore
aims at stimulating motivation and discipline within the group dynamics. This
requires clear communication and good leadership. Only through positive
employee behavior management can the intended objectives be achieved.
Coordinating is the function of establishing such relationships among various parts
of the organization that they all together pull in the direction of organizational
objectives. It is thus the process of tying together all the organizational decisions,
operations, activities and efforts so as to achieve unity of action for the
accomplishment of organizational objectives.
Controlling
By verifying whether everything is going according to plan, the organization

knows exactly whether the activities are carried out in conformity with the plan.
Control takes place in a four-step process:
 Establish performance standards based on organizational objectives

 Measure and report on actual performance
 Compare results with performance and standards
 Take corrective or preventive measures as needed
Controlling may be the most important of the four management functions. It

provides the information that keeps the corporate goal on track. By controlling
their organizations, managers keep informed of what is happening; what is working
and what isn’t; and what needs to be continued, improved, or changed.
Management is an integral process and it is difficult to put its functions neatly in
separate boxes. Management functions tend to coalesce, and it sometimes becomes
difficult to separate one from the other.
2.Principles of management are crucial in administering an organization. One of

the earliest scientists of management Henri Fayol has laid down 14 principles of
management. These 14 principles incorporate within them the rules and guidelines
with which a management should ideally function.
1. Division of Work
In practice, employees are specialized in different areas and they have different
skills. Different levels of expertise can be distinguished within the knowledge areas
(from generalist to specialist). Personal and professional developments support
this. According to Henri Fayol specialization promotes efficiency of the workforce
and increases productivity. In addition, the specialization of the workforce
increases their accuracy and speed.
2. Authority and Responsibility
In order to get things done in an organization, management has the authority to

give orders to the employees. Of course with this authority comes responsibility.
According to Henri Fayol, the accompanying power or authority gives the
management the right to give orders to the subordinates. The responsibility can be
traced back from performance and it is therefore necessary to make agreements
about this. In other words, authority and responsibility go together and they are two
sides of the same coin.
3. Discipline
This third principle of the 14 principles of management is about obedience. It is

often a part of the core values of a mission and vision in the form of good conduct
and respectful interactions. This management principle is essential and is seen as
the oil to make the engine of an organization run smoothly.
4. Unity of Command
The management principle ‘Unity of command’ means that an individual employee

should receive orders from one manager and that the employee is answerable to
that manager. If tasks and related responsibilities are given to the employee by
more than one manager, this may lead to confusion which may lead to possible
conflicts for employees. By using this principle, the responsibility for mistakes can
be established more easily.
5. Unity of Direction
This management principle of the 14 principles of management is all about focus

and unity. All employees deliver the same activities that can be linked to the same
objectives. All activities must be carried out by one group that forms a team. These
activities must be described in a plan of action. The manager is ultimately
responsible for this plan and he monitors the progress of the defined and planned
activities. Focus areas are the efforts made by the employees and coordination.
6. Subordination of Individual Interest
There are always all kinds of interests in an organization. In order to have an

organization function well, Henri Fayol indicated that personal interests are
subordinate to the interests of the organization (ethics). The primary focus is on the
organizational objectives and not on those of the individual. This applies to all
levels of the entire organization, including the managers.
7. Remuneration
Motivation and productivity are close to one another as far as the smooth running
of an organization is concerned. This management principle of the 14 principles of
management argues that the remuneration should be sufficient to keep employees
motivated and productive. There are two types of remuneration namely
nonmonetary (a compliment, more responsibilities, credits) and monetary
(compensation, bonus or other financial compensation). Ultimately, it is about
rewarding the efforts that have been made.
8. The Degree of Centralization
Management and authority for decision-making process must be properly balanced

in an organization. This depends on the volume and size of an organization
including its hierarchy.
Centralization implies the concentration of decision making authority at the top

management (executive board). Sharing of authorities for the decision-making
process with lower levels (middle and lower management), is referred to as
decentralization by Henri Fayol. Henri Fayol indicated that an organization should
strive for a good balance in this.
9. Scalar Chain
Hierarchy presents itself in any given organization. This varies from senior
management (executive board) to the lowest levels in the organization. Henri
Fayol’s “hierarchy” management principle states that there should be a clear line in
the area of authority (from top to bottom and all managers at all levels). This can
be seen as a type of management structure. Each employee can contact a manager
or a superior in an emergency situation without challenging the hierarchy.
Especially, when it concerns reports about calamities to the immediate
managers/superiors.
10. Order
According to this principle of the 14 principles of management, employees in an

organization must have the right resources at their disposal so that they can
function properly in an organization. In addition to social order (responsibility of
the managers) the work environment must be safe, clean and tidy.
11. Equity
The management principle of equity often occurs in the core values of an

organization. According to Henri Fayol, employees must be treated kindly and
equally. Employees must be in the right place in the organization to do things right.
Managers should supervise and monitor this process and they should treat
employees fairly and impartially.
12. Stability of Tenure of Personnel
This management principle of the 14 principles of management represents

deployment and managing of personnel and this should be in balance with the
service that is provided from the organization. Management strives to minimize
employee turnover and to have the right staff in the right place. Focus areas such as
frequent change of position and sufficient development must be managed well.
13. Initiative
Henri Fayol argued that with this management principle employees should be
allowed to express new ideas. This encourages interest and involvement and
creates added value for the company. Employee initiatives are a source of strength
for the organization according to Henri Fayol. This encourages the employees to be
involved and interested.
14. Esprit de Corps
The management principle ‘esprit de corps’ of the 14 principles of management

stands for striving for the involvement and unity of the employees. Managers are
responsible for the development of morale in the workplace; individually and in the
area of communication. Esprit de corps contributes to the development of the
culture and creates an atmosphere of mutual trust and understanding.
The 14 principles of management can be used to manage organizations and are

useful tools for forecasting, planning, process management, organization
management, decision-making, coordination and control.
List of literature

Moscow 2004

12th edition
THEME 7 MOTIVATION IN THE MANAGEMENT SYSTEM

Plan
1. Definition and importance of motivation 2. Different theories of

motivation 3. Types of motivation
1.Motivation is the word derived from the word ’motive’ which means needs,
desires, wants or drives within the individuals. It is the process of stimulating
people to actions to accomplish the goals. In the work goal context the
psychological factors stimulating the people’s behavior can be:
• desire for money

• success
• recognition
• job-satisfaction
• team work
One of the most important functions of management is to create willingness

amongst the employees to perform in the best of their abilities. Therefore the role
of a leader is to arouse interest in performance of employees in their jobs.
People with less ability but lots of strength are able to perform better than people
with superior ability and lack of will. Hard work is crucial to success and
achievement.
Motivation is a very important for an organization because of the following

benefits it provides:
1) Puts human resources into action
Every concern requires physical, financial and human resources to accomplish the
goals. It is through motivation that the human resources can be utilized by making
full use of it. This can be done by building willingness in employees to work. This
will help the enterprise in securing best possible utilization of resources.
2) Improves level of efficiency of employees
The level of a subordinate or an employee does not only depend upon his
qualifications and abilities. For getting best of his work performance, the gap
between ability and willingness has to be filled which helps in improving the level
of performance of subordinates.
3) Builds friendly relationship
Motivation is an important factor which brings employees satisfaction. This can be

done by keeping into mind and framing an incentive plan for the benefit of the
employees. This could initiate the following things:
• Monetary and non-monetary incentives,

• Promotion opportunities for employees,
• Disincentives for inefficient employees.
4) Leads to stability of work force
Stability of workforce is very important from the point of view of reputation and
goodwill of a concern. The employees can remain loyal to the enterprise only when
they have a feeling of participation in the management. The skills and efficiency of
employees will always be of advantage to employees as well as employees. This
will lead to a good public image in the market which will attract competent and
qualified people into a concern. As it is said, “Old is gold” which suffices with the
role of motivation here, the older the people, more the experience and their
adjustment into a concern which can be of benefit to the enterprise.
We can summarize by saying that motivation is important both to an individual and

a business.
Motivation is important to an individual as:
 Motivation will help him achieve his personal goals.

 If an individual is motivated, he will have job satisfaction.
 Motivation will help in self-development of individual.
 An individual would always gain by working with a dynamic team.
Similarly, motivation is important to a business as:
 The more motivated the employees are, the more empowered the team is.
 The more is the team work and individual employee contribution, more
profitable and successful is the business.
 During period of amendments, there will be more adaptability and creativity.
 Motivation will lead to an optimistic and challenging attitude at work place.
It is a manager's job to motivate employees to do their jobs well. So how do

managers do this? The answer is motivation in management, the process through
which managers encourage employees to be productive and effective.
There are many ways to motivate employees. Managers who want to encourage
productivity should work to ensure that employees:
• Feel that the work they do has meaning or importance

• Believe that good work is rewarded
• Believe that they are treated fairly
Incentive is an act or promise for greater action. It is also called as a stimulus to

greater action. Therefore, management has to offer the following two categories of
incentives to motivate employees:
Monetary incentives- Those incentives which satisfy the subordinates by

providing them rewards in terms of rupees. Money has been recognized as a chief
source of satisfying the needs of people. Money is also helpful to satisfy the social
needs by possessing various material items. Therefore, money not only satisfies
psychological needs but also the security and social needs. Therefore, in many
factories, various wage plans and bonus schemes are introduced to motivate and
stimulate the people to work.
Non-monetary incentives- Besides the monetary incentives, there are certain

nonfinancial incentives which can satisfy the ego and self- actualization needs of
employees. The incentives which cannot be measured in terms of money are under
the category of “Non- monetary incentives”. Whenever a manager has to satisfy
the psychological needs of the subordinates, he makes use of non-financial
incentives. Non- financial incentives can be of the following types:-
• Security of service- Job security is an incentive which provides great

motivation to employees. If his job is secured, he will put maximum efforts
to achieve the objectives of the enterprise. This also helps since he is very
far off from mental tension and he can give his best to the enterprise.
• Praise or recognition- The praise or recognition is another non- financial
incentive which satisfies the ego needs of the employees. Sometimes praise
becomes more effective than any other incentive. The employees will
respond more to praise and try to give the best of their abilities to a concern.
• Suggestion scheme- The organization should look forward to taking
suggestions and inviting suggestion schemes from the subordinates. This
inculcates a spirit of participation in the employees. This can be done by
publishing various articles written by employees to improve the work
environment which can be published in various magazines of the company.
This also is helpful to motivate the employees to feel important and they can
also be in search for innovative methods which can be applied for better
work methods. This ultimately helps in growing a concern and adapting new
methods of operations.
• Job enrichment- Job enrichment is another nonmonetary incentive in which

the job of a worker can be enriched. This can be done by increasing his
responsibilities, giving him an important designation, increasing the content
and nature of the work. This way efficient worker can get challenging jobs
in which they can prove their worth. This also helps in the greatest
motivation of the efficient employees.
• Promotion opportunities- Promotion is an effective tool to increase the spirit
to work in a concern. If the employees are provided opportunities for the
advancement and growth, they feel satisfied and contented and they become
more committed to the organization.
2.Maslow's hierarchy of needs is a motivational theory in psychology comprising a

five-tier model of human needs, often depicted as hierarchical levels within a
pyramid. Needs lower down in the hierarchy must be satisfied before individuals
can attend to needs higher up. From the bottom of the hierarchy upwards, the needs
are: physiological, safety, love and belonging, esteem and self-actualization.
The needs have been classified into the following in order:
Physiological needs- These are the basic needs of an individual which includes
food, clothing, shelter, air, water, etc. These needs relate to the survival and
maintenance of human life.
Safety needs- These needs are also important for human beings. Everybody wants
job security, protection against danger, safety of property, etc.
Social needs- These needs emerge from society. Man is a social animal. These
needs become important. For example- love, affection, belongingness, friendship,
conversation, etc.
Esteem needs- These needs relate to desire for self-respect, recognition and
respect from others.
Self-actualization needs- These are the needs of the highest order and these needs
are found in those person whose previous four needs are satisfied. This will include
need for social service, meditation.
In 1959, Frederick Herzberg, a behavioral scientist proposed a two-factor theory or
the motivator-hygiene theory. According to Herzberg, there are some job factors
that result in satisfaction while there are other job factors that prevent
dissatisfaction. Herzberg classified these job factors into two categories-
Hygiene factors- Hygiene factors are those job factors which are essential for
existence of motivation at workplace. These do not lead to positive satisfaction for
long-term. But if these factors are absent / if these factors are non-existant at
workplace, then they lead to dissatisfaction. In other words, hygiene factors are
those factors which when adequate/reasonable in a job, pacify the employees and
do not make them dissatisfied. These factors are extrinsic to work. Hygiene factors
are also called as dissatisfiers or maintenance factors as they are required to avoid
dissatisfaction. These factors describe the job environment/scenario. The hygiene
factors symbolized the physiological needs which the individuals wanted and
expected to be fulfilled. Hygiene factors include:
 Pay - The pay or salary structure should be appropriate and reasonable. It

must be equal and competitive to those in the same industry in the same
domain.
 Company Policies and administrative policies - The company policies
should not be too rigid. They should be fair and clear. It should include
flexible working hours, dress code, breaks, vacation, etc.
 Fringe benefits - The employees should be offered health care plans
(mediclaim), benefits for the family members, employee help programs, etc.
 Physical Working conditions - The working conditions should be safe, clean

and hygienic. The work equipment's should be updated and well-maintained.
 Status - The employees’ status within the organization should be familiar
and retained.
 Interpersonal relations - The relationship of the employees with his peers,
superiors and subordinates should be appropriate and acceptable. There
should be no conflict or humiliation element present.
 Job Security - The organization must provide job security to the employees.
Motivational factors- According to Herzberg, the hygiene factors cannot be

regarded as motivators. The motivational factors yield positive satisfaction. These
factors are inherent to work. These factors motivate the employees for a superior
performance. These factors are called satisfiers. These are factors involved in
performing the job. Employees find these factors intrinsically rewarding. The
motivators symbolized the psychological needs that were perceived as an
additional benefit. Motivational factors include:
 Recognition - The employees should be praised and recognized for their

accomplishments by the managers.
 Sense of achievement - The employees must have a sense of achievement.
This depends on the job. There must be a fruit of some sort in the job.
 Growth and promotional opportunities - There must be growth and
advancement opportunities in an organization to motivate the employees to
perform well.
 Responsibility - The employees must hold themselves responsible for the
work. The managers should give them ownership of the work. They should
minimize control but retain accountability.
 Meaningfulness of the work - The work itself should be meaningful,
interesting and challenging for the employee to perform and to get
motivated.
In 1960, Douglas McGregor formulated Theory X and Theory Y suggesting two

aspects of human behavior at work, or in other words, two different views of
individuals (employees): one of which is negative, called as Theory X and the
other is positive, so called as Theory Y. According to McGregor, the perception of
managers on the nature of individuals is based on various assumptions.
Assumptions of Theory X
An average employee intrinsically does not like work and tries to escape it
whenever possible. Since the employee does not want to work, he must be
persuaded, compelled, or warned with punishment so as to achieve organizational
goals. A close supervision is required on part of managers. The managers adopt a
more dictatorial style. Many employees rank job security on top, and they have
little or no aspiration/ ambition.
• Employees generally dislike responsibilities.

• Employees resist change.
• An average employee needs formal direction.
Assumptions of Theory Y
Employees can perceive their job as relaxing and normal. They exercise their
physical and mental efforts in an inherent manner in their jobs. Employees may not
require only threat, external control and coercion to work, but they can use
selfdirection and self-control if they are dedicated and sincere to achieve the
organizational objectives. If the job is rewarding and satisfying, then it will result
in employees’ loyalty and commitment to organization. An average employee can
learn to admit and recognize the responsibility. In fact, he can even learn to obtain
responsibility. The employees have skills and capabilities. Their logical
capabilities should be fully utilized. In other words, the creativity, resourcefulness
and innovative potentiality of the employees can be utilized to solve organizational
problems.
Thus, we can say that Theory X presents a pessimistic view of employees’ nature
and behavior at work, while Theory Y presents an optimistic view of the
employees’ nature and behavior at work. If correlate it with Maslow’s theory, we
can say that Theory X is based on the assumption that the employees emphasize on
the physiological needs and the safety needs; while Theory X is based on the
assumption that the social needs, esteem needs and the self-actualization needs
dominate the employees.
McGregor views Theory Y to be more valid and reasonable than Theory X. Thus,
he encouraged cordial team relations, responsible and stimulating jobs, and
participation of all in decision-making process.
Implications of Theory X and Theory Y
Quite a few organizations use Theory X today. Theory X encourages use of tight
control and supervision. It implies that employees are reluctant to organizational
changes. Thus, it does not encourage innovation.
Many organizations are using Theory Y techniques. Theory Y implies that the
managers should create and encourage a work environment which provides
opportunities to employees to take initiative and self-direction. Employees should
be given opportunities to contribute to organizational well-being. Theory Y
encourages decentralization of authority, teamwork and participative decision
making in an organization. Theory Y searches and discovers the ways in which an
employee can make significant contributions in an organization. It harmonizes and
matches employees’ needs and aspirations with organizational needs and
aspirations.
David McClelland and his associates proposed McClelland’s theory of Needs /

Achievement Motivation Theory. This theory states that human behavior is
affected by three needs - Need for Power, Achievement and Affiliation. Need for
achievement is the urge to excel, to accomplish in relation to a set of standards, to
struggle to achieve success. Need for power is the desire to influence other
individual’s behavior as per your wish. In other words, it is the desire to have
control over others and to be influential. Need for affiliation is a need for open and
sociable interpersonal relationships. In other words, it is a desire for relationship
based on co-operation and mutual understanding.
The individuals with high achievement needs are highly motivated by competing
and challenging work. They look for promotional opportunities in job. They have a
strong urge for feedback on their achievement. Such individuals try to get
satisfaction in performing things better. High achievement is directly related to
high performance. Individuals who are better and above average performers are
highly motivated.
The individuals who are motivated by power have a strong urge to be influential
and controlling. They want that their views and ideas should dominate and thus,
they want to lead. Such individuals are motivated by the need for reputation and
self-esteem. Individuals with greater power and authority will perform better than
those possessing less power. Generally, managers with high need for power turn
out to be more efficient and successful managers. They are more determined and
loyal to the organization they work for. Need for power should not always be taken
negatively. It can be viewed as the need to have a positive effect on the
organization and to support the organization in achieving it’s goals.
The individuals who are motivated by affiliation have an urge for a friendly and
supportive environment. Such individuals are effective performers in a team. These
people want to be liked by others. The manager’s ability to make decisions is
hampered if they have a high affiliation need as they prefer to be accepted and
liked by others, and this weakens their objectivity. Individuals having high
affiliation needs prefer working in an environment providing greater personal
interaction. Such people have a need to be on the good books of all. They generally
cannot be good leaders.
ERG Theory
To bring Maslow’s need hierarchy theory of motivation in synchronization with

empirical research, Clayton Alderfer redefined it in his own terms. His rework is
called as ERG theory of motivation. He recategorized Maslow’s hierarchy of needs
into three simpler and broader classes of needs:
• Existence needs- These include need for basic material necessities. In short,
it includes an individual’s physiological and physical safety needs.
• Relatedness needs- These include the aspiration individuals have for
maintaining significant interpersonal relationships (be it with family, peers
or superiors), getting public fame and recognition. Maslow’s social needs
and external component of esteem needs fall under this class of need.
• Growth needs- These include need for self-development and personal
growth and advancement. Maslow’s self-actualization needs and intrinsic
component of esteem needs fall under this category of need.
Reinforcement theory of motivation
Reinforcement theory of motivation was proposed by BF Skinner and his

associates. It states that individual’s behavior is a function of its consequences. It is
based on “law of effect”, i.e., individual’s behavior with positive consequences
tends to be repeated, but individual’s behavior with negative consequences tends
not to be repeated.
Reinforcement theory of motivation overlooks the internal state of individual, i.e.,

the inner feelings and drives of individuals are ignored by Skinner. This theory
focuses totally on what happens to an individual when he takes some action. Thus,
according to Skinner, the external environment of the organization must be
designed effectively and positively so as to motivate the employee. This theory is a
strong tool for analyzing controlling mechanism for individual’s behavior.
However, it does not focus on the causes of individual’s behavior.
The managers use the following methods for controlling the behavior of the
employees:
Positive Reinforcement- This implies giving a positive response when an
individual shows positive and required behavior. For example - Immediately
praising an employee for coming early for job. This will increase probability of
outstanding behavior occurring again. Reward is a positive reinforce, but not
necessarily. If and only if the employees’ behavior improves, reward can said to be
a positive reinforcer. Positive reinforcement stimulates occurrence of a behavior. It
must be noted that more spontaneous is the giving of reward, the greater
reinforcement value it has.
Negative Reinforcement- This implies rewarding an employee by removing

negative / undesirable consequences. Both positive and negative reinforcement can
be used for increasing desirable / required behavior.
Punishment- It implies removing positive consequences so as to lower the

probability of repeating undesirable behavior in future. In other words, punishment
means applying undesirable consequence for showing undesirable behavior. For
instance - Suspending an employee for breaking the organizational rules.
Punishment can be equalized by positive reinforcement from alternative source.
Extinction- It implies absence of reinforcements. In other words, extinction

implies lowering the probability of undesired behavior by removing reward for that
kind of behavior. For instance - if an employee no longer receives praise and
admiration for his good work, he may feel that his behavior is generating no
fruitful consequence. Extinction may unintentionally lower desirable behavior.
Vroom's expectancy theory assumes that behavior results from conscious choices
among alternatives whose purpose it is to maximize pleasure and to minimize pain.
Vroom realized that an employee's performance is based on individual factors such
as personality, skills, knowledge, experience and abilities. He stated that effort,
performance and motivation are linked in a person's motivation. He uses the
variables Expectancy, Instrumentality and Valence to account for this.
Expectancy is the belief that increased effort will lead to increased performance i.e.
if I work harder then this will be better. This is affected by such things as:
• Having the right resources available (e.g. raw materials, time)

• Having the right skills to do the job
• Having the necessary support to get the job done (e.g. supervisor support, or
correct information on the job)
Instrumentality is the belief that if you perform well that a valued outcome will be
received. The degree to which a first level outcome will lead to the second level
outcome. i.e. if I do a good job, there is something in it for me. This is affected by
such things as:
• Clear understanding of the relationship between performance and outcomes

– e.g. the rules of the reward 'game'
• Trust in the people who will take the decisions on who gets what outcome
• Transparency of the process that decides who gets what outcome
Valence is the importance that the individual places upon the expected outcome.
For the valence to be positive, the person must prefer attaining the outcome to not
attaining it. For example, if someone is mainly motivated by money, he or she
might not value offers of additional time off.
The three elements are important behind choosing one element over another
because they are clearly defined: effort-performance expectancy (E>P expectancy)
and performance-outcome expectancy (P>O expectancy).
E>P expectancy: our assessment of the probability that our efforts will lead to the
required performance level.
P>O expectancy: our assessment of the probability that our successful performance
will lead to certain outcomes.
Crucially, Vroom's expectancy theory works on perceptions – so even if an
employer thinks they have provided everything appropriate for motivation, and
even if this works with most people in that organization, it doesn't mean that
someone won't perceive that it doesn't work for them.
At first glance expectancy theory would seem most applicable to a

traditionalattitude work situation where how motivated the employee is depends on
whether they want the reward on offer for doing a good job and whether they
believe more effort will lead to that reward.
However, it could equally apply to any situation where someone does something
because they expect a certain outcome. For example, I recycle paper because I
think it's important to conserve resources and take a stand on environmental issues
(valence); I think that the more effort I put into recycling the more paper I will
recycle (expectancy); and I think that the more paper I recycle then less resources
will be used (instrumentality)
Thus, Vroom's expectancy theory of motivation is not about self-interest in rewards

but about the associations people make towards expected outcomes and the
contribution they feel they can make towards those outcomes.
3.Different types of motivation fall into two main categories. We are going to
review and discuss those major categories before we begin moving into more
minor forms of motivation.
1. Intrinsic Motivation
Intrinsic motivation is a type of motivation in which an individual is being

motivated by internal desires. For example, let’s say an individual named Bob has
set himself a goal to begin losing weight and becoming healthier. Let’s also
imagine that Bob’s reason to pursue this path of fitness and wellness is to improve
his health overall and feel more happier with his appearance. Since Bob’s desire to
change comes from within, his motivation is intrinsic.
2. Extrinsic Motivation
Extrinsic motivation, on the other hand, is a type of motivation in which an

individual is being motivated by external desires. Rather than being motivated by
the need to look better and feel healthier, let’s say that Bob was feeling pressure
from his wife to slim down and improve his physique so that she would be more
attracted to him. Since this pressure comes from the outside, this is an example of
extrinsic motivation.
All types of motivation are going to fall into one of the two categories above. Now
that we’ve covered these motivational types and provided you with some
examples, here are minor forms of motivation that are capable of making a big
impact in your life!
3. Reward-Based Motivation or Incentive Motivation
Incentive motivation or reward-based motivation is a type of motivation that is

utilized when you or others know that they will be a reward once a certain goal is
achieved. Because there will be something to look forward to at the end of a task,
people will often become more determined to see the task through so that they can
receive whatever it is that has been promised.
The better the reward, the stronger the motivation will be!
4. Fear-Based Motivation
The word “fear” carries a heavy negative meaning but when it comes to
motivation, this is not necessarily the case. Anyone who is big on goal-setting and
achievement knows that accountability plays a huge role in following through on
goals. When you become accountable either to someone you care about or to the
general public, you create a motivation for yourself that is rooted in the fear of
failure. This fear helps you to carry out your vision so that you do not fail in front
of those who are aware of your goal. Fear-based motivation is extremely powerful
as long as the fears is strong enough to prevent you from quitting.
5. Achievement-Based Motivation
Titles, positions, and roles throughout jobs and other areas of our lives are very
important to us. Those who are constantly driven to acquire these positions and
earn titles for themselves are typically dealing with achievement-based motivation.
Whereas those who use incentive motivation to focus on the rewards that come
after a goal is met, those who use achievement-based motivation focus on reaching
a goal for the sake of achievement. Those who need a boost in their professional
life will find achievement-based motivation extremely helpful.
6. Power-Based Motivation
Those who find happiness in becoming more powerful or creating massive change
will definitely be fueled by power-based motivation. Power-based motivation is a
type of motivation that energizes others to seek more control, typically through the
use of positions in employment or organizations. Although it may seem to be a bad
thing, power-based motivation is great for those who wish to change the world
around them based on their personal vision. If you’re looking to make changes,
power-based motivation may just be the way to go!
7. Affiliation Motivation
People often say that it’s not what we do but who we know that dictates our
success. For people driven by affiliation motivation, this is most certainly true.
Those who use affiliation motivation as a driving force to meet their goals thrive
when they connect with others in higher power positions than them. They also
thrive when those people compliment the work that they do as well as their
achievements. Affiliation motivation is a great force to help you achieve your
social goals and move up in the world.
8. Competence Motivation
Have you always wanted to be better at anything you do? Is one of your goals to
learn how to do your job better or improve at your hobby? If so, you may be in
need of some competence motivation. Competence motivation is a type of
motivation that helps others to push forward and become more competent in a
certain area. This type of motivation is especially helpful when it comes to learning
new skills and figuring out ways around obstacles that one is faced with in
different areas of life.
9. Attitude Motivation
A problem with our attitude, perspectives, and beliefs is an issue that many of us
face. It can become a problem on the way that we move throughout to the point
that we begin to lose our happiness and miss out on our dreams. For those of you
who are losing out on life because of your attitude, attitude motivation will help
you to recover and move forward properly. Attitude motivation is a type of
motivation that comes to those who intensely desire to change the way that they
see the world around them and the way that they see themselves. Goals associated
with self-awareness and self-change will be met with attitude motivation.
Motivation is absolutely vital if you want to achieve your dreams. Using the 9
types of motivation mentioned above, nothing will be able to stand in the way of
you and your goals any longer!
List of literature

Moscow 2004

12th edition
THEME 8. CONTROLLING IN MANAGEMENT SYSTEM
Plan
1. Definition of controlling in management system 2. Characteristics and

steps of controlling process 3. Types of controlling 4. Principles of
controlling 5. Why are controls needed
1.Control, or controlling, is one of the managerial functions like planning,

organizing, staffing and directing. It is an important function because it helps to
check the errors and to take the corrective action so that deviation from standards
are minimized and stated goals of the organization are achieved in a desired
manner. Controlling is the process of ensuring that actual activities conform to
planned activities. Controlling helps managers monitor the effectiveness of their
planning, organizing, and leading activities.
Management control can be defined as a systematic effort by business

management to compare performance to predetermined standards, plans, or
objectives in order to determine whether performance is in line with these
standards and presumably in order to take any remedial action required to see that
human and other corporate resources are being used in the most effective and
efficient way possible in achieving corporate objectives.
Managers are responsible for controlling in the organization and it is a manager’s

duty to improve the effectiveness of organization’s control system; as can do a
great deal to improve the effectiveness of their control systems.
In fact, controlling determines what is being accomplished — that is, evaluating

the performance and, if necessary, taking corrective measures so that the
performance takes place according to plans. Controlling can also be viewed as
detecting and correcting significant variations in the results obtained from planned
activities. Control is any process that guides activity towards some predetermined
goals. Thus control process tries to find out deviations between planned
performance and actual performance and to suggest corrective actions wherever
these are needed. Planning without controlling is useless. Control is necessary in
every organization to ensure that everything is going properly. Every manager,
therefore, should have an effective and adequate control system to assist him in
making sure that events conform to plans. However, control does not work
automatically, but it requires certain design.
Undoubtedly, controlling also helps managers monitor environmental changes and

the effects of these changes on the organizations’ progress.
Control is closely related with other functions of management because control may
be affected by other functions and may affect other functions too. Often it is said
planning is the basis, action is the essence, delegation is the key, and information is
the guide for control. In fact, managing process is an integrated system and all
managerial functions are interrelated and interdependent. When control exists in
the organization, people know: what targets they are striving for, how they are
doing in relation to the targets, and what changes are needed to keep their
performance at a satisfactory level.
2. Following are the characteristics of controlling function of management-
1. Controlling is an end function- A function which comes once the

performances are made in confirmities with plans.
2. Controlling is a pervasive function- which means it is performed by
managers at all levels and in all type of concerns.
3. Controlling is forward looking- because effective control is not possible
without past being controlled. Controlling always looks to future so that
follow-up can be made whenever required.
4. Controlling is a dynamic process- since controlling requires taking reviewal
methods, changes have to be made wherever possible.
5. Controlling is related with planning- Planning and Controlling are two
inseparable functions of management. Without planning, controlling is a
meaningless exercise and without controlling, planning is useless. Planning
presupposes controlling and controlling succeeds planning.
Controlling as a management function involves following steps:
Establishment of standards- Standards are the plans or the targets which have to
be achieved in the course of business function. They can also be called as the
criterions for judging the performance. Standards generally are classified into two-
Measurable or tangible - Those standards which can be measured and expressed
are called as measurable standards. They can be in form of cost, output,
expenditure, time, profit, etc.
Non-measurable or intangible- There are standards which cannot be measured

monetarily. For example- performance of a manager, deviation of workers, their
attitudes towards a concern. These are called as intangible standards.
Controlling becomes easy through establishment of these standards because

controlling is exercised on the basis of these standards.
Measurement of performance- The second major step in controlling is to measure

the performance. Finding out deviations becomes easy through measuring the
actual performance. Performance levels are sometimes easy to measure and
sometimes difficult. Measurement of tangible standards is easy as it can be
expressed in units, cost, money terms, etc. Quantitative measurement becomes
difficult when performance of manager has to be measured. Performance of a
manager cannot be measured in quantities. It can be measured only by-
• Attitude of the workers,

• Their morale to work,
• The development in the attitudes regarding the physical environment, and 
Their communication with the superiors.
It is also sometimes done through various reports like weekly, monthly, quarterly,
yearly reports.
Comparison of actual and standard performance - Comparison of actual

performance with the planned targets is very important. Deviation can be defined
as the gap between actual performance and the planned targets. The manager has to
find out two things here- extent of deviation and cause of deviation. Extent of
deviation means that the manager has to find out whether the deviation is positive
or negative or whether the actual performance is in conformity with the planned
performance. The managers have to exercise control by exception. He has to find
out those deviations which are critical and important for business. Minor deviations
have to be ignored. Major deviations like replacement of machinery, appointment
of workers, quality of raw material, rate of profits, etc. should be looked upon
consciously. Therefore it is said, “ If a manager controls everything, he ends up
controlling nothing.” For example, if stationery charges increase by a minor 5 to
10%, it can be called as a minor deviation. On the other hand, if monthly
production decreases continuously, it is called as major deviation.
Once the deviation is identified, a manager has to think about various cause which
has led to deviation. The causes can be-
1. Erroneous planning,
2. Co-ordination loosens,
3. Implementation of plans is defective, and
4. Supervision and communication is ineffective, etc.
Taking remedial actions- once the causes and extent of deviations are known, the
manager has to detect those errors and take remedial measures for it. There are two
alternatives here-
a) Taking corrective measures for deviations which have occurred; and

b) After taking the corrective measures, if the actual performance is not in
conformity with plans, the manager can revise the targets. It is here the
controlling process comes to an end. Follow up is an important step because
it is only through taking corrective measures, a manager can exercise
controlling.
3. It is also valuable to understand that, within the strategic and operational levels
of control, there are several types of control. The first two types can be mapped
across two dimensions: level of proactivity and outcome versus behavioral. The
following table summarizes these along with examples of what such controls might
look like.
Proactivity
Proactivity can be defined as the monitoring of problems in a way that provides

their timely prevention, rather than after the fact reaction. In management, this is
known as feedforward control; it addresses what can we do ahead of time to help
our plan succeed. The essence of feedforward control is to see the problems
coming in time to do something about them. For instance, feedforward controls
include preventive maintenance on machinery and equipment and due diligence on
investments.
Concurrent Controls
The process of monitoring and adjusting ongoing activities and processes is known
as concurrent control. Such controls are not necessarily proactive, but they can
prevent problems from becoming worse. For this reason, we often describe
concurrent control as real-time control because it deals with the present. An
example of concurrent control might be adjusting the water temperature of the
water while taking a shower.
Feedback Controls
Finally, feedback controls involve gathering information about a completed

activity, evaluating that information, and taking steps to improve the similar
activities in the future. This is the least proactive of controls and is generally a
basis for reactions. Feedback controls permit managers to use information on past
performance to bring future performance in line with planned objectives.
Outcome and Behavioral Controls
Controls also differ depending on what is monitored, outcomes or behaviors.

Outcome controls are generally preferable when just one or two performance
measures (say, return on investment or return on assets) are good gauges of a
business’s health. Outcome controls are effective when there’s little external
interference between managerial decision making on the one hand and business
performance on the other. It also helps if little or no coordination with other
business units exists.
Behavioral controls involve the direct evaluation of managerial and employee

decision making, not of the results of managerial decisions. Behavioral controls tie
rewards to a broader range of criteria, such as those identified in the Balanced
Scorecard. Behavioral controls and commensurate rewards are typically more
appropriate when there are many external and internal factors that can affect the
relationship between a manager’s decisions and organizational performance.
They’re also appropriate when managers must coordinate resources and
capabilities across different business units. Control-Problem Avoidance
In most situations, managers can avoid some control problems by allowing no

opportunities for improper behavior. One possibility is automation. Computers and
other means of automation reduce the organization's exposure to control problems
because they can be set to perform appropriately (that is, as the organization
desires), and they will perform more consistently than do human beings.
Consequently, control is improved.
Another avoidance possibility is centralization, such as that which takes place with
very critical decisions at most organization levels. If a manager makes all the
decisions in certain areas, those areas cease to be control problems in a managerial
sense because no other persons are involved.
A third avoidance possibility is risk-sharing with an outside body, such as an

insurance company. Many companies bond employees in sensitive positions, and
in so doing, they reduce the probability that the employees' behavior will cause
significant harm to the firm.
Finally, some control problems can and should be avoided by elimination of a

business or an operation entirely. Managers without the means to control certain
activities, perhaps because they do not understand the processes well, can eliminate
the associated control problems by turning over their potential profits and the
associated risk to a third party, for example, by subcontracting or divesting.
If management cannot, or chooses not to avoid the control problems caused by

relying on other individuals, they must address the problems by implementing one
or more control tactics. The large number of tactics that are available to help
achieve good control can be classified usefully into three main categories,
according to the object of control; that is, whether control is exercised over specific
actions, results, or personnel. Table 1 shows many common controls classified
according to their control object; these controls are described in the following
sections.
Control of Specific Actions
One type of control, specific-action control, attempts to ensure that individuals

perform (or do not perform) certain actions that are known to be desirable (or
undesirable). Management can limit the incidence of some types of obviously
undesirable activity by using behavioral constraints that render the occurrence
impossible, or at least unlikely. These constraints include physical devices, such as
locks and key-personnel identification systems, and administrative constraints,
such as segregation of duties, which make it very difficult for one person to carry
out an improper act.
A second type of specific action control is action accountability — a type of

feedback control system by which employees are held accountable for their
actions. The implementation of action-accountability control systems requires: (1)
defining the limits of acceptable behavior, as is done in procedures manuals; (2)
tracking the behaviors that employees are actually engaged in; and (3) rewarding or
punishing deviations from the defined limits. Although action-accountability
systems involve the tracking and reporting of actual behaviors, their objective is to
motivate employees to behave appropriately in the future. These systems are
effective only if employees understand what is required of them, and they feel that
their individual actions will be noticed and rewarded or punished in some
significant way.
A third type of specific-action control is preaction review. This involves observing

the work of others before the activity is complete, for example, through direct
supervision, formal planning reviews, and approvals on proposals for expenditures.
Reviews can provide effective control in several ways by: correcting potentially
harmful behavior before the full damaging effects are felt; or influencing behavior
just by the threat of an impending review, such as causing extra care in the
preparation of an expenditure proposal. One advantage of reviews is that they can
be used even when it is not possible to define exactly what is expected prior to the
review.
Control of Results
Control can also be accomplished by focusing on results: this type of control comes
in only one basic form, results accountability, which involves holding employees
responsible for certain results. Use of results-accountability control systems
requires: (1) defining the dimensions along which results are desired, such as
efficiency, quality, and service; (2) measuring performance on these dimensions;
and (3) providing rewards (punishments) to encourage (discourage) behavior that
will lead (not lead) to those results. As with action-accountability systems, results-
accountability systems are future-oriented; they attempt to motivate people to
behave appropriately. But they are effective only if employees feel that their
individual efforts will be noticed and rewarded in some significant way.
Control of Personnel
A third type of control can be called personnel control because it emphasizes a

reliance on the personnel involved to do what is best for the organization, and it
provides assistance for them as necessary. Personnel controls can be very effective
by themselves in some situations, such as in a small family business or in a
professional partnership, because the underlying causes of the needs for controls
(personal limitations and lack of goal congruence) are minimal. However, even
when control problems are present, they can be reduced to some extent by: (1)
upgrading the capabilities of personnel in key positions, such as tightening hiring
policies, implementing training programs, or improving job assignments; (2)
improving communications to help individuals know and understand their roles
better and how they can best coordinate their efforts with those of other groups in
the organization; and (3) encouraging peer (or subordinate) control by establishing
cohesive work groups with shared goals.
4.The basic principles of management control can be grouped into 10 elements

reflecting their purpose and nature, structure and process. These principles of
management control are given below:
Principle of Assurance of Objective. The basic purpose of management control is

the attainment of objectives does this by detecting failures, in plans. Potential or
actual, deviations from plans should be detected enough to permit effective
corrective action.
Principle of Efficiency of Controls. A management control system should detect

and highlight the causes of deviations from plans with minimum possible costs and
unwanted consequences. The principle of efficiency is particularly important in
control because techniques tend to become costly and burdensome. A manager
may become so engrossed in control that he spends more than it is to detect a
deviation. Controls which seriously interfere with authority of subordinates or
morale of those who execute plans, is inefficient.
Principle of Control Responsibility. The primary responsibility for the exercise

of control lies with the manager charged with the execution of plans. His
responsibly cannot be waived or rescinded without changing the organization
structure. This simple principle clarifies the often misunderstood role of controllers
and control units. These, agencies act in a service or staff provide control
information. But they cannot exercise control unless given the managerial authority
and responsibility for the things controlled.
Principle of Forward Looking. Control, like planning should be forward looking.

The principle is often disregarded largely because control has been depend up
accounting and statistical data instead of upon forecasts and projections. Even
though forecast are not accurate, they are better than historical records. Ideally, a
control system should provide instantaneous feedback so that, deviations from
desired performance is corrected as soon as they occur. If this is not possible
control should be based on forecasts, so as to foresee deviations in time. For
example, cash forecasts help in maintaining the solvency of business by
anticipating cash shortages and preventing them.
Principle of Direct Control. Most, controls used today are based on the fact that
human being make mistakes. They are often used as indirect controls aimed at
catching errors, often after the fact. Where ever is possible, direct controls aimed at
preventing errors should be used. Improving the quality of managers can minimize
the need for indirect controls. High quality managers make very few mistakes and
carry out all their functions to the best advantage.
Principle of Reflection of Plans. Controlling is the task of making sure that plans
are carried out effectively. Therefore, control techniques must reflect the specific
nature and structure of plans. For example, cost control, must be based on planned
costs of a definite and specific type.
Principle of Organizational Suitability. A management control system fit the

manage authority area and it should reflect the organization structure. When the
management control system is tailored to the structure of the organization, it pin
points the responsibility for action and facilitates correction of deviation from the
plans. Similarly, the information to appraise performance against plans must be
suitable to the position of the manager who is to, use it. In other words, all figures
and reports used for purposes of control must be in terms of the organization.
Principe of Individuality of Controls. Controls become effective when they are

consistent with the position, operational responsibility, competence, and needs of
the individual concerned. The scope and detail information required vary with the
level and function of management. Similarly, different managers prefer different
forms and units of reporting information. Therefore, controls should meet the
individual requirements of each manager.
Principle of Critical Point Controls. While exercising control, a manager should

focus attention on the factors, which are critical to appraising performance. It
would he unnecessary and wasteful for a manager to check each and every detail of
performance. Therefore, he should concentrate his attention on critical points of
performance.
Principle of Action. Control is a waste of time unless the corrective action is

taken. Corrective action may involve redrawing plans, reorganization, replacement
or training of a subordinate, motivation of staff, etc. Control is justified only when
indicated or experienced deviations from plans are corrected through appropriate,
planning, organizing, staffing and directing.
5. If all personnel always did what was best for the organization, control — and
even management — would not be needed. But, obviously individuals are
sometimes unable or unwilling to act in the organization's best interest, and a set of
controls must be implemented to guard against undesirable behavior and to
encourage desirable actions.
One important class of problems against which control systems guard may be
called personal limitations. People do not always understand what is expected of
them nor how they can best perform their jobs, as they may lack some requisite
ability, training, or information. In addition, human beings have a number of innate
perceptual and cognitive biases, such as an inability to process new information
optimally or to make consistent decisions, and these biases can reduce
organizational effectiveness.4 Some of these personal limitations are correctable or
avoidable, but for others, controls are required to guard against their deleterious
effects.
Even if employees are properly equipped to perform a job well, some choose not to
do so, because individual goals and organizational goals may not coincide
perfectly. In other words, there is a lack of goal congruence. Steps must often be
taken either to increase goal congruence or to prevent employees from acting in
their own interest where goal incongruence exists.
If nothing is done to protect the organization against the possible occurrence of

undesirable behavior or the omission of desirable behavior caused by these
personal limitations and motivational problems, severe repercussions may result.
At a minimum, inadequate control can result in lower performance or higher risk of
poor performance. At the extreme, if performance is not controlled on one or more
critical performance dimensions, the outcome could be organizational failure.
List of literature

Moscow 2004

12th edition
THEME 9. METHODS OF MANAGEMENT
Plan
1. Definition and essence of management methods 2. Economic

management methods 3. Administrative methods 4. Socio-psychological
methods
1.Management methods represent specific types of management, thus the way how
it is the organization, resources and its processes managed. Management methods
therefore significantly affect planning, organizing and the performance of other
managerial functions. They affect the management of either the whole organization
(business) or its specific part (e.g. in an organizational unit). The management
method is a method related to the specific impact on the managed object in order to
achieve the set goal. Management methods reflect the main content of management
activities. Characterizing these methods, it is important to disclose their focus,
content and organizational form. The direction of management methods is
expressed in the orientation to the management system (object) (firm, department,
division, company, etc.). The content characterizes the specifics methods of
influence. The organizational form is the impact on a specific situation. It can have
a direct form (direct impact) or indirect (statement of the problem and the creation
of incentive conditions). Some authors classify management methods depending on
their content, focus and organizational form are distinguished the following
management methods:
• organizational and administrative, based on direct directive instructions;
• economic, conditioned by the same incentives;
• socio-psychological, used to improve the social activity of employees.
An objective basis for the use of organizational management methods is the
organizational relations that form part of the management mechanism.
Organizational relations form the basis for the implementation of one of the most
important functions of management - the functions of the organization, which
determines the task of organizational and administrative activity as the
coordination of subordinates' actions. Sharp remarks have been made to the
administrative department more than once. Stiffness of the strictly administrative
approach, absence of incentives to initiative, creative work, innovative
development was emphasized. But it cannot be overlooked that no economic
methods can exist without organizational and administrative influence, which
ensures clarity and consistency in the performance of work, discipline of
employees. It is important to determine the effective combination and rational
correlation of organizational, administrative and economic methods, as well as to
clarify the very essence of the administrative approach, which in modern
conditions is transformed into a synthesis of administrative and organizational
components proper.
Within the organization, three forms of manifestation of organizational and

administrative methods are possible
• Mandatory prescription (order, prohibition, etc.);

• conciliation (consultation, resolution of compromise);
• recommendations, wishes (advice, clarification, proposal, communication,
etc.).
In most cases, these are direct tasks and orders of higher management bodies,
which are aimed at compliance with laws and regulations, orders and orders of
managers in order to optimize production processes.
2. Economic management methods - a set of methods and methods of
management, based on the use of economic laws, interests and a system of
interrelated economic indicators, norms and standards. Economic methods
correspond to the socio-economic nature of the enterprise and are a means of
developing production and exchange on a market basis. The priority of economic
methods in market conditions is explained by the fact that management relations
are primarily determined by economic relations and, ultimately, reduce to the
management of interests through interests and through interests. A distinctive
feature of the current stage in the development of economic management methods
is their focus on encouraging the activity of an enterprise, depending on its
effectiveness, saving resource
Economic methods of management Table 1

Group of methods Components of a group of methods
Methods governed by state and regional Tax system of the country; tax system of
bodies (refer to the economic factors of the region; the country's credit and
the external environment of the
management system, the parameters of financial mechanism; credit and
which are not determined by the financial mechanism of the region
enterprise)
Methods regulated by the enterprise Economic standards of the enterprise;

the system of material incentives for
workers; system of responsibility for
quality and efficiency of work;
application of scientific approaches to
management
These standards should be developed on the basis of the results of marketing

research, analysis and forecasting of the most important indicators of quality and
resource intensity of the enterprise's products and competitors, the organizational
and technical level of production. Economic standards are included in the business
plan and fall into the functional subsystem of the management system.
3. Administrative method of management. This method is based on the fact

that all activities of the organization are conducted on the strict subordination of
employees and on their unconditional fulfillment of instructions. This method is
used if the weight of traditions is large, according to which only an unambiguous
decision can be made. As a result of applying the administrative method, the
achieved result is achieved, but the possibility of its development is not provided.
Another distinguishing feature of this method is the promotion of efficiency, not
initiative. The effectiveness of this method is significantly limited, since it does not
take into account and does not use all the capabilities of the organization.
Administrative and legal methods of management - the totality of legal
(administrative and administrative) means of influencing people's relations in the
production process. Administrative methods - a method of implementing
managerial influences on personnel. They are based on power, discipline and
penalties.
Feature of administrative methods:
- direct nature of the impact - any regulatory or administrative act is subject to

mandatory execution;
- compliance of administrative methods with the norms of government bodies.
Administrative and legal methods are based on the following systems:
• System of legislative acts of the country and region - state laws, decrees,
resolutions, state standards, regulations, instructions, methodologies and
other documents approved by state bodies for compulsory application on the
territory of the country.
• The system of normative-directive and methodological documents of the
enterprise and the higher organization, which are mandatory for application.
These include: standards, procedures, regulations, instructions and similar
documents for long-term use, as well as orders, orders, instructions approved
by the management of the enterprise and operating only at the enterprise.
The role of administrative methods of management is a powerful lever for

achieving the set goals in cases where it is necessary to subordinate the collective
and direct it to specific management tasks.
4.The purpose of socio-psychological management methods is the cognition and

use of the laws of people's mental activity for the optimization of psychological
phenomena and processes in the interests of society and the individual. This is the
unity, close connection and interdependence of social and psychological
management methods. However, there is a difference between them: with the help
of social methods, relations in groups and between groups are managed; with the
help of psychological - management of the behavior of the individual and
interpersonal relations in the group.
The purpose of sociological methods is to manage the formation and development

of the collective, to create a positive social and psychological climate in the team,
to achieve optimal unity, to achieve a common goal by ensuring the unity of
interests, developing initiatives, etc. Sociological methods are based on the needs,
interests, motives, goals and t.
Methods of management of individual group phenomena and processes include:
• methods to enhance social activity, which are designed to enhance the

initiative and creative attitude of members of the team to perform official
and public duties:
• methods of social regulation - to streamline social relations in collectives on
the basis of identifying common goals, interests;
• methods of managing normative behavior - the regulation of social relations
through the normalization of behavior.
Methods of management of individual and personal behavior are designed to

provide the necessary production behavior of personnel in accordance with the
objectives:
• suggestion - a direct impact on the will of the individual in complex, critical

situations;
• the methods of the personal example are designed for the imitation effect;
• methods of orienting conditions are used to change the attitude of staff to
work. To do this, it is necessary to inform about the progress of assignments,
about profitability and profitability, about wages and other performance
indicators of the enterprise and the individual.
The goal of psychological methods is the creation of a moral and psychological

climate conducive to the activation of the individual's activity and increasing the
degree of satisfaction with the process of work in the collective, at the enterprise.
Psychological methods include:
• methods of formation and development of the work collective, taking into

account psychological and socio-psychological compatibility;
• methods of humanizing relations between employees and managers,
consistent with the principles of social justice: leadership style, ethics and
management culture;
• methods of psychological motivation (motivation), forming in the workers
initiative, enterprise, the desire for high-performance work;
• methods of professional selection and training are focused on the
correspondence of the psychological characteristics of a person to the work
performed.
When choosing the management method, it is necessary to take into account: speed
of achievement of the goal;
 the probability of achieving the goal;

 the relationship of submission;
 the identity of a managed;
 the identity of the manager;
 economic independence;
 the climate in the team
The choice of methods is largely determined by the competence of the leader,

organizational skills, knowledge in the field of social psychology. The knowledge
of the socio-psychological and individual characteristics of the performers gives
the leader the opportunity to form and adopt an optimal management style and
thereby ensure an increase in the efficiency of the enterprise by improving the
socio-psychological climate and increasing the level of satisfaction with work.
List of literature

Moscow 2004

12th edition
THEME 10. STRATEGY OF MANAGEMENT SYSTEM

Plan
1. Definition, meaning and features of strategic management 2. Essence
of strategic planning and its functions 3. Steps of strategic management
process 4. Strategy Formulation and implementation process 5. Strategy
evaluation and strategic decisions
6. SWOT analysis.
1.Strategy is an action that managers take to attain one or more of the

organization’s goals. Strategy can also be defined as “A general direction set for
the company and its various components to achieve a desired state in the future.
Strategy results from the detailed strategic planning process”.
A strategy is all about integrating organizational activities and utilizing and

allocating the scarce resources within the organizational environment so as to meet
the present objectives. While planning a strategy it is essential to consider that
decisions are not taken in a vaccum and that any act taken by a firm is likely to be
met by a reaction from those affected, competitors, customers, employees or
suppliers.
Strategic Management is all about identification and description of the strategies

that managers can carry so as to achieve better performance and a competitive
advantage for their organization. An organization is said to have competitive
advantage if its profitability is higher than the average profitability for all
companies in its industry.
Strategic management can also be defined as a bundle of decisions and acts which
a manager undertakes and which decides the result of the firm’s performance. The
manager must have a thorough knowledge and analysis of the general and
competitive organizational environment so as to take right decisions. They should
conduct a SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats),
i.e., they should make best possible utilization of strengths, minimize the
organizational weaknesses, make use of arising opportunities from the business
environment and shouldn’t ignore the threats.
Strategic management is nothing but planning for both predictable as well as

unfeasible contingencies. It is applicable to both small as well as large
organizations as even the smallest organization face competition and, by
formulating and implementing appropriate strategies, they can attain sustainable
competitive advantage.
It is a way in which strategists set the objectives and proceed about attaining them.
It deals with making and implementing decisions about future direction of an
organization. It helps us to identify the direction in which an organization is
moving.
Strategic management is a continuous process that evaluates and controls the

business and the industries in which an organization is involved; evaluates its
competitors and sets goals and strategies to meet all existing and potential
competitors; and then reevaluates strategies on a regular basis to determine how it
has been implemented and whether it was successful or does it needs replacement.
Strategic Management gives a broader perspective to the employees of an

organization and they can better understand how their job fits into the entire
organizational plan and how it is co-related to other organizational members. It is
nothing but the art of managing employees in a manner which maximizes the
ability of achieving business objectives. The employees become more trustworthy,
more committed and more satisfied as they can co-relate themselves very well with
each organizational task. They can understand the reaction of environmental
changes on the organization and the probable response of the organization with the
help of strategic management. Thus the employees can judge the impact of such
changes on their own job and can effectively face the changes. The managers and
employees must do appropriate things in appropriate manner. They need to be both
effective as well as efficient.
One of the major role of strategic management is to incorporate various functional
areas of the organization completely, as well as, to ensure these functional areas
harmonize and get together well. Another role of strategic management is to keep a
continuous eye on the goals and objectives of the organization. Strategic
management can also help an organization gain competitive advantage and
improve market share.
The strategic management process helps company leaders assess their company's
present situation, chalk out strategies, deploy them and analyze the effectiveness of
the implemented strategies. The strategic management process involves analyzing
cross-functional business decisions prior to implementing them. Strategic
management typically involves:
• Analyzing internal and external strengths and weaknesses.

• Formulating action plans.
• Executing action plans.
• Evaluating to what degree action plans have been successful and making
changes when desired results are not being produced.
Strategic Management in Practice
Making companies able to compete is the purpose of strategic management. To that

end, putting strategic management plans into practice is the most important aspect
of the planning itself. Plans in practice involve identifying benchmarks, realigning
resources – financial and human – and putting leadership resources in place to
oversee the creation, sale, and deployment of products and services. Strategic
management extends to internal and external communication practices as well as
tracking to ensure that the company meets goals as defined in its strategic
management plan.
For example, a for-profit technical college wishes to increase enrollment of new

students and graduation of enrolled students over the next three years. The purpose
is to make the college known as the best buy for a student's money among five
forprofit technical colleges in the region, with a goal of increasing revenue. In this
case, strategic management means ensuring that the school has funds to create
high-tech classrooms and hire the most qualified instructors. The college also
invests in marketing and recruitment and implements student retention strategies.
The college’s leadership assesses whether its goals have been achieved on a
periodic basis.
Organizational culture can determine the success and failure of a business and is a
key component that strategic leaders consider when developing a dynamic
organization. Culture is a major factor in the way people in an organization outline
objectives, execute tasks and organize resources. A strong business culture will
make it easier for leaders to motivate their staff to execute their tasks in alignment
with the outlined strategies. Therefore, it is important to create strategies that are
suitable to the organization's culture. If a particular strategy does not match the
organization's culture, it would hinder the ability to accomplish the outcomes
expected from that strategy implementation.
Features of Strategy
Strategy is Significant because it is not possible to foresee the future. Without a

perfect foresight, the firms must be ready to deal with the uncertain events which
constitute the business environment. Strategy deals with long term developments
rather than routine operations, i.e. it deals with probability of innovations or new
products, new methods of productions, or new markets to be developed in future.
Strategy is created to take into account the probable behavior of customers and
competitors. Strategies dealing with employees will predict the employee behavior.
2. Strategic planning is an organizational management activity that is used to set

priorities, focus energy and resources, strengthen operations, ensure that employees
and other stakeholders are working toward common goals, establish agreement
around intended outcomes/results, and assess and adjust the organization's
direction in response to a changing environment. It is a disciplined effort that
produces fundamental decisions and actions that shape and guide what an
organization is, who it serves, what it does, and why it does it, with a focus on the
future. Effective strategic planning articulates not only where an organization is
going and the actions needed to make progress, but also how it will know if it is
successful.
What is a Strategic Plan?
A strategic plan is a document used to communicate with the organization the

organizations goals, the actions needed to achieve those goals and all of the other
critical elements developed during the planning exercise. Strategic planning is a
process in which organizational leaders determine their vision for the future as well
as identify their goals and objectives for the organization. The process also
includes establishing the sequence in which those goals should fall so that the
organization is enabled to reach its stated vision.
Strategic planning process
Organizations generally look three to five years ahead when engaged in strategic
planning. The strategic planning process results in a strategic plan, a document that
articulates both the decisions made about the organization's goals and the ways in
which the organization will achieve those goals. The strategic plan is intended to
guide the organization's leaders in their decision-making moving forward.
Benefits of strategic planning
Strategic planning has many benefits. It forces organizations to be aware of future

opportunities and challenges. It also forces organizations to understand what
resources will be needed to seize upon or overcome those opportunities and
challenges. Additionally, strategic planning gives individuals a sense of direction
and marshals them around a common mission. It creates standards and
accountability. Strategic planning also helps organizations limit or avoid time spent
on crisis management, where they're reacting to unexpected changes that they
failed to anticipate and/or prepare for.
Simply put, strategic planning determines where an organization is going over the
next year or more, how it's going to get there and how it'll know if it got there or
not. The focus of a strategic plan is usually on the entire organization, while the
focus of a business plan is usually on a particular product, service or program.
There are a variety of perspectives, models and approaches used in strategic

planning. The way that a strategic plan is developed depends on the nature of the
organization's leadership, culture of the organization, complexity of the
organization's environment, size of the organization, expertise of planners, etc. For
example, there are a variety of strategic planning models, including goals-based,
issues-based, organic, scenario (some would assert that scenario planning is more
of a technique than model), etc.
1) Goals-based planning is probably the most common and starts with focus
on the organization's mission (and vision and/or values), goals to work toward the
mission, strategies to achieve the goals, and action planning (who will do what and
by when).
2) Issues-based strategic planning often starts by examining issues facing the

organization, strategies to address those issues and action plans.
3) Organic strategic planning might start by articulating the organization's

vision and values, and then action plans to achieve the vision while adhering to
those values. Some planners prefer a particular approach to planning, eg,
appreciative inquiry.
When Should Strategic Planning Be Done?

The scheduling for the strategic planning process depends on the nature and needs
of the organization and the its immediate external environment. For example,
planning should be carried out frequently in an organization whose products and
services are in an industry that is changing rapidly . In this situation, planning
might be carried out once or even twice a year and done in a very comprehensive
and detailed fashion (that is, with attention to mission, vision, values,
environmental scan, issues, goals, strategies, objectives, responsibilities, time lines,
budgets, etc). On the other hand, if the organization has been around for many
years and is in a fairly stable marketplace, then planning might be carried out once
a year and only certain parts of the planning process, for example, action planning
(objectives, responsibilities, time lines, budgets, etc) are updated each year.
Consider the following guidelines:
1. Strategic planning should be done when an organization is just getting started.

(The strategic plan is usually part of an overall business plan, along with a
marketing plan, financial plan and operational/management plan.)
2. Strategic planning should also be done in preparation for a new major venture,
for example, developing a new department, division, major new product or line
of products, etc.
3. Strategic planning should also be conducted at least once a year in order to be

ready for the coming fiscal year (the financial management of an organization is
usually based on a year-to-year, or fiscal year, basis). In this case, strategic
planning should be conducted in time to identify the organizational goals to be
achieved at least over the coming fiscal year, resources needed to achieve those
goals, and funded needed to obtain the resources. These funds are included in
budget planning for the coming fiscal year. However, not all phases of strategic
planning need be fully completed each year. The full strategic planning process
should be conducted at least once every three years. As noted above, these
activities should be conducted every year if the organization is experiencing
tremendous change.
4. Each year, action plans should be updated.
5. Note that, during implementation of the plan, the progress of the implementation
should be reviewed at least on a quarterly basis by the board. Again, the
frequency of review depends on the extent of the rate of change in and around
the organization.
Strategic planning functions consist of several activities performed by

management in every organization. They are directed to long term goal setting and
decision making. Management roles and responsibilities for strategic planning
include several activities (management functions):
• decision-making process in critical business areas,

• strategic programming,
• developing strategies on corporate level,
• developing strategies for company business units (SBU)
• developing of functional strategies,
• developing business plans,
• selecting business objectives, primarily regarding the specification of
products (services), calculation of prices, marketing functions, costs, quality,
production, technological parameters, etc.
• creating innovation and adapting to changes in environment,
• developing ways to meet the needs and expectations of customers as well as
to improve position of the company in a competitive environment,
• long-term planning and forecasting,
• integrating and coordinating factor for other functional programs, investment
projects and operating plans.
3. The strategic management process means defining the organization’s

strategy. It is also defined as the process by which managers make a choice of a set
of strategies for the organization that will enable it to achieve better performance.
Strategic management is a continuous process that appraises the business and
industries in which the organization is involved; appraises it’s competitors; and
fixes goals to meet all the present and future competitor’s and then reassesses each
strategy.
Strategic management process has following four steps:
 Environmental Scanning- Environmental scanning refers to a process of

collecting, scrutinizing and providing information for strategic purposes. It
helps in analyzing the internal and external factors influencing an
organization. After executing the environmental analysis process,
management should evaluate it on a continuous basis and strive to improve
it.
 Strategy Formulation- Strategy formulation is the process of deciding best
course of action for accomplishing organizational objectives and hence
achieving organizational purpose. After conducting environment scanning,
managers formulate corporate, business and functional strategies.
 Strategy Implementation- Strategy implementation implies making the
strategy work as intended or putting the organization’s chosen strategy into
action. Strategy implementation includes designing the organization’s
structure, distributing resources, developing decision making process, and
managing human resources.
 Strategy Evaluation- Strategy evaluation is the final step of strategy
management process. The key strategy evaluation activities are: appraising
internal and external factors that are the root of present strategies, measuring
performance, and taking remedial / corrective actions. Evaluation makes
sure that the organizational strategy as well as it’s implementation meets the
organizational objectives.
These components are steps that are carried, in chronological order, when creating
a new strategic management plan. Present businesses that have already created a
strategic management plan will revert to these steps as per the situation’s
requirement, so as to make essential changes. Strategic management is an ongoing
process. Therefore, it must be realized that each component interacts with the other
components and that this interaction often happens in chorus.
4. Strategy formulation refers to the process of choosing the most appropriate

course of action for the realization of organizational goals and objectives and
thereby achieving the organizational vision. The process of strategy formulation
basically involves six main steps. Though these steps do not follow a rigid
chronological order, however they are very rational and can be easily followed in
this order.
 Setting Organizations’ objectives - The key component of any strategy

statement is to set the long-term objectives of the organization. It is known
that strategy is generally a medium for realization of organizational
objectives. Objectives stress the state of being there whereas Strategy
stresses upon the process of reaching there. Strategy includes both the
fixation of objectives as well the medium to be used to realize those
objectives. Thus, strategy is a wider term which believes in the manner of
deployment of resources so as to achieve the objectives. While fixing the
organizational objectives, it is essential that the factors which influence the
selection of objectives must be analyzed before the selection of objectives.
Once the objectives and the factors influencing strategic decisions have been
determined, it is easy to take strategic decisions.
 Evaluating the Organizational Environment - The next step is to evaluate the

general economic and industrial environment in which the organization
operates. This includes a review of the organizations competitive position. It
is essential to conduct a qualitative and quantitative review of an
organizations existing product line. The purpose of such a review is to make
sure that the factors important for competitive success in the market can be
discovered so that the management can identify their own strengths and
weaknesses as well as their competitors’ strengths and weaknesses. After
identifying its strengths and weaknesses, an organization must keep a track
of competitors’ moves and actions so as to discover probable opportunities
of threats to its market or supply sources.
 Setting Quantitative Targets - In this step, an organization must practically
fix the quantitative target values for some of the organizational objectives.
The idea behind this is to compare with long term customers, so as to
evaluate the contribution that might be made by various product zones or
operating departments. Aiming in context with the divisional plans - In this
step, the contributions made by each department or division or product
category within the organization is identified and accordingly strategic
planning is done for each sub-unit. This requires a careful analysis of
macroeconomic trends.
 Performance Analysis - Performance analysis includes discovering and
analyzing the gap between the planned or desired performance. A critical
evaluation of the organizations past performance, present condition and the
desired future conditions must be done by the organization. This critical
evaluation identifies the degree of gap that persists between the actual reality
and the long-term aspirations of the organization. An attempt is made by the
organization to estimate its probable future condition if the current trends
persist.
 Choice of Strategy - This is the ultimate step in Strategy Formulation. The
best course of action is actually chosen after considering organizational
goals, organizational strengths, potential and limitations as well as the
external opportunities.
Strategy implementation is the translation of chosen strategy into organizational

action so as to achieve strategic goals and objectives. Strategy implementation is
also defined as the manner in which an organization should develop, utilize, and
amalgamate organizational structure, control systems, and culture to follow
strategies that lead to competitive advantage and a better performance.
Organizational structure allocates special value developing tasks and roles to the
employees and states how these tasks and roles can be correlated so as maximize
efficiency, quality, and customer satisfaction-the pillars of competitive advantage.
But, organizational structure is not sufficient in itself to motivate the employees.
An organizational control system is also required. This control system equips

managers with motivational incentives for employees as well as feedback on
employees and organizational performance. Organizational culture refers to the
specialized collection of values, attitudes, norms and beliefs shared by
organizational members and groups.
Following are the main steps in implementing a strategy:
 Developing an organization having potential of carrying out strategy

successfully.
 Disbursement of abundant resources to strategy-essential activities.
 Creating strategy-encouraging policies.
 Employing best policies and programs for constant improvement.
 Linking reward structure to accomplishment of results.
 Making use of strategic leadership.
Excellently formulated strategies will fail if they are not properly implemented.
Also, it is essential to note that strategy implementation is not possible unless there
is stability between strategy and each organizational dimension such as
organizational structure, reward structure, resource-allocation process, etc.
Strategy implementation poses a threat to many managers and employees in an

organization. New power relationships are predicted and achieved. New groups
(formal as well as informal) are formed whose values, attitudes, beliefs and
concerns may not be known. With the change in power and status roles, the
managers and employees may employ confrontation behavior.
5. Strategy Evaluation is as significant as strategy formulation because it
throws light on the efficiency and effectiveness of the comprehensive plans in
achieving the desired results. The managers can also assess the appropriateness of
the current strategy in today's dynamic world with socio-economic, political and
technological innovations. Strategic Evaluation is the final phase of strategic
management.
The significance of strategy evaluation lies in its capacity to co-ordinate the task
performed by managers, groups, departments etc., through control of performance.
Strategic Evaluation is significant because of various factors such as - developing
inputs for new strategic planning, the urge for feedback, appraisal and reward,
development of the strategic management process, judging the validity of strategic
choice etc.
The process of Strategy Evaluation consists of following steps-
 Fixing benchmark of performance - While fixing the benchmark, strategists

encounter questions such as - what benchmarks to set, how to set them and
how to express them. In order to determine the benchmark performance to
be set, it is essential to discover the special requirements for performing the
main task. The performance indicator that best identify and express the
special requirements might then be determined to be used for evaluation.
The organization can use both quantitative and qualitative criteria for
comprehensive assessment of performance. Quantitative criteria includes
determination of net profit, ROI, earning per share, cost of production, rate
of employee turnover etc. Among the Qualitative factors are subjective

evaluation of factors such as - skills and competencies, risk taking potential,
flexibility etc.
 Measurement of performance - The standard performance is a bench mark
with which the actual performance is to be compared. The reporting and
communication system help in measuring the performance. If appropriate
means are available for measuring the performance and if the standards are
set in the right manner, strategy evaluation becomes easier. But various
factors such as managers contribution are difficult to measure. Similarly
divisional performance is sometimes difficult to measure as compared to
individual performance. Thus, variable objectives must be created against
which measurement of performance can be done. The measurement must be
done at right time else evaluation will not meet its purpose. For measuring
the performance, financial statements like - balance sheet, profit and loss
account must be prepared on an annual basis.
 Analyzing Variance - While measuring the actual performance and
comparing it with standard performance there may be variances which must
be analyzed. The strategists must mention the degree of tolerance limits
between which the variance between actual and standard performance may
be accepted. The positive deviation indicates a better performance but it is
quite unusual exceeding the target always. The negative deviation is an issue
of concern because it indicates a shortfall in performance. Thus in this case
the strategists must discover the causes of deviation and must take corrective
action to overcome it.
 Taking Corrective Action - Once the deviation in performance is identified,
it is essential to plan for a corrective action. If the performance is
consistently less than the desired performance, the strategists must carry a
detailed analysis of the factors responsible for such performance. If the
strategists discover that the organizational potential does not match with the
performance requirements, then the standards must be lowered. Another rare
and drastic corrective action is reformulating the strategy which requires
going back to the process of strategic management, reframing of plans
according to new resource allocation trend and consequent means going to
the beginning point of strategic management process.
Strategic decisions are the decisions that are concerned with whole environment in
which the firm operates, the entire resources and the people who form the company
and the interface between the two.
Characteristics/Features of Strategic Decisions
 Strategic decisions have major resource propositions for an organization.

These decisions may be concerned with possessing new resources,
organizing others or reallocating others.
 Strategic decisions deal with harmonizing organizational resource
capabilities with the threats and opportunities.
 Strategic decisions deal with the range of organizational activities. It is all
about what they want the organization to be like and to be about.
 Strategic decisions involve a change of major kind since an organization
operates in ever-changing environment.
 Strategic decisions are complex in nature.
 Strategic decisions are at the top most level, are uncertain as they deal with
the future, and involve a lot of risk.
 Strategic decisions are different from administrative and operational
decisions. Administrative decisions are routine decisions which help or
rather facilitate strategic decisions or operational decisions. Operational
decisions are technical decisions which help execution of strategic decisions.
To reduce cost is a strategic decision which is achieved through operational
decision of reducing the number of employees and how we carry out these
reductions will be administrative decision.
Strategic Decisions Administrative Operational Decisions

Decisions
Strategic decisions Administrative decisions Operational decisions are
are long-term are taken daily. not frequently taken.
decisions.
These are considered These are short-term These are mediumperiod

where The future planning based Decisions. based decisions.
is concerned.
Strategic decisions are These are taken These are taken in

taken in Accordance with according to strategic accordance with strategic
organizational mission and and administrative
vision. and operational decision.
Decisions.
These are related to overall These are related These are

Counter planning of all to working of related to
Organization. employees in an production.
Organization.
These deal with These are in welfare of These are related to

organizational Growth. employees working in an production and factory
organization. growth.
6. SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By

definition, Strengths (S) and Weaknesses (W) are considered to be internal factors
over which you have some measure of control. Also, by definition, Opportunities
(O) and Threats (T) are considered to be external factors over which you have
essentially no control.
SWOT Analysis is the most renowned tool for audit and analysis of the overall
strategic position of the business and its environment. Its key purpose is to identify
the strategies that will create a firm specific business model that will best align an
organization’s resources and capabilities to the requirements of the environment in
which the firm operates.
In other words, it is the foundation for evaluating the internal potential and
limitations and the probable/likely opportunities and threats from the external
environment. It views all positive and negative factors inside and outside the firm
that affect the success. A consistent study of the environment in which the firm
operates helps in forecasting/predicting the changing trends and also helps in
including them in the decision-making process of the organization.
An overview of the four factors (Strengths, Weaknesses, Opportunities and

Threats) is given below-
Strengths - Strengths are the qualities that enable us to accomplish the

organization’s mission. These are the basis on which continued success can be
made and continued/sustained. Strengths can be either tangible or intangible. These
are what you are well-versed in or what you have expertise in, the traits and
qualities your employees possess (individually and as a team) and the distinct
features that give your organization its consistency. Strengths are the beneficial
aspects of the organization or the capabilities of an organization, which includes
human competencies, process capabilities, financial resources, products and
services, customer goodwill and brand loyalty. Examples of organizational
strengths are huge financial resources, broad product line, no debt, committed
employees, etc.
Weaknesses - Weaknesses are the qualities that prevent us from accomplishing our
mission and achieving our full potential. These weaknesses deteriorate influences
on the organizational success and growth. Weaknesses are the factors which do not
meet the standards we feel they should meet. Weaknesses in an organization may
be depreciating machinery, insufficient research and development facilities, narrow
product range, poor decision-making, etc. Weaknesses are controllable. They must
be minimized and eliminated. For instance - to overcome obsolete machinery, new
machinery can be purchased. Other examples of organizational weaknesses are
huge debts, high employee turnover, complex decision making process, narrow
product range, large wastage of raw materials, etc.
Opportunities - Opportunities are presented by the environment within which our

organization operates. These arise when an organization can take benefit of
conditions in its environment to plan and execute strategies that enable it to
become more profitable. Organizations can gain competitive advantage by making
use of opportunities. Organization should be careful and recognize the
opportunities and grasp them whenever they arise. Selecting the targets that will
best serve the clients while getting desired results is a difficult task. Opportunities
may arise from market, competition, industry/government and technology.
Increasing demand for telecommunications accompanied by deregulation is a great
opportunity for new firms to enter telecom sector and compete with existing firms
for revenue.
Threats - Threats arise when conditions in external environment jeopardize the

reliability and profitability of the organization’s business. They compound the
vulnerability when they relate to the weaknesses. Threats are uncontrollable. When
a threat comes, the stability and survival can be at stake. Examples of threats are -
unrest among employees; ever changing technology; increasing competition
leading to excess capacity, price wars and reducing industry profits; etc.
Advantages of SWOT Analysis
SWOT Analysis is instrumental in strategy formulation and selection. It is a strong

tool, but it involves a great subjective element. It is best when used as a guide, and
not as a prescription. Successful businesses build on their strengths, correct their
weakness and protect against internal weaknesses and external threats. They also
keep a watch on their overall business environment and recognize and exploit new
opportunities faster than its competitors.
SWOT Analysis helps in strategic planning in following manner-
 It is a source of information for strategic planning.

 Builds organization’s strengths.  Reverse its weaknesses.
 Maximize its response to opportunities.
 Overcome organization’s threats.
 It helps in identifying core competencies of the firm.
 It helps in setting of objectives for strategic planning.
 It helps in knowing past, present and future so that by using past and current
data, future plans can be chalked out.
SWOT Analysis provide information that helps in synchronizing the firm’s

resources and capabilities with the competitive environment in which the firm
operates.
Limitations of SWOT Analysis
SWOT Analysis is not free from its limitations. It may cause organizations to view
circumstances as very simple because of which the organizations might overlook
certain key strategic contact which may occur. Moreover, categorizing aspects as
strengths, weaknesses, opportunities and threats might be very subjective as there
is great degree of uncertainty in market. SWOT Analysis does stress upon the
significance of these four aspects, but it does not tell how an organization can
identify these aspects for itself.
There are certain limitations of SWOT Analysis which are not in control of
management. These include-
 Price increase;
 Inputs/raw materials;
 Government legislation;
 Economic environment;
Searching a new market for the product which is not having overseas market due to
import restrictions; etc.
 Internal limitations may include-

 Insufficient research and development facilities;
 Faulty products due to poor quality control;
 Poor industrial relations;
 Lack of skilled and efficient labor; etc.
List of literature

Moscow 2004

12th edition
THEME 11. DIRECTORY (LEADERSHIP) AND (AUTHORITY) POWER

IN THE MANAGEMENT SYSTEM
Plan
1. Definition of directory (leadership). Main types of directors,

characteristics of leaders 2. Power in the management system 3. Sources
of power in management system 4. Persuasive management
1. A director is a person from a group of managers who leads or supervises a
particular area of a company. Companies that use this term often have many
directors spread throughout different business functions or roles (e.g. director of
human resources).[2] The director usually reports directly to a vice president or to
the CEO directly in order to let them know the progress of the organization. Large
organizations also sometimes have assistant directors or deputy directors. Director
commonly refers to the lowest level of executive in an organization, but many
large companies use the title of associate director more frequently. Some
companies also have regional directors and area directors. Regional directors are
present in companies that are organized by location and have their departments
under that. They are responsible for the operations for their particular country.
Though directors are the first stage in the executive team, area directors are seen as
higher up, based on their area of control.
Depending upon the size of an organization or a company, the number of directors

can vary. Start-up companies can have a single director, which is the minimum for
a private limited company according to the law. However, as organizations and
businesses expand, the number of directors can increase because more tasks and
responsibilities become present. For example, if the company expands and has
more than one department, such as finance, sales, marketing, production and IT,
then the business may form a board of directors, with each director overseeing a
department and maintaining full responsibility within that department.
A board of directors ensures that a clearly outlined structure is in place which will
help the business to work much more efficiently.
Larger businesses and organizations will form a clear board structure as the
following:
Chairman - This particular role within the company is often a non executive role
that also has the task of overseeing the entire business or organization.
Managing Director - A managing director is employed by the business, often by

the chairman. Other roles include running the business and producing salaries. The
managing director manages the board of directors and oversees the performance of
the business, thus reporting back to the chairman.
Executive Directors - A group of executive directors who each play a significant

role within the company. They maintain full responsibility over their respective
departments such as Finance, Marketing and Sales. Each director manages their
department ensuring that tasks and objectives are being met. Executive directors
also sit on the board.
Non-executive directors - These advise the business by proposing different forms

of strategy and also decide remuneration of the executive directors.
Having a clear structure within the business has a positive impact on the employees
and it also helps to organize the business. By having a team of executive directors,
employees can report to their executive directors if a problem or an issue occurs.
A managing director oversees the performance of the company as a whole and then
has the duty to report back to the chairman or board of directors. The chairman or
board of directors may set daily and weekly targets, which should be met by the
employees that are working within their respective departments.
The managing director also has the role to report their progress so the board can
evaluate it to see if targets have been achieved. Roles include:
• Maintaining the overall performance of the company and in particular the

departments within.
• Producing and planning strategic operating plans and objectives for the
longterm future. Also ensuring all short term targets have been achieved.
• Keeping in regular contact with the board of directors or chairman and to
maintain a positive relationship.
An executive director within a company or an organization is usually from the

board of directors and oversees a specific department within the organization such
as Marketing, Finance, Production and IT. The Executive Director must ensure that
all employees within his/her department are achieving the objectives which have
been set and must also make daily decisions within the department.
Roles include
• Overseeing their specific department such as Finance, Marketing or

Manufacturing.
• Maintaining the role of a specified decision maker within the department.
• Analyzing and evaluating the efficiency of day to day tasks within the
departments and ensuring all objectives are being met
Company director
A company director is one of the employees within a group of managers who

maintains a prolific role within an organization and usually has the higher role
within an organization. This is mainly because they decide on how to control the
business and also make the final and key decisions.
The company director(s) is mainly responsible for:
• Ensuring the company’s strategic objectives and plans which have been set
are being met.
• Analyzing and monitoring the progress of its employees towards achieving
the objectives and targets set.
• Appointing or hiring senior managers for certain departments such as
Finance and Marketing
A vice president is an officer in government or business who is below a president
(managing director) in rank. It can also refer to executive vice presidents,
signifying that the vice president is on the executive branch of the government,
university or company. In non-financial businesses, vice presidents often report
directly to the president or CEO of the company and is a member of the executive
management team. Some corporations that use this term may have individuals with
the title of vice president responsible for specific business divisions (e.g., Vice
President for Legal, Vice President for Sales and Marketing, Vice President for
Finance, or Vice President for Human Resources).
The President is a leader of an organization, company, community, club, trade

union, university or other group. The relationship between the president and the
Chief Executive Officer varies, depending on the structure of the specific
organization. In a similar vein to the Chief Operating Officer, the title of corporate
President as a separate position (as opposed to being combined with a "C-Suite"
designation, such as "President and Chief Executive Officer" or "President and
Chief Operating Officer") is also loosely defined; the President is usually the
legally recognized highest rank of corporate officer, ranking above the various
Vice Presidents (including Senior Vice President and Executive Vice President),
but on its own generally considered subordinate, in practice, to the CEO. The
powers of the president vary widely across organizations and such powers come
from specific authorization in the bylaws (e.g. the president can make an
"executive decision" only if the bylaws allow for it).
The powers of the president vary widely across organizations. In some

organizations the president has the authority to hire staff and make financial
decisions, while in others the president only makes recommendations to a board of
directors, and still others the president has no executive powers and is mainly a
spokesman for the organization. The amount of power given to the president
depends on the type of organization, its structure, and the rules it has created for
itself
Leadership is a process by which an executive can direct, guide and influence the
behavior and work of others towards accomplishment of specific goals in a given
situation. Leadership is the ability of a manager to induce the subordinates to work
with confidence and zeal. Leadership is the potential to influence behavior of
others. It is also defined as the capacity to influence a group towards the realization
of a goal. Leaders are required to develop future visions, and to motivate the
organizational members to want to achieve the visions. According to Keith Davis,
“Leadership is the ability to persuade others to seek defined objectives
enthusiastically. It is the human factor which binds a group together and motivates
it towards goals.”
Characteristics of Leadership
• It is an inter-personal process in which a manager is into influencing and

guiding workers towards attainment of goals.
• It denotes a few qualities to be present in a person which includes
intelligence, maturity and personality.
• It is a group process. It involves two or more people interacting with each
other.
• A leader is involved in shaping and moulding the behavior of the group

towards accomplishment of organizational goals.
• Leadership is situation bound. There is no best style of leadership. It all
depends upon tackling with the situations.
Leaders help themselves and others to do the right things. They set direction, build
an inspiring vision, and create something new. Leadership is about mapping out
where you need to go to "win" as a team or an organization; and it is dynamic,
exciting, and inspiring. Yet, while leaders set the direction, they must also use
management skills to guide their people to the right destination, in a smooth and
efficient way. According to the idea of transformational leadership , an effective
leader is a person who does the following:
• Creates an inspiring vision of the future.
• Motivates and inspires people to engage with that vision.
• Manages delivery of the vision.
• Coaches and builds a team, so that it is more effective at achieving the
vision.
Leadership brings together the skills needed to do these things. We'll look at each
element in more detail.
1. Creating an Inspiring Vision of the Future
In business, a vision is a realistic, convincing and attractive depiction of where you

want to be in the future. Vision provides direction, sets priorities, and provides a
marker, so that you can tell that you've achieved what you wanted to achieve.
Therefore, leadership is proactive – problem solving, looking ahead, and not being
satisfied with things as they are.
Once they have developed their visions, leaders must make them compelling and
convincing. A compelling vision is one that people can see, feel, understand, and
embrace. Effective leaders provide a rich picture of what the future will look like
when their visions have been realized. They tell inspiring stories , and explain their
visions in ways that everyone can relate to. Here, leadership combines the
analytical side of vision creation with the passion of shared values, creating
something that's really meaningful to the people being led.
2. Motivating and Inspiring People
A compelling vision provides the foundation for leadership. But it's leaders' ability
to motivate and inspire people that helps them deliver that vision. For example,
when you start a new project, you will probably have lots of enthusiasm for it, so
it's often easy to win support for it at the beginning. However, it can be difficult to
find ways to keep your vision inspiring after the initial enthusiasm fades, especially
if the team or organization needs to make significant changes in the way that it
does things. Leaders recognize this, and they work hard throughout the project to
connect their vision with people's individual needs, goals and aspirations.
One of the key ways they do this is through Expectancy Theory . Effective leaders
link together two different expectations:
• The expectation that hard work leads to good results.

• The expectation that good results lead to attractive rewards or incentives.
This motivates people to work hard to achieve success, because they expect to
enjoy rewards – both intrinsic and extrinsic – as a result.
Other approaches include restating the vision in terms of the benefits it will bring
to the team's customers, and taking frequent opportunities to communicate the
vision in an attractive and engaging way.
What's particularly helpful here is when leaders have expert power . People admire
and believe in these leaders because they are expert in what they do. They have
credibility, and they've earned the right to ask people to listen to them and follow
them. This makes it much easier for these leaders to motivate and inspire the
people they lead.
Leaders can also motivate and influence people through their natural charisma and
appeal, and through other sources of power , such as the power to pay bonuses or
assign tasks to people. However, good leaders don't rely too much on these types
of power to motivate and inspire others.
Coaching and Building a Team to Achieve the Vision
Individual and team development are important activities carried out by

transformational leaders. To develop a team, leaders must first understand team
dynamics. A leader will then ensure that team members have the necessary skills
and abilities to do their job and achieve the vision. They do this by giving and
receiving feedback regularly, and by training and coaching people to improve
individual and team performance. Leadership also includes looking for leadership
potential in others. By developing leadership skills within your team, you create
an environment where you can continue success in the long term. And that's a true
measure of great leadership.
2. Authority is a legal power which is possessed by a person from his superior

officers and with the help of which he succeeds in getting the things done by his
sub-ordinates. Authority is the key to managerial functions. If the managers do not
possess required authority, they will not be able to perform their duties properly. A
manager is in a position to influence his subordinates only by the use of his
authority.
Definitions
• "Authority is the right to give order and the power to exact obedience". –
Henri Fayol
• "Authority is the power to command, to act or not to act in a manner deemed

by the possessor of the authority to further enterprise or departmental
performance". – Koontz and O'Donnell.
For the successful use of authority following factors may be taken into
consideration:
1. Favourable Atmosphere : For the implementation of authority, favourable

atmosphere must be created in the enterprise so that sweet human relations may be
established in the enterprise.
2. Justified Behavior : The second important use for successful implementation

of authority is the justified behavior of the officers towards their subordinates.
They must feel and treat all the employees on an equal ground. If they do not do
so, the employees may not contribute their efforts towards the attainment of
objectives of enterprise.
3. Mutual Co-operation and Faith : There must be mutual cooperation and

mutual trust between officers and employees of the enterprise for the successful
use of authority.
4. Interest in the work : A very important condition of the successful use of

authority is that the employees must have an interest in the work for which they are
responsible. If they are not interested in their work, it may be very difficult for the
higher officers to implement their authority.
5. Respect to Superiors : There must be an atmosphere in the enterprise in

which the employees pay their best regards to their bosses. If they do not have a
feeling of regard for them, they may not obey their orders.
Delegation means devolution of authority on subordinates to make them to perform

the assigned duties or tasks. It is that part of the process of organization by which
managers make it possible for others to share the work of accomplishing
organizational objectives. Delegation consists of granting authority or the right to
decision-making in certain defined areas and charging the sub-ordinate with
responsibility for carrying through the assigned tasks. Delegation refers to the
assignment of work to others and confer them the requisite authority to accomplish
the job assigned.
Power may be defined as "the ability to exert influence. If a person has power it
means that he is able to change the attitude of other individuals.
Power" is a measure of an individual's potential to get others to do what he or she

wants them to do, as well as to avoid being forced by others to do what he or she
does not want to do.
• Power-oriented behavior refers to individual actions aimed primarily at
acquiring or using power.
• Power dynamics refers to interpersonal interactions that involve
poweroriented behavior
Managers regularly acquire and use power. They do so deliberately and

consciously as well as intuitively and unconsciously. Power-oriented behavior has
an impact on managerial career progress, on job performance, on organizational
effectiveness, and on the personal lives of employees. It involves the combined
topics of power, influence, authority, and organizational politics.
There is a curious inconsistency between the relevance of power to management

and the lack of serious discussion of the subject in management literature.
To remedy this situation, the purpose of this book is to help managers and students
of management gain a basic understanding of the acquisition and use of power in
managerial jobs, since there is a critical need for skillfully executed power-oriented
behavior and an understanding of the positive function such leadership behavior
serves and how it can help organizations, their managers, and society at large.
Most managers would be both more effective and more successful if they had a
better understanding of power dynamics. Power skills are not the only factors that
are necessary for success in management, since intelligence, maturity, and hard
work also are essential, but they are a crucial aspect of good leadership.
Powerful managers gain and maintain really sizable amounts of power by moving
into positions that control key contingencies for their organizations. They do so
because they recognize that as long as their organization has to compete with
others to get support from its environment, those who can manage the most
problematic environmental contingencies are really the most important people in
the organization. Everyone in an organization, must depend on a powerful
manager, and that situation gives him or her a great deal of power!
3.Former Yale University political science professor Robert A. Dahl described
power as a relationship between two people in the following terms: “person A
getting person B to do what person A wants them to do.” According to the 1960
study Bases of Social Power by John R.P. French and Bertram Raven, there are
five basic types or sources of power in management: reward, legitimate, coercive,
referent, and expert.
Reward Power
The theory of reward power relies on the belief that employees are more likely to
perform their job at a high level if they know rewards are contingent on their
performance. Managers have the power to control the allocation of these rewards,
which can include pay raises, bonuses, days off, awards or recognition. Rewards
should be given out according to what a recipient values and should only be used
when earned.
Legitimate Power
Legitimate power - power conferred by the organization and wielded by the

manager by virtue of his position - is the most simple and basic source of power in
management. The manager's power and influence is seen as fair and legitimate by
the employee because the power is derived from the manager's position, experience
or status. Legitimate power is also called position power.
Coercive Power
Coercive power is a source of power that relies on an employee’s high dependency

on his job, current pay and benefits. Managers try to intimidate employees with
reprimand or punishments such as losing their job or being demoted; this source of
power leaves employees no choice but to perform well or risk losing their job.
Coercive power forces compliance through punishment. Subordinates agree to a
manager's wishes to avoid the consequences of noncompliance, consequences such
as being written up, losing out on promotions, being given undesirable assignments
or being fired. Used unfairly, coercive power inspires resistance, corrodes
workplace morale and distances workers from management.
Expert and Informational
Experts exert influence over those who need or want their expertise. Expert power
is important, since anyone can acquire it. Expert power may come from having a
skill or ability such as the know-how to use a complicated software program. It
also may be exerted by those holding knowledge of situations, processes or people.
This knowledge can then be used to make sound judgments and plans. Information
power is related to expert power in that it involves holding knowledge. The power
to access information, hold it, share it or trade it gives those with information
power an "insider's edge." Expert power is the source of power that every manager
should strive to achieve. With expert power, an employee trusts and believes in
everything a manager tells or asks of them because they see the manager as having
great expertise in the specific area of business. Managers can get employees to do
almost any activity to help the business because of the employee’s respect of the
manager’s expertise and experience.
Referent Power
Referent power influences others by inspiring esteem. The esteem might arise
through personal charm or common affiliations. Like expert power, anyone can
acquire referent power. Requests from those holding referent power are honored if
someone wants to be liked or affiliated with the referent power holder. Sometimes
charisma is separated from referent power as a special case power source that only
a few can muster. Either way, the personal esteem people inspire can cause
subordinates to not only comply with requests, but to commit to them personally.
Referent power is based on the relationship of the manager and employee.
With this source of power, employees will work hard and respond well to a
manager’s use of power because of a positive working relationship, strong
emotional bonds or a physical attraction. The source of referent power is more of
an employee choice rather than a managerial style or ploy.
4. There are a number of different management styles – autocratic, laissez-faire,
and consultative leadership. All of which have their pros and cons, but there is
another effective management style you might not be familiar with, Persuasive
Management.
Persuasive management bears one major resemblance to the autocratic or

authoritarian leadership style in that, at the end of the day, you call the shots.
The two styles differ in their approach however, as while autocratic managers will
simply tell their team what to do, a persuasive manager will try to convince them
that it is the best way forward.
When is it Effective?
Persuasive management is not as widely applicable as other management styles,

and is often left out of the discussion entirely. Despite its relative obscurity,
persuasive management can be very effective in the following scenarios.
When you’re the expert
Persuasive management is most effective when used in situations where you know
far more about the subject matter than the team you’re leading. As you are an
expert in a complex field, there would be little benefit in seeking the input of those
who are not.
But team members are still able to perform individual tasks or execute certain parts
of the plan. Therefore, persuading them that the ideas are good and the work they
do matters will instill passion in them, and yield much better results.
When managing upwards
Persuasive management can also be a very effect tactic when managing upwards.
As an expert in your field, you may be called upon to provide your professional
insight and opinion.
In such cases, you need to convince people who are more senior than you that they
can trust your judgement. Honing your powers of persuasion could make this a
very effective approach to an often difficult situation.
What are the Pros and Cons?
Persuasive management is a style that has a lot of potential. Whether or not this
potential works in your favour depends heavily on you as an individual, and hinges
primarily on your persuasive powers. If you can manage to persuade your team to
back your way of thinking, persuasive management has a lot to offer.
The biggest potential advantages are:

• The ability to make quick decisions
• No confusion as to the corporate hierarchy or decision-making process
• Creative and professional freedom
• A better reaction than you would get with alternative styles, such as
autocracy
However, fail to persuade your team and this style has the potential to work against
you.
Persuasive management is not a style for every situation, and it is certainly not a
style for everyone. In order to effectively implement it, you need to be
knowledgeable, trustworthy, compelling, and stimulating. Without building the
relationship with your team on a foundation of trust, this style has little to no
chance of success. But if you can establish such a relationship, persuasive
management can be a very effective and rewarding approach.
List of literature

Moscow 2004

12th edition
THEME 12. LEADERSHIP IN THE MANAGEMENT SYSTEM

Plan
1. Introduction to leadership. What is the leadership. Importance of

leadership in modern management 2. Leadership qualities 3. Difference
of leadership and management 4. Leadership styles and skills
1.The aim of good management is to provide services to the community in an

appropriate, efficient, equitable, and sustainable manner. This can only be achieved
if key resources for service provision, including human resources, finances,
hardware and process aspects of care delivery are brought together at the point of
service delivery and are carefully synchronized. Management and leadership are
important for the delivery of good health services. Although the two are similar in
some respects, they may involve different types of outlook, skills, and behaviors.
Good managers should strive to be good leaders and good leaders, need
management skills to be effective. Leaders will have a vision of what can be
achieved and then communicate this to others and evolve strategies for realizing
the vision. They motivate people and are able to negotiate for resources and other
support to achieve their goals. Managers ensure that the available resources are
well organized and applied to produce the best results. In the resource constrained
and difficult environments of many low – to middle-income countries, a manager
must also be a leader to achieve optimum results.
Organizations need strong leadership for optimum effectiveness. Leadership, as we

know, is a trait which is both inbuilt and can be acquired also. Organizational
leadership deals with both human psychology as well as expert tactics.
Organizational leadership emphasizes on developing leadership skills and abilities
that are relevant across the organizations. It means the potential of the individuals
to face the hard times in the industry and still grow during those times. It clearly
identifies and distinguishes the leaders from the managers. The leader should have
potential to control the group of individuals.
An ideal organizational leader should not dominate over others. He should guide
the individuals under him, give them a sense of direction to achieve organizational
goals successfully and should act responsibly. He should be optimistic for sure. He
should be empathetic and should understand the need of the group members. An
organizational leader should not only lead others individually but also manage the
actions of the group.
Individuals who are highly ambitious, have high energy level, an urge to lead,
selfconfidence, intelligence, have thorough knowledge of job, are honest and
flexible are more likely to succeed as organizational leaders. Individuals who learn
the organizational leadership develop abilities and skills of teamwork, effective
communication, conflict resolution, and group problem solving techniques.
Organizational leaders clearly communicate organizational mission, vision and
policies; build employees morale, ensure efficient business operations; help
employees grow professionally and contribute positively towards organizations
mission.
Tips for Effective Organizational Leadership
 A leader must lead himself, only then he can lead others. He must be
committed on personal and professional front, and must be responsible. He
must be a role model for others and set an example for them.
 A leader must boost up the morale of the employees. He should motivate
them well so that they are committed to the organization. He should be well
acquainted with them, have concern for them and encourage them to take
initiatives. This will result in more efficient and effective employees and
ensure organizational success.
 A leader must work as a team. He should always support his team and
respect them. He should not hurt any employee. A true leader should not be
too bossy and should not consider him as the supreme authority. He should
realize that he is part of the organization as a whole.
Organizational leadership involves all the processes and possible results that lead
to development and achievement of organizational goals. It includes employees’
involvement, genuineness, effective listening and strategic communication.
Leadership is a process by which an executive can direct, guide and influence the
behavior and work of others towards accomplishment of specific goals in a given
situation. Leadership is the ability of a manager to induce the subordinates to work
with confidence and zeal. Leadership is the potential to influence behaviour of
others. It is also defined as the capacity to influence a group towards the realization
of a goal. Leaders are required to develop future visions, and to motivate the
organizational members to want to achieve the visions.
Characteristics of Leadership
 It is an inter-personal process in which a manager is into influencing and

guiding workers towards attainment of goals.
 It denotes a few qualities to be present in a person which includes

intelligence, maturity and personality.
 It is a group process. It involves two or more people interacting with each
other.
 A leader is involved in shaping and moulding the behaviour of the group
towards accomplishment of organizational goals.
 Leadership is situation bound. There is no best style of leadership. It all
depends upon tackling with the situations.
According to Keith Davis, “Leadership is the ability to persuade others to seek

defined objectives enthusiastically. It is the human factor which binds a group
together and motivates it towards goals.
Importance of Leadership
Leadership is an important function of management which helps to maximize

efficiency and to achieve organizational goals. The following points justify the
importance of leadership in a concern.
 Initiates action- Leader is a person who starts the work by communicating

the policies and plans to the subordinates from where the work actually
starts.
 Motivation- A leader proves to be playing an incentive role in the concern’s
working. He motivates the employees with economic and non-economic
rewards and thereby gets the work from the subordinates.
 Providing guidance- A leader has to not only supervise but also play a
guiding role for the subordinates. Guidance here means instructing the
subordinates the way they have to perform their work effectively and
efficiently.
 Creating confidence- Confidence is an important factor which can be
achieved through expressing the work efforts to the subordinates, explaining
them clearly their role and giving them guidelines to achieve the goals
effectively. It is also important to hear the employees with regards to their
complaints and problems.
 Building morale- Morale denotes willing co-operation of the employees
towards their work and getting them into confidence and winning their trust.
A leader can be a morale booster by achieving full co-operation so that they
perform with best of their abilities as they work to achieve goals.
 Builds work environment- Management is getting things done from people.
An efficient work environment helps in sound and stable growth. Therefore,
human relations should be kept into mind by a leader. He should have
personal contacts with employees and should listen to their problems and
solve them. He should treat employees on humanitarian terms.
 Coordination- Co-ordination can be achieved through reconciling personal
interests with organizational goals. This synchronization can be achieved
through proper and effective co-ordination which should be primary motive
of a leader.
What are the attributes of a good leader? Leaders often (but not necessarily
always):
 have a sense of mission;

 are charismatic;
 are able to influence people to work together for a common cause;
 are decisive;
 use creative problem solving to promote better care and a positive working
environment.
Managers who have these leadership qualities are a credit to the services they
manage. However managers must ensure that day-to-day processes run well to
produce the desired results. Certain attributes are required for a manager to be
effective, including:
■ clarity of purpose and tasks;
■ good organizational skills;
■ ability to communicate tasks and expected results effectively; ■
ability to negotiate various administrative and regulatory processes;
■ good delegation skills.
Leadership is the process of influencing an organized group towards a common

goal. This definition sounds easy, but the application can provide a real challenge.
Your goal as a leader in the organization is to do the best job you can at
influencing your people towards a common goal. Since you are dealing with a very
diverse group of people, it is important to understand the different approaches to
motivate them to meet their goals. Leadership style is the pattern of behaviors you
use when you are trying to influence the behaviors of those you are trying to lead.
Each leadership style can be identified with a different approach to problem
solving and decision making. Possessing a better understanding of the various
leadership styles and their respective developmental levels will help you match a
given style for a specific situation. The challenge is to master the ability to change
your leadership style for a given situation as the person’s development level
changes.
How can you help your followers increase their development level? Here are some
practical ideas:
1. Explain to them what you want to get done.
2. Provide the guidance they might need before they start.
3. Give them the opportunity to complete the task on their own.
4. Give them a lot of positive encouragement.
Your goal should be to help your followers increase their competence and
commitment to independently accomplish the tasks assigned to them, so that
gradually you can begin to use less time-consuming styles and still get high quality
results.
2. A leader has got multidimensional traits in him which makes him appealing and
effective in behavior. The following are the requisites to be present in a good
leader:
1) Physical appearance- A leader must have a pleasing appearance. Physique

and health are very important for a good leader.
2) Vision and foresight- A leader cannot maintain influence unless he exhibits
that he is forward looking. He has to visualize situations and thereby has to
frame logical programs.
3) Intelligence- A leader should be intelligent enough to examine problems and
difficult situations. He should be analytical who weighs pros and cons and
then summarizes the situation. Therefore, a positive bent of mind and mature
outlook is very important.
4) Communicative skills- A leader must be able to communicate the policies
and procedures clearly, precisely and effectively. This can be helpful in
persuasion and stimulation.
5) Objective- A leader has to be having a fair outlook which is free from bias
and which does not reflects his willingness towards a particular individual.
He should develop his own opinion and should base his judgement on facts
and logic.
6) Knowledge of work- A leader should be very precisely knowing the nature
of work of his subordinates because it is then he can win the trust and
confidence of his subordinates.
7) Sense of responsibility- Responsibility and accountability towards an
individual’s work is very important to bring a sense of influence. A leader
must have a sense of responsibility towards organizational goals because
only then he can get maximum of capabilities exploited in a real sense. For
this, he has to motivate himself and arouse and urge to give best of his
abilities. Only then he can motivate the subordinates to the best.
8) Self-confidence and will-power- Confidence in himself is important to earn
the confidence of the subordinates. He should be trustworthy and should
handle the situations with full will power. (You can read more about
SelfConfidence at : Self Confidence - Tips to be Confident and Eliminate
Your Apprehensions).
9) Humanist-This trait to be present in a leader is essential because he deals
with human beings and is in personal contact with them. He has to handle
the personal problems of his subordinates with great care and attention.
Therefore, treating the human beings on humanitarian grounds is essential
for building a congenial environment.
10) Empathy- It is an old adage “Stepping into the shoes of others”. This
is very important because fair judgement and objectivity comes only then. A
leader should understand the problems and complaints of employees and
should also have a complete view of the needs and aspirations of the
employees. This helps in improving human relations and personal contacts
with the employees.
From the above qualities present in a leader, one can understand the scope of
leadership and it’s importance for scope of business. A leader cannot have all traits
at one time. But a few of them helps in achieving effective results.
3.Leadership differs from management in a sense that:
1) While managers lay down the structure and delegates authority and
responsibility, leaders provides direction by developing the organizational
vision and communicating it to the employees and inspiring them to achieve
it.
2) While management includes focus on planning, organizing, staffing,

directing and controlling; leadership is mainly a part of directing function of
management. Leaders focus on listening, building relationships, teamwork,
inspiring, motivating and persuading the followers.
3) While a leader gets his authority from his followers, a manager gets his
authority by virtue of his position in the organization.
4) While managers follow the organization’s policies and procedure, the
leaders follow their own instinct.
5) Management is more of science as the managers are exact, planned,
standard, logical and more of mind. Leadership, on the other hand, is an art.
In an organization, if the managers are required, then leaders are a
must/essential.
6) While management deals with the technical dimension in an organization or
the job content; leadership deals with the people aspect in an organization.
7) While management measures/evaluates people by their name, past records,
present performance; leadership sees and evaluates individuals as having
potential for things that can’t be measured, i.e., it deals with future and the
performance of people if their potential is fully extracted.
8) If management is reactive, leadership is proactive.
9) Management is based more on written communication, while leadership is
based more on verbal communication.
The organizations which are over managed and under-led do not perform upto the
benchmark. Leadership accompanied by management sets a new direction and
makes efficient use of resources to achieve it. Both leadership and management are
essential for individual as well as organizational success.
Basis Manager Leader

Origin A person becomes a manager A person becomes a leader on
by virtue of his position. basis of his personal qualities.
Formal Rights Manager has got formal rights Rights are not available to a
in an organization because of leader.
his status.
Followers The subordinates are The group of employees whom

the followers of the leaders leads are his
managers. followers.
Functions A manager performs all five Leader influences people to

functions of management. work willingly for group
objectives.
Necessity A manager is very essential to A leader is required to create

a concern. cordial relation between person
working in and for
organization.
Stability It is more stable. Leadership is temporary.
Mutual All managers are leaders. All leaders are not managers.
Relationship
Accountability Manager is accountable for Leaders have no well defined
self and subordinates accountability.
behaviour and performance.
Concern A manager’s concern is A leader’s concern is group

organizational goals. goals and member’s
satisfaction.
Followers People follow manager by People follow them on

virtue of job description. voluntary basis.
Role A manager can continue in A leader can maintain his

continuation office till he performs his position only through day to
duties satisfactorily in day wishes of followers.
congruence with
organizational goals.
Sanctions Manager has command over A leader has command over

allocation and distribution of different sanctions and related
sanctions. task records. These sanctions
are essentially of informal
nature.
4. Leadership style is the way a managerial leader applies his influence in getting
work done through his subordinates in order to achieve the organizational
objectives. The main attitude or belief that influences leadership style is the
perceived role of the manager versus the role of the subordinates. It depends upon
the role of the leader whether he likes to work more of a colleague,
facilitator and decision maker and on the other hand the response of the
subordinates would determine the particular style to be in application. Broadly
speaking, there are three basic leadership styles: -
1. Autocratic or Dictatorial Leadership: In this leadership style the leader

assumes full responsibility for all actions. Mainly he relies on implicit obedience
from the group in following his orders. He determines plans and policies and
makes the decision-making a one man show. He maintains very critical and
negative relations with his subordinates. He freely uses threats of punishment and
penalty for any lack of obedience. This kind of leadership has normally very short
life.
2. Democratic Leadership: In this case, the leader draws ideas and

suggestions from his group by discussion, consultation and participation. He
secures consensus or unanimity in decision-making. Subordinates are duly
encouraged to make any suggestion as a matter of their contribution in decision-
making and to enhance their creativity.
This kind of leadership style is liked in most civilized organization and has very
long life.
3. Laissez-faire Free Rein Leadership: Quite contrary to autocratic

leadership style, in this leadership style the leader depends entirely on his
subordinates to establish their own goals and to make their own decisions. He let
them plan, organize and proceed. He takes minimum initiative in administration or
information. He is there to guide the subordinates if they are in a problem. This
kind of leadership is desirable in mainly professional organization and where the
employees are self-motivated. Leader works here just as a member of the team.
We shall now discuss the roots of such leadership styles i.e. we shall try to
understand as to how these different leadership styles have been evolved by the
management scholars. Ethics refer to the desirable and appropriate values and
morals according to an individual or the society at large. Ethics deal with the purity
of individuals and their intentions. Ethics serve as guidelines for analyzing “what is
good or bad” in a specific scenario. Correlating ethics with leadership, we find that
ethics is all about the leader’s identity and the leader’s role.
Ethical theories on leadership talk about two main things: (a) The actions and
behaviour of leaders; and (b) the personality and character of leaders. It is essential
to note that “Ethics are an essential to leadership”. A leader drives and influences
the subordinates / followers to achieve a common goal, be it in case of team work,
organizational quest, or any project. It is an ethical job of the leader to treat his
subordinates with respect as each of them has unique personality. The ethical
environment in an organization is built and developed by a leader as they have an
influential role in the organization and due to the fact that leaders have an influence
in developing the organizational values.
An effective and ethical leader has the following traits / characteristics:
 Dignity and respectfulness: He respects others. An ethical leader should

not use his followers as a medium to achieve his personal goals. He should
respect their feelings, decision and values. Respecting the followers implies
listening effectively to them, being compassionate to them, as well as being
liberal in hearing opposing viewpoints. In short, it implies treating the
followers in a manner that authenticate their values and beliefs.
 Serving others: He serves others. An ethical leader should place his
follower’s interests ahead of his interests. He should be humane. He must act
in a manner that is always fruitful for his followers.
 Justice: He is fair and just. An ethical leader must treat all his followers
equally. There should be no personal bias. Wherever some followers are
treated differently, the ground for differential treatment should be fair, clear,
and built on morality.
 Community building: He develops community. An ethical leader considers
his own purpose as well as his followers’ purpose, while making efforts to
achieve the goals suitable to both of them. He is considerate to the
community interests. He does not overlook the followers’ intentions. He
works harder for the community goals. Honesty: He is loyal and honest.
Honesty is essential to be an ethical and effective leader. Honest leaders can
be always relied upon and depended upon. They always earn respect of their
followers. An honest leader presents the fact and circumstances truly and
completely, no matter how critical and harmful the fact may be. He does not
misrepresent any fact.
It is essential to note that leadership is all about values, and it is impossible to be a

leader if you lack the awareness and concern for your own personal values.
Leadership has a moral and ethical aspect. These ethics define leadership. Leaders
can use the above mentioned traits as yardsticks for influencing their own
behaviour.
Effective Leadership Skills
Master Your Time: Effective leaders will always be in a position to manage their
time well. They would know how to prioritize list of activities / pending tasks.
Most important - they would know the different between ’urgent’ and ’important’.
Remember, not everything that is urgent is important. Also, not everything that is
important is urgent.
Ask Questions: Leaders will ask questions that help them assess employees’
contribution to the organization and also help employees understand how better
they can contribute towards organizational goals. A Leader must ask his / her
employees - the task they perform, do they feel their task is linked to the big
picture, and is there anything that comes in the way of their performance.
Provide Work-Life Balance: In today’s world where working hours are on a rise,
an effective leader must ensure that his / her workers are able to maintain a balance
between their personal and professional lives. Effective leaders should always lead
by example by leaving on time, avoiding meetings during Fridays or end of the
business days, not calling employees on their day off. Remember, an effective
leader will have effective followers only if they are not burnt out or feel they are
over worked.
Manage Employee’s Professional growth: An effective leader will always chart

out a personal development plan [PDP] along with his / her employee. He would
identify the training the employee will need to go through keeping in mind his
personal development plan. The employees will feel encouraged and valued.
 Let your employees speak: An effective leader has to be a good listener.

Have an "open hour" with your employees and let them speak their heart
out. You will be surprised to know the number of ideas they have. Always
follow and believe in the mantra "Silence is Golden". Your employees will
feel they are being heard and they also have a way to express their thoughts.
Facilitate Brainstorming... Generate ideas: Effective leaders will always

encourage people to get together in a room and brainstorm on ideas to solve a
particular problem. Remember, discussions are always healthy and almost all the
times they also help creating solutions which are mutually agreed upon.
Create Talent Pool: Smart leaders will always be ready for any shortage in staff.
They will have their talent pool ready in case of any crisis situation. They will
ensure that every employee has a trained / trainable back-up.
Be Courageous: As per Peter Drucker, “whenever you see a successful business,

someone once made a courageous decision”. An effective leader will always be
ready to take difficult / courageous decisions when required.
Be Competent: The art of “tooting your own horn without blowing it” is a
delicate balance of demonstrating your “expertise” and “taking credit” in a way
that people notice their success. And one of the safest ways to do it is to celebrate
and bring attention to team achievements. Praise people for good work, and when
you do so, be specific on what exactly you liked. Shaking hands is a gesture that
will show them that you are actually happy about their contribution and their
success. And thus, you will prove out your competence as a leader.
Be Visionary: What’s lying ahead in future is a topic of fascination and has

mystic charm. This is a trait of absolute confidence and should be handled with
care. It is important to make goals specific, with possible outcomes and benefits,
without making promises that you may not be able to keep. A successful leader
knows his goals and checks if performance and goals are in symmetry.
List of literature


Moscow 2004

12th edition
THEME 13. CONFLİCT AND STRESS MANAGEMENT
Plan
1. Introduction to conflict management 2. Communication skills as a

mechanism to avoid conflicts 3. Strategies of preventing (avoiding) of
conflict situations 4. Causes of stress at workplace
1. Whenever two individuals opine in different ways, a conflict arises. In a

layman’s language conflict is nothing but a fight either between two individuals or
among group members. No two individuals can think alike and there is definitely a
difference in their thought process as well as their understanding. Disagreements
among individuals lead to conflicts and fights.
Conflict arises whenever individuals have different values, opinions, needs,

interests and are unable to find a middle way. Tim and Joe were working in the
same team and were best of friends. One fine day, they were asked to give their
inputs on a particular project assigned to them by their superior. There was a major
clash in their understanding of the project and both could not agree to each other’s
opinions. Tim wanted to execute the project in a particular way which did not go
well with Joe. The outcome of the difference in their opinions was a conflict
between the two and now both of them just can’t stand each other. The
dissimilarity in the interest, thought process, nature and attitude of Tim and Joe
gave rise to a conflict between the two.
Conflict is defined as a clash between individuals arising out of a difference in

thought process, attitudes, understanding, interests, requirements and even
sometimes perceptions. A conflict results in heated arguments, physical abuses and
definitely loss of peace and harmony. A conflict can actually change relationships.
Friends can become foes as a result of conflict just as in the case of Tim and Joe.
A conflict has five phases.
Prelude to conflict - It involves all the factors which possibly arise a conflict
among individuals. Lack of coordination, differences in interests, dissimilarity in
cultural, religion, educational background all are instrumental in arising a conflict.
Triggering Event - No conflict can arise on its own. There has to be an event
which triggers the conflict. Jenny and Ali never got along very well with each
other. They were from different cultural backgrounds, a very strong factor for
possibility of a conflict. Ali was in the mid of a presentation when Jenny stood up
and criticized him for the lack of relevant content in his presentation, thus
triggering the conflict between them.
Initiation Phase - Initiation phase is actually the phase when the conflict has
already begun. Heated arguments, abuses, verbal disagreements are all warning
alarms which indicate that the fight is already on.
Differentiation Phase - It is the phase when the individuals voice out their
differences against each other. The reasons for the conflict are raised in the
differentiation phase.
Resolution Phase - A Conflict leads to nowhere. Individuals must try to

compromise to some extent and resolve the conflict soon. The resolution phase
explores the various options to resolve the conflict. Conflicts can be of many types
like verbal conflict, religious conflict, emotional conflict, social conflict, personal
conflict, organizational conflict, community conflict and so on.
Conflicts and fighting with each other never lead to a conclusion. If you are not on
the same line as the other individual, never fight, instead try your level best to sort
out your differences. Discussion is always a better and wiser way to adopt rather
than conflicts.
The dissimilarity in the interests, thought processes, needs, attitudes of individuals

result in a conflict. It is defined as a clash among individuals resulting in verbal
disagreements, physical abuses and tensions. A conflict never provides any
solution to a problem, instead it just worsens the situation. It leads to disrespect
among individuals, hampers the productivity and individuals often feel
demotivated after a fight.
Conflicts must be prevented at the right time in order to avoid tensions and other
adverse effects. In such a scenario, conflict management comes in picture.
Conflict Management involves the steps undertaken to prevent the conflict at the
right time and also helps to resolve it in an effective and smooth manner. No
conflict can just start on its own. There has to be an event or an incident to trigger
the same. Through conflict management, one actually finds out the possible events
which can start a conflict and tries his level best to avoid them.
Understanding conflict management with the help of an example.

Jenny and Joe were a part of the branding team headed by Thomas. Jenny and Joe
never got along very well, a fact well known by Thomas. From the very beginning,
Thomas had carefully charted out the key responsibility areas for both Jenny and
Joe. He had strictly instructed both of them not to interfere in each other’s work
and communicate through email marking a carbon copy to him as well. What is
Thomas actually trying to do here ? He is simply trying to avoid a conflict between
Jenny and Joe so that they can deliver their best and do not waste their time and
energy in fighting.
It is very essential to understand the factors which might lead to a conflict. An

individual must consider all the events which initiate a fight for an effective
conflict management. Discussion goes a long way in preventing conflicts. Before
implementing any new idea, make sure you discuss with each and everyone related
to it. Listen to what other individuals have to say and consider their opinions as
well. Ignoring anybody’s views might lead to a tussle. No two individuals can
think on the same line but it is always wise to find a middle way which takes into
account everybody’s interests. Don’t leave any issue unaddressed, instead discuss
it when all the participants are present. Never criticize or make fun of anyone as
they lead to a conflict. Be a good and an effective listener. Greet everyone with a
warm smile. Individuals must not be too rigid and must learn to compromise
sometimes. Do not create an environment which would lead to disagreements. At
workplaces, transparency must be maintained at all levels and there must be a
single point of contact to address the issues of individuals. The subordinates should
have an easy access to their superiors to avoid confusions. An individual must not
utter any word which might hurt the sentiments of the other individuals. If you
come across any situation which you don’t find appropriate, don’t start spreading
rumors; instead sit with the other people involved and sort out the differences as
soon as possible. Avoid back bitings as it is one of the strongest reasons for
conflicts.
Always ask yourself whether the fight will benefit you or not? What will you
achieve out of fighting? Never provoke others to fight as it would only create a
negative environment and add on to one’s tensions. Don’t always support your
friend and oppose the person not known to you. Stand by what is right and always
correct the other person if he is wrong, but in a polite manner. Even if a conflict
doesn’t involve you, don’t just ignore, instead intervene immediately to pacify the
individuals. Be a good mediator and try to resolve the issues keeping everyone in
mind. Conflict management helps individuals to understand the causes of a conflict
and helps prevent it at the right time.
Conflict management plays a very important role in preventing conflicts among

individuals. How does a conflict arise? When individuals strongly oppose each
other’s opinions and ideas, the probability of a conflict arises. A conflict starts
when individuals think on different lines and find it very difficult to accept each
other’s ideas. Conflict must be avoided as it destroys the peace, lowers the
productivity as well as demotivates the individuals. All the factors leading to a
fight must be explored and efforts must be made to prevent a conflict. A conflict is
not very easy to control; an individual needs certain skills for the same.
2.Effective communication skills are of utmost importance to prevent conflicts.

While interacting with others, you have to take special care of your speech and the
way you speak. Never ever shout on anyone, even if you do not agree with him.
Always speak in a polite but convincing manner. Greet others with a warm smile.
It works. Be very specific and precise in your speech. Do not use complicated
words and confuse others. Keep a control on your tongue and do not use words
which might hurt the sentiments of others. Avoid using abusive languages.
Listening Skills
An individual must not give his expert comments unless and until he is very clear
what the other person wants. Always be a good listener. Don’t just jump to
conclusions and assume things on your own. Always listen to the other side of the
story as well.
Discussion
Don’t just follow the rumor mills blindly, do discuss with others as well.
Differences can crop up anytime but fighting would provide no solution. It is
always better to sit and discuss the issues on an open forum. All the participants
must give their inputs and efforts must be made to find out an alternative. Invite all
the members involved and never ignore anyone as it would never solve the
problem. Everyone has a right to express his views and a middle way has to be
found.
Patience
One needs to be very patient to avoid conflicts. There would be people at your
workplace and even home who would try to provoke you to fight. Never ever get
influenced. Always follow your instincts and support what is right. Be very
sensible and patient. Learn to keep a control on your emotions. Do not ever lose
your temper as it would only make the situation worse.
Impartial
An individual has to be impartial to avoid conflicts. Do not always support your

friend. Stand by what is correct and never support what is wrong. Any individual,
even if he is your friend must be corrected if you feel he is wrong. Listen to
everyone and never ignore anyone just because you don’t know him.
Never Criticize
Make the other person understand if he is wrong. Don’t criticize him as it would
definitely hurt his sentiments. The other person might not be as intelligent as you
are, but you have no right to make fun of him. Others will look up to you if you
guide the other person well and make him realize his mistakes.
Positive Attitude
Positive attitude is essential to avoid fights and conflicts. In offices, never ever play
the Blame game. No one is perfect and if you have done anything wrong, have the
courage to accept it. Human Beings are bound to make mistakes but never try to
put the blame on anyone else’s shoulders. Avoid backbiting as it only spoils the
relationships. If you don’t agree with anyone’s views, discuss with him on his face,
he will like it. Don’t always find faults in others and be a little more adjusting as
life is all about adjustments.
Ignore others
Individuals must try to adopt the middle path approach which considers the
interests of one and all. Don’t unnecessarily waste your energy for a person who is
too adamant and is not willing to compromise at all. Ignore the person who is too
demanding as it would solve half of your problems.
3.Every individual has his own style of working and reacting to any particular
situation. Problems are bound to come when individuals work together. Never
leave any problem unattended as a small problem can eventually become a major
reason to worry later on. The problems must be addressed on an open platform and
all related employees must be invited. Never discuss any problem separately with
individuals as the other person might feel neglected. Prefer a conference room or
the board room to discuss the problems and find a solution to it. Never always
depend on verbal communications. Official communications must be preferably
through emails marking a CC to all the participants as it is more reliable and
transparent.
A difference in the opinions, values, understandings and thought processes of

individuals lead to a conflict. When individuals strongly oppose each other’s ideas
and concepts, a conflict starts. It has been observed that when people think in
dissimilar ways and are not willing to compromise at all, conflict arises.
Conflict can start anytime and at any place when individuals are not ready to
accept the middle path approach. A conflict results in verbal arguments, abuses,
tensions and also spoils relationships.
Before starting any conflict one should take some time out to think, “How will this
fight benefit me?” “Is it going to provide me any solution ?”
Nothing beneficial and productive comes out of a conflict. It is simply a wastage of

time and energy for and thus every individual should try his level best to prevent
conflict.
First learn to keep a control on your emotions. Never ever get too hyper or
overreact as it leads you nowhere. Always remember the other individual you are
dealing with might not be as educated as you, might not be from the same
background as you are, but you have no right to ridicule his opinions. Be a good
and a patient listener. Listen carefully what the other person has to say and then
only give your expert comments. Even if you don’t agree to his suggestions, don’t
just start fighting, instead discuss with him. Both of the individuals must try to
compromise to some extent and find a solution. Conflicts only add on to your
anxiety and thus it must be avoided at any cost. Never be rigid on any point,
instead be flexible and try to find out an alternative.
Learn to keep a control on your tongue. One must think before he speaks. Don’t
unnecessarily shout on others as it not only spoils the ambience but also brings a
lot of negativity around. Soften your voice while interacting with others and learn
to adjust with others. Sit with the other person and try to sort out your differences.
Misunderstandings also lead to conflicts, so be very clear and transparent in your

communications. Never play with words and the content of your communication
has to be specific to avoid conflicts. Do cross check with the speaker whether he
has understood everything in the desired form or not, failing which would lead to
misunderstandings and eventually to a fight.
Effective communication goes a long way in preventing conflicts. Don’t always

expect the other person to understand everything on his own. It is your moral
responsibility to make him aware of what you exactly expect out of him.
Every individual has the right to express his views and opinions, and you have no
right to criticize him. If you respect other individuals, you will get respect in
return. If a conflict arises among group members; make sure you address all the
participants together. The issues and problems must be addressed on an open
forum. Personal favours and biases must be avoided for a peaceful environment.
Listen to each and everyone’s opinion and then only take a decision. Be a good
leader and try to take everyone along. Keep your mind calm and composed.
Don’t feel guilty if you have done anything wrong, instead admit it. Never hesitate
to accept your faults. Be the first one to apologize. A small sorry can work
wonders and prevent conflicts and unnecessary tensions.
If the other individual is too demanding and adamant and is just not willing to
listen, the best solution is to avoid him. You can’t be everyone’s favourite, learn to
ignore people who are just not flexible and always ready to initiate a conflict.
Don’t always bother what the other person has to say about you. Always act in a
manner which you think is appropriate and don’t just blindly trust the rumor mills.
No one wins in a fight and you gain nothing out of it. As they say “Prevention is
better than cure”, thus a conflict must be prevented at its early stages as it snatches
one’s mental peace and harmony.
Communication also plays a very important role in avoiding conflicts at work

places. Be very clear and precise in your communication. Never adopt a casual
attitude at work as it would strictly go against you. Never deliver any speech or
presentation at a noisy place as no one will be able to understand what the other
person intends to communicate resulting in misunderstandings.
Never carry your problems to work as it never allows you to concentrate in your
work. For an employee, office must come first and he must keep his personal
interests on the backburner. Learn to trust your colleagues. Always approach the
right person and don’t spread rumors unnecessarily. One should not be too
adamant at workplaces. Be a little more adjusting and flexible. Every employee
must try to compromise to the best possible extent and try to find out an
alternative. Create a healthy and a professional environment at office.
Differences can not only arise between two individuals but involve many
individuals in a group. One has to very careful while handling conflicts in a group
as if not controlled at the right time can lead to major unrest and severe tensions.
Let learn more about conflict management in groups.
Never ever implement any idea in a group without discussing with others. One
should not impose his ideas on individuals in a group. The thoughts and ideas must
be shared with everyone on a proper forum. Do not discuss one by one, rather
invite each and everyone for the same. Address all of them on a common platform.
An individual before downloading any information to the group, first himself has
to be very clear what he expects out of them. The communication has to be precise,
relevant and should not confuse the others. Remember one wrong
misinterpretation, and the entire message gets distorted. Do cross check with the
group whether they have received the correct information or not. Always depend
on appropriate and reliable sources for communication. The information must be
shared through email and cc must be marked to all the participants to ensure
transparency among the group members.
A single point of contact must be assigned to a group to sort out the queries. The
SPOC (Single Point of Contact) must be easily available and the group members
must have an easy access to him. Unnecessarily running here and there is sheer
wastage of time and never sorts out any problem. The group ideally should have
likeminded people to avoid conflicts. While forming a group, make sure that the
individuals have similar if not same likings, thought processes and backgrounds.
The probability of a conflict reduces in such cases. Each member of the group
must trust the other member and should have confidence in each other. Never ever
just simply start the presentation or seminar; instead begin with greetings and
compliments.
Meet everyone with a warm smile and do not forget the handshake. Personal
interests must be left out. While taking decisions, no one should be biased and try
to see his personal interest first. Never be selfish or ignore the other member. Do
not ever underestimate your group member and always listen to his side of the
story as well. Be a good listener and consider everyone’s views and opinions.
Don’t always support your friend as it might not go very well with the other
person. Appreciate if the other person is right or has come out with a brilliant idea.
Correct the other person if he is wrong and do guide him properly. An individual
must stay out of criticism to avoid conflicts in a group. Human beings are bound to
make errors but you have no right to make fun of his ideas and concepts. Avoid
using derogatory sentences in groups. Be a good leader and take everyone along.
A leader should be one who is able to understand his group member well and
support them always. Gossip must be avoided as it results in severe conflicts. If
you find anything wrong with a member, discuss the issues with him only; never
ever tell his friend or spread rumors. The other person will never like it. Be very
straightforward but gentle.
Counseling can also reduce the conflicts to a large extent. If any member is upset
with the other, make both the members sit face to face to discuss their differences.
Never ever provoke any individual to fight, instead make him understand. Don’t
always find faults in your group members, be a little more flexible and adjusting.
Always be calm, composed and adopt a positive attitude. Never ever lose your
temper and unnecessarily react over petty issues. If the conflict doesn’t involve you
but other members of the group, intervene immediately and try to resolve it at the
earliest.
Conflict Management plays a very important role in reducing the chances of

conflicts in a group and results in better bonding among the members and better
output.
Stress at workplace is a common feature and majority people experience it. Some
jobs are associated with stress. The persons holding these jobs come under stress
and suffer from the consequences. From a physiological point of view, stress may
be defined as any state during which the body tends to mobilize its resources and
utilize more energy than it ordinarily would.”
Any event in the environment may cause stress if the same is perceived as
threatening. Any event may cause stress. It is not certain that the specific events are
the causes of stress. Sometimes an event may cause stress but the same event may
not cause stress some other time.
The stress leads to physiological and psychological changes such as changes in

heart rate, skin resistance, respiration, blood pressure and endocrine activity. These
changes will deviate a person from normal performance. These changes are known
as stress response. These changes often lead to anxiety and fatigue. A moderate
level of stress may have positive effect and person may work harder and for long
hours but a low level of stress may have negative effect and adversely affect the
performance of the employee.
Any situation, any event can be a potential cause of stress. The causes of stress
vary from person to person and situation to situation. So to say, the causes of stress
are relative to person time and situation.
4.The following are the causes of stress or stressors:
1. Organizational Causes
The organizational causes include the organizational structure, managerial

leaderships, rules and regulations, extent of centralization and decentralization,
type of communication, delegation of powers, number of employees in a room or
hall working together etc. are the potential causes of stress at the organization
level. Organization structure defines authority responsibility relationship, and
decision making process. Excessive nature of centralized decisions and allowing
participation of employees in decision making process cause stress. Style of
leadership adopted by the managers and executives of the organization also affect
the mental balance of the employees. Delegation of authority is effected to get the
work completed early and relieve the managers of their managerial burden. Some
managers do not delegate their authority and want to work themselves. This
increases their burden of work and they come under stress. The large number of
employees working in a room also is a cause of stress. They can’t concentrate on
their work in a crowd and come under tension.
2. Group Level Causes
At workplace human beings are working. Human beings are social animals they
live in groups. This group ideology holds good at workplace also. Employees have
to work in groups. Certain jobs demand teamwork. Employees’ behavior is
influenced by group. The group is also a potential cause of stress where there is
lack of cohesiveness and social support. Working together in groups is essential at
lower level of the organization. Lack of this is a cause of stress. Workers when
they work together and in groups they develop social relationships at the
workplace. They get support from each other. Lack of social support becomes a
cause of stress. The conflicts between groups also are a cause of stress because
inter-department or intergroup conflicts increase the burden of work and cause
strain.
3. Individual Level Causes
There are many reasons for causing stress to an individual. At the workplace when
two superiors have assigned the work to the same individual simultaneously put
him under stress. He will be under tension as to whose work is to be finished first.
This is because of role conflict. Another reason for stress for an individual is when
the job responsibilities are not clearly defined. The types of personality also are the
causes of stress to an individual. “Type A personality” individuals are workaholics;
works speedily and exactly, don’t rest, and don’t enjoy life.
4. Domestic Level Causes
Several changes are taking place nowadays. Joint family system has now broken.
Modern approach to life has changed the life style of individuals. Everyone wants
complete freedom. To run the family according to modern life style is becoming
increasingly difficult. Majority middle class people face the identity crisis. They
want to lead sophisticated life style which the rich can afford. They suffer from
financial crisis which becomes a major cause of worry and tension for them.
Children’s education, death of a spouse, purchase of new house, soaring prices, etc.
are the causes of stress to an individual on domestic front.
Strategies to reduce stress can be divided into:
 Organizational level strategies 

Individual level strategies.
Organizational Level Strategies:
The stressors or causes of stress at organization level can be effectively controlled

and managed by the organization itself. The organization can implement the
programmes for its employees such as relaxation techniques, physical fitness
programmes, stress education, group discussions, family counseling, hobby
workshops, sports and recreation facilities, time management, counseling in respect
of drug and alcohol abuse, obesity control techniques etc. to reduce stress.
Improved communication, proper delegation of authority reducing centralization of
authority, jobs redesign specially to enrich them, proper selection and placement of
persons at respective jobs, participative decision making and practicing the core
techniques of human resource management are some of the strategies that can keep
the stress under control.
Individual Level Strategies:
Organization can make its own efforts as far as possible to reduce the stressors at
workplace but an individual should make all out efforts to manage his own stress
effectively.
Following are some of the ways to manage stress individually:
• One should take proper balanced diet at proper time.

• Avoid drinking and smoking.
• Regular exercise for fitness.
• Know your strong and weak points.
• Relax for some time to control blood pressure, heart rate.
• Prayers like worshiping, offering Namaz, etc., meditations, yoga can help
reduce tension.
• Effective time management by preparing daily lists of work according to
their priorities and follow it.
• Plan your career.
• Open your heart to your friends; express your feelings, emotions, threats
etc. It helps in relieving the mind from botheration.
• Take pride on your achievements and receive from others.
• Exercise control on yourself.
• Identify the factors causing stress. Try to keep away from them as far as
possible.
List of literature
17.Dr. Karam Pal, “Management Concepts and organizational behaviour”

Moscow 2004
23.Samuel C. Certo, S.Trevis Certo, “Modern management, concepts and skills”,
12th edition
THEME 14. MANAGEMENT DECİSİON MAKİNG
Plan
1. Definition and importance of the decision making process 2. Types of

decision making process 3. Steps of decision making process 4. Decision
making techniques
1.Every organization needs to make decisions at one point or other as part of

managerial process. Decisions are made in the best interest of the organization.
Decisions are taken to support organizational growth. Discussions and
consultations are two main tools that support and eventually bring out decisions.
For instance to take a decision on how to embark on new business activity
suggested by strategic management team must have developed through series of
consultative process, which is now available with implementation team. Decision
making is the mental process of choosing from a set of alternatives. Good decision
making involves knowing what will be accepted and enthusiastically supported in
your company. Whatever a manager does, he does through decision-making.
Herbert Simon has said the process of managing as a process of decision-making.
decision-making is a typical form of planning. It involves choosing the best
alternative among various alternatives, in order to realize certain objectives.
As a leader, you will make decisions involving not only yourself, but the morale
and welfare of others. Some decisions, such as when to take a break or where to
hold a meeting, are simple decisions which have little effect on others. Other
decisions are often more complex and may have a significant impact on many
people. Therefore, having a decision-making, problem solving process can be a
helpful tool. Such a process can help you to solve these different types of
situations.
Decision-making is an integral part of modern management. Essentially, Rational

or sound decision making is taken as primary function of management. Every
manager takes hundreds and hundreds of decisions subconsciously or consciously
making it as the key component in the role of a manager. Decisions play important
roles as they determine both organizational and managerial activities. A decision
can be defined as a course of action purposely chosen from a set of alternatives to
achieve organizational or managerial objectives or goals. Decision making process
is continuous and indispensable component of managing any organization or
business activities. Decisions are made to sustain the activities of all business
activities and organizational functioning. Decisions are made at every level of
management to ensure organizational or business goals are achieved.
Decision making comprises a series of sequential activities that together structure

the process and facilitate its conclusion. These steps are:
• Establishing objectives
• Classifying and prioritizing objectives
• Developing selection criteria
• Identifying alternatives
• Evaluating alternatives against the selection criteria
• Choosing the alternative that best satisfies the selection criteria
• Implementing the decision
Decision-making is a truly fascinating science, incorporating organizational

behavior, psychology, sociology, neurology, strategy, management, philosophy,
and logic. The ability to make effective decisions that are rational, informed, and
collaborative can greatly reduce opportunity costs while building a strong
organizational focus. As a prospective manager, effective decision-making is a
central skill necessary for success. This requires the capacity to weigh various
paths and determine the optimal trajectory of action.
2.Three approaches to decision making are avoiding, problem solving and problem
seeking. Every decision-making process reaches a conclusion, which can be a
choice to act or not to act, a decision on what course of action to take and how, or
even an opinion or recommendation. Sometimes decision making leads to
redefining the issue or challenge. Accordingly, three decision-making processes
are known as avoiding, problem solving, and problem seeking.
Avoiding
One decision-making option is to make no choice at all. There are several reasons
why the decision maker might do this:
• There is insufficient information to make a reasoned choice between

alternatives.
• The potential negative consequences of selecting any alternative outweigh
the benefits of selecting one.
• No pressing need for a choice exists and the status quo can continue without
harm.
• The person considering the alternatives does not have the authority to make
a decision.
Problem Solving
Most decisions consist of problem-solving activities that end when a satisfactory

solution is reached. In psychology, problem solving refers to the desire to reach a
definite goal from a present condition. Problem solving requires problem
definition, information analysis and evaluation, and alternative selection.
Problem Seeking
On occasion, the process of problem solving brings the focus or scope of the
problem itself into question. It may be found to be poorly defined, of too large or
small a scope, or missing a key dimension. Decision makers must then step back
and reconsider the information and analysis they have brought to bear so far. We
can regard this activity as problem seeking because decision makers must return to
the starting point and respecify the issue or problem they want to address.
3. The most outstanding quality of successful manager is his/her ability to make

sound and effective decisions. A manager has to make up his/her mind quickly on
certain matters. It is not correct to say that he has to make spur of the moment
decisions all the time. For taking many decisions, he gets enough time for careful
fact finding, analysis of alternatives and choice of the best alternative. Decision
making is a human process. When one decides, he chooses a course alternative
which he thinks is the best. Decision making is a proper blend of thinking, deciding
and action. An important executive decision is only one event in the process which
requires a succession of activities and routine decisions all along the way.
Decisions also have a time dimension and a time lag. A manager takes time to
collect facts and to weigh various alternatives. Moreover, after decides, it takes still
more time to carry out a decision and, often, it takes longer before he can judge
whether the decision was good or bad. It is also very difficult to isolate the effects
of any single decision.
The following procedure should be followed in arriving at a correct decision:
1. Setting objectives : Rational decision-making involves concrete objectives.

So the first step in decision-making is to know one's objectives. An objective is an
expected outcome of future actions. So before deciding upon the future course of
efforts, it is necessary to know beforehand what we are trying to achieve. Exact
knowledge of goals and objectives bring purpose in planning and harmony in
efforts. Moreover, objectives are the criteria by which final outcome is to be
measured.
2. Defining the Problem : It is true to a large extent that a problem well

defined is half solved. A lot of bad decisions are made because the person making
the decision does not have a good grasp of the problem. It is essential for the
decision maker to find and define the problem before he takes any decision.
Sufficient time and energy should be spent on defining the problem as it is not
always easy to define the problem and to see the fundamental thing that is causing
the trouble and that needs correction. Practically, no problem ever presents itself in
a manner that an immediate decision may be taken. It is, therefore, essential to
define the problem before any action is taken, otherwise the manager will answer
the wrong question rather than the core problem. Clear definition of the problem is
very important as the right answer can be found only to a right question.
3. Analyzing the problem : After defining the problem, the next step in
decisionmaking is analyzing it. The problem should be thoroughly analyzed to find
out adequate background information and data relating to the situation. The
problem should be divided into many sub-problems and each element of the
problem must be investigated thoroughly and systematically. There can be a
number of factors involved with any problem, some of which are pertinent and
others are remote. These pertinent factors should be discussed in depth. It will save
time as well as money and efforts. In order to classify any problem, we require lot
of information. So long as the required information is not available, any
classification would be misleading. This will also have an adverse impact on the
quality of the decision. Trying to analyze without facts is like guessing directions
at a crossing without reading the highway signboards. Thus, collection of right
type of information is very important in decision making. It would not be an
exaggeration to say that a decision is as good as the information on which it is
based.
Collection of facts and figures also requires certain decisions on the part of the
manager. He must decide what type of information he requires and how he can
obtain this.
4. Developing Alternatives : After defining and analyzing the problem, the

next step in the decision making process is the development of alternative courses
of action. Without resorting to the process of developing alternatives, a manager is
likely to be guided by his limited imagination. It is rare for alternatives to be
lacking for any course of action. But sometimes a manager assumes that there is
only one way of doing a thing. In such a case, what the manager has probably not
done is to force himself consider other alternatives. Unless he does so, he cannot
reach the decision which is the best possible. From this can be derived a key
planning principle which may be termed as the principle of alternatives.
Alternatives exist for every decision problem. Effective planning involves a search
for the alternatives towards the desired goal. Once the manager starts developing
alternatives, various assumptions come to his mind, which he can bring to the
conscious level. Nevertheless, development of alternatives cannot provide a person
with the imagination, which he lacks. But most of us have definitely more
imagination than we generally use. It should also be noted that development of
alternatives is no guarantee of finding the best possible decision, but it certainly
helps in weighing one alternative against others and, thus, minimizing
uncertainties.
While developing alternatives, the principle of limiting factor has to be taken care
of. A limiting factor is one which stands in the way of accomplishing the desired
goal. It is a key factor in decision making. If such factors are properly identified,
manager can confine his search for alternative to those which will overcome the
limiting factors. In choosing from among alternatives, the more an individual can
recognize those factors which are limiting or critical to the attainment of the
desired goal the more clearly and accurately he or she can select the most
favourable alternatives.
5. Selecting the Best Alternative : After developing alternatives one will have
to evaluate all the possible alternatives in order to select best alternative. There are
various ways to evaluate alternatives. The most common method is through
intuition, i.e., choosing a solution that seems to be good at that time. There is an
inherent danger in this process because a manager's intuition may be wrong on
several occasions.
The second way to choose the best alternative is to weigh the consequences of one
against those of the others. Peter F. Drucker has laid down four criteria in order to
weigh the consequences of various alternatives. They are :
Risk : A manager should weigh the risks of each course of action against the
expected gains. As a matter of fact, risks are involved in all the solutions. What
matters is the intensity of different types of risks in various solutions.
Economy of Effort : The best manager is one who can mobilize the resources for
the achievement of results with the minimum of efforts. The decision to be chosen
should ensure the maximum possible economy of efforts, money and time.
Situation or Timing : The choice of a course of an action will depend upon the
situation prevailing at a particular point of time. If the situation has great urgency,
the preferable course of action is one that alarms the organization that something
important is happening. If a long and consistent effort is needed, a slow start
gathers momentum approach may be preferable.
Limitation of Resources : In choosing among the alternatives, primary attention

must be given to those factors that are limiting or strategic to the decision involved.
The search for limiting factors in decision-making should be a never ending
process. Discovery of the limiting factor lies at the basis of selection from the
alternatives and hence of planning and decision making. There are three bases
which should be followed for selection of alternatives and these are experience,
experimentation and research and analysis which are discussed below :
In making a choice, a manager is influenced to a great extent by his past

experience. He can give more reliance to past experience in case of routine
decisions; but in case of strategic decisions, he should not rely fully on his past
experience to reach at a rational decision.
Under experimentation, the manager tests the solution under actual or simulated
conditions. This approach has proved to be of considerable help in many cases in
test marketing of a new product. But it is not always possible to put this technique
into practice, because it is very expensive. Research and Analysis is considered to
be the most effective technique of selecting among alternatives, where a major
decision is involved. It involves a search for relationships among the more critical
variables, constraints and premises that bear upon the goal sought.
6. Implementing the Decision : The choice of an alternative will not serve any
purpose if it is not put into practice. The manager is not only concerned with taking
a decision, but also with its implementation. He should try to ensure that
systematic steps are taken to implement the decision. The main problem which the
manager may face at the implementation stage is the resistance by the subordinates
who are affected by the decision. If the manager is unable to overcome this
resistance, the energy and efforts consumed in decision making will go waste. In
order to make the decision acceptable, it is necessary for the manager to make the
people understand what the decision involves, what is expected to them and what
they should expect from the management.
In order to make the subordinates committed to the decision it is essential that they
should be allowed to participate in the decision making process. The managers
who discuss problems with their subordinates and give them opportunities to ask
questions and make suggestions find more support for their decisions than the
managers who don't let the subordinates participate. The area where the
subordinates should participate is the development of alternatives.
They should be encouraged to suggest alternatives. This may bring to surface

certain alternatives which may not be thought of by the manager. Moreover, they
will feel attached to the decision. At the same time, there is also a danger that a
group decision may be poorer than the one man decision. Group participation does
not necessarily improve the quality of the decision, but sometimes impairs it.
Someone has described group decision like a train in which every passenger has a
brake. It has also been pointed out that all employees are unable to participate in
decision making. Nevertheless, it is desirable if a manager consults his
subordinates while making decision.
7. Follow-up the Decisions : Kennetth H. Killer, has emphatically written in

his book that it is always better to check the results after putting the decision into
practice. He has given reasons for following up of decisions and they are as
follows:
• If the decision is a good one, one will know what to do if faced with the
same problem again.
• If the decision is a bad one, one will know what not to do the next time.
• If the decision is bad and one follows-up soon enough, corrective action
may still be possible.
In order to achieve proper follow-up, the management should devise an efficient

system of feedback information. This information will be very useful in taking the
corrective measures and in taking right decisions in the future.
The following are some of the important decision making techniques :

• Qualitative Techniques
• Quantitative Techniques
Qualitative Decision Making Techniques
There is a great importance of generating a reasonable number of alternatives, so

that one can decide upon the better quality items and make better decision.
Generating a reasonable number of alternatives is very useful for solving any
complex problem. There are following means of generating the alternatives :
 Brainstorming
 Synectics
 Nominal Grouping
Brainstorming
This technique was developed by Alex F. Osborn, and is one of the oldest and best
known techniques for stimulating the creative thinking. This is carried out in a
group where members are presented with a problem and are asked to develop as
many as potential solutions as possible. The member of the group may be experts,
may be from other organizations but the members should be around six to eight.
The duration of the session may be around 30 minutes to 55 minutes. The premise
of brainstorming is that when people interact in a free and exhibited atmosphere,
they will generate creative ideas. The idea generated by one person acts as a
stimulus for generating idea by others. This generation of ideas is a contagious and
creates an atmosphere of free discussion and spontaneous thinking. The major
objective of this exercise is to produce as many deals as possible, so that there is
greater likelihood of identifying a best solution.
The important rules of brainstorming are as given below :
 Criticism is prohibited.
 Freewheeling is always welcome.
 Quantity is desirable.
 Combination and improvements are sought.
One session of brainstorming exercise generates around 50 to 150 ideas.
Brainstorming is very useful in research, advertising, management, armed forces,
governmental and non-governmental agencies.
Limitations of Brainstorming
The limitations of brainstorming are given below :
 It is not very effective when a problem is very complex and vague

 It is time consuming
 It is very costly
 It produces superficial solutions.
Synectics
This technique was developed by William J.J. Gordon. It is recently formalized

tool of creative thinking. The word Synectics is a Greek word, meaning the fitting
together of diverse elements. The basic purpose of synectics is to stimulate novel
and even bizarre alternatives through the joining together of distinct and apparently
irrelevant ideas. The selection of members to synectics group is based on their
background and training. The experienced leader states the problem for the group
to consider, group reacts to the problem stated on the basis of their understanding
and convictions. When the nature of the problem is thoroughly reviewed and
analyzed, group proceeds to offer potential solutions. The leader has to structure
the problem and he/she can use various methods to involve the preconscious mind,
like role-playing, use of analogies, paradoxes, metaphors and other thought
provoking exercises. This helps in generation of alternatives. The technical expert
assists the group in evaluating the feasibility of ideas. It also suffers from some
limitations of brainstorming. This is more useful and appropriate for solving
complex and technical problems.
Nominal Grouping : This was developed by Andrew Van de Ven. Nominal group
is very effective in situations where a high degree of innovation and idea
generation is required. It is highly structured and follows following stages :
Stage-I : Around seven to ten participants with different background and training
are selected, familiarized with a selected problem like what alternatives are
available for achieving a set of objective.
Stage-2 : Each member is asked to prepare a list of ideas in response to the

identified problem, individually for achieving a set of objective.
Stage -3 : After ten minutes, the member shares ideas, one at a time, in a
roundrobin manner. The group facilitator records the ideas on a blackboard or flip
chart for all to see.
Stage-4 : Each group member then openly discusses and evaluates each recorded
ideas. At this point, it may be rewarded, combined, added or deleted.
Stage-5 : Each member votes ranking the ideas privately. Following a brief
discussion of the vote, a final secret ballot is conducted. The group's preference is
the arithmetical outcome of the individual voter, these are followed by concluding
meeting
There are a number of quantitative techniques for decision-making that are

discussed below :
Stochastic Methods : In many management decisions, the probability of the

occurrence of an event can be assumed to be known, even when a particular
outcome is unpredictable. Under these conditions of risk, stochastic methods will
be useful. Actually, stochastic methods merely systematize the thinking about
assumptions, facts and goals that is involved in decisions under conditions of risk.
Three steps are basic to formalizing the factors to be considered in a decision

involving probabilities :
1) The decision maker should first lay out, in tabular form, all the possible
actions that seem reasonable to consider and all the possible outcomes of
these actions
2) The decision maker must then state in quantitative form a probability
distribution, projecting chances of each outcome that might result from each
act. In this step, it may only be possible to assign probabilities that are
reasonable estimates. The key to this step is to state explicitly the various
probabilities that might be attached to each act-outcome situation
3) finally, the decision maker must use some quantitative yardstick of value
(usually rupees) that measures the value of each outcome. It is then possible
to calculate an average of the outcome-values weighted by the assigned
probabilities; the result is called the expected monetary value.
Simulation Techniques : Often, when a management problem is too complex to

be answered by series of mathematical equations, it is possible to simulate the
probable outcomes before taking action. In this way, the manager may rapidly try
out on paper (or with a computer) the results of proposed actions before the actions
are taken. By trying out several policies, it is possible to determine which one has
the best chance of providing the optimum result.
The idea of randomness represented by random numbers is at the heart of

simulation. Random numbers are numbers, each of which has the same chance of
being selected. Tables of random numbers are now readily available.
One type of simulation is used in queuing problems, one in which the need for
personnel or equipment varies over a time period but the determination of the peak
demands cannot be estimated because the occurrence is random or due to chance.
With simulation, the manager can try out available strategies as they might result in
different outcomes, depending upon probabilities from a table of random numbers.
For example, the store manager may wish to determine the work schedules for
three sales people to serve customers and to decide whether to add a fourth
salesperson. The problem arises from not knowing when customers may appear in
the store. Experience may indicate the probabilities that at some hours of the day
all three sales people will be serving customers, but that at other times the sales
people will be idle. In simulating the traffic for a day, the manager may wish to use
subjective probabilities for those times in which there are no data from experience,
but even if there are no experience data, it is still possible to simulate an activity by
using random numbers.
In practice, simulation is carried out by electronic computers. In seconds, a

computer can perform thousands of simulation trails and at the same time compile
all costs. At the present time, inventory decision rules are commonly tested on
computers. The executive specifies such things as reorder points and order quantity
and the computer determines the costs of that policy over the same period of time.
After many different policies are put through the series of simulation runs, the best
policy can be selected
List of literature
25.Dr. Karam Pal, “Management Concepts and organizational behaviour”

Moscow 2004
31.A.Q. Ivasenko, “Management”, Novosibirsk 2001
32.Samuel C. Certo, S.Trevis Certo, “Modern management, concepts and
skills”, 12th edition
THEME 15. İNTERNATİONAL EXPERİENCE İN MANAGEMENT
Plan
1. Management experience in Japan 2. Management experience in USA
1. A management model is something like that: it is a simple construct of how you

lead and manage your organization and your people with goal of becoming not
only a successful company but a good one. Notice the words "becoming" and
"good". Management is always becoming, forever changing: yet to have a culture
and agreed ways of doing things you need this management framework for people
to think and act in harmony. It is sometimes called "corporate culture: but it is
more than that. "Good" is of course a value judgment: management models are not
just about short term performance in a competitive market but also about delivering
long-term value with a purpose. "Good" is a question of what value and to whom.
Management models are important because, like business models, they define a
company. This means that each company has to define its own management model,
develop it, adapt it to changing circumstances and, when cracks appear, to patch it
up or to completely renew it. The management stories of famous founders include
how they invented their management models, and the stories of famous
turnarounds are about how the leaders had to disrupt their own management
models.
There are different models of management that take into account the national
specificity of this or that country in the world. First of all, it is related to the
features of corporate cultures of different peoples. It is known that the key to
management the nature of people's business relationships. However, there are
American and Japanese classic models, which differ from other people's
management.
The Japanese system of management is one of the most effective in the world is
one. His main achievement is the ability to work with people. Japanese
management is directed to the group form of labor organization. Japanese
management uses collective responsibility. Here, members of the group take part in
the decision making process they are responsible for its realization. The work of
the firm, information about his plans is delivered to all employees. The manager is
always in production, among the employees. Employees' proposals and complaints
are considered urgently. Japanese company is paying great attention to scientific
and technical progress. Japanese companies are known for their customer
orientation and their high-quality products. Efficient business processes therefore
play a major role in Japanese management, and many Japanese management
concepts have been adopted and successfully integrated into Western management
techniques and businesses. The most famous concept in a Japanese firm is kaizen,
or continuous improvement, which is often considered a philosophy and aims at
improving and perfecting all management processes within a firm. Another
concept, which has become successful in Western firms, is the 5S System, which
helps organize business and production processes within the firm.
The high quality with which Japanese products are produced and with which
services are performed are based on business practices that are recognized outside
of Japan. In this arena, the Japanese have developed and implemented very
effective tools for sustaining their competitive quality advantage.
In the West, kaizen is the most well-known concept of Japanese management.
Kaizen is the Japanese term for “continuous improvement.” The overall goal is to
enhance the quality of products and to maximize cost efficiency and the safety of
manufacturing processes. The concept is based on two principles. First, kaizen is
not restricted to a single management discipline but is considered a part of every
single business process. Second, kaizen is a continuous process that is supported by
all members of a Japanese organization. Kaizen can therefore be applied to every
management process or operation and in every organization. Every process can be
improved and should be continuously improved.
The Japanese concepts of change and improvement differ from Western ideas on
these topics. In a Western firm, change typically refers to “radical” change. If a
business process or a strategy is changed, we prefer to see a real difference
compared to the original situation. The Japanese have a different attitude toward
change. Their ideas of change and improvement are ubiquitous. Every process and
activity can Kaizen and Total Quality Management be improved at any time.
Even small changes, such as moving a desk, are considered important because the
changes will improve the situation in the long run. Since Japan is a group-oriented
society, any change, adaptation, or improvement must be discussed with a large
number of people. Important decisions can never be made by just one person.
However, group discussions often do not lead to radical ideas, as too many people
are involved and too many viewpoints must be considered—the more people
involved, the more mass oriented the decision becomes. Radical changes such as
drastic downsizing or adopting a strategy are very difficult to implement in a
Japanese firm.
We can distinguish between two types of kaizen: gemba (actual workplace) kaizen
and teian (plan) kaizen. Gemba and teian kaizen both aim to develop higher
production and quality standards. Gemba kaizen is an action-oriented approach and
refers to improvement activities that are performed in the actual workplace, such as
on the shop floor or on the manufacturing line. Gemba kaizen involves every
aspect of everyday work that can be improved. The focus of gemba kaizen lies in
small changes that will modify the overall success of the company—not
necessarily right away but over time. Gemba kaizen methods are quality circles
and suggestion systems. In quality circles, a specialized team develops and designs
ideas concerning how to improve the company’s performance. Suggestion systems
encourage employees to submit suggestions for improving work processes and
customer satisfaction. Teian kaizen, on the other hand, represents a theory-based
approach and refers to strategic improvements that are influenced by top
management. Here, the implementation of new processes and practices play the
most dominant role. The overall goals of teian kaizen are improved business and
manufacturing practices. The most prominent teian kaizen methods include total
quality control and just-in-time management.
Another famous management practice related to gemba kaizen is the 5S System.

The “5S” refers to five key words all starting with an “S” in Japanese. The words
describe how a workplace or production process can be effectively organized. The
5S System consists of five stages of a production process, which are seiri (sort),
seiton (set in order), seiso (clean), seiketsu (systematize), and shitsuke
(standardize). The words combined do not really make up a system but a set of
guidelines regarding how to improve a business or production process, or any kind
of standardized process, and maintain lasting, high-quality performance.
In the first stage, seiri, all tools and materials used in the work process are taken
care of. Seiri refers to tidiness and structured organization. During the seiri
process, all materials and tools are sorted, and only the necessary ones are kept for
continued use. Everything else is stored or discarded. This process leads to fewer
hazards and less clutter that might interfere with productive work.
Stage 2, seiton, refers to straightening and orderliness. In this phase, all the
materials and tools chosen for the production process are organized. The focus is
on the need for an orderly workplace. Even though the translation appears to
indicate something similar to “sweeping,” the intent is to arrange the tools,
equipment, and parts in a manner that promotes workflow. It has to be systematic.
For example, tools and equipment should be kept where they will be used (i.e., in
order to straighten the flow path), and the process should be arranged in an order
that maximizes efficiency. There should be a place for everything, and everything
should be in its place—this is also known as “demarcation and labeling of place.”
Stage 3, seiso, stands for sweeping and cleanliness. It means to clean all items used
at work (e.g., all materials used during a manufacturing process). The workplace,
for example, has to be clean and tidy all the time. At the end of each shift, a work
area is cleaned up and everything is restored to its place. This makes it easy to
know what goes where and to have confidence that everything is where it should
be. The key point is that maintaining cleanliness should be part of daily work—not
an occasional activity that is initiated only when things get too messy.
Phase 4, seiketsu, translates as “standards.” Seiketsu refers to making all the

cleaning, control, and improvement processes a regular activity in the workplace,
allowing for control and consistency. Basic housekeeping standards apply
everywhere in the facility. Everyone knows exactly what his or her responsibilities
are. Housekeeping duties are part of regular work routines.
Phase 5, shitsuke, means “sustaining discipline.” It also refers to standardizing and

sustaining the process to support long-term kaizen goals and to maintaining and
reviewing standards. Once the previous four phases have been established, they
become the new way of operating the organization. Maintaining a focus on this
new way of operating is essential, and a gradual decline back to the old ways of
operating should not be allowed. But if an issue arises about improvements in
working, a new way of doing things, or a new requirement concerning output, it
usually leads to a review of the first four commandments.
Genchi genbutsu, a Japanese term translated into English as “go and see for
yourself,” has revolutionized Japanese firms and their business practices. This
phrase enforces a simple but effective policy where employers immerse themselves
in their company’s daily operations by experiencing a production site or business
section for themselves. Genchi genbutsu is used to train young employees who are
entering the company right after graduating from a university to let them
experience the work and learn it from scratch. Many Japanese companies have a
strong focus on stability and prefer their workforce to remain constant for many
years, sometimes even a lifetime. They usually take 1 or 2 years to train their
employees and socialize them in the firm. In most cases, this happens also by
genchi genbutsu.
Genchi genbutsu is also used in cooperation with job rotation, which is still very
popular in the Japanese firm. Many Japanese employees are moved to a new
department every 2 to 3 years to ensure that they know all aspects of the business.
In their new assignment, they learn each task by doing it from scratch. Japanese top
managers who mostly “grew up” in only one firm have often worked in almost all
parts of their company and really “know every corner of the firm.” This is one
reason why Japanese firms feel uncomfortable hiring top managers from other
firms or industries.
Japan is a collectivistic culture, which means that the well-being of the whole team
is more important than the well-being of one individual. Westerners often assume
that Asian people secretly prefer to be more individualistic and (especially when
working in a Western firm) are only looking for opportunities to do so. However,
this is not quite correct. In general, being in a group or team is considered better
than performing things on one’s own. In Asian societies, being a member of group
is considered more positive and valuable than being a nonmember (even if this
means that one can fulfill one’s personal wishes and intentions). Being in a group
comes with comfort and security. Japanese groups and teams also
resemble families, accepting people’s differences but expecting them to behave in

a certain way. Japanese groups (and organizations) are difficult to enter and to
leave. In order to study at a prestigious university or to work for a well-known
Japanese firm, young people are required to spend years studying and to go
through a very difficult and extremely competitive recruiting process. Once they
have entered a company, however, they will benefit from the security of their firm
and will be considered members of these organizations for most of their lives.
Japanese groups and companies have a long-term orientation. Team members

should have a good or friendlike relationship with one another. Harmonious
relationships have a high priority; open conflict and competition are mostly
avoided. To guarantee harmonious cooperation, Japanese prefer to stick to rules
and clearly defined procedures. Detailed processes dominate the Japanese
workplace. In many famous Japanese management areas, such as production
management (the famous “Toyota way,” for example) and the service industry,
Japan’s obsession with process has led to world leadership in these areas.
However, Japanese firms are very often criticized for not being strategic or
futureoriented enough, concentrating too much on management operations and
internal relationships, and often neglecting strategic aspects. Japanese groups and
organizations always exhibit high motivation and are oriented toward high
achievement. Working hard and doing one’s best are strongly promoted values in
Japanese society.
To be effective and to be competitive, Japanese teams exhibit a very strong and

solid group structure. Japanese groups are based on seniority, where older and
more experienced members have more influence on other members. Older
members of the group are considered more experienced and have more power.
They are called senpai, and not only do they have more power, but they also have
numerous duties. Since relationships play a major role in Japanese firms, older
members are responsible for younger employees and their training, so they help
them become integrated into the organization. Younger employees are called
kôhai; they are expected to follow the advice of their senpai and to show respect
for them. Senpai-kôhai relationships can last a lifetime and can be found in every
Japanese elementary school as well as in the largest businesses in Japan.
During its success in the 1980s, Japanese management became famous for the fact
that Japanese companies would give their employees full job security. Employees
were expected to stay in the firm for most of their careers; in many cases, they
would not even have any other job until their retirement. Lifetime employment was
seen as a major success factor of Japanese companies at that time, leading to
higher motivation and dedication of Japanese workers. This technique allowed
Japanese firms to focus on long-term innovations without fearing high turnover
and knowledge leaks.
Japanese firms are world leaders in cost-efficient and quality-oriented

manufacturing. Next to kaizen, Japanese production management techniques have
had the greatest influence on Western firms and their business processes. Japanese
firms have managed to make products for almost half the price of those of their
Western competitors and have reduced the product defect rate to almost zero.
The leading firm in this field is Toyota, which is responsible for many
groundbreaking techniques such as just-in-time management (or lean
management), the so-called kanban system, and other successful concepts such as
jidôka and heijunka. The overall goals of these techniques are to reduce any kind
of waste and to improve the quality of production processes and the final products.
Today, however, these practices have become a standard in Japanese firms, and
they have moved beyond these practices to develop even more efficient
manufacturing processes.
Just-in-time (JIT) is a management philosophy based on planned elimination of all
waste, such as inventory and associated carrying costs within production,
essentially to improve a business’s return on investment. It is a production strategy
aimed at streamlining a production process by sending the right part to the right
place on the manufacturing line at the right time. Just-in-time production
techniques produce parts as they are needed in order to keep inventory low and
minimize storage costs. Implemented correctly, JIT can dramatically improve a
manufacturing organization’s return on investment, quality, and efficiency. Just-
intime is the one Japanese management practice that has been most successfully
implemented in Western corporations.
2. America is one of the most advanced nations of the world. America is infact,
leader in modern management techniques. The economy of America is a free
economy and people lead their lives freely without much social checks and
barriers. They want to lead independent life and are accustomed to the ‘hire and
fire’ style of management. Employment on contract basis started in America,
which is being followed by other countries of the world. This country has rich
management experience. American managers are always differ with their business
qualities. Ending the essence of the American model of management degrees can
be summed up in a single word - individuality.
American management style can be described as individualistic in approach in so

far as managers are accountable for the decisions made within their areas of
responsibility.
Although important decisions might be discussed in open forum the ultimate

responsibility for the consequences of the decision lies with the boss – support or
seeming consensus will evaporate when things go wrong. The up side of this
accountability is, of course, the American dream that outstanding success will
inevitably bring outstanding rewards.
Therefore, American managers are more likely to disregard the opinions of

subordinates than managers in other, more consensus or compromise- oriented
cultures. This can obviously lead to frustrations, which can sometimes seem to boil
over in meeting situations.
Titles can be very confusing within American organization with a bewildering

array of enormously important-sounding job descriptors on offer (Executive
VicePresident etc.). Titles, in any case, tend to be a poor reflection of the relative
importance of an individual within a company. Importance is linked to power,
which could be determined by a number of factors such as head-count
responsibility, profitability of sector or strategic importance to the organization at
that point in time.
A distinction is often made between management style (around organization and

process) and leadership style (more strategic and inspirational.) Great leadership is
expected at the top of an organization rather than competent management but it can
be difficult to define what great leadership actually is – and a US definition may
not mean much in other parts of the world.
Main Features of American Management System:
1. Process of decision making is quite fast and it is undertaken on individual

basis. Decisions are taken at different levels of management by the people or
superiors operating at these levels.
2. The system adheres to bureaucratic and formal organizational structure with

the specific line of individual responsibility and accountability.
3. American companies meet their manpower requirements usually by

conducting campus interviews and inviting people working in other companies. It
is helpful in developing a culture of frequent hopping.
4. People are more careers conscious and are honest towards their profession
rather than the company in which they are working. In-fact, they use the present
company as a stepping stone for the advancement of their career.
5. Promotions in American companies are based on individual performances.

Annual performance evaluation is undertaken select the most efficient workers.
6. Training and development programs are part and parcel of every type of
organization in the United States of America.
7. Leadership style is autocratic or directive in nature and main decisions are

undertaken by the leaders.
8. Usually, one way communication takes place in American style of

management. It travels from top to bottom.
The American model sets the purpose of a business as maximizing shareholder

value and this is perhaps its most distinctive and debatable principle. Purpose also
includes the respect of individual freedom and the focus on individual
responsibility. These three components underlie the American model's claim to be
an example for the world. Managing people shows three key components: visible
and decisive leadership, sometimes called leading from the front, focus on
performance which is also how people are measured, and psychological
reinforcement of motivation through rewards and recognition. Relationships are in
line with a founding principle of American democracy, self-expression.
Like business deals, the social relationship of individual to company is based on

contracts rather than social relationships. American management relations avoid
the ties of loyalty or insider relations, preferring contracts that are flexible with
obligations ending at the end of the contract. Managing change is one of the
strengths of American management: it is based on the spirit of enterprise and a
positive and even optimistic attitude to the future. The social cost of change is
generally attributed to the individual and the safety net is often minimal, with the
idea that individual resilience is the key resource for making change into an
opportunity.
American firms are ruthless at rapidly rewarding and promoting good employees
and retraining or firing bad employees. The reasons are threefold.
• The U.S. has tougher levels of competition. Large and open U.S. markets
generate the type of rapid management evolution that allows only the bestmanaged
firms to survive.
• Human capital is important. America traditionally gets far more of its

population into college than other nations.
• The U.S. has more flexible labor markets. It is much easier to hire and fire
employees.
Many developing-country firms, even while trying to implement new techniques

like Lean Management, ignore the fact that labor is different from other “inputs.”
Many of the Chinese firms surveyed did not even employ managers who spoke the
same language as the workers, relying on interpreters or basic sign-language for
communication. As you can imagine, this does not lead to a feeling of mutual
support between management and workers.
Various refresher courses in US universities are widely used to increase the

effectiveness of managerial staff, systematic renewal of their professional
knowledge.
American companies send their managers to such courses for the following
purposes:
 the ability of the leader to expand his imagination, to see the progress of his
events. So prepare the manager to undertake additional responsibility;
 get acquainted with the latest information on the theory and practice of the
company's management;
 rewarding creative and innovative approach to consideration of problems
and decision-making
 to allow the manager to discuss new ideas and problems with other
businesses in the business world;
 assisting the manager to assess his / her own capabilities in the future career
and his / her role in the company.
American managers, especially young people, are eager to advance on a career and
do not hide it. Modern American managers rarely believe in the fact that service
progress is due to personal services. Usually it occurs as a result of optimal
combination of business skills and teamwork skills. In general, almost modern
American managers are happy with their lives. Coordinate an interesting, tense
work with decent wages is the lives of managers is fully valuable.
List of literature
1.Parissa Haghirian ,” Understanding Japanese Management Practices”, USA 2010

2. I.B. Amirov, Z.E. Hajiyeva, “Management”, Baku 2015
3. www.worldbusinessculture.com

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THEME 1 FORMATION AND DEVELOPMENT OF MANAGEMENT

1. Introduction to management. Definition of the management 2. Skills and

1. Organization is a group of people intentionally organized to accomplish an

The four basic management functions—activities that make up the management

Planning involves choosing tasks that must be performed to attain organizational

Controlling is the fourth function in the management process. Controlling means

Controlling is the management function through which managers:

1. Gather information that measures recent performance within the organization.

2. Compare present performance to pre-established performance standards.

3. From this comparison, determine whether the organization should be modified

Figure 1 Classic mistakes commonly made by managers in carrying out various

Management must always be aware of the status and use of organizational

Organizational Inputs outputs

2. Management skill is the ability to carry out the process of reaching

1. Task-related activities are management efforts aimed at carrying out

2. People-related activities are management efforts aimed at managing people

3. Change-related activities are management efforts aimed at modifying

To increase the probability of being successful, managers should have

• Clarifying roles: assigning tasks and explaining job responsibilities, task

Management is the attainment of organizational goals in an effective and efficient

Based on our definition of management, the manager’s responsibility is to

• Assigning of jobs and tasks to various workers.

Managers must rethink their approach to organizing, directing, and motivating

3. The purpose of studying various schools of management thought is to enable

Frederick Winslow Taylor (1856-1915) is considered the father of scientific

As organizations became larger and more complex, the authoritarian-paternalistic

It is difficult to classify all these researchers as neoclassical theorists. Many of

1. Dr. Karam Pal, “Management Concepts and organizational behaviour”

2. Agasef Imran, “Management”, Baku 2007

3. Richard L.Daft, “Management”, 9th edition, 2009

4. Michael H.Mescon, Michael Albert, Franklin Khedouri, “Management”,

6. E.P. Ghuseva, “Management”,Moscow 2008

7. Samuel C. Certo, S.Trevis Certo, “Modern management, concepts and skills”,

1. Introduction to organization. Definitions of organization

• Industrial enterprises are created and operate in various spheres of industry

It is known that enterprise is a legal personality, it possesses certain property,

• Individual businesses are enterprises that are in common ownership of a

In a Partnership, two or more people share ownership of a single business. Like

• Partnerships are relatively easy to establish; however time should be invested in

• Prospective employees may be attracted to the business if given the incentive to

• Profits must be shared with others.

There are distinguished the following types of enterprise associations:

 Joint ventures are established on a contractual basis by at least two

3. An organization is a collection of people who work together to attain specified

Meaning An organization type in An organization formed within

Creation Deliberately by top Spontaneously by members.

Purpose To fulfill, the ultimate To satisfy their social and

Nature Stable, it continues for a long Not stable

Communication Official communication Grapevine

Control Rules and Regulations Norms, values and beliefs

Focus on Work performance Interpersonal relationship

Authority Members are bound All members are equal.

Key Differences Between Formal and Informal Organization

A leader in a formal, hierarchical organization, who is appointed to a managerial

4. Another important thing we must know about is the organizational structures.

I want to say you some definitions of this category:

1) Organizational structure is a set of organizational units and their

This kind of organizational structure classifies people according to the function

There is important to emphasize the advantage and disadvantage of functional

The advantages are as follows:

• High degree of specialization

The disadvantages are as follows:

• Communications faces several barriers

Definitions of this structure